Saturday, June 21, 2008


Contractors seriously affected by fuel crisis Many may have to abandon projects due to costly materials


Sabah Builders Association (SBA) President Tsen Kui Lin has expressed his grave concern over the future of the contractors who are seriously affected by the domino effect of the uncontrolled fuel prices hike, in particular on the cost escalation of building materials. He said that contractors are facing the dilemma of either abandoning their ongoing projects (and face the legal consequences) or continue to dig deep into their own pockets to finance the losing projects. “The question is how far could they go before they exhausted all their lifetime savings,” he said yesterday. Tsen noted that since November 2007, the price of steel bars had increased from RM2,400 to RM4,000 a tonne, a whopping 80 per cent increase, while cement price had gone up by 30 per cent and transport 45 per cent. “With the present conditions of contract for construction, the contractors are finding it impossible to manage the cost of construction,” he said. Towards this end, the SBA has been advocating the inclusion of a price fluctuation cause for the affected building materials in all the on-going construction projects as well as new projects, whether they are private and public sector, projects. Lately, the Master Builders Association Malaysia (MBAM) in Kuala Lumpur and the Sarawak Builders Association had voiced the same concern over the issue in order to save the construction sector, he pointed out. Tsen reckoned that for the on-going projects, the fluctuation clause for the affected building materials would partially compensate the contractors and allow them some breathing space to complete them. Contractors are only partially compensated because there are other indirect cost increases which they will not be compensated, he said, adding that it is very costly to reactivate abandoned projects. According to him, for future projects, with the fluctuation clause, the contractors will be able to estimate more realistically over the tender price. He said this way, the owners would save money in the long term as the projects can be completed on time without the risk of being abandoned. “Besides, the small contractors will be spared from any eventualities caused by the sudden price fluctuation of building materials,” said Tsen, urging the Government to take cognizance of this prevailing crisis in the construction industry as many contractors will go bust. “Corrective actions should be speedily implemented by the Government to save the construction industry. Any failure of the construction industry will definitely affect the other industries, including financial institutions and the Government,” he cautioned.