State and Territory governments and private parties continue to invest in major infrastructure, including in the areas of transport, energy, health and social infrastructure, in particular on the Australian east coast and Tasmania. However, delivering these projects in the current environment presents a set of legal, commercial and delivery challenges that are materially different from those faced even five years ago. 

This article highlights six key issues affecting infrastructure projects in Australia. 

Cost escalation and risk allocation pressures 

Cost escalation remains one of the most significant challenges for Australian infrastructure projects - particularly in Victoria. Volatile material pricing, labour shortages in relevant areas of expertise and supply chain disruption have placed pressure on traditional lump sum and fixedprice risk models. 

In response to these pressures, principals/owners are: 

  • looking at split contracting models or ‘principal supplied’ equipment to increase price certainty, 
  • increasingly seeking to push cost risk down the contracting chain, and 
  • tightening contractual mechanisms for relief events, variations and extensions of time. 

Contractors, on the other hand, are seeking: 

  • clearer (and additional) price and time adjustment mechanisms, 
  • greater transparency around latent condition and scope change risk, and 
  • early warning and collaborative resolution processes. 

The result is heightened tension around contractual risk allocation, particularly where contract forms have not kept pace with market conditions. 

These pressures, when combined with market conditions which can make economic viability of projects less secure, place further obstacles to much needed infrastructure investment. 

Greater scrutiny of time bars and notice regimes 

Notice provisions and time bars are now a frontline dispute issue on most big infrastructure projects. 

Principals continue to rely on strict contractual notice regimes to manage delay, variation and latent condition exposure.  

Contractors are increasingly finding that: 

  • late or noncompliant notices are being used to deny otherwise genuine claims, and 
  • “knowledge on site” or informal communications are insufficient to preserve entitlement. 

This has driven: 

  • earlier legal involvement during project delivery (rather than postcompletion), and 
  • greater emphasis on systems, training and contract administration discipline at site level. 

With legislative reform empowering adjudicators and courts to scrutinise unfair noticebased time bars, this remains a rapidly evolving risk area, and moving forward principals will need to be able to justify reliance on time-bars by reference to a real and legitimate commercial interest. Time bars taking effect in a short period of time are likely to face heightened scrutiny from adjudicators and courts. Contractors seeking to “pass down” time bars to subcontractors and suppliers are likely to face more resistance, now that legislative reforms have highlighted the “unfair” nature of such provisions and may offer legal defences to the enforceability of such provisions. 

Security of payment reform and cashflow strategy: Victoria in focus 

Victoria’s Security of Payment regime is undergoing its most significant reform in two decades, fundamentally changing how payment disputes will be managed. 

Key features of the new regime include: 

  • removal of “excluded amounts”, allowing claims for disputed variations and delay costs, 
  • monthly claiming without reference dates, 
  • tighter payment timeframes, and 
  • reduced ability for respondents to raise new defences after issuance of a payment schedule in adjudicated matters. 

While these changes are intended to improve cash flow, they will also result in: 

  • larger and more complex payment claims, 
  • increased adjudication risk exposure for principals (and head contractors downstream), and 
  • less tolerance for poor documentation or late responses. 

Infrastructure participants are now reassessing payment strategy as a project management issue, not just a legal one. 

Performance security and retention disputes 

Disputes concerning performance security and retention have become more frequent, particularly on distressed or delayed projects. 

Contemporary issues impacting upon performance security include: 

  • calls on security as leverage rather than genuine risk protection, 
  • disputes over entitlement to retain or release security at practical completion, and 
  • increasing scrutiny of the timing and procedural fairness of recourse to security. 

With new statutory processes emerging to regulate claims on security and claims for the release of security (changes to Victoria’s security of payment regime set out notice requirements for having recourse to security and grant express rights for parties providing security to have that security returned), parties can expect greater judicial and adjudicative oversight of what was once considered a largely contractual domain. 

Procurement models and early contractor involvement 

Infrastructure procurement continues to evolve, with increased use of: 

  • Early Contractor Involvement (ECI), 
  • alliances and hybrid delivery models, and 
  • collaborative contracting frameworks. 

While these models promise better risk sharing and constructability outcomes, they also raise: 

  • probity and governance risks, 
  • uncertainty around cost and scope commitment (raising ‘bankability’ issues and therefore potentially limiting funding models for delivering projects), and 
  • disputes about transition from early works to delivery phases. 

Legal issues now often arise before a traditional construction contract is even executed, requiring careful structuring of precontractual rights and obligations. 

Much has been written about adopting more collaborative contracting models, but there needs to be a cultural shift in the infrastructure development and delivery market to adopt such models (including buy-in from the financing market) and to implement them successfully. 

Regulatory, ESG and community pressure 

Infrastructure projects in Australia are increasingly shaped by: 

  • environmental and planning approval complexity, 
  • sustainability and emissions obligations, and 
  • community and stakeholder engagement risk. 

These pressures can translate directly into: 

  • program delay, 
  • scope change, and 
  • increased compliance costs. 

Managing regulatory risk has become as critical as managing construction risk, particularly for transport, energy and urban infrastructure projects. 

Final observations 

Successful infrastructure delivery is not just about engineering and funding. It requires: 

  • sophisticated contract administration, 
  • early legal risk identification, and 
  • proactive dispute avoidance strategies, including a more collaborative approach to delivery risks. 

Projects that succeed tend to be those where legal, commercial and delivery teams are aligned early, rather than relying on dispute mechanisms once positions have hardened. This requires a more flexible approach to risk allocation and management, where collaboration can lead to cost effective and better outcomes.