An update on the Fair Work Commission’s fuel cost recovery order and the continuing implications for local government contracts.
On 21 April 2026, the Fair Work Commission introduced a Road Transport Contractual Chain Order – Fuel Cost Recovery, requiring parties in a road transport contractual chain to pass through increases in fuel costs and review pricing at least twice monthly.
Our previous article exploring this topic recommended Councils review their contracts to identify where they may be a primary party in the transport chain and ensure existing fuel adjustment, rise-and-fall, or reimbursement mechanisms comply with the Order.
Where are we now?
The weekly national average terminal gate price for diesel has fallen below $2 per litre. Accordingly, the fuel cost recovery obligations have been on ‘pause’ from 7 June 2026, noting that the Order was drafted such that the obligations creased to apply once prices fell below that level. There was no express provision for it to recommence if prices rose above $2 per litre again. Previously affected parties are no longer required to continue the rate adjustment processes prescribed by the Order. Arrangements made outside of the Order (e.g. contractual rise and fall clauses) may continue to apply depending on the terms of the arrangement.
Importantly, the Order remains in effect. This means that for the period the Order applied:
- a party that was entitled to an adjustment that did not receive it could still seek to enforce the Order; and
- a party that failed to comply with the Order could still be subject to penalties for non-compliance.
Councils should ensure that they retain records that demonstrate their compliance with the Order during the period it was in force.
What should Councils be considering?
Although the fuel cost recovery obligations have ceased, Councils should remain mindful of the broader commercial impacts of fuel and freight cost volatility. Global energy markets continue to be influenced by geopolitical uncertainty and supply chain disruption, including ongoing tensions in the Middle East. We expect that suppliers will continue to seek time and cost relief for geo-political risks, both in existing and new contracts.
Councils should also continue to monitor developments from the Fair Work Commission, including the making of any new order in future if fuel prices rise again.
Key takeaways
- Fuel cost recovery obligations under the Order have ceased, as national average diesel prices fell below $2 per litre on 7 June 2026.
- The Order remains in force. Councils should be aware of the need to comply with the Order during the period that it applied.
- Fuel and freight cost volatility remains a commercial risk, despite the fall in diesel prices, and will likely continue to feature in contract negotiations and administration over the coming months.
- Councils should keep an eye out for any further order made by the Fair Work Commission if fuel prices rise again.
If you require any further information, please reach out to our Construction and Major Projects team.