The Construction Industry Development Board (CIDB)
KUALA LUMPUR, May 3 — 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.
(Congratulations to CIDB Chief Executive Datuk Ir. Ahmad 'Asri Abdul Hamid for being chosen Construction Professional of the Year at RICS Awards 2020)
"The price increase of construction materials will undoubtedly affect the cash flow in the supply chain and is expected to be passed on to the end-users."
“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.
CIDB revealed that price increases will have different impacts on large and small contractors depending on the purchased quantity and other factors (such as rising raw material prices, limited building material inventory, and incidental costs).
Simulation results of price increases show that construction costs for small contractors have increased by 7%, while profit margins have fallen by 15% to 25%. 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 and Malay Mail
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