Deloitte administrators say the sector needs a review into why fixed-price contracts for big projects are not working.
has thrown a spotlight on the perils of head contractors shouldering all the risk with fixed-price contracts in big projects.
Project subcontractors are also being paid in full after the administrators secured – from joint venture partners and project principals – funding to keep projects going.Although $248 million was in the total list of creditors, that also included intercompany dealings within Clough. Deloitte’s best estimate of the amount owed to ordinary unsecured trade creditors is about $12 million.
Webuild has renegotiated higher some Clough contracts with client companies to reflect higher costs, potentially giving rise to some claims. Problems with fixed price contracts and cost-plus contracts have dogged the sector for decades. Companies have run into problems if costs escalate for potentially unseen problems, such as Lendlease in 2019 facing a blowout on the $650 million fixed-price revamp of Brisbane’s Kingsford Smith Drive after the discovery of problematic ground conditions.that businesses hiring head contractors – Clough was one – needed to deeply consider “the adverse outcome … if things don’t go well”.
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