Contractors Urge VOP Revival, EOT As Costs Surge
IPOH, April 9 (Bernama) -- The government has been urged to take immediate steps, including reinstating the Variation of Price (VOP) mechanism for construction materials, to help contractors grappling with rising costs driven by the global energy crisis.
Malaysia Malay Contractors Association (PKMM) president Datuk Mohd Rosdi Ab Aziz said measures previously implemented during crises such as COVID-19 had proven effective in easing cost pressures on contractors.
“VOP is a fair mechanism. When the cost of building materials rises, the government adjusts prices upward, and when costs fall, prices can be reduced accordingly.
“Today, diesel prices have risen by 100 per cent from the base level, which means construction material costs could increase by as much as 40 to 50 per cent. This is a drastic rise and is beyond what contractors can reasonably absorb based on the original contract prices,” he said.
He was speaking to reporters after attending the PKMM Aidilfitri celebration here on Thursday.
Mohd Rosdi also urged the government to refrain from penalising or terminating contracts of contractors unable to complete projects on time due to escalating costs.
“Third, the government should immediately consider granting extensions of time (EOT) based on current challenges, and fourth, for the longer term, it should consider a moratorium mechanism similar to that implemented during COVID-19 to ease cash flow pressures and prevent financial strain on large ongoing projects,” he said.
He added that about 4,000 PKMM contractors have been affected so far, although they continue to carry on with projects at a slower pace.
"However, if the situation persists without swift government intervention, project delays will worsen, and more projects could be stalled or risk being classified as distressed," he said.
Mohd Rosdi said the association has engaged with the government, including the Public Works Department, and has submitted proposals to help contractors remain viable under current conditions.
“A month has passed, and there has been no action. We urge the government to act swiftly to prevent the situation from deteriorating further. If action is taken now, the situation can still be salvaged,” he added.
-- BERNAMA