Civil contractors warn diesel price hikes will add thousands to construction costs, home buyers set to suffer

The cost of each residential lot in new estates will jump by up to $15,000 due to massive hikes to diesel prices and other materials, according to civil contractors. The Civil Contractors Federation WA say a doubling in diesel costs for trucks and earthmoving equipment was putting jobs at risk amid fixed price contracts. Contractors are also suffering cost hikes in materials derived from petrochemicals which are used in land development, including a 40 per cent price jump for PVC pipes, a 10 to 15 per cent boost to asphalt and a 30 to 40 per cent increase to bitumen. The group said combined costs add $7000 to $15,000 per residential lot in new estates. Frank Janssen, managing director of Tracc Civil, said the higher costs added about $10 million to his $110m worth of contracted works. “That’s basically all our profits,” he said. “If one of our clients is slow to pay, we would be toast.” Tracc employs 300 staff directly and has another 150 labour hire staff. Recent fuel excise cuts make no difference to civil works off-road contractors who already get the rebate. While local government and private land developers have offered to help with heightened costs, he said State Government agencies were not budging on fixed-price contracts. “I can only asking for grace. They are not obliged to pay extra,” Mr Janssen said. “But most clients have come to the party by offering to pay most or all of the extra fuel costs.” CCF chief executive, Andy Graham, said civil contractors were also facing higher infill sand costs, which had increased from $36 to $43 per cubic metre tonne in the past month as direct result of fuel levies. On a 500 sqm block needing 1.5m of sand fill, new sand prices add $5000 to the lot price. “Our contractors’ bottom lines took a big hit in March, but April looks worse,” Mr Graham said. “Margins have evaporated and businesses and jobs are under threat. “We are grateful to those clients who are stepping up to support their contractors through this crisis.” But he said some government agencies were enforcing contracts “to the letter” and refusing to discuss any relief. “We have urged the State Government to act now before contractors and subcontractors on their projects lose cash flow and risk collapse,” Mr Graham said. “As one of our industry’s biggest clients, the State Government can show leadership and send a powerful message that civil contractors need support to survive this crisis.” The extra costs will likely get passed on to house and land buyers. It will put further pressure on them, on top of the extra $3000 the diesel costs will add to the cost of building a house, according to the Housing Industry Association. Treasurer Rita Saffioti acknowledged off-road operators did not incur a significant benefit from the fuel excise cuts because they already received the rebate as off-road users. She said the State Government was seeking information about the issue from industry groups and had started discussions with the Commonwealth over potential ways to help the sector — particularly those involved in bulk earthworks and land preparation — under its programs and support.