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Friday, January 11, 2008

Prices of Building Materials for Government Jobs

Contractors: Allow us to make adjustments

Local contractors hope that the government will allow them to pass on increased cost of building materials for all government contracts, following a decision by the government to implement an automatic price mechanism (APM) for cement.

Currently, they are not able to adjust the prices of building materials for government contracts to reflect changes in the market.

"If the government were to implement the APM on cement as well as steel bars and billets, it is only right that contractors who take on government jobs be allowed to have the same cost pass-through mechanism," Master Builders Association of Malaysia (MBAM) deputy president Ng Kee Leen told reporters at a media luncheon recently.

WONG: Contractors still able to buy cement at RM10.70 per bag

"Right now, only the Public Works Department's Form 203 provides for price fluctuation clause. All other government jobs do not allow for cost pass-through," he added.

Nevertheless, MBAM president Patrick Wong said that although it was reported that cement price would be subjected to an APM, contractors are still able to buy cement at RM10.70 per bag.

The cement price in Pahang, Selangor, Malacca, Negri Sembilan, Kuala Lumpur and Putrajaya is currently fixed at RM219 per tonne.

In Perlis, Kedah, Penang and Perak, the price is RM217 per tonne, while in Terengganu and Kelantan cement is sold at RM233 per tonne. In Johor, cement is priced at RM224 per tonne.

The Cabinet Committee on Essential Products, chaired by Deputy Prime Minister Datuk Seri Najib Razak, was to introduce the APM for cement from January 1 2008, but to date, it has yet to be implemented.

With the introduction of the APM, cement prices will be revised at each quarterly review period.

While steel millers have been lobbying for an automated price mechanism for steel bars, the Domestic Trade and Consumer Affairs Ministry had, three weeks ago, informed steel millers of an approval for a 12 per cent increase in government-controlled ceiling prices of steel bars and billets.

Effective December 1 2007, the various type of billets are priced at between RM1,907 and RM2,035 per tonne, up from between RM1,703 and RM1,817 previously.

Also, the new ceiling price of steel bars is between RM2,225 and RM2,419 per tonne from between RM1,837 and RM2,010 previously. This is a 20 per cent increase, or nearly RM400 per tonne.

Ng, who is also Gamuda Bhd director, cited the RM12.5 billion project to double track 330km of the existing single railway line from Perak to Perlis.

He said one of the reasons the job was priced at that level was because it had already factored in costlier copper, cement and steel materials.

"Costlier building materials had been factored into the job value. However, if building material costs are to escalate further, it will eat into our margin," said Ng.

By New Straits Times (by Ooi Tee Ching)

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