The Victorian Government has announced a Royal Commission into the construction sector, with the Terms of Reference released yesterday outlining that the inquiry is now formally titled the ‘Royal Commission into the Integrity of Major Public and Civil Infrastructure Construction Projects in Victoria’.

Contractors, suppliers, labour-hire companies, third parties who offer mediation or other dispute resolution services and other commercial entities materially involved in Major Construction Projects should take note that your processes and practices may come under scrutiny, and should prepare as best as possible, as the Royal Commission can demand document production and require attendance at the Royal Commission to give evidence.

The Royal Commission, which has been allocated a budget of approximately $50 million and will be led by Commissioner, the Honourable Christopher Kourakis AC, is likely to be one of the most significant regulatory developments affecting the Victorian construction industry in recent years.

Its focus will be on issues related to the oversight of construction and infrastructure projects, including the roles of the government, the executive, various government departments, and delivery agencies. Importantly, the conduct of the CFMEU, construction companies, labour hire firms, consortia, and criminal actors on Victoria’s major projects will be examined. In a statement released alongside the Terms of Reference, the Premier highlighted that ‘nothing is off limits’ with this inquiry.

The construction industry should therefore assume that the Royal Commission will be broad, document intensive and demanding of management time and resources.

We detail the Royal Commission’s powers, risks, and what you can do to prepare below.

Terms of Reference

The Terms of Reference broadly direct the Commission to inquire into the extent of corruption, criminal conduct or serious misconduct on or in relation to ‘Major Construction Projects’, being all major public and civil infrastructure construction projects commissioned by the State of Victoria, including projects delivered by State entities under the Public Administration Act 2004 (Vic). This extends to conduct by the CFMEU Construction & General Division, construction companies and consortia, sub-contractors, labour-hire companies, ‘Contracting Entities’ (head-contractors and consortia, sub-contractors, labour-hire companies, mediators and other commercial entities materially involved in Major Construction Projects) and ‘Suppliers’ (any individuals or entities providing goods or services in relation to Major Construction Projects).

For the private sector, the Commission is also tasked with identifying measures to prevent, reduce or mitigate corruption, criminal conduct or serious misconduct on major construction projects commissioned by the private sector for private sector purposes, although domestic and residential construction projects are excluded from this aspect of the inquiry.
The Commission will examine causes and preconditions of misconduct, including:

1. legislative and regulatory frameworks and industry practices around sub-contracting, labour hire, mediation, supply chains and procurement;
2. the roles and responsibilities of the executive government and ‘Delivery Authorities’ (including the Suburban Rail Loop Authority, Victorian Infrastructure Delivery Authority, the Victorian School Building Authority and Development Victoria); and
3. the adequacy of actions taken by Contracting Entities and government to respond to or mitigate risks, including the effectiveness of measures arising from previous inquiries.

The inquiry will also consider measures to recoup funds misappropriated or received as a result of misconduct and may work cooperatively with a Special Prosecutor and refer matters to Victoria Police, the Independent Broad-based Anti-corruption Commission (IBAC), or Regulatory and Licensing Authorities (including the Labour Hire Authority, the Workforce Inspectorate Victoria and WorkSafe) for investigation or prosecution.

Lawful, legitimate and appropriate conduct under industrial relations laws and occupational health and safety laws and regulations is expressly excluded from the scope of the inquiry.

Powers the Royal Commission can exercise upon businesses

The purpose of a Royal Commission is not to impose penalties but to examine and understand issues that are often large and systemic, rather than individual instances of wrongdoing. As a result, Royal Commissions have an exceptionally broad set of powers.

That said, the Victorian Government has made it clear that wherever wrongdoing is uncovered in the course of this inquiry, they will be investigated and the relevant wrongdoers pursued.

Unlike ordinary regulatory reviews or commercial disputes, Royal Commissions have extensive coercive powers pursuant to the Inquiries Act 2014 (Vic). The Commissioner may hold public and private hearings and, among other things:

1. summon individuals to appear and give evidence and/or produce documents or other materials; and
2. in some circumstances, obtain and execute search warrants and seize property.

Importantly, evidence obtained under compulsion cannot generally be used in subsequent court proceedings, except in limited circumstances where the evidence could otherwise be obtained. This safeguard recognises the significant compulsory powers exercised by the Commission. These powers can be exercised regardless of whether the recipient is accused of any wrongdoing.

A business that receives a summons or notice cannot choose not to participate. It is compelled to comply. Failure to comply with compulsory processes may give rise to severe legal consequences. Witnesses who hinder the investigation or make false or misleading statements may face penalties.

Persons compelled to give evidence before a Royal Commission cannot ordinarily rely on standard protections such as legal professional privilege or the privilege against self-incrimination. However, notwithstanding the breadth of the Commission’s coercive powers, there are limited protections in certain circumstances.

The Commission must report its findings to Parliament by 20 August 2027. The report will be made public and is expected to include findings and recommendations for reform. The Commissioner may also, if considered appropriate, provide an interim report on urgent or immediate actions needed to respond to or mitigate risks on Major Construction Projects currently under construction, including changes to contractual arrangements and legislative reform affecting Delivery Authorities and regulatory oversight.

You do not need to be accused of wrongdoing to become involved

One of the most common misconceptions about Royal Commissions is that they only affect businesses alleged to have engaged in misconduct.

A contractor may be required to produce documents because it participated in a project under scrutiny. A consultant may hold information relevant to procurement decisions. A subcontractor may have knowledge of events that the Commissioner wishes to examine. A developer may be asked to explain how decisions were made years earlier, notwithstanding that it faces no criticism.

For that reason, contractors, subcontractors, consultants, labour hire providers, developers and other project participants should all be considering whether information within their organisations may become relevant to the inquiry.

From past experience, parties will often have very little time to react once compulsory notices are issued to them. At that point, the challenge is no longer only identifying risks, it is also locating years’ worth of records, gathering information from former employees, identifying relevant decision-makers, and responding to requests under significant time pressure.

The businesses best placed to manage these processes are typically those that begin assessing their own risk profile and, if necessary, preparing before they hear from the inquiry.

Dealing with documentary evidence

When businesses become involved in Royal Commissions, the greatest challenge is often finding and organising information.

Project records are often dispersed across multiple systems, key personnel may have left the business, and important decisions may have been made years earlier. As a result, contract administrators, project directors and commercial managers are frequently required to reconstruct events from incomplete records and recollections, creating significant administrative burden, disruption, cost and time pressures for businesses responding to inquiries.

Before any formal requests arrive, businesses should be considering:

1. where relevant records are maintained;
2. how procurement and project decisions were documented;
3. whether document retention practices are adequate;
4. who within the organisation is likely to possess relevant knowledge; and
5. whether there are any obvious gaps in the documentary record.

Taking these steps early can significantly reduce disruption later.

Internal reviews: Understanding your position before the inquiry does

The announcement of a Royal Commission often prompts organisations to undertake internal reviews of past projects, governance processes or procurement practices. Therefore, a useful exercise for many organisations in this position is to proactively identify and secure potentially relevant material before compulsory processes commence.

This may include project correspondence, procurement records, governance documents, incident reports, safety records, meeting minutes, contract administration files, and communications with third-party consultants or subcontractors. Businesses may also benefit from identifying the personnel most closely involved in relevant projects.

Businesses should approach these exercises carefully. Investigations undertaken without appropriate legal oversight can inadvertently create documents that may later become subject to production to the Royal Commission or otherwise undermine claims for legal professional privilege. Once privilege is lost, it can be difficult or impossible to restore.

Next steps: Preparation

With the Terms of Reference now released, businesses should turn their attention to how the scope of the inquiry may affect them. Waiting for further developments before taking any preparatory steps could leave you on the back foot once the Commissioner begins exercising its powers.

While a Royal Commission does not determine criminal liability or professional misconduct, evidence obtained during the inquiry may be referred to other agencies for investigation or prosecution. In practice, the end of the inquiry is often the beginning of a wider regulatory process.

If you believe you may be called to give evidence to the Commission, or if evidence presented to the Commission may relate to you, it is important to seek legal advice promptly to understand your rights and obligations.

HWLE Lawyers’ Construction and Infrastructure team regularly assists clients in responding to investigations and in high-stakes disputes. We can advise on document preservation, internal reviews, legal professional privilege, compulsory information requests, witness preparation, and broader risk management strategies arising from the Royal Commission and any related proceedings.

This article was written by Matthew Bliem, Partner, Anthony Whelan, Partner, Ariadne Paras, Associate, Estelle Ruyssenaers, Associate.