Most contractors approach cost recovery conversations from a contractual position: I have a rise and fall clause, here is my notice, here is my calculation. Or: I do not have a clause but this is unfair and I need relief.
Both approaches misread the room. The principal is not making a contractual decision. They are making a commercial and risk decision, under their own pressures, with their own stakeholders watching.
I have been on both sides of this conversation. As in-house counsel at Thiess, Laing O’Rourke, and Acciona, I was the person contractors were approaching. I have also acted for contractors making cost recovery claims against principals. The claims that succeeded shared common features. The ones that failed shared different ones.
Program risk. A principal’s single biggest concern is whether their project will be delivered on time and to scope. Frame your cost recovery approach around delivery, not contractor hardship.
Supply chain stability. Principals who have experienced subcontractor insolvencies on previous projects know what they cost. If your key subcontractors are also absorbing unrecoverable cost increases, that is a factual project risk worth putting to your principal.
Their financier’s requirements. Principals on private projects are typically project-financing their construction. A project at risk of delay or contractor default may trigger reporting obligations and potentially a breach of the finance facility.
Claims they cannot verify. A letter asserting that costs have risen will be rejected. Every cost recovery claim needs to be supported by documentation specific to your project: purchase orders, invoices, fuel receipts, Shannon Drew’s financial analysis across all six inputs including overhead recovery and pricing exposure.
Claims that have no contractual hook. Even where the commercial outcome might be the same, a claim framed as a specific entitlement under a specific clause or as a formal commercial variation is procedurally cleaner for the principal to approve to their own stakeholders.
Blaze Business & Legal
Need advice on your specific position?
Three fixed-fee services covering your legal, cost, and business situation. Rachelle Hare and Shannon Drew directly.
When the principal refuses to engage
Some principals will refuse to engage regardless of how well the approach is framed. The refusal to engage is itself relevant information for formal processes. A principal who was put on notice of the cost position and refused any step to manage it is in a weaker position in a dispute.
Blaze Business & Legal
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.
