Builder Due Diligence: Choosing a Resilient Builder in a Crisis

_A practical guide to navigating the Victorian building crisis, protecting your investment, and finding a financially sound builder aligned with your regenerative goals._ You've got your plans approved, your documents ready, and suddenly you're staring at news headlines about another building company collapse. Roberts Co's Victorian arm went under in March 2025, leaving major projects in limbo. Before that, Porter Davis Homes left 1,700 families stranded. With 3,217 construction companies collapsing in 2024 alone, a 26% increase from the previous year, choosing a builder feels like walking through a minefield blindfolded. Yet here's what the headlines don't tell you: thousands of excellent builders continue delivering quality projects every day. The key isn't avoiding all risk; that's impossible in any business relationship. It's understanding which risks you're taking and how to protect yourself while finding a builder who shares your regenerative vision. This chapter gives you the tools to navigate builder selection with your eyes wide open, knowing exactly what to look for, what to avoid, and how to structure arrangements that protect your interests while enabling your regenerative goals. ## The Perfect Storm: Why Victorian Builders Are Failing The construction industry faces a perfect storm that's important to understand, not to scare you, but to help you make informed decisions. Fixed-price contracts signed before the pandemic now face material costs that are 30.8% higher than they were at the start of the COVID-19 pandemic. Labour shortages persist, putting upward pressure on wages and extending project timelines. Many builders operating on thin profit margins simply can't absorb these increases. When they signed your neighbour's contract in 2022 for a fixed price, they might now face costs that erase any potential profit. The builder who collapses isn't necessarily incompetent or dishonest; they might simply be caught in an economic vice that's crushing the entire industry. This context matters because it shapes how you approach builder selection. You're not just assessing technical competence; you're evaluating financial resilience and risk management in an industry undergoing a fundamental transformation. Since July 1, 2025, the new Building and Plumbing Commission (BPC) has replaced the Victorian Building Authority (VBA), introducing stricter compliance measures. This new, more powerful watchdog combines regulation, insurance, and dispute resolution to enhance consumer protection. Builders now face enhanced mandatory inspections and expanded rectification order powers. While these changes aim to improve quality, they also increase compliance costs. For you, this means a builder who has adapted to these new requirements demonstrates forward-thinking and regulatory competence. Ask potential builders how they've adjusted to the BPC's requirements. Those who can articulate specific changes show they are staying current. ## Due Diligence That Actually Protects You The standard advice to "check their licence and insurance" won't protect you in this market. You need forensic-level due diligence that reveals genuine financial health.  _Comprehensive builder evaluation for project success_  **Financial Health Assessment** Start with specialised services like Builders Financial Certification or Corporate Scorecard, which provide detailed builder financial assessments. These reports analyse cash flow patterns, debt structures, and project pipelines in ways that basic credit checks miss. Request three years of project history, not just references. Look for patterns: Are project values increasing or decreasing? Are they taking on too many jobs to generate cash flow? Examine their supplier relationships. Builders in financial stress often stretch payment terms, so calling major suppliers to discreetly inquire if a builder's accounts are current can be valuable intelligence. Finally, check court records for payment disputes or other legal proceedings, as patterns of disputes can indicate systematic cash flow problems. **Project Pipeline and Subcontractor Network** Understanding a builder's current and future work reveals more than their bank balance. A healthy builder maintains a steady pipeline with staggered start dates. Warning signs include large gaps in their schedule or a sudden clustering of project starts. Critically, calculate their exposure to fixed-price contracts signed before 2024. If a significant portion of their work is locked into pre-inflation pricing, they are likely under financial pressure. Visit their current job sites unannounced. Active, well-organised sites suggest good project management, while sites that appear stagnant could indicate resource constraints. In Victoria's construction industry, builders are primarily coordinators, so the stability of their subcontractor network is vital. Ask for a list of their regular subcontractors and contact them. Long-term relationships and enthusiastic feedback are positive indicators; hesitation is a red flag. **Insurance and Protection Verification** Domestic Building Insurance (DBI) is mandatory for residential projects over $16,000, but not all policies are equal. Request the Certificate of Insurance and verify that it specifically covers your project, names you as the beneficiary, and is from an APRA-authorised insurer. Verify your builder's registration through the Building and Plumbing Commission website. Check their registration class matches your project type and review their disciplinary history. ## Finding Builders Who Understand Regenerative Construction Many builders now claim "green" or "sustainable" expertise, but regenerative construction requires a fundamentally different mindset. You need builders who understand that buildings should produce more than they consume, not just consume less. **Beyond Green Credentials** Look for builders who can articulate the difference between sustainable and regenerative approaches. Regenerative builders discuss positive environmental impact, circular economy principles, and long-term stewardship. B Corporation certification provides third-party verification of a company's commitment to social and environmental performance. While few Victorian builders have this certification, those that do, like Melbourne-based Hone Built, have demonstrated a deep commitment to these principles, often scoring significantly higher than the median on B Lab's impact assessment. **Assessing Technical Capability** Regenerative construction often involves natural materials like hempcrete or rammed earth and requires a solid understanding of principles like airtightness and thermal bridging. Ask specific technical questions: "How would you prevent thermal bridging?" or "What's your approach to maintaining airtightness?" Builders who engage thoughtfully with these questions are better candidates than those who dismiss them. Smaller, values-aligned builders can be an excellent fit for regenerative projects. They often provide direct principal involvement, greater flexibility, and a stronger investment in their reputation. Indigenous-owned building companies and social enterprises offer unique value. Companies like Barpa Construction Services bring deep cultural knowledge and a commitment to community benefit. Research shows that for every dollar of revenue, Indigenous businesses generate significant social and economic value for their communities. ## Contract Structures That Share Risk Fairly  _Creating equitable agreements that protect all parties_ The traditional fixed-price contract, which made sense when costs were stable, is now a primary driver of builder failure. In the current market, it forces builders to either price in huge contingencies or accept unmanageable risks. **Cost-Plus Contracts: Transparency Over Certainty** Cost-plus contracts, where you pay the actual costs plus an agreed builder margin (typically 15-20%), are better suited to current conditions. This model offers transparency and ensures the builder is compensated fairly, keeping them viable. The key to a successful cost-plus arrangement is structure and oversight: establish clear margin percentages, require weekly cost reporting with receipts, and set approval thresholds for any variations. **Progressive Payments and Alternative Models** Instead of large, risky progress payments, structure payments to closely match work completed, such as weekly or fortnightly invoices. This reduces the builder's cash flow pressure and your exposure. Other models worth considering include Integrated Project Delivery (IPD), where the architect, builder, and key trades form a partnership to share risk and reward, and Construction Management agreements, where the builder acts as a consultant managing trades you engage directly. Staged contracts, which break the project into phases with separate agreements, can also limit exposure while allowing the project to move forward. ## Red Flags and Final Decisions Be wary of quotes significantly below others, pressure for large deposits, and a reluctance to provide detailed cost breakdowns. High-pressure sales tactics, poor communication, and speaking negatively about past clients are all behavioural warning signs. Always use industry-standard contracts from organisations like Master Builders Victoria or the HIA. Your selection should be a structured, three-stage process: 1. **Screening:** Start with 5-7 builders and eliminate any with obvious red flags. 2. **Evaluation:** Conduct detailed evaluations of 3-4 candidates, including site visits and comprehensive reference checking. 3. **Selection:** Hold formal interviews, negotiate contract terms, and make your final choice based on a weighted decision matrix that balances financial stability, technical skill, regenerative understanding, and communication. Trust your instincts. A construction project is a long-term relationship. Choosing someone you trust and communicate well with is just as important as their technical competence. --- ## Key Summary: Your Builder Selection Toolkit The Victorian building industry is navigating an unprecedented crisis, but this doesn't mean your regenerative project has to be put on hold. It means proceeding with a new level of awareness and diligence. The headlines are sobering, with thousands of insolvencies driven by soaring costs and labour shortages, but thousands of skilled, resilient builders remain. Your task is to cut through the noise, identify a partner who is both financially sound and philosophically aligned, and structure your relationship for mutual success. Your due diligence must go far beyond a license check. It requires a forensic approach: investing in a professional financial assessment, analysing a builder's project pipeline for signs of distress, and verifying the stability of their subcontractor network. Pay close attention to their exposure to old, fixed-price contracts, as these are a major source of financial strain. At the same time, look for the markers of a true regenerative partner, someone who talks about circular economies, not just energy ratings, and who engages thoughtfully with the technical challenges of building better. The fixed-price contract model is broken in this volatile market. To protect both yourself and your builder, embrace more transparent and equitable structures. Cost-plus contracts, progressive payment schedules, and innovative models like Integrated Project Delivery shift the focus from adversarial risk-shifting to collaborative problem-solving. These structures ensure the builder remains viable, the single most important factor in getting your project finished, while giving you clear sight over where your money is going. ## Chapter Resources [**Victorian Building Authority - Find a Practitioner →**](https://www.vba.vic.gov.au/tools/find-practitioner) _Use the official Victorian Building Authority search tool to verify a builder's registration, check their license class, and review any disciplinary history. Essential first step in due diligence to ensure your builder is properly registered for your type of work._