What Are the Biggest Tendering Risks for Contractors in New Zealand in 2026?

The biggest tendering risks for contractors in New Zealand in 2026 include cost volatility, underpricing, incomplete tender documents, unfavourable contract terms, labour constraints, compliance obligations, and financial exposure during long tender processes. For many contractors, the key risk is not simply losing work, but winning work on terms that undermine margin and increase legal or delivery risk.

Why is tendering risk higher for contractors in 2026?

As New Zealand’s construction sector moves through 2026, contractors face a tendering environment shaped by economic uncertainty, regulatory change, and evolving client expectations. While competition for work remains intense, the risks embedded in the tendering phase have arguably become more significant than ever. Understanding and actively managing these risks is critical to maintaining profitability and long-term viability.

1. Price Escalation and Cost Volatility

Material and labour cost volatility remains the most prominent tendering risk in 2026. Although inflation has eased compared with earlier years, prices for steel, concrete, timber, fuel, and specialist trades remain unpredictable. Contractors submitting fixed-price tenders risk absorbing increases that occur between tender submission and project completion, particularly on long-duration projects. Inadequate escalation clauses or overly optimistic allowances can quickly erode margins.

2. Underpricing Due to Competitive Pressure

A constrained pipeline of publicly funded projects has intensified competition. Many contractors feel pressure to “buy work” by submitting low tenders to maintain cash flow and workforce continuity. This creates a significant risk of underpricing, where bids fail to reflect true delivery costs, risk premiums, or overhead recovery. In 2026, insolvency risk remains closely linked to aggressive tender pricing rather than lack of work.

3. Incomplete or Poor-Quality Tender Documentation

Design immaturity continues to be a major issue, particularly on early contractor involvement (ECI) and fast-tracked projects. Incomplete drawings, provisional specifications, and unresolved consenting matters shift design and coordination risk onto contractors at tender stage. If these risks are not clearly priced or contractually managed, contractors may face scope gaps, rework, and disputes later in the project lifecycle.

4. Unfavourable Contract Terms and Risk Transfer

Clients are increasingly seeking to transfer risk to contractors through bespoke or heavily amended contracts. Common examples include limited relief for delays outside the contractor’s control, broad indemnities, high liquidated damages, and narrow variations mechanisms. Accepting these terms without fully pricing or qualifying the risk can expose contractors to significant financial and legal consequences.

5. Labour Availability and Productivity Assumptions

While overall labour demand has softened in some regions, skilled trade shortages persist in others. Tender programmes that assume optimistic productivity rates or uninterrupted labour supply may not reflect on-site realities. In 2026, contractors face heightened risk where tender pricing does not adequately account for training costs, supervision, absenteeism, or reliance on subcontractors with stretched capacity.

6. Sustainability and Compliance Requirements

Environmental and social procurement requirements are increasingly embedded in tenders, particularly for government and large commercial projects. Contractors may be required to demonstrate carbon reduction measures, waste minimisation, Māori or other culturally appropriate outcomes, or modern slavery compliance. Failure to fully understand the cost and operational implications of these obligations can lead to under-priced tenders or non-compliance risks post-award.

7. Financial Exposure During Prolonged Tender Periods

Extended tender timeframes, multiple bid rounds, and late client changes increase bid costs and management distraction. For smaller and mid-tier contractors, the cumulative cost of unsuccessful tenders can strain cash flow. There is also risk in committing resources to preferred-bidder status without firm contract award, particularly if project funding or scope changes late in the process.

Conclusion

In 2026, tendering risk for New Zealand contractors is less about winning work at any cost and more about disciplined risk selection and pricing. Contractors who invest in robust technical advisors, carry out contract reviews, and select bidding strategies are better positioned to protect margins and avoid downstream disputes. In a challenging market, saying “no” to the wrong tender can be as important as winning the right one.

If you would like further or more specific advice on construction related issues, get in touch with Rebecca Richter, our construction law expert.

1.What are the main tendering risks for contractors in New Zealand in 2026?

The main tendering risks include price escalation, underpricing, incomplete tender documentation, unfavourable contract terms, labour constraints, sustainability and compliance obligations, and financial exposure caused by long tender processes.

2. Why is underpricing such a major tendering risk?

Underpricing can leave contractors locked into projects that do not properly recover delivery costs, overheads, or risk allowances. In a competitive market, low bids may win work but still damage profitability and increase insolvency risk.

3 How do incomplete tender documents create risk for contractors?

Incomplete drawings, provisional specifications, and unresolved consenting issues can shift design, coordination, and scope risk onto the contractor. If these risks are not identified and priced at tender stage, they can lead to rework, disputes, and margin erosion later.

4. What contract terms should contractors watch for during tendering?

Contractors should pay close attention to clauses dealing with delay risk, liquidated damages, indemnities, variations, escalation, and other provisions that transfer disproportionate risk to the contractor.

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