KUALA LUMPUR : The Construction Industry Development Board (CIDB), Malaysia is recommending a variation of price (VOP) clause be included for government projects to reduce the burden of contractors being affected by current building material inflation.
CIDB chief executive, Datuk Ahmad ‘Asri Abdul Hamid, said including it during the movement control order (MCO) period would also guarantee projects are finished on time.
“Price increases in building material will undeniably impact the cash flow of those in the supply chain and is expected to be passed on to the end user.
“This issue will definitely trigger various effects for everyone in the industry during this challenging period due to the pandemic,” he said in a statement today (April 3).
CIDB revealed that an increase in prices would affect small and big contractors differently based on the purchase quantity and other factors like an increase in raw material prices, limited stock of building material and incidental costs.
A simulation for the price hike showed a 7 per cent increase in construction costs and 15 — 25 per cent decrease in the profit margin for small contractors, particularly.
Ahmad ‘Asri said CIDB intends to hold talks with the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP) soon to find the best way to help small contractors.
For now, contractors are advised to be careful in providing price quotations to protect against price hikes, while those involved in ongoing projects should renegotiate their contract with the client.
BERNAMA / MALAY MAIL