Control of rising costs vital to prevent construction crisis: NCA

The National Construction Association (NCA) warned that many construction projects across the country would be jeopardised unless the Government take steps to minimise the fluctuating material prices and other costs by incorporating the costs into the formula used for construction contracts.
If not, many projects across the country would come to a halt as contractors stand to lose their profit margins, the association pointed out.
Chairperson of the association, M. Darinton Paul said that contractors are struggling to finalise projects with clients based on previously agreed prices, against the current unforeseen situation of the rapidly depreciating rupee.
Noting that several key inputs are left out of this formula, Paul said, “For instance, the electrical and mechanical aspects of construction - most of which are imported - are neglected. With the rupee depreciating rapidly, import prices are surging, forcing contractors to bear unbearable expenses while losing their profit margins,” he said.
“The depreciation of the Rupee is not something that a contractor sees when bidding. Even if they do, if those inputs are included considering future price hikes, the contractor might lose the tender as well,” he added.
He further explained that the depreciation of the rupee is not something that a contractor foresees, and even if predicted and include those inputs, the contractor might lose the opportunity.
The Association also requested that the formula be extended to short-term projects as well, given the fast pace of rupee depreciation.
He also pointed out that prices of tar and Bitumen imported to Sri Lanka, two essential components of the construction industry, have risen sharply.
“There are many carpet roads that we have signed with the Government to construct. If this issue with the formula is not addressed, there is no way that we can construct these roads,” he warned.
He also pointed out that the scarcity of some materials in the market, caused by import restrictions and rupee depreciation,is an evolving challenge.
"Some of our consultants still make certain materials mandatory for projects instead of recommending available," he added.
He emphasised that the consultants and clients need to be flexible in this economic situation and allow using alternative material, to avoid the industry reaching a crisis.
He suggested the Industry Ministry introduce a bulletin method that incorporates all the monthly price fluctuations into the formula.