A contractor working on a government project has a significant advantage over one working on an equivalent private sector project: the government principal is subject to procurement policies and value-for-money obligations that private sector principals are not.
Those policies do not automatically entitle you to cost recovery. But they create a framework for a conversation that a private sector principal may simply refuse to have.
The Commonwealth Procurement Rules require Commonwealth entities to achieve value for money, to treat suppliers fairly and consistently, and to conduct procurements with integrity. A Commonwealth entity that refuses to engage on a legitimate cost increase claim creates risk for its own project. The argument to make is not that the agency is contractually obliged to pay. It is a commercial and policy argument for why engagement on cost sharing is in the agency’s interest.
The Queensland Procurement Policy and the Building and Construction Procurement Guidance from the Department of Energy and Public Works specifically address how agencies should manage cost escalation on capital works projects. The guidance encourages agencies to consider contract modifications and commercial negotiations where cost escalation threatens project delivery. Reference this guidance explicitly in your approach to the agency.
GC21 is a more contractor-friendly document than many standard forms. Schedule 7 deals with cost reimbursement. If Schedule 7 has been completed in the Contract Particulars, the contract includes a cost adjustment mechanism. Check Schedule 7 before assuming you have no entitlement.
GC21 also includes a good faith obligation on both parties, which creates an argument for engaging on cost sharing even where the strict contractual position is unfavourable.
Defence Housing Australia and Defence construction projects are subject to Commonwealth procurement rules and specific contract frameworks. Rachelle Hare worked in-house in this environment and has direct experience of how cost recovery conversations are conducted within the Defence procurement framework.
The Commonwealth’s approach to cost recovery on Defence projects has been evolving in response to the sustained period of cost escalation.
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Government agencies respond to formal, documented, policy-referenced approaches.
The back-to-back problem: where you do achieve cost recovery from the government principal, consider whether any of that recovery should flow through to affected subcontractors.
Shannon Drew’s full cost analysis
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Three fixed-fee services for construction businesses working through the cost crisis. Rachelle Hare and Shannon Drew directly, from the first conversation.
Rachelle Hare is a construction lawyer and business adviser with 25 years of experience, including in-house roles at Thiess, Laing O’Rourke, Acciona, DHA, and UGL. She advises construction businesses on contracts, cost recovery, risk, procurement, commercial strategy, and business structuring across Queensland and Australia.
