Key Facts:
- Cement Concrete & Aggregates Australia (CCAA) and Civil Contractors Federation Victoria (CCF Victoria) are calling for urgent clarification on fuel-cost relief across Victoria's Big Build programme, with Melbourne diesel prices having risen by almost 57 per cent since late February 2022.
- The organisations have written jointly to the Victorian Premier seeking an urgent meeting after a member reported that Suburban Connect stated all Big Build projects have been directed not to provide fuel-cost relief unless contracts expressly include a rise-and-fall mechanism.
- CCAA and CCF Victoria argue that the absence of a rise-and-fall clause in legacy fixed-price contracts is precisely why a retrospective relief mechanism is needed, as businesses had no reasonable opportunity to price this risk when contracts were signed.
- The two organisations are seeking mandatory and auditable pass-through of extraordinary fuel costs to subcontractors and suppliers, as well as a direct application pathway where a head contractor fails to act.
- CCAA and CCF Victoria are also calling for future Victorian Government contracts to include appropriate rise-and-fall provisions and mechanisms to address extreme and unexpected price escalation.
Cement Concrete & Aggregates Australia (CCAA) and Civil Contractors Federation Victoria (CCF Victoria) are calling for urgent clarification of fuel-cost relief arrangements across Victoria's Big Build, with wholesale diesel prices remaining more than 50 per cent above late-February levels.
The latest Australian Institute of Petroleum data show Melbourne diesel Terminal Gate Prices at 259.3 cents per litre on 16 September, compared with 165.3 cents per litre on 27 February, immediately before the extraordinary fuel-price escalation that began in March.
That represents an increase of 94 cents per litre, or almost 57 per cent, adding significant costs for businesses supplying Victoria's housing and infrastructure pipeline.
CCAA Chief Executive Officer Michael Kilgariff said the latest prices reinforced the need for a practical pathway for extraordinary fuel costs under legacy fixed-price contracts.
"Construction material suppliers should not be left carrying extraordinary fuel costs simply because contracts signed before these increases did not anticipate them," Mr Kilgariff said.
"Diesel prices in Melbourne are now almost 57 per cent higher than they were in late February. For businesses moving cement, concrete and aggregates across Victoria every day, that has a significant impact."
CCF Victoria Executive Director Annie Kessell said civil contractors were facing the same pressures across the infrastructure delivery chain.
"Victorian civil contractors cannot be expected to absorb a fuel-price shock of this magnitude while continuing to deliver the Government's projects program on contracts priced in a fundamentally different market," Ms Kessell said.
CCAA and CCF Victoria have written jointly to the Victorian Premier seeking an urgent meeting on fuel-cost relief for Big Build projects.
CCAA has been advised by a member that, in relation to the Suburban Rail Loop, Suburban Connect has stated that all Big Build projects have been directed not to provide fuel-cost relief unless the relevant contract expressly provides for fuel to be subject to a rise-and-fall mechanism.
CCAA and CCF Victoria are seeking urgent clarification as to whether this represents a broader Victorian Government position.
"The absence of a rise-and-fall clause in a legacy fixed-price contract is precisely why a retrospective relief mechanism is needed," Mr Kilgariff said.
"Businesses that entered into contracts before these extraordinary increases had no reasonable opportunity to price that risk."
Ms Kessell said the consequences extended across contractors, subcontractors and suppliers.
"An absence of a rise-and-fall clause should not become a licence to push extraordinary and unforeseeable costs down the supply chain," Ms Kessell said.
"Contractors, subcontractors and suppliers are all part of the same delivery chain, and when legitimate cost increases cannot be recovered, the pressure ultimately lands on the businesses doing the work."
CCAA and CCF Victoria have asked the Government, if such a direction exists across Big Build projects, to review it so verified extraordinary fuel-cost claims can be considered under legacy fixed-price contracts.
They are also seeking mandatory and auditable pass-through to subcontractors and suppliers and a direct application pathway where a head contractor does not act.
"If suppliers are paying higher transport costs downstream but have no mechanism to recover legitimate increases upstream, those costs become trapped in the supply chain," Mr Kilgariff said.
"That puts unnecessary pressure on the businesses Victoria relies on to supply the materials needed for its housing and infrastructure pipeline."
CCAA and CCF Victoria are also calling for future Victorian Government contracts to include appropriate rise-and-fall provisions and mechanisms for extreme and unexpected price escalation.
"Victoria cannot expect its' civil construction industry to bankroll these projects by absorbing costs that were never priced into these contracts," Ms Kessell said.
"The Victorian Government needs to recognise the reality on the ground and provide a clear, consistent and auditable pathway for extraordinary fuel costs to be addressed.
"Contractors should be building roads, rail and critical infrastructure - not carrying an unpriced fuel risk that was impossible to anticipate when these contracts were signed."
"With diesel prices now almost 57 per cent above late-February levels, this issue has not gone away," Mr Kilgariff said.
"Victoria needs clarity and a practical pathway that ensures legitimate relief can reach the businesses actually bearing these costs."
