IEM Takes Dual Action Approach To Address Global Supply Crisis Impact

KUALA LUMPUR, May 10 (Bernama) -- The Institution of Engineers, Malaysia (IEM) has released its Engineering Impact Survey Report to address the impact of the global supply crisis triggered by recent geopolitical developments in the Middle East.

It has also introduced Practice Note 2026-01 to provide immediate contractual guidance for the engineering profession.

IEM president Yau Chau Fong said in a statement that the proactive dual action approach to address the crisis was taken following a National Economic Action Council (MTEN) briefing. 

 "The findings paint a concerning picture of the Malaysian engineering landscape; 90.51 per cent of respondents agreed that the industry is grappling with a staggering 85 per cent escalation in diesel prices, and 81.15 per cent confirmed they have experienced an average 12.59 per cent increase in key materials such as steel, concrete, and bitumen.

"Around 88.89 per cent of respondents report budget overruns, while 74.90 per cent face significant project delays, " the statement said.

It said 83.90 per cent of contractors, particularly small and medium enterprises (SMEs), are facing acute financial stress, with many nearing insolvency. 

Critically, Yau said, 37.45 per cent of respondents noted potential quality compromises, as financial pressures increase the risk of "cutting corners," which directly threatens public safety and asset sustainability. 

The IEM Engineering Impact Survey Report is based on a survey of 272 seasoned professionals, over half of whom have more than 20 years of technical expertise, Yau said. 

Meanwhile, the Practice Note 2026-01, "Managing Material Price Fluctuation in Construction Contracts Arising from Global Supply Disruptions" clarifies the administration of projects under IEM’s conditions of contract (IEM COC).

The practice note emphasises that under standard IEM COC terms, the contract sum is fixed unless parties have agreed that an option module B applies. Option module B is essentially a “price fluctuation clause”. It enables the contractor to claim for any upward price increase for cement, steel reinforcement, bitumen and diesel.

"While the engineer must remain impartial and cannot certify payments on an ex-gratia basis, the practice note encourages engineers to act as facilitators for 'amiable solutions'. This includes supplementary agreements’ considerations to ensure project viability despite unprecedented market shocks.

Yau said the issuance of Practice Note 2026-01 will help guide IEM members. Nonetheless, he said professional guidance alone is insufficient.

“We urgently call for government intervention to stabilise material supplies and implement mandatory variation of price (VOP) mechanisms to prevent a total collapse of our national project delivery pipeline,” said Yau.

He said IEM advocates for a tri-partite alignment between individual engineers, the institution, and the government.

Key recommendations include targeted subsidies with immediate diesel and fuel rebates for the engineering and logistics sectors, standardising VOP and extension of time mechanisms across all public and private projects.

It also suggested incorporating bidirectional price fluctuation clauses in new contracts to ensure fairness for employers and contractors. 

-- BERNAMA