Everyone can read the insolvency figures. Almost nobody prices what sits underneath them.

1. The short version

The contrarian argument on Australian construction is that the failure figures describe small residential builders rather than civil contractors, and that the sector is therefore better than its reputation. The argument is correct. It is also no longer worth anything, because the buyers setting prices in this market already act on it.

Two facts sit behind that. NRW Holdings and SRG Global both posted record results in FY26 and both have been actively acquiring: NRW paid around $200 million for Fredon, which contributed $684.3 million of revenue in nine months, and SRG integrated TAMS inside eight months.^3, 4 A financial buyer bidding for a well run Western Australian civil business is bidding against listed groups with an overhead base to absorb the target into, contract synergies it cannot replicate, and a lower cost of capital. Those buyers can pay a full price and still make their number.

So the useful question is not whether the sector is undervalued. It is not. The useful question is why two contractors with similar revenue, similar work and similar customers change hands at materially different multiples.

The answer is structure. Not the assets, not the order book, and not the sector. How the business is built.

This article asks three questions. Which companies are actually failing, and does that tell us anything about the rest? Who is paying for the work, and for how long? And if the sector is fully priced, where does the difference in value actually sit?

2. Which companies are actually failing

More than 3,400 construction companies failed nationally in 2025 to 2026, out of 14,152 business failures in total, and construction remained the largest single category.¹ That count fell for the first time since the post-pandemic wave began, down from the year before. It is worth registering rather than dismissing: it is early evidence that the worst of the adjustment may be behind the industry, not proof that it is over. Construction still accounts for close to a quarter of all corporate failures nationally, a share the sub-sectors inside it do not carry evenly.

The category is doing the damage. Construction in that figure runs from a two person tiling business to a company building highways, and the failures cluster hard at one end. Western Australia’s building regulator states it plainly. Over the six years to June 2023, failures among registered Western Australian building companies ran at less than a fifth of the number captured in the national construction figure, and represented less than 1% of registered building companies in the state.²

Table 1. What sits inside one insolvency category

Sub-sector	Economic shape	Failure exposure
Residential building	Fixed price agreed with a single household, delivered over a year with no pricing power and thin capitalisation.	Where failures concentrate. One bad contract is sufficient.
Trade and building services	Subcontract work for the same customers, carrying their payment risk without their margin.	Second order exposure to the group above.
Heavy and civil engineering	Plant owning, pre-qualified with government and utility clients, carrying committed forward work.	A different business. This is the group we look at.

ASIC’s own data shows the same shape underneath the improved headline count. Companies with fewer than 20 staff are hit far harder than larger ones, and credit assessments of those firms show weaker financial indicators across every measure.⁵ A national figure turning down by a few percentage points does not tell us whether that improvement was earned in the segment this article is about, or in the segment it is not. The safest reading is that the trend line has turned, not that the picture in Table 1 has changed.

2.1 The other half is not comfortable either

It is worth being precise about what those record results do and do not prove. NRW earned 5.4% on its civil work, and its largest division, contract mining, was flat on the prior year at $1.54 billion.³ Margins in this sector are thin and stay thin.

Civil

Roads, earthworks and urban development

5.4%

Group

All segments, including acquisitions

6.7%

Contract mining

Largest division, flat year on year

9.1%

3. Who is paying for the work

Three separate customers fund this work in Western Australia. They are unlikely to withdraw together.

Table 2. Committed workload by funder

Funder	Committed position
State government	$13.2 billion in 2026 to 2027 and $44.3 billion over the four years to 2029 to 2030, the largest program in the state's history. A year earlier the same program was forecast to fall to $9.8 billion by 2026 to 2027 as METRONET wound down.6
Federal government, defence	$12 billion committed to the naval shipyard at Henderson, with total investment publicly discussed at around $25 billion over the decade, though that figure was contested rather than confirmed at the site announcement. Site confirmed 24 August 2026.7 Delivery model and contracting structure remain unresolved.
Resources sector	$34 billion invested in Western Australian mining and petroleum in 2025, a decade high. As at March 2026, $55 billion of projects under construction, up from $50 billion six months earlier, with a further $121 billion in study phase. Resources remain by a wide margin the largest driver of new business investment in the state.8

As forecast a year earlier

2025 to 2026 Budget

$9.8b

As actually budgeted

2026 to 2027 Budget

$13.2b

3.1 Committed is not the same as billable

The Civil Contractors Federation WA commissions Oxford Economics to update its ten year outlook on the state’s civil market on a rolling basis. The current edition, covering the decade to FY2036 and launched in August 2026, puts the pipeline at $173 billion, below the $208 billion the prior edition of the same report had put on the decade a year earlier. Road and rail work fell in 2025 for the first time since 2019, and the current edition’s near term outlook holds activity broadly flat before any meaningful lift later in the decade.⁹

Nationally, civil work actually completed fell 6.0% in the June 2026 quarter, the first quarterly contraction in that measure since the September 2025 quarter.¹⁰

Both of these move the same direction. The headline decade pipeline has just been revised down, not up, and the near term outlook is flat. Neither undermines the argument here; if anything, a downward revision to the ten year number is a reason to take the flat two year patch more seriously, not less. That patch is where structural weakness converts into failure, and it is the reason the difference between a well built contractor and a poorly built one is about to become visible.

4. Where the difference in value actually sits

Two contractors can carry the same revenue, the same clients and the same equipment, and transact at materially different multiples. The variable is not the sector, the assets or the workload. It is three features of how the business is assembled.

Table 3. What separates the top of the range from the bottom

Structural feature	Priced as a job	Priced as a business
Earnings	Personal costs mixed in. Revenue booked on unapproved variations. The buyer prices the doubt.	Three years normalised, every adjustment documented. Earnings are knowable.
Cash cycle	Claims made late, retention unchased, no visibility over the cash position across the book.	Claims on time, retention tracked and released, cash forecast contract by contract.
Owner dependency	The owner is the pre-qualification, the estimator and the client relationship.	Management layer in place, systems documented, relationships held at more than one level.

4.1 Whether the earnings can be established

At a 5% margin, accounting choices determine the equity value. Personal costs run through the company. Plant depreciation policy moves the number either way. Revenue is recognised on variations the client has not approved.

A buyer facing that either prices in a wide margin for error or withdraws. Both outcomes cost the vendor.

4.2 Whether the working capital cycle is managed or merely survived

A civil contractor pays weekly, invoices monthly, and waits, with a slice of every invoice retained until practical completion. Money leaves fast and returns slowly. This, not profitability, is what ends solvent businesses in this industry.

Two things follow. A contractor that actively manages the cycle, claims promptly and pursues retention release is materially less risky than one carrying the same order book and no visibility over its cash position. And the risk itself is falling. Since February 2024, retention money on Western Australian contracts above $20,000 must be held in trust rather than in the head contractor’s own accounts, and a bill before parliament in May 2026 would extend equivalent protection to payments on government work.¹¹ For a contractor with public sector workload, the counterparty risk is genuinely lower than the sector’s reputation implies.

4.3 Whether the business exists independently of the owner

Main Roads, the utilities and local councils maintain approved contractor lists. Getting onto them takes years and rests on a delivery record held by a person, not by the entity. So do most client relationships in this market.

This is the widest single determinant of value. A business where the owner is the pre-qualification, the estimator and the relationship is not a company with a succession problem. It is a job with equipment attached, and buyers price it accordingly.

4.4 Why this is about to matter more

A large share of business owners nearing retirement age intend to exit within the next few years, and only a minority have a documented plan for how.¹²

Civil contracting fits that profile closely. Plant heavy, relationship dependent, rarely institutionally owned. A substantial number of these businesses will come to market over the next few years, into a buyer group that is already active and already disciplined, and the ones that have done the structural work will be paid for it.

5. What would prove us wrong

The government reprofiles. The $44.3 billion is a forward estimate, not a contract book. It has moved once already, from a forecast below $10 billion a year to a record, inside a single budget. It can move back.

Henderson runs late, or costs more than announced. The $12 billion is announced, not spent, and the wider decade figure is contested rather than settled. At the site announcement itself, the Commonwealth was asked on the record whether the real cost had grown well beyond initial guidance and did not offer a revised number. What gets built and who builds it is still being designed, and projects of this scale routinely slip.

Input costs outrun agreed prices. Most civil work is priced up front and delivered across one to two years. Western Australian construction businesses continue to name finding staff among the most commonly cited barriers to growth.¹³ A contractor that priced its book on flat labour assumptions is exposed regardless of how full that book is.

The defect turns out to be permanent. This is the one that would undo our approach rather than the sector view. Owner dependency is fixable when the owner holds the knowledge. It is not fixable when the owner is the client relationship, and that distinction is often only visible after completion. Where we get this wrong, we will have paid for a transferable business and bought a personal one.

6. How we approach it

6.1 We underwrite the cash cycle before the order book

Committed work is why a business is interesting. It is never why it is fundable. The question is whether it can fund delivery on what it has already signed.

6.2 We prefer recurring maintenance to project work

Shutdown repairs, water and sewer renewals, rolling road maintenance. Less impressive to describe, materially better cash characteristics, and across a flat two years, work that repeats is worth more than work that is large.

6.3 We pay for the handover, not the entity

Where value sits in relationships and approved contractor status, the structure has to hold the owner in place long enough to transfer both. A contractor bought and abandoned at settlement is a plant yard and a website.

7. Where we are spending our time

Civil and earthworks contractors serving government departments and utilities, where demand is settled and the cash cycle is the binding problem. Industrial services businesses attached to recurring maintenance for mines and processing plants rather than one off construction. Owner run businesses approaching succession where the pre-qualification is genuine and the structural work has not yet been done.

We are not looking at residential building, and we are not backing a business whose case depends on Henderson arriving on schedule.

8. Conclusion

The insolvency figures are accurate, and the first sign of the wave breaking does not change what they describe. They are also no longer a source of advantage to anyone, because the buyers active in this market have already worked out which businesses they describe.

What has not been worked out, by most owners, is that the same market pays very differently for two businesses doing the same work. The premium goes to the one whose earnings can be established, whose cash cycle is managed, and which continues to function when the founder is not in the room. Those three things take years to build and cannot be assembled during a sale process.

Over the next two years, Western Australian civil activity is flat before it lifts, and the outlook that lift depends on has just been revised down rather than up. That is the window in which the structural work either gets done or does not, and it is the difference between a business that transacts at the top of its range and one that does not transact at all.

Demand was never the constraint here. Structure is.