TPG25-05: Guidance on security for construction projects

In recent years, NSW has seen significant investment in infrastructure and construction, with the government's focus expanding from traditional sectors like road and rail to emerging areas such as renewable energy, water, and housing. The government aims to achieve value for money, deliver quality projects on time and within budget, and improve financial sustainability, despite the increasing scale and complexity of major infrastructure projects and the current fiscal environment. Contractors, while understanding these financial objectives, also aim to maintain profitability and good cash flow.

However, achieving these financial objectives has been challenging due to factors like COVID-19, cost escalation, supply chain risks, and skills shortages. These pressures have led to greater volatility in key building material prices and fluctuating industry profits over the past decade. In the 12 months leading up to May 2024, the construction industry accounted for 31% of insolvencies in NSW.

The NSW Government continues to focus on the risk management over a project’s lifecycle. Security guidance is one of the tools which the government can use to ensure security is commensurate with each project financial and performance related risks and ensure a consistent approach across the NSW Government.

This paper provides guidance on:

• the key types of security that are available
• how to optimise the Security Package
• alternatives and additions to security
• how to determine the appropriate type of security to obtain from the Contractor
• how and when to assess the adequacy of security for large-scale infrastructure projects.