A fixed-price contract transfers cost risk from the client to you. That is what it is for, and it is why clients like them.
The question is whether you are being paid for carrying it. In 2026, mostly not.
The size of the problem
Industry analysis puts the aggregate cost increase across Australian construction at 7 to 7.5% — covering fuel, materials, wages, superannuation, insurance, interest and government charges.
On a 5% net margin, a 7% cost increase does not compress your margin. It eliminates it and puts you 2% behind.
Construction remains the largest single contributor to Australian insolvencies — 3,472 external administrations in the most recent full year, out of 14,011 economy-wide.
What moved, and when
Anything signed before March 2026 was priced in a different economy.
| Input | Change |
|---|---|
| Fuel excise | 52.6c → 20.6c → 36.6c → 53.7c/L (3 Aug 2026) |
| Award rates | +4.75% from 1 July 2026 |
| Minimum wage | +5.97% to $26.44/hr |
| Superannuation | 12%, plus Payday Super timing change |
| Interest | Cash rate 4.35%; finance costs +36.3% since March 2020 |
| Insurance | Some premiums +60% since 2019 |
Quantify your exposure this week
Not a feeling. A table.
For every live contract:
| Contract | Original price | Costs to date | Cost to complete (today’s rates) | Exposure | Months remaining |
|---|---|---|---|---|---|
Rank by exposure. Most builders doing this properly for the first time find two or three jobs carrying nearly all the risk — and are surprised which ones.
You cannot manage what you have not quantified. “We’re a bit behind on that one” is not quantification.
Rise-and-fall: use the clause you already have
A surprising number of builders hold a rise-and-fall clause and never invoke it, because the conversation is uncomfortable.
That is margin you already negotiated and are handing back.
Check three things on every contract:
- Does a rise-and-fall or price adjustment clause exist?
- Does its scope cover the inputs that actually moved — fuel and labour, not just steel and timber?
- What notice and evidence does it require, and have you complied?
Many clauses lapse if not claimed within a defined window. Claiming late is the same as not claiming.
Contingency, honestly
With 7–7.5% annual cost movement, a 2% contingency is not contingency. It is optimism with a line item.
Size it to the term. A three-month job carries far less cost risk than an eighteen-month one. Contingency should scale with duration, not sit at a fixed percentage out of habit.
Price the volatility, not the average. If fuel has moved four times in five months, the right contingency reflects the range, not the midpoint.
Do not compete it away. The builder who wins on a 1% contingency in a 7% cost environment is buying the job. Sometimes that is a deliberate strategic decision. Usually it is not a decision at all.
Structures that share risk
Provisional sums for genuinely uncertain scope — site conditions, unknown services, client-selected finishes.
Cost-plus with a cap — client gets transparency and an upper bound, you get cost recovery.
Rise-and-fall tied to a published index — the same logic that makes fuel surcharges acceptable in transport. Symmetrical, verifiable, and it falls as well as rises.
Shorter fixed-price windows. A price valid for 30 days instead of 90 is a small ask and a substantial risk reduction.
The discipline that matters most
Be willing to not win the job.
Work priced below cost does not become profitable through volume. It consumes the capacity, cash and management attention you would otherwise apply to work that pays — and in a business where every new project draws cash down before it generates any, underpriced work actively accelerates the problem.
A full order book of underpriced work is not a business. It is a slower failure with better optics.
Where to go next
- Why Australian Builders Go Under With a Full Order Book\n- Fuel Excise Is Back at 53.7c\n- Business Cash Flow in Australia\n- Pricing for Profit
Sources: ASIC insolvency statistics FY2025-26; State of Australian Construction Industry 2026; Fair Work Commission Annual Wage Review 2026; Department of Infrastructure fuel excise fact sheet; RBA Statement on Monetary Policy May 2026. General information, not legal or commercial advice — obtain advice on your specific contract terms.