The government is expected to pay around RM 1 billion as Variation of Price ( VOP) to contractors of over 1,000 9MP projects by 2010, said Works Minister Datuk Mohd Zin Mohamad.
` The Minstry of Works has identified 1,311 government projects which are eligible for the payment under VOP. The gov’t has paid out RM44.2 million to contractors of 270 gov’t projects as at Nov 17, 2008.’ he said.
He added that VOP is an effort undertaken by the gov’t to help contractors minimize losses caused by the drastic price increase of building material such as steel, particularly last year.
` On Aug 6 , 2008, the gov’t decided to implement a new method to calculate VOP in order to minimize the losses of contractors due to the increase in construction cost.’ said Zin.
He explained that under the new method, 11 types of building materials were considered under VOP for civil engineering projects compared to five in the past.
For projects under building construction, VOP is based on changes in the cost index for 14 materials and steel prices.
The gov’t has also agreed to implement VOP for mechanical and electrical ( M & E ) projects with the condition that they are under civil engineering or building construction.
` Meanwhile the gov’t also considering backdating the implementation date for the steel VOP to Jan 1, 2008 from May 12, 2008 previously. The gov’t will maintain its 50:50 risk sharing with the contractors,’ he said.
Besides steel, Zin said the VOP is also applied to copper and iron for M & E projects which were implemented from July 1, 2008.
Source: The Borneo Post
Dated 23 January 2009
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