ABIC SW 2018 H · New South Wales
Building Material Cost Increases and Supply Chain Risk
When global supply shocks send material prices up mid-project, who wears the cost, and how do you share genuine increases without opening the door to open-ended price rises?
The problem with an all-or-nothing fixed price
A standard fixed-price residential contract puts the risk of material cost increases squarely on the builder. That works in a stable market. It stops working when international supply is disrupted and the price of key materials jumps double digits between quoting and buying, so the builder either absorbs a loss or looks for ways to claw it back, and the project sours.
The instinctive fixes are both bad. A bare "rise and fall" or cost-escalation clause can hand the builder an open-ended right to pass through price movement, which owners rightly resist. Leaving it out entirely leaves a genuine, evidenced global cost shock with nowhere to go. What is missing is a disciplined middle path.
- Fixed price alone makes the builder wear even extraordinary, uncontrollable cost shocks.
- Open "rise and fall" clauses let ordinary price movement be passed straight to the owner.
- No agreed threshold to separate normal fluctuation from a genuine supply shock.
- No independent check on whether a claimed increase is real and properly evidenced.
How the supply chain Special Conditions fix it
These Special Conditions pair the monthly progress payment amendment with a deliberately narrow supply chain cost-increase mechanism. Only overruns that depend on international supply and exceed ten percent qualify, and they must be claimed on an open-book basis within twenty business days, so ordinary price movement is not passed through.
Crucially, the builder cannot simply raise the price. The architect assesses every claim within twenty business days and adjusts the contract price accordingly; unilateral price hikes are excluded. Both sides get a fair, transparent route through cost volatility, with control kept in the hands of the contract administrator.
Standard ABIC form vs with Special Conditions
| Aspect | Standard ABIC form | With Special Conditions |
|---|---|---|
| Ordinary price movement | Builder absorbs it (fixed price) or passes it on (open clause). | Not passed through; only qualifying shocks are claimable. |
| What qualifies | Undefined or unlimited. | International-supply-dependent overruns above ten percent only. |
| Evidence required | Often none. | Open-book basis, claimed within twenty business days. |
| Who decides | The builder, in an open clause. | The architect assesses each claim within twenty business days; no unilateral hikes. |
Who this protects
Builders
A fair, evidenced route to recover genuine global cost shocks, instead of absorbing extraordinary increases you could not have priced.
Owners & owner-builders
Protection from open-ended price rises: only real, above-threshold, independently assessed increases can ever be passed on.
Architects
A defined, open-book assessment role with a twenty-business-day window, rather than refereeing an uncapped escalation dispute.
Common questions
Can a builder increase the price for material cost rises under an ABIC contract?
Not under the standard form on a fixed price. These Special Conditions allow it only in narrow circumstances: the overrun must depend on international supply and exceed ten percent, be claimed on an open-book basis within twenty business days, and be assessed by the architect. Unilateral price hikes are excluded.
How is the owner protected from open-ended price increases?
Only international-supply-dependent overruns above a ten percent threshold qualify, so ordinary price movement is not passed through, and every claim is assessed independently by the architect before the contract price is adjusted.
Who decides whether a supply chain cost increase is payable?
The architect assesses every claim within twenty business days and adjusts the contract price accordingly. The builder cannot raise the price unilaterally.
Does this option keep the monthly progress payment change?
Yes. It combines the monthly progress payment regime with the supply chain cost-increase mechanism in one set of Special Conditions for ABIC SW 2018 H NSW contracts.
The Special Conditions that do this
Licensed, ready-to-use Special Conditions drafted by Christopher Larcos, a solicitor and architect with more than 40 years in the construction industry.
ABIC SW 2018 H NSW, Monthly Payment Structures & Targeted Amendments
ABIC SW 2018 H NSW - Monthly Progress Payments + Supply Chain Special Conditions
$220.00AUD
- Locks in monthly billing instead of stage payments.
- Caps exposure to global cost shocks: only international-supply-dependent overruns above ten percent qualify, claimed on an open-book basis within twenty business days.
- The architect assesses every claim within twenty business days and adjusts the contract price; unilateral price hikes are excluded.
ABIC SW 2018 H NSW, Monthly Payment Structures & Targeted Amendments
ABIC SW 2018 H NSW - Monthly Progress Payments + Supply Chain + Force Majeure Special Conditions
$320.00AUD
- Locks in monthly billing instead of stage payments.
- Suspends affected obligations during natural disasters, pandemics, war, or government acts; lets either party walk away after sixty continuous days of delay.
- Caps exposure to global cost shocks: only international-supply-dependent overruns above ten percent qualify, claimed on an open-book basis within twenty business days.