A large commercial joinery or interior fit-out tender is a complex calculation for many subcontractors, and high-risk projects can waste time and money. These days, subbies must take macroeconomic volatility, regulatory disruption, and industry-wide insolvency into account when tendering for work.
Understanding what constitutes a “high risk” tender is essential, so read on for our in-depth breakdown that could save you time, dollars, and headaches in the near future.
What are the insolvency risks in the construction industry
In the 2023-24 financial year, 2,975 Australian construction firms collapsed, which tells us the industry is in a state of turbulence. This figure represents approximately 27% of all company failures nationally, and this much financial distress in a single industry has a flow-on effect for large commercial tendering decisions.
Builder bankruptcies are a big risk for joinery subcontractors, as their packages are typically installed toward the end of a project timeline. If a builder collapses mid-project, joinery firms can be left with significant work-in-progress and pre-purchased materials, with very little chance of receiving payment. This situation makes for a high-risk tender. When the correct amount of reliable financial due diligence is not performed by the principal contractor, the stage is set for significant financial trouble.
Is a labour shortage a risk?
There is a shortage of skilled workers, including cabinetmakers and carpenters, in Australia, which can create opportunities and risks in the world of commercial tenders. Around 36% of occupations in the building sector are in short supply, making it hard for builders to fill positions.
For joinery firms, scarcity means delivery risks and cost pressures. When apprenticeship intakes decline, labour costs can outpace general inflation.
When labour pricing in a joinery tender is based on historical averages as opposed to current market rates, things become high-risk. Finances aside, there can also be productivity losses due to less experienced staff, and liquidated damages if delivery deadlines slip.
The silver lining of this situation for joinery subcontractors is the lower amount of competition. In an industry where skilled workers are few and far between, your chances of winning a tender, if you can demonstrate your suitability for the project, increase.
Can material price volatility be an issue in tenders?
Fluctuations in the prices of timber, laminates, hardware, and other materials can pose risks for joinery businesses. In 2025, joinery materials saw a 2.9% price rise, making the need for price escalation clauses for joinery work vital.
These clauses can mitigate the risk somewhat, however the time difference between tender submission and material procurement may not be covered. Joinery projects have long lead times, especially for specialised items, so detailed “rise and fall” clauses or escalation mechanisms are essential to ensure you are not betting on price stability. Timber prices jumped 1.8% in a single quarter in the 2025 rise we mentioned above, so even short-term exposure can devastate margins.
A high-risk tender often features supplier quotes with validity periods that are shorter than the anticipated procurement timelines, or even worse, no locked-in supplier pricing at all.
What are the regulatory risks in tendering?
A high-risk tender fails to address material substitution protocols and any associated cost mechanisms. Variation clauses are vital for regulatory changes to avoid financial losses and legal liability. The biggest example of this in joinery tenders is the national ban on engineered stone products containing crystalline silica.
High rates of silicosis were found in those who worked as stonemasons and joiners, which led to a ban across the manufacturing, supplying, processing, and installation of engineered stone benchtops, panels, and slabs in 2024. Businesses that cut or process banned materials are deemed non-compliant and can face severe penalties.
Important note: Contracts may be active today that were signed before July 2024 with delivery schedules past the ban’s commencement. It is illegal to install engineered stone regardless of any prior contractual commitments. Porcelain, sintered stone, or natural stone (all of which are more expensive) must be used instead.
What is the Unfair Contract Terms (UCT) regime?
The Unfair Contract Terms (UCT) essentially protects you from unfair terms in standard contracts. The regime applies to standard form contracts where one party has fewer than 100 employees or less than $10 million annual turnover.
This actually applies to 98.5% of Australian construction businesses and virtually all joinery subcontractors. The regime looks to target problematic clauses such as:
- Termination for convenience
Head contractors cannot cancel contracts at short notice without sufficient compensation.
- Unbalanced indemnities
Subcontractors should not be expected to cover losses beyond their control.
- Onerous time bars
There can be no unreasonably short or uncertain notice periods that override legitimate variation or extension claims.
- Unilateral variation rights
Principals cannot change the scope without fair price or timeline adjustments.
High-risk tenders often have outdated contract templates that do not account for the legislative changes above. These clauses are governed by the Australian Competition and Consumer Commission, and all terms that mirror those listed above can be considered void.
Being aware of design and construct joinery tenders
Design and Construct (D&C) procurement can be found in large-scale projects, but this set-up can put more risk on subcontractors who assume full responsibility for design documentation and constructability.
If you, as the subcontractor, are the single point of responsibility for design defects, it can be harder (or more expensive) to acquire professional indemnity insurance. If a D&C tender or contract includes fit-for-purpose obligations, this can require a higher level of professional capability than smaller joinery firms have, potentially leading to quality failures and insolvency. A tender that accepts D&C responsibility without corresponding margin increases to cover things like insurance costs is certainly higher risk than a project where these tasks are split.
What risks are present in the Scope of Work?
High-risk tenders will often feature vague, incomplete, or ambiguous scope descriptions. When scopes leave excessive room for interpretation, dispute situations are more likely to arise.
Here are two examples of phrases that pop up often in the scope of work section that should raise cause for concern (or at least further questioning):
- All work necessary to fulfil the intent
- Generally in accordance with the plans
These statements shift responsibility for identifying missing items to subcontractors and lack specificity for dispute resolution. In a similar vein, if a tender is missing a Bill of Quantities, identifying legitimate variations is basically impossible. When tenderers underprice bids because indirect costs (like insurance and waste removal) have been ignored, there is no buffer for contingencies, which you can almost always bank on needing in complex projects.
Protecting yourself with good risk management
Risk management is essential for every small business and subcontractor applying for large tenders, and is much more effective than reactive contract negotiation.
Here are some of our recommendations to lower risk and ensure better management of it:
- Maintain visibility with clear communication between technical and commercial teams
- Use Building Information Modelling to examine projects before construction begins
- Procure long-lead materials months in advance if possible, to lock in prices and reduce schedule risk
- Aim for collaborative contracting through negotiation and avoid burdensome risk-transfer terms
High-risk tenders are essentially those that have poor financial due diligence and are based on outdated assumptions. To ensure your business avoids these, adopt an anticipatory mindset and approach every tender as a strategic exercise in risk management. By identifying risk factors and putting mitigation frameworks in place, you can confidently apply for the big projects that will truly move the needle for your business.
Alexander
Green
General Manager - Subcontractors
