• Review entitlement clauses to assess contractor / principal exposure.

  Principals should review delay and cost entitlement provisions to understand their exposure to claims arising from fuel-related supply delays or cost increases. Key questions include:

  • Are fuel shortages or broader supply chain disruptions expressly addressed?
  • Do relief events capture upstream supplier failure, transport disruption or fuel rationing?
  • Is relief limited to time, or does it extend to cost?
  • Is relief limited to events occurring within Australia, or does it extend to events originating overseas?
• Indexation and escalation provisions

  Where indexation applies, careful consideration should be given to:

  • Which indices are used (for example, CPI, construction cost indices or specific fuel or materials indices)
  • Whether those indices adequately reflect current fuel and freight volatility
  • Whether the mechanism is sufficiently adaptable to achieve its intended risk‑sharing purpose with contractors, or whether it creates unintended exposure for either party, and when the regime starts to be available 
• Force majeure regimes

  For Force majeure relief to be available, it needs to be included in the relevant contract (as there is no common law doctrine implied into all contracts). 

  Force majeure provisions warrant close scrutiny in the current environment:

  • Do overseas conflicts, war, hostilities or fuel shortages fall within the definition?
  • Does the regime provide time relief only, or both time and cost relief?
  • Are there notice, mitigation or termination thresholds that may be triggered if disruption persists?
• Change in Law regimes

  Where there is Government intervention in relation to the supply of fuel, including measures to price‑cap fuel, limit supply, or restrict the number of personnel permitted on Site, this may give rise to a change in law entitlement. Any such entitlement will depend on the precise drafting of the change in law provisions in the head contract and relevant subcontracts, including:

  • Whether the change is required to have general application
  • Whether relief is limited to cost, time, or both
  • Any exclusions for economic or market‑based impacts
• Insurance considerations

  Typically, insurance policies available to the construction sector do not provide cover for war or its equivalents. As a result:

  • Contractors will generally have no insurance‑backed relief for delays or costs arising from war‑related fuel shortages or supply disruptions
  • Under principal‑procured insurance programs, there may be a component for Delay in Start‑Up (DSU) to the extent that completion or handover of the Works is delayed by these events

  While DSU cover could, in theory, be argued to offset delay liquidated damages, this is not typically how contracts are structured, and care should be taken before assuming any automatic set‑off.

• Financial security and contractor viability

  Given the heightened insolvency risk across the construction sector, principals should consider:

  • What contractual rights exist to request updated financial information or assurances from contractors
  • Whether performance bonds, parent company guarantees or other security remain adequate
  • Warning signs such as delayed payments to subcontractors, requests for early release of retention or earlier payment, or a marked increase in claims activity
• Targeted commercial responses

  For projects or contractors that are at risk or under threat, principals may wish to consider:

  • Temporary or targeted commercial relief to preserve continuity of works
  • Early engagement to restructure delivery approaches or resequencing activities
  • Adjustments to scope or program to reduce exposure to constrained fuel or materials

Cost plus contracts

For cost plus and reimbursable arrangements, fuel volatility presents a different set of considerations. Principals to these sorts of contract should consider: 

• Revisiting cost plans and contingencies: Cost plans and contingencies should be reassessed to ensure they remain sufficient in light of escalating fuel prices and supply disruption.
   
• Whether there may be a need to rephase funding: Where expenditure is accelerating due to increased input costs, principals may need to rephase funding approvals and cash‑flow forecasts.
   
• Pause or descope decisions: If there is no prospect of additional funding, early decisions may be required to pause works, descope non‑critical elements or commence early engagement with the contractor and designer to manage risk and minimise abortive cost.
   
• Capped or GMP arrangements: For capped cost plus or GMP contracts, progress against the cap or ceiling amount should be closely monitored, with early assessment of whether fuel impacts are eroding remaining contingency.
   
• Incentivised models: Where incentive regimes apply, principals should assess the likely impact of increased supply costs and delays on incentive achievability and consider whether incentives require recalibration to remain effective and aligned with project objectives.

Pre-award or multi-phase contracts 

While most head contracts will be fixed lump sum, principals should review whether any projects are:

• Still in an Early Contractor Involvement (ECI) or pre‑contract phase
• Subject to a pricing validity period
• Expressly carved out for global disruption or supply chain instability

Where pricing has not yet been finalised, or where validity periods are approaching expiry, it is prudent to revisit pricing assumptions in light of current fuel volatility. In particular:

• Contractors may no longer be able to honour pricing based on historic fuel inputs or logistics assumptions
• Offers containing global disruption carve‑outs may now be capable of repricing without contractual breach

As an interim risk management measure, principals may also consider including additional clarifications or exclusions in new or revised pricing submissions. For example:

• Clarifying that pricing assumes the continued availability of fuel
• Stating that pricing is based on prevailing fuel prices at the date of offer
• Identifying fuel‑dependent components of the Works (including transport, plant operation and material manufacture) as being subject to adjustment if fuel supply or pricing materially changes

While such clarifications will not override executed lump sum contracts, they can be effective in:

• Managing expectations during ECI or negotiated procurement phases
• Preserving flexibility where contracts are not yet finalised
• Reducing the risk of future disputes about assumed market conditions

Closing observations

Fuel volatility and global supply disruption are increasingly a recurring feature of the construction landscape. For Australian principals, the focus should extend beyond strict contractual rights to proactive risk management, early engagement and pragmatic commercial decision‑making. Projects that address these issues early are more likely to preserve continuity, protect value and avoid more significant disruption as conditions continue to evolve.

We are analysing a range of project and industry contracts, rights and entitlements and considering novel ways that contract clauses might apply to affected projects.  We would be happy to discuss this with you in the context of your contract and project – please reach out.