- Cement Concrete & Aggregates Australia (CCAA) is urging the NSW Government to establish a fuel-cost recovery mechanism for legacy infrastructure contracts, following a rise in Sydney wholesale diesel prices of more than 58 per cent since late February 2022.
- Many existing government contracts do not provide a clear pathway for head contractors to recover extraordinary fuel cost increases from downstream subcontractors and construction-material suppliers.
- CCAA has written to NSW Premier Chris Minns requesting an urgent meeting and action to address extraordinary fuel and petroleum-based input cost increases affecting fixed-price legacy contracts.
- The organisation is calling for retrospective relief for verified extraordinary fuel costs, mandatory and auditable pass-through provisions to subcontractors and suppliers, and an alternative recovery pathway where head contractors fail to submit eligible claims.
- CCAA is also seeking the introduction of appropriate rise-and-fall and extraordinary price-escalation mechanisms in future NSW Government contracts, noting that other jurisdictions have successfully implemented practical solutions to manage extraordinary cost escalation.
Cement Concrete & Aggregates Australia (CCAA) is calling on the NSW Government to urgently establish a workable fuel-cost recovery mechanism for legacy infrastructure contracts, with Sydney wholesale diesel prices now around 58 per cent above late-February levels.
The latest Australian Institute of Petroleum data show Sydney diesel Terminal Gate Prices at 261.9 cents per litre on 16 September, compared with 165.5 cents per litre on 27 February — an increase of 96.4 cents per litre, or more than 58 per cent.
That adds significant costs for businesses transporting the heavy construction materials needed to deliver NSW’s housing and infrastructure pipeline.
Alliance contracts generally manage cost risk collaboratively, with actual costs assessed openly and savings or overruns shared against an agreed target. Traditional contracts may allow recovery in defined circumstances, but extraordinary fuel escalation is not always covered, leaving head contractors without a clear pathway to recover downstream fuel surcharges.
CCAA believes governments need a clear mechanism that allows verified extraordinary fuel costs to be recognised at the project level and ensures appropriate relief flows through to the subcontractors and construction-material suppliers actually bearing those costs.
CCAA Chief Executive Officer Michael Kilgariff said the latest prices reinforced the need for a practical solution for contracts entered into before the extraordinary escalation.
“Construction material suppliers should not be left carrying extraordinary fuel costs simply because government contracts signed before these increases did not anticipate them,” Mr Kilgariff said.
“Diesel prices in Sydney are now almost 54 per cent higher than they were in late February. For an industry moving millions of tonnes of heavy materials across NSW every year, that has a significant impact.
“Our members are paying increased freight costs through their supply chains, including fuel surcharges paid to owner-drivers, but too often there is no workable mechanism for recovering those costs from head contractors.”
CCAA has written to NSW Premier Chris Minns seeking an urgent meeting and action to address extraordinary fuel and related petroleum-based input cost increases under legacy fixed-price government infrastructure contracts.
The issue is particularly acute for suppliers engaging owner-drivers, with CCAA members in many cases paying increased fuel surcharges while being unable to recover corresponding increases from head contractors.
“This is not about transferring normal commercial risk to government,” Mr Kilgariff said.
“It is about dealing fairly with extraordinary costs that could not reasonably have been anticipated when contracts were entered into. Without an effective upstream recovery mechanism, those costs become trapped further down the supply chain.”
CCAA is calling for retrospective relief for verified extraordinary fuel costs, mandatory and auditable pass-through to subcontractors and suppliers, and an alternative pathway where a head contractor does not submit eligible downstream claims.
It is also seeking appropriate rise-and-fall and extraordinary price-escalation mechanisms in future NSW Government contracts.
“Other jurisdictions have shown that practical mechanisms can be established to respond to extraordinary cost escalation,” Mr Kilgariff said.
“NSW needs a solution for projects already underway and better mechanisms for managing these risks in future contracts.”
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About CCAA
CCAA is the voice of Australia’s heavy construction materials industry, an industry that contributes $20.7 billion to GDP and supports 112,970 jobs nationwide. CCAA members produce most of Australia's cement, concrete and aggregates, which are essential to the nation’s building and construction sectors.
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Contact: Mitch Itter, Manager Communications | 0431 542 660 | [email protected]