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Hike in material cost: govt says its contractors can adjust prices

Free Malaysia Today logo Free Malaysia Today 14/5/2022 K. Parkaran
Contractors can apply for a Variation of Price to avoid projects from being adversely affected, according to a Treasury circular. © Provided by Free Malaysia Today Contractors can apply for a Variation of Price to avoid projects from being adversely affected, according to a Treasury circular.

PETALING JAYA: With the hike in the price of construction material caused by the global impact from the pandemic, the government has allowed its contractors to apply for Variation of Price (VOP) to ensure that projects are completed on time.

However, this applies only to construction projects that were awarded between January 2021 and June 2022.

In a Treasury circular sighted by FMT, Putrajaya admitted there has been a significant hike in construction material brought about by the impact of the Covid-19 pandemic throughout the world.

“A study was conducted by the public works department (JKR) on three latest special releases by the statistics department on the cost of construction material.

“It showed there is an increase in the construction material cost index and its average unit price. The VOP is vital to avoid the projects from being adversely affected and to ensure they are completed on time,” the circular stated.

The government said the VOP will be allowed for all tendered projects awarded between Jan 1, 2021 to June 30 this year, and will continue until the projects are completed, adding that the relevant departments must include this variation clause in the existing contracts.

According to the circular, the affected items listed as qualifying for a price variation include certain steel material, crushed aggregate (crushed rock), and copper.

“All price variations must be based on the special releases on the price of these materials by the statistics department periodically.”

However, the Treasury said works that are not eligible for VOP include repairs, renovations, and building demolitions.

“However, for renovation work that involves a building complete with foundation, walls, and roof, and if the VOP exceeds 50% of the total value of repair work, then the builder can apply for price variations accordingly,” it said.

The Treasury listed all the requirements and eligibility clauses in the circular.

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