Mackay Chapman December Building and Construction Update
Welcome back to Mackay Chapman’s monthly building and construction update.
In this final edition for 2025, we examine a damning report into Victoria’s building insurer, new signs of movement in the construction labour market as major infrastructure projects wind down, and a recent case where Mackay Chapman successfully negotiated the reinstatement of a client’s DBI eligibility.
As always, our aim is to keep our readers informed about the regulatory and commercial developments shaping Victoria’s construction industry.
Ombudsman report highlights serious failings in VMIA’s handling of homeowner claims
A new report from the Victorian Ombudsman has delivered a severe critique of the Victorian Managed Insurance Authority (VMIA), the state’s last-resort domestic building insurer.
The report found that VMIA’s approach (particularly in the aftermath of major builder collapses, such as Porter Davis) exacerbated the stress and uncertainty experienced by homeowners.
The Ombudsman identified several systemic issues:
- Poor communication and lack of transparency: Leaving claimants unsure of decisions, timelines or next steps.
- A culture of distrust and disrespect: With internal messages between staff using disparaging and inappropriate language about homeowners.
- Inconsistencies in claims assessment: Where VMIA inspection outcomes at times contradicted independent expert findings obtained by homeowners.
- Use of external lawyers: Many claimants found this intimidating and unnecessarily adversarial during what was already a vulnerable period.
The report concluded that while VMIA fulfilled its role in many cases, for others (particularly those already living with unresolved defects), the process fell significantly short of community expectations for a government body.
VMIA has apologised and committed to improved communication, transparency, and dispute-handling approaches.
Big Build wind-down signals potential shift in trade labour availability
After years of unprecedented activity driven by Melbourne’s Big Build, the final stages of the Metro Tunnel and West Gate Tunnel projects may begin reshaping the construction labour market.
Industry leaders across regional Victoria are reporting early signs that skilled tradespeople are now open to taking on work in residential and regional developments.
Builders have observed a growing interest from Melbourne subcontractors seeking new projects as major infrastructure works near completion.
There’s also been an increase in willingness from metro trades to travel or relocate, driven by a slowdown in city-based work.
However, this optimism is tempered by national labour pressures.
With Queensland’s infrastructure program accelerating ahead of the 2032 Olympics, there is a real possibility that contractors may head interstate in search of higher salaries and long-term government work.
The Victorian Government has highlighted workforce initiatives such as the Local Jobs First Amendment Bill and the Regional Worker Accommodation Fund, aimed at supporting supply across both metro and regional projects.
For now, residential builders (particularly outside of Melbourne) may soon see some relief from chronic trade shortages – though the broader national labour dynamic remains a key variable moving into next year.
Mackay Chapman Case study: DBI eligibility reinstated following targeted negotiation
Mackay Chapman recently acted for a builder employing more than a dozen staff and delivering multiple high-value residential projects.
The VMIA had unilaterally imposed restrictive conditions on the builder’s DBI eligibility and refused to issue DBI certificates for existing construction projects despite these being applied for (and deducted from the builder’s DBI limit) prior to the conditions being imposed. In other words, the BPC was requiring the builder to satisfy terms of eligibility it had not yet accepted before it would issue certificates under existing terms (that were accepted).
The restrictive conditions would have stalled all insured works and jeopardised the builder’s ability to continue trading.
Our team:
- Prepared a detailed submission outlining the builder’s financial position, active project pipeline, and capacity to perform.
- Proposed a secure indemnity structure supported by deeds of indemnity.
- Demonstrated that the retrospective application of terms was commercially impractical and inconsistent with standard industry practice.
- Recommended a staged eligibility framework to allow later expansion once initial milestones were met.
The result? VMIA (now BPC) confirmed the builder’s DBI eligibility, issued the certificates, removed the restrictive conditions, and agreed to conduct a further review within three months to consider a limit increase.
This outcome enables the builder to resume insured works immediately and provides a stable foundation for future growth.
Season’s greetings!
As 2025 comes to an end, the Mackay Chapman team extends its sincere thanks to our clients and partners.
It has been a year defined by regulatory change, market shifts, and evolving expectations of fairness and accountability across Victoria’s construction industry.
We wish you a safe and restful holiday break and look forward to supporting your business objectives in 2026.
The contents of this update and its linked articles do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such. They are designed and intended as general information in summary form, current at publication, for general informational purposes only. You should seek legal or other professional advice concerning any particular legal matters you or your organisation may have.
