CIDB says govt projects should provide for price variation

 

A price increase simulation has shown a 7% rise in construction costs and 15% to 25% drop in profit margin.

KUALA LUMPUR: The Construction Industry Development Board is recommending that government projects contain a price variation clause, which would ease the burden of contractors affected by inflation of building material prices.

CIDB chief executive Ahmad ‘Asri Abdul Hamid, said including the clause 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.

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 of the price increase showed a 7% rise in construction costs and 15% to 25% decrease in profit margin for small contractors, particularly.

Ahmad ‘Asri said the board would hold talks with the domestic trade ministry to find the best way to help small contractors.

In the meantime contractors should be careful when providing price quotations and ensure they are protected against price increase, while those involved in ongoing projects should renegotiate their contract with the client, he said. - FMT