Construction contracts set a legal framework for capital works and are vital to ensure a successful project. They are guides that detail expectations, risks (and their management), and time/budget considerations. There is, however, more than one common type of construction contract in Australia, each with advantages depending on the project type.
The construction industry relies heavily on subcontracting, which accounts for around 79% of its income, meaning a large share of contract value flows through subcontractor chains. The correct use of appropriate contracts affects payment terms and downstream risks, ensuring subbies are treated fairly and that works are completed properly.
Having a construction contract in place is non-negotiable, so we’ve detailed the different types of standard-form contracts to help you determine which is right for your project and work.
What are the various types of construction contracts Australia has?
There are many Australian construction contracts, and even some international ones, that can be relevant when working on local projects via overseas development or building agencies. There are six main categories of contract types that we will explore in this article:
- Australian Standards (AS) Suite
- International Standard Forms
- Government and Defence Contracts
- Residential Construction Contracts
- Project Delivery Contract Types
- Industry-Specific Contracts
Legal teams will make significant changes to the specifics of these contracts. Still, the following explanations will help you understand their applications and benefits, so you’ll know which is appropriate for your project.
Australian Standards (AS) Suite
| Contract | Risk Allocation | Primary Use | Key Features | Payment Structure |
| AS 4000 | More risk on Principal through detailed variation processes | Medium to large commercial or industrial projects | Highly prescriptive administrative framework; detailed invoicing required | Defined progress claims with strict payment schedules |
| AS 2124 | Risk distributed/negotiated; more flexible | Smaller or consulting-led developments | Streamlined, flexible approach; less prescriptive | Discretionary cost management permitted |
| AS 4300 | Hierarchical structure relying on AS 4000 | Subcontracting relationships | Integrates with head contract framework | Mirrors head contract payment terms |
| AS 4902 | Mostly taken by Contractor | Design and construct projects | Single point responsibility for design and construction | Fixed price with variations |
AS 4000
As the industry benchmark for medium-to-large-scale commercial projects, this contract type offers a highly prescriptive framework that clearly defines governance and procedures. It’s great for ensuring the fair treatment of concurrent delays and protecting contractors from losing Extension of Time entitlements.
On the downside, these contracts feature significant administrative complexity, demand meticulous invoicing, detailed progress claims, and stringent notice requirements.
AS 2124
This is a more streamlined, flexible alternative to the contract option above, better suited to smaller or consulting-led projects. It is somewhat looser on prescriptive payment timing and more discretionary in cost management, reducing administrative burden.
There is a broader list of qualifying causes of delay, but the trade-off is a bigger risk for contractors. For example, minor contractor-caused delays can result in the total forfeiture of time extensions. Consider it an “all or nothing” approach that requires perfect administrative records and flawless performance from contractors, who are automatically liable for liquidated damages if the work is not completed by the due date.
AS 4300
This hierarchical contractual structure relies on the AS 4000 for its dispute resolution provisions and general framework. This isn’t necessarily a bad thing, as it ensures consistency and alignment between the Head Contractor and subbies. A great example of this is how payment terms and Extension of Time entitlements mirror the head contract, so subbies have pass-through rights protecting them when the Head Contractor has valid claims against the Principal.
It does mean another heavy administrative burden for subbies similar to the AS 4000, and their rights are contingent upon the Head Contractor complying with due dates and notice requirements.
AS 4902
Specifically designed for Design and Construct projects, this contract type puts a single point of responsibility on the contractor for both design and construction. This offers fixed-price certainty, streamlined project delivery, and clear accountability, which is great for projects with integrated delivery and performance guarantees.
There will commonly be fitness-for-purpose obligations and mandatory professional indemnity insurance requirements, placing a bit more functional risk on the contractor, but this is often priced in to account for the higher risk and greater financial exposure for the contractor compared to construct-only models.
FIDIC International Standard Forms
| Contract | Primary Use | Key Features | Australian Application |
| FIDIC Red Book | Traditional construction projects where employer provides design | – Contractor constructs to employer’s design
– Engineer administers contract – Balanced risk allocation |
Used for international projects in Australia, particularly with foreign funding or international contractors |
| FIDIC Yellow Book | Design and build projects | – Contractor responsible for both design and construction
– Fitness for purpose obligations – Single point responsibility |
Applied to major infrastructure and process plant projects |
| FIDIC Green Book | Small, simple projects of short duration | – Simplified procedures
– Reduced administrative burden – Suitable for minor works |
Limited use; generally preferred for small projects |
FIDIC Red Book
The traditional international construction contract where the owner provides the complete design and the contractor builds it. Recognised worldwide, this is the best option for international projects with foreign investors or contractors who are familiar with FIDIC standards.
There is a balanced risk allocation with clear procedures administered by an independent Engineer; however, like any separated design-build arrangement, when something goes wrong, disputes may arise over the owner of the problem.
FIDIC Yellow Book
A design-build model where the contractor takes responsibility for both designing and building the project, giving owners more certainty that the finished project will work as intended. This often comes at a higher price as design liability and fitness-for-purpose guarantees are priced in, not too dissimilar to the AS 4902.
FIDIC Green Book
This is the simplified, short-form version of international contracts, which makes it popular for small, straightforward projects. Streamlined procedures, reduced administration requirements, fast and cheap to manage. All of this sounds great, but these contracts can lack the detailed protections and procedures of the options above. If the project is complex or high-value, AS contracts are generally a better option to protect all of the parties involved.
Government and Defence Contracts
| Contract | Primary Use | Key Features | Special Provisions |
| GC 21 | Federal government construction projects | – Standard government contract template
– Compliance with Commonwealth procurement policies – Risk-averse approach |
Strict compliance requirements
Extensive reporting commitments Security and background check requirements Government-favourable terms |
| Defence HC-1 | Major defence construction projects | – Complex security requirements
– Stringent quality standards – Defence-specific compliance |
– National security clearances required
– Specialised inspection regimes – Defence-specific variations processes – Enhanced quality assurance protocols |
| Defence DSC-1 | Design services for defence facilities | – Design-specific requirements
– Security-cleared designers – Specialised technical standards |
– Defence design standards compliance
– Intellectual property provisions – Security classification management |
| Defence MCC-1 | Small-scale defence facility works | – Simplified procedures for minor works
– Lower value thresholds – Reduced administrative burden |
– Streamlined for efficiency on smaller projects
– Still maintains security requirements – Faster approval processes |
| Commonwealth Contracting Suite | Range of federal government projects | – Standardised terms across agencies
– Integrated with procurement policies – Risk management framework |
– Consistent approach across departments
– Value for money focus – Probity requirements – Indigenous participation provisions |
GC 21
As the standard contract template for federal government construction projects in Australia, the goal here is to ensure compliance with Commonwealth procurement policies. These contracts provide a consistent, standardised, and risk-averse approach across most (if not all) government work. If you regularly work with the government, you’ll be no stranger to this contract type (which does involve extensive reporting obligations, strict compliance requirements, and terms that favour the government).
Defence HC-1
Used for major defence construction projects, these contracts often include complicated security requirements, strict quality standards, and specialised inspection controls. Winning a Defence HC-1 contract often means substantial, long-term work, but national security clearances, quality assurance protocols, and defence-specific variation processes also come along with the deal.
Defence DSC-1
Specifically for design services on defence facilities, you will need to be a security-cleared designer and compliant with specialised technical and security standards (intellectual property provisions/security classification management). Construction design firms interested in working on the projects need the right security credentials and expertise, but the competition is minimal, so you are well-positioned to win ongoing specialised work.
Defence MCC-1
A streamlined version of the above options for small-scale defence facility works. These contracts often lead to simpler procedures and faster approval processes, but still maintain specific security requirements. Consider this the contract for minor projects, far less burdensome than the HC-1 but still more complex than most commercial contracts.
Commonwealth Contracting Suite
This contract combines several federal government contracts to account for different departments and agencies. The focus here is often value for money and ease of working across multiple government agencies. These can be long contracts that favour the government with extensive compliance with procurement procedures, which means more administrative work.
Residential Construction Contracts
| Contract | Full Name | Key features | Payment Structure | Builder/Owner Balance |
| HIA | Housing Industry Association Contracts | – In-depth coverage
– Flexible for modifications – Builder association template |
Traditional progress payment system | Weighted toward builder’s commercial interests; requires homeowner legal review |
| MBA | Master Builders Association Contracts | – Detailed specifications
– Better for complex residential projects – Somewhat more balanced |
Flexible customisation based on milestones | Better balance than HIA; includes more homeowner management mechanisms; still requires legal review |
| QBCC | Queensland Building and Construction Commission Contract | – Highly standardised
– Statutorily-defined – Good for straightforward builds |
Strict statutory payment schedules | Government-issued for consumer protection; prioritises clarity |
HIA
Housing Industry Association contracts are comprehensive residential building contracts that offer flexible provisions for project modifications to account for most of the scenarios that arise in residential construction.
They are widely recognised, readily available, and familiar to most residential builders in tenders across Australia, and are basically the go-to standard for Australian building industry contracts. However, they inherently favour the builder’s commercial interests (over the homeowner’s) and the dispute resolution pathway is more reactive than proactive.
MBA
Master Builders Association contracts are more balanced than HIA contracts, with more detailed specifications better suited to complex residential projects. These contracts include mechanisms to address issues during construction and a very flexible payment structure.
QBCC
As the only state with a specified construction contract, Queensland’s government-issued residential construction contracts are designed with consumer protection as their primary focus.
These contracts are highly standardised, with statutorily defined terms, strict payment schedules mandated by law, and state-regulated dispute processes. They are a lot less flexible than HIA or MBA contracts and are only applicable in Queensland. These contracts are not recommended for complex or unique residential projects.
Project Delivery Contract Types
| Model/Type | Full Name | Risk Allocation | Cost Structure | Primary Use Case |
| Lump-Sum | Fixed Price Contract | Contractor bears most risk | Fixed total price | Well-defined scope, low complexity |
| Cost-Plus | Cost Reimbursement Contract | Owner bears cost risk | Actual costs + agreed fee/percentage | Undefined scope, early start needed |
| GMP | Guaranteed Maximum Price | Shared risk (cap on owner’s exposure) | Costs reimbursed up to maximum, with savings sharing | Moderately defined scope |
| Unit Price | Schedule of Rates/Unit Rates Contract | Quantity risk shared | Price per unit × actual quantities | Uncertain quantities (earthworks, utilities) |
| Time and Materials (T&M) | Labour and Materials Reimbursement | Owner bears most risk | Hourly rates + material costs + markup | Emergency works, undefined scope, maintenance |
| Design and Build (D&B) | Design and Construct (D&C) / EPC | Mostly contractor (single point responsibility) | Typically lump-sum or GMP | Fixed price certainty needed, standard complexity |
| Design and Build (D&B) | Traditional/
Separated Procurement |
Contractor manages construction risk only; owner holds design risk | Various (often lump-sum) | Well-defined scope, low complexity, owner wants design control |
| Managing Contractor (MC) | Construction Management | Primarily owner (time and cost risk) | Fixed MC fees + reimbursed subcontractor costs | Complex projects needing early contractor involvement, government projects |
| Incentive Construction | Performance-Based Contract | Shared through incentive mechanisms | Base price + incentive payments/penalties | Projects where performance optimisation is critical |
| Alliancing | Alliance Contract / Relationship Contract | Shared collectively (all win/all lose) | Pain/gain share; non-owner participants share pain only to extent of margin | Large infrastructure, high uncertainty, mega-projects |
| IPD | Integrated Project Delivery | Shared among key participants | Shared financial model with pain/gain mechanisms | Complex projects requiring high collaboration |
As the table above shows, there is some diversity among construction contract types in Australia. This is necessary as construction projects vary enormously in complexity, risk profile, and stakeholder objectives. A one-size-fits-all Australian standard construction contract approach simply won’t work; it is as impractical as it is commercially inefficient.
The main difference in the contract types above is how they address risk allocation. Some owners prioritise budget certainty and are willing to pay a premium for it (lump-sum), while others value flexibility and transparency (cost-plus). The construction industry serves a range of clients, and each requires contract frameworks that match their risk tolerance.
Project uncertainty is the main driver of contract selection. In the world of construction tendering, we see everything from projects with well-defined and complete documentation, (where fixed-price approaches can be best) to projects with more unknowns that require flexible cost-reimbursement structures.
Contractual diversity also allows for competitive advantage and market specialisation. Subbies can differentiate themselves by specialising in specific delivery models and risk placement.
Industry-Specific Contracts
| Contract | Description | Primary Use | Key Features | Industry/Sector |
| ABIC MW | Australian Building Industry Contract/Major Works | Major commercial building projects | – Tailored for building (not engineering) projects
– Alternative to AS suite – Industry-specific provisions |
Commercial building construction |
| Custom Contracts | Bespoke/Project-Specific Agreements | Unique, complex, or specialised projects | – Tailored to specific project needs
– May combine elements from standard forms – Requires extensive legal drafting – Used when standard forms inadequate |
All sectors where standard contracts don’t fit |
ABIC MW
This building-specific alternative to the engineering-focused AS suite of contracts exists as commercial building projects have distinct characteristics, risks, and industry practices compared to heavy civil or infrastructure work. ABIC contracts include provisions for architectural finishes, building services coordination, and defect management, all elements that may not fit neatly into engineering contract frameworks. Building contractors and developers’ workflows and risk profiles are simply better suited to ABIC contracts.
Custom Contracts
As we’ve discussed, some construction projects are too unique, complex, or specialised for a standard contract. Custom contracts provide a solution for bespoke framework requirements with precise risk allocation, project-specific requirements, and unique regulatory circumstances. These contracts require extensive legal drafting but provide the ultimate flexibility.
How do you choose the best contract type?
The following guidelines will help you ensure the right contract type for your project:
- A lump sum contract is a clear solution when contractors can accurately estimate costs due to the existence of a clear statement of work.
- When the project scope is unclear, risk can be mitigated by bidding with time and materials.
- Unit price contracts are great for repeat work as they make it easy to expand the project scope.
- When working with a fixed budget, guaranteed maximum price contracts reduce financial risk.
- A cost-plus contract limits risk when pricing estimations are unclear or untrustworthy.
Remember, you can use different contract types in different phases of large projects. Contract types may even overlap (e.g. cost-plus projects including a maximum price). Always read the conditions of every contract carefully and be confident that you understand what you are signing before beginning work.
Dealing with contracts when winning new work
Contract considerations are important when working with new builders or subbies, and can form a significant part of the tender documentation that leads to new relationships being formed. E1 streamlines document control in the tendering process and provides data-driven risk management to help builders and subbies make more informed decisions. Learn more about E1 today.
Alexander
Green
General Manager - Subcontractors
