Navigating geopolitical disruption

• Sustained increases in fuel, freight and material costs are placing pressure on margins and delivery assumptions across infrastructure projects.
• While physical availability constraints are emerging in some areas, the predominant challenge for most projects is cost escalation rather than inability to perform.
• Impacts are uneven, varying significantly depending on sector, contract model, procurement strategy and project stage.
• These pressures are increasing the risk of misalignment between principals, contractors and subcontractors, particularly where contracts do not clearly deal with input cost volatility.

• Rapid escalation in diesel, fuel and freight costs is flowing directly into construction inputs and logistics.
• Secondary impacts are emerging across materials reliant on energy‑intensive production or global shipping routes, with price increases and reduced availability becoming more visible over time.
• Pressure on subcontractors and supply chains is increasing insolvency and delay risk, particularly on fixed‑price or tightly‑priced projects.
• Parties are increasingly testing whether existing contractual mechanisms were designed to respond to prolonged input cost volatility, rather than short‑term disruption.

• Are current force majeure provisions triggered by cost escalation, or do they require true inability to perform?
• Do principal retained risk regimes actually respond to this scenario, or are they limited to defined events and physical impacts on the works?
• Do rise and fall mechanisms meaningfully capture diesel and fuel inputs, and do relevant indices keep pace with current escalation?
• Will change in law provisions respond to emergency fuel or supply legislation, and if so, do they address availability only or also price?
• Can general indexation realistically offset diesel‑specific escalation?
• Is there any realistic basis for frustration, or does performance remain possible albeit more costly?

Existing contracts

• Prioritise contract triage to understand how key provisions respond to sustained input cost volatility, including force majeure, principal‑retained risk, rise and fall, indexation and change in law clauses.
• Assess whether cost pressure—rather than physical inability to perform—creates misalignment between contractual risk allocation and commercial reality.
• Engage early between principals and contractors where ongoing cost escalation creates delivery, solvency or insolvency risk, recognising that strict reliance on contractual rights may not preserve project outcomes.
• Monitor second‑order impacts as they emerge, including freight disruption, secondary materials availability and subcontractor stress, and reassess assumptions as conditions evolve.

Imminent and pipeline contracts

• Review pricing and risk allocation assumptions in light of ongoing volatility, including whether fixed‑price models remain appropriate.
• Consider targeted mechanisms to manage input cost escalation where appropriate, such as provisional sums, diesel‑specific rise and fall regimes or priced contingencies.
• Ensure rise and fall and indexation mechanisms are calibrated to relevant inputs and indices, and operate in a balanced, two‑way manner.