Built Environment Economist - September to November 2025
Firstly, I would like to say how immensely honoured, privileged and humbled I am to have been chosen to be the next Chief Executive Officer of the Australian Institute of Quantity Surveyors.
As CEO, I will endeavour to undertake the role conscientiously and to the best of my ability – and then some. With the AIQS team, I will aim to roll out more benefits for members, increase the membership and strengthen the quantity surveying profession. I have “big shoes to fill”, and I want to thank Grant Warner for his outstanding service to AIQS over the past ten years. I look forward to working with AIQS President, Andrew Brady FAIQS, CQS, for the final few months of his term, and with Fiona Doherty FAIQS, CQS for her term as President.
In terms of my background, I have been the Executive Director of the Australian Construction Industry Forum (ACIF) since January 2016. ACIF currently has 24 member associations and brings together representatives of around 300,000 employees in the industry. I brought to ACIF strong skills in research, policy and advocacy from roles with the Australian Institute of Building and the Australian Automobile Association. I have also been the Executive Director of the Association of Commercial Air Conditioning Contractors (ACACC) since October 2016. I hold a PhD in Political Science, undertaken at the Australian National University. I have also held teaching roles overseas, worked in international banking, and for a management consulting firm. In my ACIF and ACACC roles, I have been progressing some of the major issues facing the construction industry, and ensured that ACIF and ACACC members engaged with the relevant Ministers and building
regulators to facilitate this. It will seem like a major luxury to have just the one role with AIQS, although I suspect there will be much to keep me busy!
The AIQS Strategic Goals for 202027 are as follows: having a robust membership base reflecting the depth and breadth of the industry; leading a profession that is diverse, equitable, and inclusive; driving industry standards and innovation; at the forefront of education for the profession; and recognised as the preeminent brand in the industry. These will be my focus and ‘guiding lights’. There are currently 3,500 Quantity Surveyors employed in Australia, 21,200 Contract Administrators and 7,000 Cost/Construction Estimators, giving a total of 31,700 (source: ABS) quantity surveying professionals. AIQS has around 2,100 members (excluding students) based in Australia, so there is much room for growth.
At the commencement of the CEO role, I intend to spend considerable time engaging with members, the board, and staff to ensure I gain a deep understanding of the organisation, so I can build upon the successes of AIQS. Australia is facing some challenges in terms of productivity, housing, and sustainability. AIQS will continue to play a key role in providing solutions to these challenges.
AIQS members should always feel welcome to reach out to me. I’m at my happiest when I’m busy helping people and making a positive difference in the world. I look forward to chatting to you sometime soon at AIQS events!
With best wishes,
DR JAMES CAMERON MAICD
ONE BANGKOK
VISUAL FEATURE
One Bangkok opened its doors to the public on October 25, 2024, marking a significant milestone for Frasers Property. Located in the heart of Bangkok, One Bangkok is the largest mixed-use project in Thailand. One Bangkok aspires to blend lifestyle, culture and sustainability, creating a new landmark in the heart of the city while fostering a community where live, work and play come together. The project team included two quantity surveying firms - Mentabuild Limited and Everest Consultancy. One Bangkok total investment value at THB 120billion.
Occupying 1.83 million square meters or about 17 hectares, in the city’s central business district, One Bangkok is a fully integrated ecosystem designed to meet the diverse needs of its residents, workers and visitors. The development includes five premium office towers, three ultra-luxury residential towers, five world-class hotels, three retail zones and One Bangkok Forum, a LIVE entertainment arena—each constructed to meet the highest standards of design and functionality.
SUSTAINABILITY
Sustainability is at the core of One Bangkok’s design. In a city where urban space is scarce, dedicating almost half of the district’s land area to green and open spaces. One Bangkok is planned, designed, and developed to be a “smart city of the future,” featuring advanced infrastructure, integrated technologies, and management systems capable of responding to disasters and climate change. The goal is to create a sustainable quality of life for the people living in this central urban area.
It is the first development in Thailand to achieve LEED for Neighborhood Development (LEED-ND) Platinum certification and is also pursuing WELL Platinum, highlighting its dedication to environmental sustainability and human well-being. Additionally, One Bangkok is the first project in Southeast Asia to earn both WiredScore and SmartScore Neighbourhood certifications, reinforcing its position as a leader in smart, sustainable urban development aligned with global standards.
The structure of One Bangkok has been designed and analysed to accommodate Bangkok’s soft soil conditions and to withstand disasters such as earthquakes. This ensures durability and safety for everyone living and working in the heart of the city, following the Ministerial Regulations No. 1301-54 and No. 1302-52 stipulated by the Department of Public Works and Town & Country Planning, Ministry of Interior.
One Bangkok is built with longterm resilience in mind, designed to withstand a 500-year flood and adapt to climate change. The perimeter landscapes function as water retention zones, while the inner development is elevated above flood levels. Backed by comprehensive contingency plans and regular emergency drills, the district is fully prepared to respond effectively to flood scenarios and ensure uninterrupted city operations.
One Bangkok has achieved 25.70% energy savings beyond ASHRAE 90.1-2010 standards through highperformance façades, smart lighting with daylight and occupancy sensors, and energy recovery systems that reuse cooling from exhaust air. One Bangkok is engineered for exceptional energy efficiency, achieving a verified 25.70% reduction in energy use compared to ASHRAE 90.1-2010 standards. This is enabled by high-performance façades, smart lighting with daylight and occupancy sensors, and energy recovery systems. The dual highvoltage power supplies are featured along with 24-hour backup power to ensure uninterrupted operations
One Bangkok reduces water consumption through water-saving fixtures, recycled wastewater for flushing, irrigation, and cooling, and a rainwater harvesting system featuring bioswales and five large retention tanks to ease pressure on the city’s drainage infrastructure. A smart security system in parking and traffic management, as well as centralised utilities, security and safety, enhances the visitor and resident experience, pioneering efforts in cyber-security and facilitating the way people work, live, and play.
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WHAT’S IN THE BOX?
SARAH SLATTERY FAIQS
Director, Partnerships & Innovation, Slattery
Modern methods of construction promise speed, precision and repeatability.
Buildings are arriving on Australian sites as a “kit of parts”. Think factory-finished panels, prefabricated cores, modular frames. Some come QR-coded, guided by AI-enabled systems. Others are more analogue, arriving by truck, assembled with traditional tools, but still following a new logic of speed and precision.
But as construction becomes more like assembly, the quantity surveyor’s role becomes more critical. Why? Because the kit of parts isn’t just physical.
Inside the box we also find digital documentation, carbon targets, build sequences, delivery schedules, real-time cost tracking… basically a whole new set of approaches and risk settings.
In other words, “modern” doesn’t always mean high-tech. Sometimes it means getting better at the basics, like using documentation to drive decisions, connecting sequence with strategy, or choosing partners based on value, not just cost.
This is construction reassembled.
Modern methods also shift more risk and responsibility upstream. Decisions once made on site must now be locked in earlier. That means the quantity surveyor’s expertise shifts upstream too.
The role of the QS has always been to see the full picture. We stress-test assumptions, expose gaps and blind spots, and help clients make confident decisions. Now we must do this across an expanded scope.
The National Construction Industry Forum’s draft Blueprint for the Future recognises that productivity won’t lift if we don’t align contracts, modernise procurement and rebalance risk. Modern methods can help, but only if the systems beneath support them.
The real value of quantity surveying isn’t just pricing what’s in the box. It’s spotting what’s missing. Prompting better questions – from people and AI –to help shape a built environment fit for the future.
“Decisions once made on site must now be locked in earlier.”
IS QUEENSLAND’S OLYMPICS INFRASTRUCTURE REALLY ON TRACK FOR 2032?
By Jack Shelley MAIQS, CQS
Queensland’s infrastructure delivery program isn’t just ambitious. It’s unprecedented. Never before has the state faced a pipeline of this scale: world-class venues, accommodation, precincts and transport links all under a global spotlight.
Success won’t be measured only by what’s ready on day 1. It will be judged by quality, value and legacy. Budgets will be under extreme public scrutiny. The expectations from athletes, media and visitors will be sky high. And Queenslanders will deserve longlasting value from the giant spend.
To turn the heat up, throw in cost escalation, labour competition, and industry-wide constraints on productivity.
Construction in Queensland is already under serious strain. Major health, energy and housing projects are already competing for skilled labour. Infrastructure Australia warns we’ll need another 18,000 engineers in Queensland by 2032 – not to mention the thousands of tradies, project managers and other specialists needed.
Across Australia, projects are blowing out, driven by inflation, risk premiums and labour shortages. Every delay, every vague scope, every procurement misstep comes at a hefty cost.
The consequences of falling short are untenable. Think of previous Games that haven’t gone swimmingly – leaving unfinished assets or expensive white
elephants that sit underused and over budget after the closing ceremony.
But there’s still time to get it right. It starts with cost clarity. Not loose estimates, but robust forecasting based on live market intelligence, local insights and credible modelling. We need to understand not only the cost to build, but also the real cost to run, maintain, adapt and evolve every asset over decades.
Rigorous cost control must follow. Without cost discipline from the outset, capital outlay and delivery outcomes will drift further apart. The right balance of functionality, finishes and whole-oflife value needs to be found early.
We must plan realistically for inevitable constraints. Strategic staging and packaging of projects will be critical. The right procurement approaches can incentivise performance, encourage innovation, support rapid mobilisation and accelerate delivery.
There’s no doubt we’ll have to build faster and better. Some Queensland construction sites are averaging just 2.5 productive days a week. With a skilled labour shortfall and tight timelines, this won’t cut it.
Modular construction, offsite manufacturing and preassembled components are gaining traction. They can dramatically lift efficiency, accelerate build times, and reduce labour intensity on site. But they need
to be integrated from the outset, not as a late-stage resort.
Crucially, Queensland must build a legacy. Every new build must have a life beyond the Games – whether that’s a venue converted into a multipurpose community facility, or an athlete’s village transformed into social or affordable housing or student accommodation, or infrastructure that can cater for long-term growth in what is already Australia’s fastest growing region.
It means designing for flexibility, lower lifecycle costs and long-term sustainability. It means choosing low-maintenance and high-durability materials, embedding energy efficiency and renewable electricity, and planning for adaptive reuse.
The road to 2032 is steep and the clock is ticking. If we don’t act with urgency, we risk falling behind. It’s time to get real about the bottlenecks and how we can unlock the delivery strategies that will get us across the line.
With the right strategies and partnerships, Queensland has the potential to deliver an exceptional Games and define the future of Australian infrastructure. We can’t afford to wait another year to ask whether we’re ready.
This article was written by Jack Shelley MAIQS, CQS from WT Partnership.
DEI – WHAT’S NEXT?
AIQS RECENTLY ASKED TWO DIVERSITY, EQUITY, AND INCLUSION (DEI) EXPERTS THE QUESTION “WHAT’S NEXT FOR DEI IN THE AUSTRALIAN BUILT ENVIRONMENT?” AND WE ARE DELIGHTED TO SHOWCASE THEIR RESPONSES IN THIS EDITION OF THE BUILT ENVIRONMENT ECONOMIST.
AMAN KAUR WOOD
EPMO Specialist – Business and Technology, Women in Transport Mentor, V/Line
“We don’t just build with concrete and code – we build with choices. And those choices decide who gets included, who is missed out and how ready our industry is for the future.
The next step for DE&I is about action, not just words. It means making inclusion part of how we plan, deliver and measure projects; not something extra or optional.
Across the industry, there are encouraging signs like quiet rooms on site for cultural reflection or sensory breaks, trials of flexible work and project success measures that look beyond just cost and time to include social value. These aren’t just box-ticking exercises –they’re signs that inclusion is becoming part of how we work.
“… they’re signs that inclusion is becoming part of how we work.”
Years ago, I led a national Fibre to the Building (FTTB) rollout – building fibre infrastructure connectivity across Australia. Our team’s diversity was like a Swiss Army knife: ready with the right tool for every challenge. When challenges hit (as they always do), our varied perspectives helped us adapt quickly, improve accessibility and keep things moving. Inclusion didn’t slow us down – it made us better. That project remains close to my heart because it demonstrated what’s possible when every voice is heard.
For quantity surveyors and cost professionals, DE&I is a chance to lead. The choices you make in procurement and defining project success can decide who takes part and who benefits.
DE&I isn’t just a social imperative – it’s the smartest, strongest way to build infrastructure that genuinely reflects the diverse communities it serves. If we get this right, we don’t just construct buildings - we construct better futures.”
MIKAEL HEINONEN MAIQS, CQS
Organisational Culture Strategist | Collabaloop
Workplace wellbeing is evolving into a competitive advantage and can leverage psychosocial safety initiatives to push this further.
“The construction industry is at an inflection point. To meet the demands of a growing pipeline, it must continue to attract new talent, especially women, while retaining its existing workforce. Even amid global pushback against DE&I, Australian governments will persist in pulling policy levers to increase female participation. But culture, not compliance, will be the true differentiator. Here are three nonpolicy shifts to watch in 2026:
I 1. MALE ALLIES, NOT MANDATES
Policy-heavy approaches can create an illusion of progress while triggering backlash from those resistant to change. Too often, DE&I feels like something "done to" people, deepening stigma instead of fostering inclusion. If you want sustainable change in a male dominated industry this will needs to come from the ground up, through growing momentum in male allyship, where workers hold each other to shared standards of respect, not just rules.
I 2. PSYCHOSOCIAL SAFETY AS A COMPETITIVE ADVANTAGE
Workplace wellbeing is evolving into a competitive advantage and can leverage psychosocial safety initiatives to push this further. Leading
organisations treat mental health, belonging, and physical safety as core to performance, not as perks or box-ticking. The most effective initiatives will be designed with, not just for, the workforce, tailored to real needs through conversation and trust. Adopting this approach evolves organisations to have more inclusive mindsets while addressing common industry issues such as burnout.
I 3. STORIES AS DATA
KPIs have a place but as Strathern noted, “When a measure becomes a target, it ceases to be a good measure.” so they continue to need context and understanding of consequence to be useful. Stories when collected at scale can reveal the lived realities contextualised behind the numbers. They provide emotional insight, highlight what’s working, and signal where change is still needed. There is a growing trend calling out for more stories, but we currently don’t collect or share them at scale.
Ultimately, we don’t need more frameworks, we need narrative infrastructure. The future of DE&I won’t be built in boardrooms or parliament, but on job sites, through everyday behaviours, ally-led change, and the courage to reimagine what’s possible.”
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As the move to higher environmental ratings for our built structures continues, the importance of accurate carbon accounting grows.
WoodSolutions’ design guide on The Role of Wood Products in Zero Carbon Buildings serves as a valuable resource for design professionals who aim to incorporate sustainable materials. Find case studies, information on green building certifications, and an EPD database that provides values for embodied greenhouse gas emissions for a range of timber products and construction materials.
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THE VALUE OF DESIGN FOR HEALTH
HEALTH
THIS ARTICLE REFERENCES THE FINDINGS OF AN ARTICLE PUBLISHED IN THE HEALTH ENVIRONMENTS RESEARCH AND DESIGN JOURNAL, 2025, ECONOMIC ARGUMENT FOR INNOVATIVE DESIGN FROM VALUING PATIENT-CENTRED STROKE REHABILITATION, WRITTEN BY RHONDA KERR, RUBY LIPSON-SMITH, AARON DAVIS, MARCUS WHITE, MARK LAM, JULIE BERNHARDT, JUAN PABLO SAA, TIANYI YANG, AND THE NOVELL REDESIGN COLLABORATION.
How should we estimate the value of design, especially in complex and costly field of health facilities? In an article recently published in the prestigious Health Environments Research and Design journal the value of an Australian hospital ward was assessed¹. Costs were measured against the value to the Australian economy and government services. More broadly, the article examines the economic arguments for providing technologically and clinically up to date services and the concept of value.
Which gives better value for a high technology project involving expensive workers – a standard design or an innovative design? Careful estimators would be inclined to preference the standard design with proven data on costs. But if we look more widely at both the costs and the benefits there may be a different answer.
An economic evaluation of the power of innovative design for the workspace of expensive clinical workers found that
increasing workspaces led to lower operational costs and improved patient outcomes. Innovative design enabled more effective working conditions and was expected to improve staff retention and allow better use of working time for outreach, follow up, support and training by means of improved technology.
The annual benefits for innovative designs in one 30-bed ward are estimated to be a $12 million economywide benefit, a $3.3 million saving for operating costs and savings to the Australian National Disability Insurance Scheme (NDIS) of between $3.93 million and $5.4 million. All values are in 2019-20 Australian Dollars and cover clinical space costs².
Capital construction costs in the standard design are estimated to be equivalent to 8.4% of operating costs per patient. Three innovative designs, based on the evidence of superior patient outcomes, align with between 8.7% and 9% of operating costs per patient. Put another way, the difference between the total capital costs of the standard and innovative designs represents between 0.3% and 0.9% of per-patient operating costs.
Key to the valuation of the asset was a new perspective. Value was considered in terms of patients, their costs and outcomes. Costs and benefits were calculated to the patient level to align with the way operational costs are assessed, and the quality of service is reported. Hospitals are funded per patient, according to their diagnosis group with different prices associated with each of over 400 diagnosis groups.
Two types of designs were important. The first was robust research design to draw in all the clinical, technological, and building research to provide best quality service. The second was allowing innovative architects to work with clinicians, people with lived experience, planners, and academics to design the most effective clinical spaces. It took more time but provided an environment of greater value to clinicians and patients.
VALUING THE DESIGN INPUT FOR A STROKE REHABILITATION WARD
Strokes cost Australia $15.7 billion over a lifetime, including $5.5 billion in direct healthcare costs, Deloitte reports. After acute hospital care, it is best practice for stroke patients to move to rehabilitation in an inpatient facility to regain cognitive and functional skills. Rehabilitation averages 23 days and has a median cost of $30,000 per patient. Despite survival rates for stroke improving, the annual NDIS costs for people disabled by stroke were $1.08 billion (increasing by 38% over a year) to June 2023.
Facilities for stroke rehabilitation (SR) are rarely purpose-built, and are commonly designed similarly to acute care units, despite the increased clinical focus on activity and independence, and the prolonged length of stay. There is no published data on the cost of capital for SR.
The NOVELL Redesign project aimed to assess the value of evidence-based facilities in SR for patients, the health system, and the economy. The value
1 Source: Kerr R, Lipson-Smith R, Davis A, et al. Economic Argument for Innovative Design From Valuing Patient-Centered Stroke Rehabilitation. HERD: Health Environments Research & Design Journal. 2025;0(0). doi:10.1177/19375867251327987
² Capital costs do not include a number of elements which will vary between projects including vehicles, roads, parking, legal and professional costs, land acquisition, maintenance, or site mitigation costs. The SR unit is assumed to be above the 4th floor of a level 4-5 general hospital with lift access to the unit, as is typical of rehabilitation facilities in Australia (Lipson-Smith, 2020).
and cost of three innovative evidencebased SR ward designs were assessed compared to a standard racetrack ward design based on the Australasian Health Facility Guidelines. The assessment of costs and efficacy is patient-based to examine how clinical care is delivered for the benefit of the patient.
The capital cost for a stroke rehabilitation ward (SR) was estimated for four designs- a conventional racetrack ward and three innovative design options. Three components to mirror the patient’s clinical pathway were addressed in the costing:
1. Physical areas directly required for SR patient care (ward areas, clinical pathway areas, clinical and nonclinical support areas, and outdoor areas).
2. Areas of the hospital indirectly required to support the operation of the SR unit (hotel services, support areas, diagnostic areas, pharmacy, outpatient clinics, administration, research, training, vertical and horizontal travel areas, etc.).
3. Technologies and specialist equipment, information and communications technologies (ICT), and systems identified for patient care.
The relationships between staffing costs, technologies, and capital costs were interesting. There was an inverse relationship between some staffing costs (outpatient clinics, some clinical supervision and patient therapy gym time), and technologies with evidencebased clinical pathways. Capital costs and technologies were not in a clear relationship. In some instances, capital costs and technologies increased at the same rate and in other clinical settings, capital costs and technologies were not aligned. The most significant
relationship was between floor area (on ward therapy areas, activated corridors) and improved patient outcomes. As floor areas were activated, patient outcomes, hospital cost efficiency, and patient outcomes all improved.
Translating the clinical evidence to physical spaces to support patient rehabilitation most effectively increased access to therapy areas and outdoor spaces, more than doubled building services areas, but decreased specific clinical support areas.
The resulting capital costs were found to be between 8.4% of operating costs for the standard ward and 8.7-9.3% of operating costs for the more innovative designs. For one standard 30-bed ward, capital costs (excluding site and projectspecific costs) were estimated to be $14.54 million for a standard ward, $6.35 million for the SI design, $18.61 million for the W design, and $20.21 million for the Z design. However, the increased capital cost associated with the non-standard designs were eclipsed by the annual operating cost savings.
As you have noticed, this analysis is not about valuing a hospital building as simply an inert asset. Rather, it considers the reason we invest in hospitals; to bring people back to health to actively participate in society and the economy. A stroke rehabilitation ward can be a partner in care supporting clinicians, enabling formal and informal human interactions, and as part of the treatment strategy.
Investing in innovative design harnessing clinical evidence as been assessed by a panel of experts, including stroke survivors, to have economic benefits that will exceed the one-off capital costs required to enhance SR. It was concluded that capital invested to support innovative
design for evidence-based SR has longterm, enduring and recurring health, economic, and NDIS cost benefits and wider benefits to the economy.
VALUE AS A KEY CONCEPT
Why consider value as a broader concept than cost? Value-based healthcare is reshaping healthcare delivery with a reduction in old methods of care that do not provide the same value to patients and the system that new methods provide. Patient outcomes are prioritised over ‘businessas-usual’, with innovative models of care and new technologies being propelled by data-driven decision-making. The aim is to create a more effective, financially sustainable healthcare system that improves health.
This analysis draws on the evidence that the physical spaces, their configuration, and the technologies used provides ongoing benefits to the economy, patients, and the health system that significantly outweighs the capital cost. Capital investment aligned to the unit purpose, patients, clinical standards, and clinical evidence can enable more innovative designs to support effective and efficient clinical care.
Conversely, there are costs associated with a standard design approach that does not incorporate evidence on clinical improvement or translate it into facilities and capital allocations to achieve better patient outcomes.
This article was written by Rhonda Kerr from Curtin University of Technology.
LIFTING CONSTRUCTION PRODUCTIVITY THROUGH SMARTER CLAIMS MANAGEMENT
CLAIMS MANAGEMENT
Australia’s construction sector is under intense scrutiny. With productivity at its lowest in decades, the Australian Constructors Association (ACA) reports output per worker has dropped by nearly eight per cent since 2002, even as wages have increased. The ACA estimates that bridging this gap could unlock around $56 billion in extra construction output.
The government’s Economic Reform Roundtable in August 2025 reinforced the urgency, concluding that lifting productivity isn’t just about on-site efficiencies — it requires streamlining the day-to-day workflows that drive project delivery.
It’s easy to look at these headlines and think the problem only lies on site — shortages of labour, weather delays or material costs. But our research suggests opportunities lie in your domain too: the processes that govern contracts, variations, progress claims and payments. By modernising these workflows, you can save significant time, reduce disputes and improve cash flow accuracy.
WHERE PRODUCTIVITY SLIPS AWAY
Among the more than 1,000 quantity surveyors and contract administrators we surveyed in our Building the Future report,
• 26 per cent still manage progress claims manually,
• 44 per cent report frequent disputes linked to claims or variations,
• 1 in 4 spend more than 10 hours per week on repetitive admin tasks.
Those hours aren’t just inconvenient; they affect your ability to provide accurate cost forecasts, negotiate with confidence and add value to your projects.
Finance teams face similar challenges. In our Building Efficient Finance Team with Construction Technology report:
• 41% still rely on manual claim processes.
• 53% struggle to meet statutory timeframes under the Security of Payment legislation.
• 44% say claim inefficiencies hurt staff satisfaction and retention.
If your finance colleagues are struggling to meet payment schedules, it doesn’t just frustrate subcontractors — it also undermines trust and increases the risk of disputes and project delays.
“When builders and subcontractors are still chasing claims through inboxes and spreadsheets, productivity suffers,” says Mark Ballinger, Director of Product Strategy at Payapps. “It’s a hidden cost that shows up in delays, disputes and burnout.”
EVIDENCE FROM THE FIELD
Many of Australia’s best-performing builders — as ranked in the 2025 BCI Top 50 — have already modernised claims and contract management:
• ADCO Constructions (Ranked #7) – uses Payapps to automate claim submission and assessment, reducing manual checks and
CLAIMS MANAGEMENT
providing real-time visibility.
• Buildcorp (Ranked #12) – sets up contracts in about 10 minutes, with straightforward claims processed in just two minutes.
• Mainbrace Constructions (Ranked #34) – cut time spent chasing documentation by ensuring claims can’t be submitted without required certificates.
• Sarah Constructions (Ranked #33) – improved payment certainty and subcontractor visibility by consolidating claims on a single platform.
“Technology doesn’t have to be complex to be impactful,” says Ballinger. “We see builders
streamline claims
and approvals in a matter of weeks, freeing their teams to focus on more strategic work.”
Research confirms these results. Businesses using platforms like Payapps are nearly twice as likely to boost productivity and save 14–31 hours a week on claims and variation management, and receive far fewer subcontractor queries. These gains free up teams to focus on forecasting, negotiation and risk management. When claims move smoothly from subcontractor to main contractor
to finance, payments are more predictable, disputes decrease and relationships improve.
Companies using platforms like Payapps save 14–31 hours per week on claims and variations.
USING TECHNOLOGY TO MAKE PROGRESS CLAIMS FASTER AND SMARTER
Digitising claims and contracts isn’t just about speed; it’s about establishing a single source of truth. A purpose-built platform can centralise contract data, automate approval workflows with reminders, offer real-time dashboards, enforce compliance through mandatory uploads, and integrate with finance systems. These features directly address the pain points highlighted in our surveys and help ensure claims are accurate and contracts are compliant.
WHAT MAKES PAYAPPS DIFFERENT
We built Payapps because we saw the friction you face every day.
• Centralised contracts and claims –single source of truth for contracts, budgets, approved variations and retentions, with automatic checks against agreed values.
• Automated workflows – claims follow a defined approval path with notifications and reminders, helping meet SOPA/CCA deadlines.
NAVIGATING SINGAPORE'S PREMIUM FIT-OUT COSTS
By Daniel Malacchini MAIQS, CQS
Singapore maintains its position as one of Asia Pacific's most expensive fit-out markets¹.
With costs ranking second only to Tokyo, and about 1.2-1.3 times more than Hong Kong, organisations in Singapore face significant investment considerations when planning workplace transformations.
While this presents significant cost challenges, it also creates an opportunity for organisations to balance smart investment decisions with today’s expectations of quality that drive workplace performance.
HOW CAN ORGANISATIONS OPTIMISE BOTH COST MANAGEMENT AND WORKPLACE VALUE?
I 1. ENGAGE A COST ADVISOR EARLY
Bringing cost management experts into the conversation at pre-conceptual phases allows organisations to tap onto industry insights that can help design development better align with budgets. The right cost management partner can help organisations avoid costly redesigns in later phases, when changes become more expensive to implement.
I 2. FOCUS ON VALUE ENGINEERING
Value engineering is a project delivery approach that minimises costs without sacrificing quality. Rather than removing functions to reduce spending, forward-looking organisations are evaluating design elements against specific business objectives, to decide where to invest for maximum impact. For example, this
FIT-OUT COSTS
1 Source: JLL Asia Pacific Fit-Out Cost Guide.
could look like prioritising collaborative spaces that support team productivity, while finding cost efficiencies in less utilised areas. Understanding utilisation patterns through data will ensure these critical functions are identified and prioritised in the earliest design stages.
I 3. OPTIMISE MATERIAL SPECIFICATION AND SOURCING
Builders’ works dominate fit-out costs across Asia Pacific, taking up 41% of total cost allocation with building services contributing 21%. Specification choices have significant impact on overall budgets, especially with Singapore's high material costs. Identifying alternative materials and solutions that can offer better value while maintaining aesthetic and performance standards can alleviate the impact on overall budgets. For instance, evaluating the use of imported versus locally sourced materials can yield substantial savings when considering Singapore's import regulations and taxes. Adoption of emerging smart building technologies may require additional upfront investment, but it can unlock enhanced data collection and analysis to empower proactive maintenance, optimise resource utilisation and ultimately drive down operational costs.
I 4. INTEGRATE SUSTAINABILITY FROM THE START
Despite higher upfront costs, 62% of Asia Pacific corporates expect an increase in sustainability performance
FIT-OUT COSTS
spend by 2030. Besides capturing long-term energy and cost savings, meeting sustainability regulations can support an organisation’s efforts to appeal to clients and future employees. Engaging sustainability experts alongside cost advisors early in the process ensures requirements are embedded in initial decisions, preventing costly later additions.
I 5. PLAN FOR REINSTATEMENT
Singapore faces high reinstatement costs due to the stringent requirements that tenants need to fulfil to restore a leased space to its original condition. Developing strong, collaborative partnerships with landlords can help tenants more easily find opportunities to reduce these costs. For example, organisations can better plan for the eventual reinstatement during the initial fit-out design by incorporating reusable elements and sustainable practices that align with their landlord’s expectations.
Key considerations that may impact future reinstatement costs include:
• Works to be undertaken to meet landlord hand-back requirements, such as replacement of raised floor & ceilings
• Extent of tenant works affecting the landlord’s asset, such as internal staircases or façade replacement
• Quality of base building, i.e. highergrade buildings typically require higher quality materials and fittings
• Commercial exit arrangement, which determines how much room a tenant has for negotiation with their landlord
I 6. INVEST IN THE RIGHT TECHNOLOGY
With security, IT and AV works accounting for 16% of total fit-out spend, organisations should invest in technology that can deliver measurable returns on productivity, space utilisation, or energy efficiency, while consider future trends and advancements.
By shifting from a cost-driven to valuedriven approach, organisations can better focus on creating spaces that deliver both immediate and long-term returns on workplace investments. The right cost management team can guide you to implement results-driven strategies on specification selection, technology integration, and space planning, so you can achieve costeffective workplaces that drive business outcomes.
This article has been written by Daniel Malacchini MAIQS, CQS Head of Cost Advisory, Project & Development Services, JLL Asia Pacific.
WHEN IS THE BEST TIME TO ENGAGE A QUANTITY SURVEYING PROFESSIONAL ON A RESOURCES PROJECT?
PIRA RAJENTHIRA MAIQS, CQS
Contracts Administrator, Clough Group
The best time to engage a Quantity Surveying (QS) professional on a resources project is at the earliest possible stage – during planning and feasibility. Early involvement enables accurate cost planning, feasibility analysis, and value management, which are critical in the high-cost, high-risk environment of the resources sector.
A QS provides essential cost intelligence that supports informed decision-making and helps align the project scope with financial constraints before the design is locked in or contracts are awarded.
Equally important is the QS’s role during the construction phase. This includes overseeing daily progress tracking, cost control, and contract administration, ensuring that actual performance aligns with planned timelines and budgets. Regular site reviews and cost updates help manage
risk in real-time, allowing for prompt action on delays, cost variations, and potential claims.
In resource projects where numerous subcontractors, tight schedules, and remote locations add complexity, the QS also plays a key role in subcontractor management, progress claim assessment, and variation evaluation. Their presence helps maintain commercial discipline, improves transparency, and supports dispute avoidance.
Engaging a QS early and maintaining their involvement throughout the project ensures a well-informed, financially controlled, and contractually sound project that can maximise value for all stakeholders.
KANNAN VINASITHAMBY AAIQS, CQS
Lead Estimator, Rio Tinto
Resource projects are not too different from residential or commercial projects; the principles are the same. Quantity surveyors can play a pivotal role in the resource industry, where the complexity, scale, and capital intensity of projects demand expert cost and contractual management. Currently, in most resource projects, quantity surveyors are engaged for quantity take-offs and estimating toward the end of the design phase. However, quantity surveyors can be engaged as early as the concept stage through to project completion. The involvement of a quantity surveying professional ensures that every financial and commercial aspect is carefully planned, monitored, and controlled.
Resource projects, whether mining operations, energy infrastructure, or processing facilities, are inherently high-value and high-risk. Early engagement of a quantity surveyor
brings the benefit of robust estimates, from order-of-magnitude, pre-feasibility to feasibility stages and beyond. In addition to estimates, quantity surveyors’ contracts and procurement acumen, along with value engineering skills, enable stakeholders to make informed decisions and mitigate financial risks before substantial investments are committed.
Throughout the lifecycle of a resource project, quantity surveyors can be utilised in study phases, procurement processes, and the implementation phase to ensure transparency and accountability. Their expertise is essential for:
• Providing accurate estimates
• Establishing control budgets
• Providing contracts and procurement advice
• Identifying potential cost overruns
• Advising on variations
• Managing change, and
• Completing final accounts and collecting benchmarking information.
They also enhance collaboration across teams, aligning technical and financial goals to deliver projects on time, on budget, and to specification.
A quantity surveyor’s role is not just about measurement and estimating; it’s about safeguarding investment, ensuring compliance, and maximising value. Their timely involvement isn’t merely a question; it’s a necessity for project success in the challenging Australian resource sector.
THE PAYMENT BLUEPRINT: REFORMING PAYMENT PRACTICES IN THE CONSTRUCTION SECTOR
By Sam Neave
PAYMENTS
THE PAYMENT ISSUE AND WHY IT MATTERS
Payments in the construction sector are often made late. In some cases, they aren’t made at all. This restricts the flow of capital in the market, hindering the sector’s ability to deliver projects on time, on budget, and to the correct specification. This is particularly concerning given the need to transition to renewable energy and address the housing shortages that affect people in Australia and abroad. Indeed, the issue of poor payment practices has garnered significant public attention in the wake of highprofile business failures, such as Probuild, Porter Davis, and Roberts Co. Poor payment practices are antecedent to the insolvency crisis faced by the construction sector.
Statistics offered by the Australian Securities & Investment Commission (ASIC) and the Department of Treasury illustrate the economic severity of the non-payment. For example, the latter found that only 58% of invoices were paid within 30 days in the Australian construction sector as compared to the national average of 68%. More alarmingly perhaps are the disproportionate levels of insolvency. Although consistently ranking among the worst performing industries, the 2024-25 financial year saw record levels of firms enter initial external administration or receivership. Specifically, rates rose 21% year-onyear. The Housing Industry Association (HIA) also warned of the implications for productivity. Their submission to the Senate inquiry in 2015 argued that the level of insolvency risk in the sector increased the difficulty for firms to secure financing, and consequently their ability to secure future business.
I EXTERNAL ADMINISTRATION OR CONTROLLER APPOINTED IN CONSTRUCTION
The non-economic implications of nonpayment are also well researched. A decade ago, submissions to the Senate inquiry on construction insolvencies highlighted that stigma, relationship difficulties, and mental health issues were prevalent after insolvency. In some extreme cases, sufferers of nonpayment died by suicide.
Non-payment and its implications are broadly recognised. Reform, however, is complicated. There have been several recommendations made, arising from various government-commissioned inquiries and industry reports. These have often polarised stakeholders, who, for varying reasons, have vested interests. One such recommendation is what is known as a ‘payment trust’.
FOUNDATION OF REFORM: INTRODUCTION TO PAYMENT TRUSTS
Imagine that the government is building a new highway in your area and they hire a builder to construct it. The builder must hire subcontractors, such as concreters, earth workers,
and plumbers. Traditionally, the government will pay the builder, who is then responsible for paying each of the subcontractors. The builder may have several similar projects at once. Payments from each project are made into one bank account, comingling funds. This temporarily increases the working capital of the builder, who is relied upon to fairly pay the subcontractors. This payment method is widely used in Australia, the United Kingdom (UK), and the United States (US), among others.
There is, however, an alternative method whereby funds for each project are held in trust for the benefit of lowertiered contractors in the supply chain. These are known as ‘payment trusts’. This keeps the funds within the project, ensuring payments are made to those stakeholders who are engaged in the works under contract. This also ‘ringfences’ the trust funds if a firm fails. Essentially, it’s a piggy bank, solely for that project.
Teng et al. (2023) defined the term ‘statutory payment trust’ to broadly
Figure 1: External Administration or Controller Appointed in Construction (ASIC 2025)
define a series of related payment method frameworks that involve trusts. In this study, the term ‘statutory’ has been removed to include frameworks that are not implemented through legislation, such as the New Engineering Contract’s (NEC) use of Project Bank Accounts (PBAs). Thus, payment trusts conceptually widen the scope of research and possibility for reform.
Teng et al. researched two payment trust frameworks; PBAs and Deemed/ Cascading Statutory Trusts (DSTs). The former has been sporadically implemented in Australia and the UK, whereas the latter has been implemented in the US. This study includes a third framework, a Retention Trust (RT), that is concerned with securing performance guarantees. Let us briefly consider the characteristics of each framework.
The implementation of DSTs in the US has varied between individual states, with different jurisdictions adopting distinct approaches and timelines. Commonly, the frameworks are implemented through statutes, requiring the use of construction trusts on qualifying projects even where they are not expressly included in the head contract. In other words, this is a legal mechanism where payment obligations create automatic trust relationships down the supply chain. This means that head contractors must hold funds in trust for subcontractors, and subcontractors, accordingly, for suppliers. Where the frameworks differ is in their requirements for separation of funds. In some states, such as Texas, there is a requirement for the funds for each project to be held in separate accounts. This increases the traceability of funds, particularly important if a contractor becomes bankrupt and their estate is distributed to creditors. In
other states, such as Maryland, there is no such requirement. Proponents of the use of this framework in Australia, such as Collins (2012), have pointed to its wide encapsulation of the supply chain, meaning that more stakeholders are protected against poor payment practices and insolvency risk.
PBAs are another payment trust framework that require the establishment of a separate bank account for each project. This framework is implemented through contracts, such as the NEC in the UK, standard form government contracts in Western Australia (WA), and through legislation in Queensland (QLD). The requirement for a separate bank account increases transparency and control. Often the head contractor establishes the account and administers it as trustee. Subcontractors and consultants are beneficiaries to the trust account.
Protection of retention monies is a necessary and pragmatic application for payment trusts. Performance guarantees are typically 5% of the contract value, and therefore, retention trusts protect the stakeholders’ profit margin. In New South Wales (NSW), retention trusts are required on projects worth over $20 million. This demonstrates a strategic application of payment reform.
The sporadic approaches and timeline of payment trust implementation is often critiqued. However, it also demonstrates the flexibility and incrementality of reform which is necessary in an industry that favours tradition. The primary differences between the frameworks are their legal status, i.e., whether they are enforceable through the contract or legislation, and the reporting requirements.
ROAD TO REFORM: CURRENT DEBATES ON PAYMENT TRUSTS
Reform is often contentious. Change to payment practices is no different. Stakeholders throughout the supply chain have voiced their support for, or opposition to, payment trusts. The supporters (often unions, academics, and superannuation funds) broadly agree that the status quo is untenably risky. Conversely, head contractors and their associations often oppose the framework, arguing against further market regulation. For the policy to be successful, decision makers must understand each constituencies’ concerns. Overcoming this divide, and building consensus, is necessary for a sustainable construction sector.
In the past decade, there have been three significant reviews into payment practices in the Australian construction sector. The reviews by the Senate (2015), Murray (2017), and Fiocco (2018) commonly investigate payment trusts as an alternate payment practice. In doing so, they identified the various stakeholders who support or opposed the reform.
The Construction, Forestry and Maritime Employees Union (CFMEU) supported the reform, arguing that it offered a “simple, cost effective, and fair means” of dealing with payment practices and insolvency risk. The Masonry Contractors Association of NSW & ACT agreed. Support also varied on the scope of the proposed reform. Some supporters, such as ARITA, were more specifically in favour of the retention trust model recommended in the earlier Collins Review (2012). Conversely, Cbus supported the imposition of a payment trust over the whole contract. Associate Professor Michelle Welsh from Monash
PAYMENTS
Business School and Adjunct Professor Philip Evans from Notre Dame Law School supported the measure as long as it protected lower-tiered contractors, who are significantly vulnerable to poor payment practices and insolvency risk. Organisations representing large contractors such as the Australian Constructors Association (ACA) and Master Builders opposed the reform, citing potential increases in regulation, reporting, and administration. Specifically, the ACA argued in their ‘Trust Deficit’ report that the imposition of payment trusts “remove the discretion of builders to use funds from one project to offset cashflow constraints on others”. They, alongside the HIA, made similar submissions to the 2015 Senate inquiry, stating that cross-subsidisation is commonplace in the industry. Adjunct Professor Evans was unconvinced of this argument, countering that “one should not use ‘other people’s money to enhance your business interest” (Senate Economic Reference Committee, 2015, p.164).
The current debate on payment trusts is divisive. These arguments were made prior to the trial and subsequent implementation of project bank accounts in QLD and WA, as well as retention trusts in NSW. It is now critical to review and learn from these applications. This will allow for further informed debate on additional implementation in other jurisdictions.
REFORM IN ACTION: CASE STUDIES FROM ABROAD
PBAs have been used in the UK since 2012, with National Highways (formally Highways England) as the most prolific user. The organisation – responsible for the delivery of road infrastructure – implemented a PBA on the M4 J19-
20 and M5 J15-17 Smart Motorway Scheme. The Tier 1 head contractor, Balfour Beatty, engaged 86% of its supply chain by value within the framework. Despite initial reluctance to engage with Teir 3 contractors, whom they had no direct contract with, payment using the PBA was successful and resulted in the full payment cycle being completed within 20 days of the assessment on average.
LIMITATIONS AND FURTHER RESEARCH ON PAYMENT REFORM
There remains considerable opposition to payment reform in the construction sector despite endemic poor payment practices and rising insolvencies. Payment trusts are by no means an all-encompassing solution. Rather, they offer protection to vulnerable stakeholders and may inadvertently change the culture of payments in the construction sector. Further research and stakeholder engagement is required to increase the viability and commercial benefit of payment trusts. Various jurisdictions that have trialled, and since implemented, payment trusts may reveal lessons that have otherwise been uncaptured in current literature and media debate.
It should also be acknowledged that payment trusts are but one of many proposed reforms related to construction payment practices. Other initiatives, such as early payment rebates, may also be integral to improving payment practices and reducing insolvency risk in construction.
This article was written by Sam Neave, Graduate Researcher from the University of Melbourne.
UNFAIR CONTRACTS IN CONSTRUCTION: IDENTIFYING RISK AND RESTORING BALANCE
By Doyles Construction Lawyers
CONTRACTS
The construction industry has long been dominated by contracts that heavily favour one party (typically the principal or head contractor), often at the expense of equitable risk-sharing and commercial fairness or efficiency. While many of these contracts are accepted as the industry standard, that doesn’t make them fair.
In recent years, regulatory attention has sharpened around contractual fairness, particularly in the context of standard form contracts imposed on small businesses. For quantity surveyors (QSs), who are often involved in contract administration and risk assessment, understanding the hallmarks of an unfair contract is essential. This article outlines what constitutes an unfair contract term, how to identify risk, and the growing regulatory framework seeking to restore balance.
WHAT IS AN UNFAIR CONTRACT TERM?
Under the Australian Consumer Law (ACL), as amended in November 2023, a term in a standard form contract may be declared unfair if:
1. It would cause a significant imbalance in the parties’ rights and obligations;
2. It is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
3. It would cause detriment (financial or otherwise) if applied or relied upon.
These provisions apply to standard form contracts where at least one party is a small business (fewer than 100 employees or less than $10 million turnover). In construction, this captures many subcontractors, consultants, and suppliers, making the risk of unfair terms highly relevant across the project supply chain.
Importantly, the legislation no longer merely voids unfair terms, it now imposes civil penalties for including or relying on such terms, creating significant commercial consequences.
COMMON EXAMPLES IN CONSTRUCTION CONTRACTS
Many contracts used in construction, particularly bespoke or principaldrafted contracts, contain clauses that may be vulnerable to challenge. QSs should be alert to the following types of terms:
• Unilateral variation rights: Clauses allowing one party (usually the principal) to vary the scope, timing, or pricing of the works without the other party’s consent.
• Uncapped indemnities: Obligations requiring one party to indemnify the other for broad categories of loss, including those outside their control or not caused by their breach.
• Termination for convenience: Rights enabling one party to terminate the contract at will, with little or no compensation to the other.
• Unilateral extensions of time: Where only one party can extend timeframes or suspend performance, regardless of the circumstances.
• Limitation of liability skewed in one direction: For example, a contract that caps the principal’s liability but leaves the contractor’s liability uncapped.
• No claims clauses: Provisions that prevent a party from claiming additional costs or time for delays caused by the principal or latent conditions.
Such clauses may not always be enforced as written, particularly if they operate harshly against a smaller contractor or supplier, but they significantly affect the commercial dynamics of a project and the risk profile for all participants.
RISK FOR QUANTITY SURVEYORS
QSs are uniquely positioned to identify contractual imbalance early and influence how risks are allocated. Their responsibilities increasingly extend beyond pricing to risk advisory functions, including:
1. Pre-contract review: During tender or procurement stages, QSs should highlight any contract clauses that may breach ACL unfairness provisions, particularly where subcontractors or consultants fall within the small business threshold.
2. Contract administration: When managing the contract, QSs must assess whether time, cost, or variation entitlements have been unfairly limited, and whether those limitations are legally enforceable.
3. Claims support: QSs preparing or reviewing claims should ensure that recordkeeping demonstrates any inequitable conduct or procedural imbalance, which may later support legal challenge or negotiation leverage.
4. Subcontract terms requiring a contractor to show that its subcontracts are not unfair in case the Principal might be an associated person to the breach.
RECENT DEVELOPMENTS
The 2023 reforms to the ACL significantly increased the consequences of unfair contract terms.
Key changes include:
• Civil penalties: Companies can now face fines of up to $50 million (or more, based on turnover) for including or relying on an unfair term.
• Broader coverage: More contracts are now captured, including those with higher value thresholds and a wider range of small business participants.
• Greater regulatory scrutiny: The ACCC and state regulators are actively monitoring construction and infrastructure sectors, issuing warnings and undertaking enforcement actions.
In tandem with this, peak industry bodies, including the Australian Procurement and Construction Council (APCC), have called for more balanced standard contracts, encouraging fairer risk allocation and clearer contract language.
These reforms demonstrate that fairness in contracting has become a legal imperative.
PRACTICAL TIPS FOR QSS
1. Audit standard contracts: Maintain a checklist of red flag clauses that may trigger unfairness concerns.
2. Promote balanced terms: Encourage the use of standard forms (e.g., AS 4000, ABIC MW) where possible, and advocate for mutual obligations in indemnity, variation, and termination clauses.
3. Document risk allocations: Ensure that contract notes or procurement briefs clearly explain any negotiated risks and the basis for accepting or rejecting certain terms.
4. Monitor enforcement: Stay updated on unfair contract case law or regulatory actions relevant to construction to inform contract reviews and professional advice.
TOWARD FAIRER CONTRACTING CULTURE
Beyond the legislative changes, there is growing industry recognition that unbalanced contracts are commercially counterproductive. They increase the risk of disputes, delay, insolvency, and reputational damage. Projects where parties feel treated unfairly, particularly contractors or consultants bearing outsised risk, are less likely to deliver on time, on budget, or without claims. By identifying and addressing unfair terms at the outset, QSs contribute not only to better outcomes for their clients but also to a more sustainable and collaborative contracting environment across the industry.
CONCLUSION
Unfair contract terms are no longer just poor practice; they are now unlawful and potentially subject to significant penalties. As trusted professionals at the intersection of cost, risk, and delivery, QSs are critical in identifying, managing, and advising on unfair contract risks.
By integrating legal awareness with commercial acumen, QSs can help restore fairness to contracting practices and ensure construction projects are built on strong foundations and balanced terms.
This article was written by Jim Doyle from Doyles Construction Lawyers.
THE BIGGER THE PROJECT, THE BIGGER THE PROBLEMS WITH LUMP SUM CONTRACTS
By Owen Hayford
EVERYONE LOVES A LUMP SUM PRICE
• For many transactions, a lump sum price provides cost certainty. It’s simple to administer:
• No need to count hours/materials, etc.
• No need to verify the actual cost, or that the actual cost is efficient
• No need for the contractor to ‘open its books’
• You can pay it in instalments by reference to milestones or percentage complete.
• It can be combined with a competitive tendering process to obtain and demonstrate value for money.
• It’s become the ‘default’ option. You rarely have to defend a decision to competitively procure a fixed-price contract. Whereas alternative pricing methods are routinely questioned, and need to be justified.
• As such, it’s a good option for many procurement situations.
But a lump sum price isn’t a great option for most construction projects
Perhaps controversially, my view is that a lump sum price isn’t a great option for most construction projects, even simple ones, because of the problems it creates in the construction context. And as construction projects get bigger, so do the problems that a lump sum price creates. The downsides of lump-sum prices are routinely underestimated.
LUMP SUM PRICES CREATE MISALIGNED INTERESTS
The main problem associated with a lump sum is the misalignment
LUMP SUM CONTRACTS
of interests that it creates and the adversarial behaviour that this causes. To understand why this is so, we need to understand the interests of the various entities that are involved in any project, and how they differ.
For this purpose, the project participants can be split into two categories:
1. the owner participant; and
2. everyone else, collectively referred to as the non-owner participants.
The owner is the entity that decides to procure the project. It’s the ultimate client and generally sits at the top of the contracting chain. The non-owner participants include contractors, subcontractors, suppliers, consultants, financiers, investors, operators, maintenance contractors, independent certifiers, and so on.
The non-owner participants are almost always commercial entities that exist to make a profit for their owners. They are not charities, and their true purpose is not found in their statement of corporate values. Being a good corporate citizen with a social licence to operate is simply a means to an end. It’s how the entity can achieve its real purpose, which is to generate a profit for its owners.
You can’t generate a profit selling widgets unless you have staff to make them and customers who want to buy them from you. Commercial entities within the construction sector tell us their purpose is something like creating sustainable built environments that enhance the quality of life for communities because they believe it will attract staff and customers and thereby sustain or increase the profit and wealth it generates for its owners.
We must therefore remember that the
primary interest of each non-owner participant is to make a profit for its owners, and all these other things that customers, staff, and communities want to hear are secondary; they are only done to the extent they have a positive impact, rather than negative impact on their primary interest.
The owner participant’s interests, on the other hand, are different. A project owner’s objectives usually revolve around cost, time, and quality outcomes. Other objectives for project owners can include environmental sustainability, stakeholder satisfaction, social licence, local industry participation, and other social objectives.
Accordingly, our two categories of project participants have different interests. But having different interests doesn’t mean their interests are misaligned. It's possible to align the profit-making interest of each nonowner participant with the various interests of the owner participants, but not once a lump sum price is agreed.
The reason why this is this way comes down to what I call the ‘law of selfinterest’.
The project owner pursues its selfinterests by setting out its price, time, quality, and other objectives in a request for tenders, and inviting the market to submit tenders that seek to optimise the tendered solution against the owner’s objectives. Each potential non-owner participant is striving to achieve the owner’s objectives so that it can win a contract and thereby achieve the non-owner participant’s profitgenerating objective. At this point in the process, the interests of owners and non-owner participants are aligned.
But, as soon as a lump sum contract is signed, the objectives of the owner and the relevant non-owner
LUMP SUM CONTRACTS
participant become misaligned. Once the lump sum price is agreed, the law of self-interest drives the non-owner participant to set about maximising the profit available to it under the contract by delivering what it promised for the minimum cost.
It is contrary to a non-owner participant’s interest to spend any more than the minimum needed to fulfil its contract obligations, because every extra dollar that it spends reduces its profit by one dollar. If it spends more to improve quality, finish earlier, or improve social licence, it is penalised with a lower profit margin. Why would it do that? Doing what is ‘best for the project’ is contrary to the law of self-interest. Similarly, if a problem occurs during construction that could be easily fixed by having the contractor do some corrective or extra work, but the contractor has an opportunity to blame another participant and have them bear the cost of fixing or overcoming the problem, then the law of self-interest will drive the contractor to the solution that is best for itself, rather than the one that’s best for the project. This is why we have the blame game on almost every project.
AS PROJECTS GET BIGGER…
As projects get bigger, the number of non-owner participants that are involved increases, and the need for interfacing participants to cooperate and collaborate with one another increases. Project owners will often impose obligations on their interfacing contractors to cooperate with one another, but if each of them is engaged under a lump sum price, each will want the other to do any work that is required to coordinate and interface the works, because each dollar they spend on such work is one dollar less profit
that they will make on their contract. So, both will refrain from undertaking any tasks that aren’t clearly in their respective scope and will assert that the owner should direct such activities as a variation. Again, it’s the law of selfinterest that drives this behaviour.
A BETTER WAY
It never ceases to amaze me how many project owners fail to grasp this basic commercial rule. They continue to assume (or hope) that tightly drafted contractual obligations will overcome the law of self-interest. Consequently, they continue to be routinely disappointed with the outcomes they achieve on their construction contract, as the statistics on construction project cost, time, and benefit realisation outcomes confirm.
Project owners who contract on a lump sum basis and then expect their contractors, consultants, and suppliers to subordinate their self-interest in generating a profit to the interests of the project need a dose of commercial reality.
Commercially astute project owners understand that their supply chain is primarily motivated by profit, and they use this to their advantage. They do this by abandoning lump sum prices and replacing these with pricing models that:
• separate cost recovery from profit; and
• link the latter to how well the project performs against KPIs based on the owner’s project objectives.
By linking the profit margin that each non-owner participant makes to the performance of the project against the owner’s objectives, we align the interests of the non-owner participant with the interests of the owner. Better
than business-as-usual performance against the KPIs, this generates a win for the owner through better project outcomes, and a win for each nonowner participant via a better-than-BAU profit margin. Conversely, worse-thanBAU performance against the KPIs results in the non-owner participants sharing the financial pain of poor project performance via a lower-thanBAU profit margin.
In my experience, it is best if the KPIs used to measure performance are based on whole-of-project outcomes, rather than outcomes on the scope performed by the relevant non-owner participant, as doing so will incentivise each non-owner participant to do what’s best for the entire project, rather than what’s best for its scope of work. This, of course, incentivises greater collaboration between the non-owner participants than will occur when each is operating under a lump sum price for its scope, which helps immensely with bigger projects involving the integration of different systems from different suppliers.
This article was written by Owen Hayford from Infralegal.
CONTRACTUAL CONFLICTS IN THE AUSTRALIAN CONSTRUCTION INDUSTRY
INTRODUCTION
The construction industry in Australia is complex and involves many stakeholders, contracts, and processes. Given the large scale and high stakes of many projects, contractual conflicts are a prevalent source of disputes. These conflicts often arise from ambiguous contract terms, scope changes, payment delays, and unmet expectations. Addressing these issues proactively is essential to avoid costly litigation and ensure project success. This paper explores the common types of contractual conflicts, the role of documentation, case studies from Australian projects, and preventive strategies.
TYPES OF CONTRACTUAL CONFLICTS
Contractual conflicts in construction projects often stem from various factors including:
1. Ambiguous Contract Terms: Vague or poorly defined contract terms can lead to differing interpretations by parties, resulting in disputes over obligations and responsibilities.
2. Scope Changes: Modifications to project scope mid-way through construction are common but can lead to disagreements over who bears the associated costs and time implications.
3. Payment Delays: Payment-related disputes often arise because of delays in approval, billing issues, or disagreements over completed work valuations.
4. Unrealistic Expectations: When stakeholders have differing expectations or goals that are not aligned in the contract, disputes become more likely.
THE ROLE OF DOCUMENTATION
Proper documentation helps prevent and resolve contractual conflicts. Clear and detailed documentation helps in setting realistic expectations, providing a basis for mutual understanding of project goals, and clarifying each party’s responsibilities. Comprehensive documentation includes initial contract terms, change orders, payment records, and project timelines.
Well-maintained documentation also serves as evidence during dispute resolution, providing a transparent record of all agreements and changes throughout the project lifecycle.
CASE STUDIES AND EXAMPLES
In Australia, several large-scale infrastructure projects have experienced significant contractual conflicts due to misalignment in contract terms and scope changes. Notable cases highlight the impact of contract clarity and risk allocation on project outcomes and the potential for disputes.
I SYDNEY LIGHT RAIL PROJECT (2ND TIER HEADING)
The Sydney Light Rail project encountered extensive delays and cost overruns, leading to a prominent legal dispute between the New South Wales government and Acciona Infrastructure Australia Pty Ltd. In Acciona Infrastructure Australia Pty Ltd v Transport for NSW [2019] NSWSC 1469, Acciona sought additional compensation due to unforeseen utility relocations that were not initially accounted for in the project scope. The dispute centred on the interpretation of risk allocation within the contract, with the court’s decision emphasising the
importance of explicit terms in defining responsibility for unforeseen work.
I ROY HILL IRON ORE PROJECT (2ND TIER HEADING)
The Roy Hill Iron Ore project in Western Australia faced disputes between Samsung C&T, the primary contractor, and Duro Felguera Australia Pty Ltd, a subcontractor. In Samsung C&T Corporation v Duro Felguera Australia Pty Ltd [2016] WASC 193, Samsung sought damages for delays and alleged breaches of contract. Duro Felguera counterclaimed, arguing that Samsung failed to provide critical project information in a timely manner, which contributed to delays. The Western Australian Supreme Court highlighted the importance of communication and clear obligations between contractors and subcontractors, especially in complex resource projects.
I NEW ROYAL ADELAIDE HOSPITAL PROJECT (2ND TIER HEADING)
The New Royal Adelaide Hospital project, one of Australia’s largest health infrastructure projects, experienced considerable delays and cost overruns. This led to legal action in Health Minister for South Australia v Hansen Yuncken Pty Ltd & CPB Contractors Pty Ltd [2017] SASC 17. The South Australian government and the construction consortium disagreed on who should bear the costs related to extensive design modifications and unanticipated construction challenges. The court’s ruling underscored the necessity for detailed and mutually agreed-upon project specifications and risk allocation in high-stakes infrastructure projects.
PREVENTIVE MEASURES
To mitigate contractual conflicts, it is essential to adopt preventive measures such as:
1. Pre-Project Planning: Conducting thorough risk assessments and clear scope definitions helps set realistic expectations from the start.
2. Stakeholder Alignment: Regular meetings and clear communication between all stakeholders ensure everyone is aligned on project goals, reducing potential conflicts.
3. Detailed Contract Terms: Explicitly defining roles, responsibilities, and contingencies in contracts can prevent ambiguities that lead to disputes.
4. Change Order Procedures: Establishing formal change order protocols allows for transparent handling of scope modifications, ensuring that all parties agree to changes in writing before they are implemented.
These strategies not only help avoid disputes but also support smooth project progress, contributing to timely and successful project completion.
CONCLUSION
Contractual conflicts are a significant risk in the Australian construction industry, with the potential to cause costly delays, budget overruns, and strained relationships among project stakeholders. By implementing preventive measures such as clear documentation, realistic expectations, and thorough contract terms, construction projects can minimise these risks. A proactive approach to contract management not only reduces the likelihood of disputes but also enhances overall project performance and success.
