Govt to implement VOP mechanism to lighten burden of contractors

The government has agreed in principle to implement the variation of price (VOP) mechanism to help contractors faced with rising costs of construction materials due to the recent targeted diesel subsidy to ensure projects are completed on time.

Finance Minister II Amir Hamzah Azizan said the decision was made to reduce the burden of contractors and was at the discussion stage between the Finance Ministry, the Public Works Ministry and the Construction Industry Development Board (CIDB).

“Discussions have begun… we just had a discussion last week, so give us some time. We understand that when we had the targeted diesel subsidy, there might be some increases felt by contractors for existing costs.

”For government contracts, the Finance Ministry is discussing with the Public Works Ministry and the CIDB on where we will fine-tune adjustments for the VOP for existing contracts,” he told the media after officiating the GI Transformation Convention: Challenges and Direction of G1 Contractors to Face the Current Era at the International Islamic University Malaysia in Kuantan yesterday.

On whether the government will include more construction materials for the VOP, Amir said the government in principle will provide VOP if there are justified increases but it requires fine-tuning and validation with the CIDB.

“We will see which materials can be justified. If there are increases, we will look at the impact on contracts and see from there,” he added.

It had been previously reported that the Malaysian Malay Contractors’ Association had hoped that the VOP would be brought back to balance up the rising cost of construction materials, said to be around 30 percent, after the implementation of the targeted diesel subsidy.

The last time the government added construction materials to the VOP list was in 2022, with 11 items, including cement, bricks, glass, ceiling and roofing materials.

- Bernama

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