Ahmad Maslan: Contractors need to submit evidence of material price increases for VOP

PASIR PUTEH (Aug 18): Contractors who claim a sudden increase in construction material prices need to submit evidence and actual cost information to the Department of Statistics Malaysia (DOSM) to enable the government to assess the application of the Variation of Price (VOP) clause.

Deputy Works Minister Datuk Seri Dr Ahmad Maslan said based on DOSM data dated Aug 10, most construction materials recorded small and stable price increases, including steel and cement which rose by less than one per cent.

He said certain materials, such as sand, recorded an increase of up to 19% in some places, but this data needs to be supported by actual information faced by contractors in the field.

"If it is not accurate, the involved associations should provide feedback to DOSM with evidence that the statistics are not accurate and specify what is inaccurate.

"We have to use the statistics provided by DOSM. If DOSM says it hasn't increased by more than one per cent, that's what we want to state. If it doesn't increase by more than one per cent, how can we give the VOP?" he said to reporters after attending the handover ceremony of the additional building of the Kelantan Matriculation College to the Ministry of Education here on Monday.

Ahmad said the government does not rule out the possibility of considering VOP if there is strong evidence showing a sudden increase in construction material prices that affects project costs.

"As long as there isn't any data showing that the increase is skyrocketing, how can we grant VOP? If it is confirmed that there is a significant increase from various angles and materials, then consideration can be given," he said.

He also said that contractor associations, including the Malay Contractors' Association of Malaysia, the Bumiputera Contractors' Association of Malaysia, Class F contractors, and other business associations, are encouraged to submit invoices and evidence related to construction material costs to the DOSM.

In April, the Malay Contractors' Association of Malaysia urged the government to take immediate action, including reactivating the VOP for construction materials, to assist contractors facing cost pressures due to the global energy crisis.

Its president, Datuk Mohd Rosdi Ab Aziz was reported to have said that the measure had been implemented during previous crises, including the Covid-19 pandemic, and had proven to help contractors manage rising costs.

Meanwhile, Ahmad said the additional project for the Kelantan Matriculation College, worth RM147.96 million, was completed without any cost increase, achieving zero major defects and zero Variation Orders (VO).

He said the project also achieved a four-star rating in the Safety and Health Assessment System in the construction industry, in addition to recording zero accidents resulting in working time loss.

The project includes academic and administrative buildings, student and lecturer accommodations, a one-stop student centre, a cafeteria, a multipurpose hall and various sports facilities.

Among the sports facilities provided are an eight-lane athletics track that meets World Athletics Class 2 standards and a hockey field rated Class 2 by the International Hockey Federation, in addition to football and rugby fields as well as multipurpose courts.

Ahmad also said that the use of the Industrialised Building System, with a score exceeding 70%, as well as Building Information Modelling, also helps improve project implementation efficiency.

He added that the defect liability period for the project is two years and any defects during this period are the contractor's responsibility, whereas maintainence after this period will be borne by the Ministry of Education through annual allocations.

..........

EdgeProp monthly brings you data, insights and solutions for an evolving market. Subscribe now for your free copy!