25th April 2004
To
the Ministry of Finance,
thro' Ir Ashari Bin Mohd Yakub
Pengarah
Cawangan Elektrik JKR
Ibu Pejabat JKR
Jalan Sultan Salahuddin
50582 Kuala Lumpur.
Dear
Sir,
Escalation
of Building Materials Prices Vis-à-vis LME
During
the last couple of years and especially the past few months; the
prices of essential materials related to and associated with the
manufacture and trading of electrical equipment, plants, apparatus,
components, cables, fittings etc. have increased; and the increases
are very substantial. Prices of steel, copper, aluminum, PVC and
other raw materials are increasing much of the time due to the
great demand (and as reported in the news media) by the economic
giant of China. These increases affect Electrical Contractors
(in fact by most contractors) who are now caught in a bind.
At
the time of bidding, the contractor in being comparative, would
have quoted his tender in conformity with prices as had been offered
to him by his vendors (who are either manufacturers or traders/suppliers).
However, at the time of award and with implementation in due course,
after a lapse of time, and in a volatile market, his supplies
have increased in prices purely due to price increases related
to raw materials like steel, copper, aluminum, PVC etc. So, before
a contractor starts work, he is already in a loss situation when
he has no recourse but to absorb the price increases of his supplies.
This is not an acceptable scenario; is not a fair position; and
there is no natural justice!
The
price increases of raw materials as in steel, copper, aluminum
etc. are beyond the control of anyone in the country; not the
contractor, nor the manufacturer nor the vendor, and also not
the Government/Client. But, there is a platform and benchmark
for which the fluctuations of price variations can be monitored
and that is the London Metal Exchange (LME).
Whilst the Government, for quite a while now, has accepted the
reality of price fluctuations for civil works as those relating
to the prices of cement, reinforcement bars (which is steel) etc.,
and accordingly compensate contractors for such volatile fluctuations,
it is now timely that the Government gives due consideration for
other contractors, such as those in the electrical engineering
(indeed in the mechanical, electrical, plumbing and fire-fighting,
i.e. MEP&F engineering and trades).
The Electrical and Electronics Association of Malaysia (TEEAM)
Page 2
25th April 2004
Ir Ashari Bin Mohd Yakub
Escalation of Building Materials Prices Vis-à-vis LME
On
behalf of TEEAM which represents Malaysian Electrical Manufacturers,
Traders/Vendors and Contractors, we call on the Government to
recognise that the price increases of raw materials, as reflected
by the indices of the LME, are beyond the control of anyone; least
of all our members. And for the industry to move on, and not be
stalled by the current situation, due consideration should be
made to contractors to compensate the price increases reflected
by the LME indices.
We
stand by to be of assistance to the MOF/JKR to work out a mutual
acceptable formula to compensate for the volatility of the LME
market place.
Though
this letter is to MOF thro' the JKR, we also appeal to MOF to
recognise that this is a pan-industry wide issue, and the same
amicable solution should be applied to all Government contracts,
including those Government owned agencies and companies such as
TNB, Telekom, DID, PNS etc.
Yours
faithfully,
Ir
Chew Shee Fuee
President
Enc.
1) Press Release
2) Material Price Increase
c.c. Ketua Pengarah Kerja Raya
ACEM
CIDB
FMM
FOMCA
MACRA
MALEA
MBAM
MCMA
MFPA
Malay Contractors Association
REDHA
Telekom
TNB
TNB Vendors Association