Unlocking productivity through smarter contracting in Australia

September 2025 is the first anniversary of the partnership between NEC and Consult Australia, the voice of Australian businesses in design, advisory and engineering. The partnership, which aims to promote best practice contracting and procurement across Australia’s infrastructure and construction sectors, has never felt more timely or relevant.

As the Australian Government enters its second term, productivity has rightly returned as a central policy focus. Construction, a sector that contributes over 7% of gross domestic product, is experiencing zero growth. This makes the focus on productivity all the more acute, along with the critical need for a tangible reform pathway towards better outcomes.

Improving productivity in construction depends on how effectively we manage risk in our commercial relationships, and NEC contracts provide a proven model for enhancing project performance.

Managing risk

Consult Australia’s Unravelling Risk campaign, launched in April this year, highlights a fundamental problem in Australia’s current approach to contracting. Too often, the culture is one of ‘risk dumping’, the practice of shifting as much contractual risk as possible down the supply chain. This behaviour may appear deceptively rational for clients in the short term, but it ultimately undermines project performance, drives up costs, reduces competition and squeezes margins to unsustainable levels. In the worst cases, this culture contributes to insolvencies and erodes trust and collaboration across the industry.

NEC’s principles resonate strongly here. NEC contracts have long promoted a philosophy of mutual trust and cooperation, early warning and proactive management of scope, time and cost risk. These features reflect precisely the kind of contractual discipline and cultural shift that Consult Australia advocates through Unravelling Risk. As we reflect on a year of partnership between Consult Australia and NEC, it is clear that at least the urgency for new ways of working is increasingly recognised.

But there is still work to do. While some government clients and leading private sector clients are starting to embrace fairer contracting principles, the general market norm remains adversarial. Legal complexity continues to grow, and unfair risk allocations remain widespread. HKA’s Crux Insight report that changes in scope account for 51% of dispute claims in Australia, which is significantly higher than the global rate of 36.9%. The productivity drag is enormous: increasing transaction costs, reducing innovation and discouraging capable firms from participating.

A model for reform

Through Unravelling Risk, Consult Australia is challenging policymakers and clients to rethink their approach. We have proposed five reforms underpinned by collaboration and transparency. All five reforms can be found embedded in NEC4:

• Scoping for success: clients need to lead by engaging with the industry at the earliest stages of projects and programmes, for example through early contactor involvement which is standardised through option X22 in NEC4.
• Valuing variations: all parties should commit to early warning processes to deal with potential variations and avoid the blame game.
• Transparent timing: all parties should ensure there is a clear process for the programme to be amended collaboratively.
• Refining the rules: governments should progress long-recommended and uncontroversial reforms to reduce the volume of unnecessary and unreasonable claims.
• Resolution over disputation: clients should incorporate standing dispute boards which actively include the project consultants on all design and contract projects.

In promoting these reforms, our collaboration with NEC has been instrumental in showing the industry what ‘good’ looks like. NEC4 contracts provide a live, proven template for putting these principles into action: they encourage collaboration, early intervention and better outcomes for all parties. The growing interest in NEC4 from Australian public-sector clients reflects a desire for reform that works not just in theory, but also in practice.

Conclusion

As Australia’s governments look for ways to deliver critical infrastructure efficiently and sustainably, reforming contracting practices must be at the heart of the agenda. Smarter, simpler, fairer contracts will not just reduce legal disputes and insolvencies, they will unlock the innovation, skills and capacity of our industry to deliver projects faster and at lower wholelife cost.

The challenge now is to move from policy conversations to action. A more productive construction sector depends on cultural change: from adversarial posturing to genuine partnership. Our first year of partnership with NEC has helped advance that conversation in Australia, and we look forward to working together to help make these reforms real.