16 October 2026 | Issue 2

Welcome to Muscat Tanzer’s weekly update on developments affecting construction, infrastructure, public procurement and government. Each edition focuses on what has changed and what organisations may need to do next.

Queensland: proposed State Planning Policy

Queensland is consulting on a draft State Planning Policy. It proposes separate state interests for employment land, energy and water, a more risk-based approach to natural hazards, and the relocation of development assessment benchmarks to the Planning Regulation 2017. The current 2017 policy remains in force. Submissions close at 11.59 pm on 26 October 2026.

Why it matters: Councils and infrastructure proponents should test the proposals against planning schemes, infrastructure corridors and projects already under assessment. A focused submission could address how the changes would be implemented and how existing work would transition. These are proposals, not current assessment requirements.

NSW: review of the local government regulation

On 9 October, the Office of Local Government opened consultation on remaking the Local Government (General) Regulation 2021. It proposes separate regulations for elections, approvals and orders, and council governance and operations. The current consultation concerns the latter two. The existing regulation remains in force and is scheduled for automatic repeal on 1 September 2027 unless remade. Submissions close at 5 pm on 6 November 2026.

Why it matters: Councils should check the proposed provisions against their approvals, enforcement, governance and procurement processes, and identify any practical gaps. Muscat Tanzer can draw on recurring issues across council matters in considering a response. The replacement regulations have not yet been made.

WA: procurement conflicts in capital works

In a report tabled on 1 October, WA’s Corruption and Crime Commission formed an opinion of serious misconduct by a senior Shire of East Pilbara employee. It found that the employee had inadequately disclosed pre-existing relationships with capital works contractors and favoured companies in exchange for gifts and other benefits. The Commission recommended a complete review of the Shire’s procurement procedures.

Why it matters: This is an integrity finding, not a change in law. Councils and project owners can use it to test conflict declarations, gifts registers, evaluation roles and decision records throughout procurement and contract administration, including variations. It is a useful case study for internal probity reviews.

Commonwealth: first high-value consultancy report due

Under an existing Department of Finance procurement policy note, entities subject to the Commonwealth Procurement Rules must report relevant consultancy contracts worth $2 million or more including GST, including variations or exercised options that reach the threshold. The first report, covering 1 July to 30 September 2026, is due 31 October 2026. It includes AusTender details and pre-market planning, such as consideration of existing resources and incumbency risks.

Why it matters: Commonwealth entities should reconcile contract notices and variations and check that their procurement records explain the planning behind each engagement. This is the first deadline under an existing policy, not a newly announced obligation. Advisers supporting Commonwealth procurements should account for the information agencies will need to report.

Muscat Tanzer advises on construction, infrastructure, procurement and probity, and government matters across Australia. We work with local, state and Commonwealth governments and public-sector suppliers. This update is general information; application depends on the project and its governing documents.

Article 10 – Public Sector Development: Getting Governance and Delivery Structures Right

As governments adopt increasingly sophisticated infrastructure delivery structures, clear authority, accountability and risk allocation are becoming critical.

Queensland’s councils, government agencies and other public-sector entities are increasingly delivering infrastructure through government-owned corporations, council-controlled entities, special purpose vehicles, joint ventures and other dedicated delivery arrangements.

These structures can provide commercial flexibility, specialist capability and clearer project focus. However, they also introduce governance and accountability challenges, particularly where government acts simultaneously as landowner, funder, project sponsor, delivery partner or statutory decision-maker.

Creating a separate delivery vehicle does not remove public-sector accountability. It makes clear governance, decision-making authority and separation of responsibilities even more important.

The delivery structure should therefore be considered early, having regard to funding, land ownership, risk allocation, government control and the intended long-term operation of the asset.

Separating Government’s Roles

One of the first governance questions should be straightforward: in what capacity is government acting?

A council or government agency may simultaneously be a shareholder, funder, landowner, procuring authority, delivery partner, future operator or statutory decision-maker.

Each role carries different responsibilities, commercial interests and potentially distinct statutory obligations.

Problems arise when those roles become blurred. Commercial project objectives must not improperly influence statutory approval or regulatory decisions. Equally, officers, directors and advisers must understand whose interests they represent and the authority under which they act.

Clear separation of roles protects both efficient project delivery and the integrity of public-sector decision-making.

Clear Authority and Contractual Alignment

Effective governance requires clarity about who can make which decisions, in what capacity and subject to what limits.

Governance frameworks should identify matters reserved to government, shareholders, boards or project control groups, and those delegated to management or project teams.

These commonly include approval of business cases, budgets, procurement strategies, contract awards, significant variations, contingency expenditure and major commercial settlements.

Delegations and financial thresholds should reflect project complexity and risk, with clear escalation when projects move beyond approved scope, budget or risk tolerances.

Equally important is ensuring that governance arrangements align with project contracts.

Major projects involve multiple participants responsible for funding, land access, approvals, design, construction, utilities and future operations. Responsibility matrices and interface protocols can clarify who is accountable for each obligation and decision.

Governance documents and project contracts should not create competing decision-making structures. Internal approval processes must be consistent with contractual obligations and applicable delegations, particularly where decisions are time-critical.

Conflicts, Probity and Statutory Independence

Public-sector projects present particular challenges where councillors, officers, directors or advisers hold overlapping roles across government and delivery entities.

Governance arrangements should address conflicts of interest, confidentiality, information sharing and the capacity in which individuals participate in decisions.

Particular care is required where government exercises statutory approval, regulatory or enforcement functions affecting projects in which it also has a commercial interest.

Procurement processes likewise require appropriate probity controls, particularly where delivery entities, development partners or related parties have existing government relationships.

Probity should be embedded from early market engagement through procurement, negotiation and significant project decisions—not treated merely as a tender evaluation exercise.

These safeguards protect the integrity, transparency and defensibility of public-sector decisions.

Reporting, Escalation and Independent Assurance

Effective oversight does not require government or project boards to manage day-to-day contract administration. It requires timely, reliable information about matters that could materially affect delivery.

Reporting should be exceptions-based, identifying departures from approved budgets, programs, risk tolerances and performance expectations.

Particular attention should be given to forecast costs, contingency drawdown, critical path delays, significant variations, claims and decisions requiring escalation.

For higher-value or higher-risk projects, independent assurance at key gateways—including procurement, contract award, major scope changes and additional funding commitments—can help test whether commercial assumptions, risk allocation and delivery arrangements remain appropriate.

The objective is to identify emerging problems while meaningful options remain available.

Delivery Deadlines and Long-Term Public Value

For major infrastructure, particularly projects accelerated by Brisbane 2032, delivery deadlines should not become the sole measure of success.

Games-time requirements must be balanced against post-2032 use, sustainability, community benefit and long-term asset performance.

Ownership, maintenance, operating costs, revenue assumptions and future asset utilisation should be considered during project planning and reflected in procurement and contractual arrangements.

A project delivered on time and within budget may still represent a poor outcome if it creates avoidable long-term financial or operational burdens.

Good governance looks beyond practical completion. It asks whether the infrastructure delivered today will continue creating public value tomorrow.

Practical Governance Safeguards

A sound governance framework should include:

• a clear project mandate, business case and delivery structure;
• separation of ownership, commercial, delivery and statutory responsibilities;
• defined delegations, reserved matters and financial thresholds;
• documented interfaces, accountability and escalation processes;
• appropriate conflict, confidentiality and probity protocols;
• exceptions-based reporting and independent assurance at key gateways; and
• periodic review of governance arrangements against project risks and contractual obligations.

These measures should be proportionate to the project’s value, complexity and risk profile.

Bringing the Series Together

Queensland’s infrastructure challenge to 2032 is not simply about how much infrastructure can be funded or how quickly it can be built.

It is a delivery challenge.

Across this series, we have explored market capacity, early engagement, procurement strategy, risk allocation, contracting, ESG, waste and energy infrastructure, probity and governance.

A consistent theme has emerged:

Successful infrastructure delivery depends on decisions made long before construction begins.

How projects are structured, how markets are engaged, how risks are allocated, how contracts are administered and how decisions are governed will determine whether Queensland’s infrastructure investment delivers lasting public value.

Brisbane 2032 provides an immediate deadline, but the infrastructure being planned and delivered now will serve Queensland communities long after the Games.

The opportunity is not simply to deliver more infrastructure by 2032. It is to improve how Queensland plans, procures, contracts and governs infrastructure for the decade beyond it.

How Muscat Tanzer Can Help

Muscat Tanzer advises councils, Queensland Government agencies and other public-sector entities on infrastructure procurement, probity, contracting, governance and project delivery.

We assist clients to establish practical delivery structures, procurement strategies and contractual frameworks that balance commercial objectives, effective risk allocation and public-sector accountability.

Early legal, procurement and probity advice can help identify governance and delivery risks before they become project problems.

Please contact us to discuss any of the issues raised in this article or throughout the Infrastructure Under Pressure series.

12 October 2026 | Issue 1 

Welcome to Muscat Tanzer’s weekly update on developments affecting construction, infrastructure, public procurement and government. Each edition focuses on what has changed and what organisations may need to do next. 

Queensland: probity under the spotlight 

In its 2025–26 annual report, tabled on 25 September, the Crime and Corruption Commission identifies probity in major infrastructure and development procurement as a priority as Queensland prepares for Brisbane 2032. Regulation, licensing and the conduct of elected officials are also areas of focus. 

Why it matters: This is a statement of regulatory priorities, not a new legal requirement. It reinforces the value of addressing conflicts, market engagement, evaluation processes and decision records at the start of a project. A probity review undertaken after a concern emerges may have fewer options to resolve it. 

NSW: proposed pay protections for council labour hire 

The NSW Government has announced proposed legislation concerning workers supplied to councils by labour hire businesses. Under the proposal, a council entering or amending such a contract would need to be satisfied that workers receive at least the remuneration they would receive if employed directly by the council, including applicable overtime and penalty rates. A Bill is expected to be introduced in October; the requirements are not yet law. 

Why it matters: Councils preparing labour hire procurements or extensions should watch the Bill’s scope and commencement provisions. If enacted as announced, tender pricing, supplier declarations and ongoing verification may all need attention. 

Victoria: labour hire rules now reach further through supply chains 

Changes effective 1 October clarify that an arrangement principally involving the supply of labour may require a licence even where workers pass through an intermediary business. The Victorian Labour Hire Authority advises providers and hosts to examine the substance of their arrangements across the supply chain. 

A further extension covering certain construction activities on Victorian Government projects over $50 million is anticipated later in October, subject to final regulations. 

Why it matters: Principals and contractors should identify who supplies and pays workers, check applicable licences, and review subcontracting and verification arrangements. They should assess the proposed construction extension once its final terms are published. 

Commonwealth: proposed workforce standards for suppliers 

Consultation is open on a draft Secure Australian Jobs Framework and proposed changes to the Commonwealth Supplier Code of Conduct. The proposals address secure work, wages and conditions, workplace safety, equality, and local jobs and skills. Submissions close 21 October. 

Why it matters: The final framework could affect how Commonwealth suppliers demonstrate workforce practices in tenders and during contracts. Purchasers and suppliers, particularly smaller businesses, have an opportunity to comment on how the requirements should be evidenced and applied proportionately. These remain proposals, not current tender obligations. 

Commonwealth: shorter supplier payment terms ahead 

The Department of Finance has announced updated payment terms. From 1 January 2027, non-corporate Commonwealth entities must pay supplier invoices issued under contracts subject to the Commonwealth Procurement Rules within a maximum of 10 business days, regardless of invoice form. Current terms continue until then. 

Why it matters: Entities have time to update contracts and invoice approval processes. Suppliers should check how invoices must be submitted and when payment becomes due under their particular arrangements. 

Muscat Tanzer advises on construction, infrastructure, procurement and probity, and government matters across Australia. We work with local, state and Commonwealth governments and support public-sector clients and suppliers across all levels of government. This update is general information; the application of a development depends on the project and its governing documents. 

Article 10 Probity Under Pressure: Maintaining Integrity in a Compressed Market

Queensland’s infrastructure pipeline is accelerating. Timeframes are tightening, funding is committed and delivery expectations are rising. The pressure to move quickly is real across councils, council-owned corporations and infrastructure agencies.

In this environment, probity is often seen as something to manage rather than something to design. That approach creates risk.

Probity is not a compliance overlay. It is a core part of procurement design that underpins fairness, transparency and defensibility. As delivery pressure increases, the consequences of getting probity wrong become more significant.

Where probity breaks down

Probity failures rarely arise from deliberate misconduct. They are typically the result of poor structure, unclear roles or inconsistent process discipline.

Common issues include:

• Unstructured market engagement
  Early engagement is now essential to test capacity and refine delivery models. However, without clear protocols, it can result in unequal access to information, perceived bias or incumbent advantage. These risks are often identified only after the process is underway.
• Role confusion across advisers
  In compressed procurements, the roles of legal, probity and procurement advisers can become blurred. Where responsibilities are not clearly defined, key decisions may lack appropriate oversight or probity input may be introduced too late to influence the process.
• Conflict of interest management
  Conflicts are a recurring feature in local government and council-owned entities. The issue is not their existence, but how they are managed. Ad hoc or inconsistent approaches create both real and perceived integrity risks.
• Informal decision-making
  Tight timelines can lead to decisions being made outside formal evaluation frameworks or without proper documentation. This creates audit risk and weakens the ability to defend outcomes.
• Incomplete audit trails
  Defensibility depends on records. Where evaluation reasoning, communications and decisions are not clearly documented, even well-run processes can be difficult to justify if challenged.

Probity as a delivery enabler

Probity does not need to slow procurement. Poorly designed frameworks do.

Well-structured probity enables faster and more confident decision-making by providing clarity on process, roles and governance from the outset.

In practice, this requires:

• Early integration
  Probity should be embedded at the start of procurement design. This includes setting clear rules for market engagement, evaluation methodologies and governance pathways before engagement with the market begins.
• Clear role definition
  Legal, probity and procurement functions each serve a distinct purpose. Defining these roles early reduces duplication, avoids gaps and supports efficient decision-making.
• Structured conflict management
  Conflicts should be identified, assessed and managed through consistent and repeatable frameworks. This reduces uncertainty and supports defensible outcomes.
• Proportionate governance
  Probity controls should align with the scale, risk and complexity of the procurement. Over-governance can be as problematic as under-governance.
• Contemporaneous record keeping
  Clear, real-time documentation of decisions, communications and evaluation outcomes is critical. This supports both audit readiness and decision-making quality.

The cost of getting it wrong

Probity failures have real practical consequences.

They can result in procurement challenges, delays, reputational damage and loss of market confidence. Where market confidence dives, so does engagement in council procurements, which depletes competition and erodes value for money. Councils then have to pay more for the same outcomes, delivering less for their budget. In some cases, processes need to be re-run, creating additional cost and programme disruption.

In a constrained market, these outcomes are amplified.

There is also an internal impact. Where governance frameworks are unclear or inconsistently applied, decision-makers become more risk-averse, which can further slow delivery.

How Muscat Tanzer can help

At Muscat Tanzer, we work at the intersection of procurement, probity and project delivery.

We support councils, council-owned corporations and infrastructure agencies to:

• design procurement processes that are efficient and defensible;
• structure early market engagement in a way that manages probity risk;
• implement practical probity protocols and conflict management frameworks; and
• align legal, commercial and governance inputs from the outset.

In a compressed delivery environment, probity is not a constraint. It is a mechanism that protects delivery outcomes.

Why procurement strategy is becoming as important as technology in delivering Queensland’s next generation of waste infrastructure.

Introduction

Queensland’s waste sector is undergoing its most significant transformation in decades.

The introduction of Food Organics and Garden Organics (FOGO) services, increasing landfill diversion targets, investment in Materials Recovery Facilities (MRFs), energy-from-waste technologies and broader circular economy initiatives are fundamentally changing how councils plan, procure and deliver waste infrastructure.

Unlike many traditional infrastructure projects, however, waste infrastructure is rarely static.

Technology continues to evolve. Regulatory settings continue to change. Community expectations continue to rise. Commodity markets fluctuate. Processing methods improve.

In this environment, councils are no longer procuring infrastructure simply to meet today’s requirements. They are procuring infrastructure that must remain commercially viable and operationally effective for decades.

A Moving Target

Traditional infrastructure projects generally have relatively stable design parameters. Waste infrastructure rarely enjoys that certainty.

Councils must make long-term investment decisions despite uncertainty surrounding:

• future waste volumes;
• changing waste composition;
• evolving environmental regulation;
• emerging processing technologies;
• recycled product markets; and
• community expectations.

The consequence is that procurement decisions made today must accommodate circumstances that may be significantly different ten or twenty years from now. As a result, Flexibility is becoming just as valuable as certainty.

Procurement is no Longer About Buying an Asset

Historically, many waste projects focused on constructing a facility. Councils are increasingly procuring long-term service outcomes rather than simply physical infrastructure.

Whether delivering:

• FOGO processing;
• MRF operations;
• transfer stations;
• advanced resource recovery facilities; or
• integrated waste management services,

the commercial success of the project often depends more on the contractual framework than the facility itself. Procurement is increasingly about establishing long-term commercial relationships capable of adapting to changing circumstances.

Allocating the Right Risks

Waste infrastructure presents a unique allocation of commercial risks. These include:

Feedstock Risk

Will projected waste volumes actually materialise? Will contamination levels exceed expectations? Who bears the financial consequences?

Technology Risk

Processing technologies continue to develop rapidly. How should contracts respond if more efficient technology becomes available during the contract term?

Regulatory Risk

Environmental regulation continues to evolve. Future compliance requirements may fundamentally change facility operations. Who is responsible for those costs?

Market Risk

Recovered materials and compost products depend upon external markets. Commodity prices fluctuate. Demand changes. Quality specifications evolve. Contracts should clearly identify who bears market exposure.

Performance Risk

Long-term operational performance depends on more than construction quality. Availability, throughput, contamination rates and product quality all influence project success. These performance measures should be carefully defined and objectively measurable.

Long-Term Contracts Require Long-Term Thinking

Many waste contracts extend well beyond traditional construction timeframes. Some operate for ten, fifteen or even twenty years. During that period:

• technology may change;
• legislation may change;
• councils may amalgamate;
• waste generation patterns may change; and
• community expectations may evolve significantly.

Rigid contractual arrangements rarely perform well over these timeframes. Instead, successful contracts build in structured mechanisms for:

• periodic review;
• technology upgrades;
• service optimisation;
• pricing adjustments; and
• continuous improvement.

The objective is not simply certainty, but must be combined with adaptability.

Collaboration is Becoming Increasingly Important

Waste infrastructure is also becoming more regional. Many councils are collaborating to achieve economies of scale that individual local governments cannot achieve independently. And regional procurement offers significant benefits, including:

• improved purchasing power;
• increased market interest;
• more efficient asset utilisation;
• greater operational resilience; and
• improved long-term affordability.

However, collaborative procurement also introduces additional governance challenges.

Successful regional projects require:

• clearly defined decision-making frameworks;
• transparent governance structures;
• consistent procurement objectives; and
• carefully documented allocation of responsibilities between participating councils.

Without these foundations, collaboration can become more complex than the procurement itself.

Procurement Must Encourage Innovation

Traditional specifications often describe exactly how infrastructure should be designed, but that approach may unintentionally prevent innovation. Given the pace of change in waste technology, councils should increasingly focus on defining:

• required outcomes;
• performance standards;
• service levels; and
• community expectations,

rather than prescribing technical solutions wherever appropriate.

Outcome-based procurement enables suppliers to propose innovative approaches that may deliver better long-term value. However, innovation should not come at the expense of accountability, but neither should procurement unnecessarily restrict it.

Contract Management Determines Success

Awarding the contract is only the beginning. Long-term waste contracts require disciplined contract management supported by:

• clearly defined KPIs;
• regular performance reporting;
• transparent governance;
• collaborative relationship management;
• structured review mechanisms; and
• effective dispute resolution processes.

The quality of contract management frequently determines whether a project continues to deliver value throughout its operational life.

What This Means for Councils

As Queensland’s waste infrastructure evolves, procurement must evolve with it. Councils should increasingly focus on:

• selecting delivery models that accommodate change;
• allocating risk to those best able to manage it;
• encouraging innovation while maintaining accountability;
• strengthening governance across regional collaborations; and
• investing in contract management capability.

The objective is no longer simply delivering infrastructure. It is creating long-term service arrangements capable of adapting to an evolving waste sector.

Conclusion

Waste infrastructure is unlike almost any other class of public infrastructure. Technology changes. Markets change. Regulation changes. Community expectations change. Contracts need to recognise that reality.

The councils that achieve the greatest long-term value will not necessarily be those that procure the newest facilities. They will be those that establish procurement and contract frameworks capable of evolving alongside industry.

As Queensland’s transition towards a circular economy accelerates, procurement strategy will increasingly become one of the defining factors in successful waste infrastructure delivery.

About Muscat Tanzer

Muscat Tanzer advises councils, regional alliances and government agencies on the procurement, contracting and governance of complex waste and resource recovery infrastructure, including FOGO services, Materials Recovery Facilities, transfer stations and long-term integrated waste management projects.

We assist clients to develop procurement strategies and commercial frameworks that balance innovation, accountability and long-term value while supporting successful project delivery.

The Fair Work Commission has just made a significant move in response to fuel volatility — and its implications go well beyond the transport sector.

Under the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026, parties across the road transport supply chain are now required to adjust rates to ensure recovery of increased fuel costs.

Notably:

• Adjustments must occur at least fortnightly
• The obligation flows through the entire contractual chain
• Recovery can be achieved via rate adjustments, fuel levies, or direct reimbursement
• Existing “rise and fall” mechanisms can satisfy the obligation
• The Order is triggered by fuel cost increases linked to Middle East conflict and supply disruption

Why This Matters for Construction

While the Order applies directly to the road transport industry, its commercial impact will be felt immediately across construction projects.

1. Cost Pass-Through Is Now Mandated (in Transport)

Transport providers now have a regulated right — and obligation — to recover fuel increases.

That means:

• Haulage costs will rise
• Supplier pricing will adjust
• Builders will see immediate upstream cost pressure

2. Fixed Price Contracts Will Be Tested — Again

Most construction contracts do not contain equivalent mandatory cost recovery mechanisms.

So we now have a disconnect:

• Transport contractors must be paid increased fuel costs
• Builders may not be entitled to recover those same increases

That gap will land squarely in project margins — or become the subject of claims.

3. Expect a Shift in Variation and Claim Behaviour

Builders and suppliers will increasingly:

• rely on variation pathways tied to transport or methodology changes
• push rise and fall arguments (where available)
• escalate commercial negotiations earlier

Even where strict legal entitlement is weak, the practical pressure to deal with these costs will increase.

4. Procurement Models Are Now Out of Sync with Market Reality

This Order reinforces a broader point:

The market is moving back to dynamic cost environments — but many contracts remain static.

Where downstream supply chains are legally entitled to adjust pricing, but head contracts are not:

• risk allocation becomes misaligned
• disputes become more likely
• project performance is put at risk

The Bigger Shift

This is more than a transport issue.

It is an example of regulatory intervention forcing cost risk to move through a supply chain — in real time.

Construction principals should be asking:

• Are we exposed to mandated cost pass-throughs in our supply chain?
• Do our contracts allow us to respond to those increases?
• Are our procurement models still fit-for-purpose in a volatile cost environment?

Final Thought

Fuel cost volatility is no longer just a commercial issue — it is now, at least in part, a regulated one.

And once cost recovery becomes embedded at one level of the supply chain, it rarely stops there.

The question is not whether these costs will reach construction projects — but how well your contracts are set up to deal with them when they do.

A recent Queensland Audit Office (QAO) report is a timely warning for councils, government-owned entities and public sector agencies: one of the most significant cyber risks may not sit inside your organisation at all, it may sit with your suppliers, vendors, consultants and service providers.

Modern organisations increasingly rely on third parties to deliver IT systems, digital services, software platforms and operational support. That creates efficiency, but it also creates exposure.

The QAO found that the audited entities were not effectively managing third-party cyber security risk, and that weaknesses in access controls, procurement practices and contracts created real vulnerabilities. In testing, the auditors were able to obtain passwords, access systems and extract sensitive information beyond what a third-party user should have been able to access. In two cases, they were able to gain administrator-level access.

That should be a wake-up call.

Importantly, these risks are no longer emerging or hypothetical. They are well understood, documented and repeatedly identified in public sector audits and guidance.

As a result, expectations on organisations, particularly councils and government entities, to identify, assess and actively manage third-party cyber risk are increasing. This is not just a technical issue, but one of governance, accountability and risk ownership.

This is not just an IT issue

Third-party cyber risk sits across:

• IT and cyber security
• procurement
• contract management
• risk and assurance
• governance and executive oversight

That is why it is often missed.

Many organisations focus on internal cyber controls, but far fewer are asking the harder questions:

• Which suppliers actually have access to our systems or sensitive data?
• Have we properly assessed the cyber risk during procurement?
• Do our contracts contain the right cyber obligations?
• Are we actively monitoring supplier risk after contract award?

Contracts are often the weak point

One of the most striking findings in the report was contractual weakness.

Of the 36 contracts reviewed:

• only 2 required third parties to report cyber incidents or vulnerabilities;
• very few included audit rights; and
• none included security requirements for the third party’s own suppliers.

That means many entities may be carrying supply chain cyber risk without any real contractual visibility or control.

What organisations should be doing now

The QAO’s better practice checklist is a useful starting point. In practical terms, organisations should be reviewing whether they are:

• properly identifying which third parties present cyber risk;
• conducting meaningful cyber due diligence during procurement;
• including clear cyber obligations in contracts;
• monitoring third-party risk throughout the contract lifecycle; and
• ensuring access controls, logging and monitoring are robust for third-party users.

The report also highlights the importance of moving beyond contracting to active contract management.

In practice, this may involve establishing a structured approach to managing third-party cyber risk across the contract lifecycle, including clearly documenting security expectations, conducting periodic supplier reviews or assurance checks, monitoring ongoing risk exposure, and ensuring there are internal processes and capability to respond to cyber incidents and evolving threats.

A practical next step may be to consider whether a more structured contract management approach is needed to manage third-party cyber risk.

This could include:

• clearly documenting security expectations for suppliers
• ensuring appropriate contractual obligations (e.g. incident reporting)
• ongoing monitoring of third-party cyber risks and controls
• ensuring staff capability to manage these risks
• periodic (e.g. annual) supplier reviews of IT security controls

The real takeaway

Third-party cyber risk is no longer a niche technical issue. It is now a procurement, contract, governance and operational resilience issue.

For councils and public entities, the real question is not whether this risk exists in your supply chain.

It is whether your organisation has the procurement settings, contract protections and governance discipline to manage it properly.

Organisations should now be actively testing whether their current frameworks are sufficient to manage this risk.

How Muscat Tanzer can help

We help councils and government entities build practical frameworks to manage these risks through procurement planning, cyber risk allocation, contract drafting, governance settings and contract management uplift.

Cost Escalation is Back — Are Your Contracts Ready?

The recent escalation of conflict in the Middle East is already having tangible, real-time impacts on Australia’s construction sector.

Fuel prices are rising. Oil markets are volatile.
Transport and logistics costs are increasing rapidly.

As always, these pressures are flowing directly into construction.

Contractors and suppliers are beginning to claim price increases, driven by fuel, freight and energy inputs. Materials are becoming more expensive to produce, more expensive to move, and less predictable to price.

This is not a hypothetical future risk. It is happening now.

Recent movements in global oil markets are already translating into domestic price pressure. Australian fuel prices have risen sharply in recent weeks, with ongoing volatility expected as geopolitical tensions continue to impact shipping routes and energy supply chains.

These conditions are already feeding into contractor pricing and supplier cost adjustments. Key indicators to monitor over the coming months include contractor tender behaviour and the frequency of escalation-related claims.

From Stability to Volatility, Again

For much of 2024 and early 2025, there was a sense that the worst of construction cost escalation had passed.

Markets had stabilised. Supply chains had improved.

Pricing had become more predictable. That assumption is now being tested.

The current environment is not just about rising costs; it is about renewed volatility, and that presents a different, more complex risk profile.

Projects that appeared commercially stable even a month ago may now be exposed to rapid input cost fluctuations, particularly those with:

• high transport inputs
• reliance on imported materials
• energy-intensive manufacturing components

Where the Pressure Will Show First

We are already seeing early indicators across the market, and these will intensify over the coming months.

1. Contractor Pricing Behaviour

Contractors are becoming more cautious in their pricing, including:

shorter validity periods increased contingencies

qualifications around fuel and freight costs increased divergence in pricing between tenderers due to differing assumptions on escalation risk.

In some cases, contractors may decline to hold pricing at all without escalation mechanisms in place to manage their risk.

2.  Supplier Price Increase Notices

Suppliers are moving quickly to protect margins, issuing:

fuel surcharge adjustments revised freight rates

updated material pricing linked to energy inputs

These increases will inevitably flow through to head contractors and ultimately to principals.

3. Increased Claims and Disputes

Where contracts are silent or unclear, cost pressure typically manifests as claims.

Expect to see:

• rise and fall claims (where mechanisms exist or are argued to exist)
• delay and disruption claims linked to supply chain impacts
• creative reliance on latent condition or change in law provisions

A key point of contention will be whether these cost increases fall within the contractor’s assumed risk under a lump sum contract, or whether they give rise to a compensable variation or contractual adjustment.

Not all claims will be well-founded, but all will require time, cost and resources to manage.

4.  Stress on Fixed-Price Contracts

Traditional lump sum contract models are particularly exposed where key input markets are volatile.

Without appropriate price adjustment mechanisms:

• contractors carry disproportionate risk
• margins erode quickly
• project performance deteriorates disputes become more likely

This is especially acute for longer-term infrastructure and civil projects.

Sustained cost pressure may also increase financial stress across the contractor and subcontractor market, with potential implications for project continuity and delivery risk.

The Real Issue: Risk Allocation, Not Just Price

The key issue is not simply that costs are rising, it is who bears the risk of that increase.

The ordinary rule of thumb in risk allocation is that risk should be borne by the party who is best able to manage that risk. Typically the contractor market is ill-equipped to deal with major and uncontrollable fluctuations in input prices.

Many contracts entered into over the past 12–24 months were negotiated in a relatively stable pricing environment.

They may not adequately address: rapid fuel-driven escalation freight volatility

energy cost shocks supply chain disruption

Where risk allocation is unclear or unbalanced, pressure will surface during delivery.

What Should Councils and Principals Be Doing Now?

This is not a “wait and see” moment. There are practical steps that can and should be taken now.

1. Review Existing Contracts

Identify exposure across your current portfolio: Do rise and fall mechanisms exist?

Are they appropriately drafted and triggered? What cost categories are covered (and excluded)?

Are there notification requirements that will become relevant?

Understanding your contractual position early is critical. Whilst principals are under no obligation to do so, some consideration could be given to proactively negotiating cost escalation mechanisms into existing contracts to maintain contractor performance and engagement on projects.

2. Prepare for an Increase in Claims

Contract administration teams should be ready for: higher volumes of notices

• more complex claims
• tighter timeframes for assessment

Clear internal processes and disciplined assessment frameworks will be essential.

3. Reassess Procurement Models

For upcoming procurements, consider whether:

• fixed-price models remain appropriate
• escalation mechanisms should be included risk sharing approaches would deliver better outcomes
• early contractor involvement (ECI) models may better manage uncertainty
• contractor engagement will disappear without well documented risk sharing mechanisms

Procurement strategies that worked in a stable market may not be fit-for-purpose in a volatile one.

4.  Engage Early with the Market 

Understanding where risk sits in the supply chain is critical.

Early engagement can provide insight into:

• materials most exposed to cost increases contractor appetite for risk
• realistic pricing structures
• appropriate allocation of escalation risk

This enables informed, proactive procurement decisions.

5. Focus on Contract Administration Discipline

In volatile environments, outcomes are often determined less by the contract itself and more by how it is administered.

Key focus areas include:

• strict compliance with notice and time provisions, noting that failure to respond within prescribed timeframes may result in loss of entitlement or deemed acceptance of claims
• consistent and transparent decision-making accurate record keeping
• early identification of emerging issues

Strong contract administration can materially reduce dispute risk as well as risk of improper incursion of cost from opportunistic claiming.

Looking Ahead

It is too early to predict the duration or extent of current market disruption.

However, one thing is clear: Volatility has returned. Projects that navigate this period successfully will not necessarily be those with the lowest price, but those with:

• clear and balanced risk allocation procurement models aligned to market conditions
• disciplined contract management
• proactive engagement with contractors and suppliers.

Final Thought

Cost escalation is no longer a theoretical risk.

It is back — and it is already working its way through the construction sector. Projects that navigate this period successfully will not be those with the lowest price, but those supported by clear risk allocation and well-structured procurement.

The question for councils and principals is simple: Are your contracts, and your procurement strategies, ready for it?

How Muscat Tanzer Can Help

Muscat Tanzer works alongside councils and project teams to navigate exactly these conditions; reviewing contracts to identify exposure, strengthening risk allocation and escalation mechanisms, and supporting procurement strategies that remain viable in volatile markets.

We also assist with real-time contract administration, including assessing and responding to claims as they arise. If cost escalation is beginning to impact your projects, we can help you respond early, manage risk, and maintain delivery outcomes.

From Compliance Checkpoint to Strategic Partner

Legal and probity advisors are often engaged at the final stage of a procurement — just before release, or when something has gone wrong.

In both cases, their role is typically reactive — reviewing documents for compliance or resolving disputes after issues arise.

But as procurement evolves into a strategic enabler (as explored throughout this Series), the role of legal and probity advisors must evolve with it.

If procurement is to function as a strategic enabler — driving economic development, sustainability, governance and community trust — advisors must be involved earlier and more meaningfully.

The most effective councils do not engage advisors only to “sign off” on compliance.
They involve them early — as partners in governance, risk design and strategic delivery.

The Limitation of the Reactive Model

When legal or probity advisors are engaged late:

• The procurement model is already set
• Risk allocation may be poorly structured
• Market engagement opportunities have passed
• Evaluation frameworks may lack defensibility

Compliance may be achieved — but strategic value can be compromised.

What Strategic Advisory Looks Like

High-performing councils involve advisors during:

• Procurement planning
• Early market engagement design
• Evaluation framework development
• Contract structuring
• High-risk exemption or direct negotiation decisions

This approach strengthens governance while enabling innovation.

Where Advisors Add the Most Value

1. Early Market Engagement
   Designing structured protocols that encourage supplier dialogue without compromising probity.

Legal and probity advisors can assist by:

• Designing structured market sounding protocols
• Drafting briefing materials and disclaimers
• Managing communication channels
• Advising on equal treatment safeguards
• Documenting engagement to withstand audit scrutiny

When properly structured, early engagement strengthens competition rather than undermines probity.

2. Evaluation Frameworks
   Evaluation is one of the highest-risk stages in any procurement.

Strategic advisors add value by:

• Aligning evaluation criteria with IP&R objectives
• Structuring defensible scoring methodologies
• Drafting clear moderation processes
• Advising on handling clarifications and negotiations
• Ensuring reasons for decision are properly documented

This reduces the likelihood of challenge while improving transparency and defensibility.

3. Fit-for-Purpose Contracts
   Many councils rely on standard form contracts without tailoring risk allocation to project context.

Strategic legal input helps ensure:

• Risk is allocated to the party best placed to manage it
• Performance-based KPIs are measurable and enforceable
• ESG and local participation obligations are legally robust
• Variation and extension mechanisms are clear
• Termination and dispute clauses align with governance settings

Contracts should reflect strategic intent — not just generic templates.

4. Exemptions & Direct Negotiations
   Under the Regulation, councils may rely on certain exemptions or conduct direct negotiations in limited circumstances.

These decisions carry governance risk.

Strategic advisors assist by:

• Documenting the justification framework
• Testing value-for-money assessments
• Designing negotiation protocols
• Ensuring transparent reporting pathways

Clear documentation protects both the organisation and individual decision-makers.

5. Contract Management Support
   Managing variations, performance issues and disputes proactively. Early advice is typically less costly than reactive dispute management.

It’s About Governance Confidence

Strategic advisors do not slow procurement down.

They:

• Reduce probity exposure
• Increase defensibility
• Support innovation within the legislative framework
• Strengthen transparency and public trust

The goal is not risk avoidance.
It is confident, structured risk management aligned with council objectives.

As councils face increasing scrutiny and complex procurement environments, engaging legal and probity advisors early can transform procurement from a compliance function into a strategic capability.

At Muscat Tanzer, we work with councils as proactive partners in procurement governance — helping move from reactive review to strategic implementation.

If your council is reviewing its procurement governance model, we would be pleased to discuss how strategic advisory engagement can support stronger outcomes, or we can provide probity training to our officers, executive or councillors.

Infrastructure delivery is one of the most complex and high-risk areas of procurement for councils.

Major projects – whether roads, waste facilities, water infrastructure, community assets or urban revitalisation programs – involve significant capital investment, technical complexity and long asset lifecycles.

Yet procurement risk is often viewed too narrowly.

Many councils focus heavily on running a compliant tender process. But the most significant risks in infrastructure delivery often arise outside the tender stage.

They emerge across the full lifecycle:

• Project planning
  • Procurement model selection
  • Market engagement
  • Contract design
  • Construction delivery
  • Long-term asset performance

Strategic procurement ensures these stages are aligned.

The Importance of Early Procurement Strategy

Some of the most important procurement decisions occur before any tender is released.

This includes considering:

• appropriate procurement models
• market capability and competition
• risk allocation
• lifecycle cost implications
• long-term operational requirements

When procurement strategy is integrated into early project planning, infrastructure delivery becomes more predictable and defensible.

Selecting the Right Procurement Model

Different projects require different approaches.

Common models include:

• Traditional design–bid–build
  • Design and construct
  • Early contractor involvement
  • Collaborative or alliance models

A one-size-fits-all approach rarely delivers optimal outcomes.

The procurement model should reflect the complexity, risk profile and innovation requirements of the project.

Risk Allocation and Contract Design

Contract structure is critical in infrastructure procurement.

Effective contracts:

• allocate risk to the party best placed to manage it
• define measurable performance obligations
• include clear variation and change mechanisms
• align payment with performance

Overly aggressive risk transfer can increase pricing and lead to disputes.

Balanced risk allocation supports collaboration and delivery certainty.

Contract Management Is Where Value Is Protected

Even the best procurement strategy can fail without strong contract management.

Councils should ensure:

• structured project performance monitoring
• clear variation governance
• regular supplier engagement
• early dispute resolution mechanisms

Procurement success is ultimately measured during delivery.

Why This Matters

Infrastructure projects represent a significant investment of public funds and shape communities for decades.

Strategic procurement helps ensure these investments deliver:

• Value for money
  • Reliable infrastructure
  • Reduced lifecycle costs
  • Transparent governance
  • Community confidence

Procurement in infrastructure delivery is not simply about running a compliant tender.

It is about managing risk and performance across the entire asset lifecycle.

How Muscat Tanzer Can Help

At Muscat Tanzer, we work with councils to design and deliver infrastructure procurement strategies that are legally robust, commercially balanced and aligned with long-term asset performance.

Our support includes:

• Procurement model selection advice
• Strategic procurement planning
• Early market engagement design
• Infrastructure contract drafting
• Probity advisory services
• Governance and evaluation framework design
• Contract management guidance

We help councils manage infrastructure procurement risk from project concept through to operational performance.