Thursday, August 28, 2008

Contractors call for price rise clauses

Contractors call for price rise clauses

Association looks for inflation protection


Rising materials prices remain the biggest concern among Asia-Pacific's contractors, who are requesting their governments to raise cost-escalation adjustment prices, according to International Federation of Asian & Western Pacific Contractors' Associations (IFAWPCA).

IFAWPCA president Aminul Islam said several problems affected the region's construction industry, although the sector had been enjoying good growth for several years in infrastructure and in residential tourism-related, industrial, office and commercial developments.

''The extraordinary rises in prices of construction components such as steel products, cement, equipment spares and fuel has brought sleepless nights to industry players,'' he said.

At an IFAWPCA meeting last week in Bangkok, price rises were the central issue, with members expressing concern at the lack of government response.

Among members drawn from 16 countries, Japanese contractors seemed least affected by rising materials costs as their government had agreed to raise the escalation prices for local contractors on government-funded projects in Japan.

Reacting to this information, Aungsuras Areekul, secretary general of the Thai Contractors Association, said the association would try again to negotiate with the government after many attempts to obtain an increase in escalation prices.

For contractors on state projects, a ''K-factor'' clause typically allows for fluctuations in expenses that occur between the signing of a contract and the date work begins.

''What we called for was not an exaggeration,'' said Mr Aungsuras. ''We tried to tell them that [rising materials prices] isn't happening only to us but all around the world.''

Despite stabilising steel product prices, Mr Aungsuras said oil prices remained a concern as they affected transportation costs.

The IFAWPCA meeting also gave members useful information about the new method of construction job bidding applied by Singapore's government.

For the Singaporean government, quality now counts for 30% in the selection process. Governments in other countries in the region continue to award jobs solely on price.

Members also extended assistance within the group. The Hong Kong Construction Association plans to provide a legal advisor to help Taiwanese contractors with a government contract.

''They are not alone,'' said the IFAWPCA president. ''We need to freely share information, ideas, models and experiences.''

Founded in 1956 with a head office in Manila, the IFAWPCA now brings together associations from Australia, Bangladesh, China, Hong Kong, India, Indonesian, Japan, Korea, Malaysia, the Maldives, Nepal, New Zealand, the Philippines, Singapore, Sri Lanka and Thailand

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