June 2026
Cost certainty under pressure
New market volatility is putting the principles of Consult Australia’s Protecting Cost Certainty report to the test. WT’s Sam Mendoza outlines what the sector can learn.
The Middle East conflict that erupted in February has introduced a layer of volatility that the sector cannot price away through contingency or contract clauses alone. At the same time, the underlying drivers of cost pressure, namely workforce constraints, an unprecedented project pipeline and years of underinvestment in sector capability, have not gone anywhere.
WT’s June 2026 Australian Construction Market Conditions Report forecasts national infrastructure escalation of 5.1% in 2026, 5.0% in 2027 and 5.2% in 2028.
These are business-as-usual (BAU) figures that deliberately exclude the direct cost impacts of the Middle East conflict. We have separated the two because the direct impacts vary so significantly by project type, materials mix and supply chain exposure that a blanket national figure would misrepresent reality and put risk allocation under pressure.
That methodological choice is itself an application of the Protecting Cost Certainty principles. The report’s first action is to put risk first, which means identifying and pricing risks transparently rather than absorbing them into a single number that obscures more than it reveals.
What the current market is telling us
The direct cost impacts of the conflict are already visible. Oil-based and petrochemical products, PVC and HDPE pipes, electrical cables, bitumen and waterproofing, have all seen supply cost increases between 15% and 30% during peak disruption. Plant-intensive trades are bearing the brunt of fuel volatility.
The secondary impacts may prove more consequential. The Strait of Hormuz disruption has lifted sea freight rates by 15% to 25%, and damage to Middle East air freight hubs has stretched critical-path delivery times from three to five business days out to four to six weeks. For infrastructure projects with significant imported componentry, these timeframes are schedule-defining.
What these impacts have in common is that they cannot be managed at the end of a project. They have to be anticipated, priced and allocated at the planning and procurement stages, which is precisely the point that Protecting Cost Certainty makes.
Why risk allocation matters more than ever
Across Australia, the construction labour force remains in high demand. Contractors are increasingly selective about the projects they tender for. In this environment, projects where clients proactively identify, manage and mitigate risks before tender are more attractive. Greater risk transparency encourages stronger supplier interest, more competitive tender environments and better cost outcomes for clients.
The opposite approach, pushing risk down the supply chain through fixed-price construct-only contracts in conditions of volatility, produces two predictable outcomes: significant risk premiums priced into bids, or the most capable contractors declining to bid at all. Neither serves cost certainty.
This is where the Protecting Cost Certainty principle of clear roles and responsibilities becomes practical. Specialists, including quantity surveyors and cost consultants, need to be engaged early to assess risk profiles, inform procurement strategy and signal risk appetite to the market. Where this is done well, the market responds with confidence and competitive pricing.
What is working in practice
On projects we are working on now, the most prepared clients are using a structured set of tools. Hyper-escalation clauses are bringing transparency to material and fuel cost movements above defined thresholds. Change-in-law provisions are addressing potential government interventions such as the National Fuel Security Plan. High-risk packages are being front-loaded or procured separately under different risk arrangements.
These mechanisms align with the Protecting Cost Certainty action to value variations. Changes are being identified early and managed transparently, rather than absorbed through contingency drawdown or deferred to end-of-project negotiation.
During delivery, the picture is more fluid. Many projects are in a wait-and-see posture. That is understandable, but it is not a strategy. Where direct cost impacts are eroding margins or threatening project viability, clients who proactively engage with relief considerations are protecting both the project and the relationship. This connects directly to the report’s fifth action: strengthening cost management through active, disciplined processes.
A test the sector cannot afford to fail
The infrastructure sector has been here before. COVID-19 and the Ukraine conflict tested how the industry manages volatility. The lessons from those periods are clear: blanket assumptions and reactive measures cost more than rigorous preparation and proactive engagement.
The current environment puts those lessons to the test again. National BAU escalation above 5% across both building and infrastructure. Brisbane infrastructure escalation forecast to reach 8.0% by 2028. Direct Middle East impacts adding a further, project-specific layer of uncertainty. And a sector capability deficit that took years to build and will take years to resolve.
Contingency is not a substitute for scope clarity, and pricing risk late is not the same as managing it early. The five actions in Protecting Cost Certainty offer a clear pathway, but they only work if government, clients, consultants and constructors take them seriously across the lifecycle of a project.
That is the work in front of us. The cost of getting it wrong has never been higher. The case for getting it right has never been clearer.
This guest opinion piece was contributed by Sam Mendoza, National Director and National Infrastructure Lead at WT, a Consult Australia member. Download the Protecting Cost Certainty report, developed by Consult Australia in collaboration with WT, or WT’s Australian Construction Market Conditions Report.