Building material pricing needs to be realistic: expressway contractors

August, 15/2022 - 07:06
Amid price surges and increasing costs for building materials, contractors of the North-South Expressway are reporting losses but are unable to halt construction due to contractual obligations.
Construction work on the North-South Expressway with Đèo Cả Group as contractor. — VNA/VNS Photo Huy Hùng

HÀ NỘI — Amid price surges and increasing costs for building materials, contractors of the North-South Expressway are reporting losses but are unable to halt construction due to contractual obligations.

They are calling upon authorities to make price adjustments and provide an urgent solution.

Lê Đức Thọ, deputy director of Cienco4 Group, one of the contractors for the North-South Expressway, said that the pandemic and fuel price surges have had a major impact for businesses.

These challenges have been depleting their resources and placing them at the risk of not being able to re-invest in personnel and equipment.

According to Thọ, the price indexes issued by local authorities are not sufficient in addressing the current situation, as their formula for adjustment is based on the aggregate index and several constructions in the localities.

However, expressway projects require a different source of building materials, he said.

Nguyễn Lê Bách, deputy head of the Planning and Technical Department of Đèo Cả Group said that not only steel but also fuel, cement, and backfill soil have been getting more expensive.

This resulted in a 18 to 30 per cent price slippage compared to the original contracts.

Lê Quyết Tiến, deputy head of the Transport Engineering Construction and Quality Management Bureau (under the Ministry of Transport) agreed that at the beginning of the price surge, price index adjustments were not sufficient and realistic, compared to fluctuations.

However, solutions have been put forward thanks to the efforts by the Ministry of Transport (MoT) and Ministry of Construction (MoC). Right now, 44 localities announce building material prices index every month, while 19 others do so every quarter.

Tiến said: “It is crucial to have the price index reflecting the actual situation."

The MoT also shares the same perspectives, he added, suggesting separate formulas to adjust prices for key building materials that witness major cost changes.

Tiến added that in the 2008 - 2009 price surges, the MoC issued two circulars that adjust the pricing of 13 key building materials, which were a significant support for businesses and contractors.

From the MoC, deputy head of the Construction Economics Department Hoàng Anh Tuấn said that there are currently two groups of construction price index: one announced by the locality or one calculated according to costs or the type of material.

The second group is specified in law, and is created to be compatible with the construction work or the bid package.

"Deciding which price index to use depends on the bidding documents and contract agreements," Tuấn added.

He said that localities should continue conducting assessment of the market, and quickly announce the price index of building materials in order to share the burden with investors.

They also need to pay close attention to local supplies to adjust the categories accordingly.

The MoC also suggested investors report the difficulties they are encountering and the causes, identifying the responsibilities and legal frameworks in adjusting contracts (including build-operate-transfer - BOT contracts).

Authorities are asked to proactively propose solutions under their management scope. — VNS

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