Ahmad Maslan: Contractors need to submit evidence of material price increases for VOP

KUALA LUMPUR, 18 AUGUST 2026 —

Malaysian Contractors Must Prove Material Cost Surges to Claim Price Adjustments, Deputy Works Minister Says

Speaking to reporters after a project handover ceremony in Kelantan, Ahmad noted that DOSM data as of Aug 10 showed most construction materials—including steel and cement—had recorded modest increases of less than 1%. However, he acknowledged that certain materials, such as sand, had seen localized price hikes of up to 19%, though these variations require verification through actual cost submissions from contractors.

“If the data isn’t accurate, the relevant associations should provide feedback to DOSM with evidence that the statistics are incorrect and specify what is inaccurate,” he said. “We have to rely on DOSM’s data. If DOSM states that prices haven’t risen by more than 1%, that’s what we must use. How can we approve a VOP if the increase isn’t significant?”

The government has not ruled out considering VOP applications if contractors present compelling evidence of sudden, substantial cost escalations affecting project budgets. “As long as there’s no data showing skyrocketing increases, how can we grant VOP?” Ahmad said. “If multiple sources confirm a significant rise across various materials, then consideration can be given.”

Contractor associations, including the Malay Contractors’ Association of Malaysia (PKMM), the Bumiputera Contractors’ Association of Malaysia (PKBM), Class F contractors, and other industry groups, have been urged to submit invoices and cost-related documentation to DOSM to substantiate their claims.

The call for stricter documentation comes amid renewed calls from industry stakeholders to reactivate VOP mechanisms, which were previously implemented during crises such as the COVID-19 pandemic. In April, PKMM President Datuk Mohd Rosdi Ab Aziz had urged the government to reinstate VOP for construction materials to ease financial pressures on contractors grappling with global energy cost volatility.

“This measure had been effective in past crises, including during the pandemic, and helped contractors manage rising costs,” Rosdi had stated at the time.

Meanwhile, Ahmad highlighted the successful completion of a RM147.96 million expansion project for the Kelantan Matriculation College, which was delivered without cost overruns, major defects, or Variation Orders (VO). The project, which achieved a four-star rating in the Safety and Health Assessment System in Construction (SHASS), also recorded zero lost-time accidents.

The development includes academic and administrative buildings, student and lecturer accommodations, a one-stop student centre, a cafeteria, a multipurpose hall, and various sports facilities. Among the amenities are an eight-lane athletics track meeting World Athletics Class 2 standards, a Class 2-rated hockey field by the International Hockey Federation, as well as football, rugby, and multipurpose courts.

Ahmad attributed the project’s efficiency to the use of Industrialised Building Systems (IBS)—with a score exceeding 70%—and Building Information Modelling (BIM), which streamlined implementation. The two-year defect liability period remains the contractor’s responsibility, after which maintenance will be handled by the Ministry of Education through annual allocations.

The government’s stance underscores a balancing act between addressing legitimate cost pressures faced by contractors and ensuring fiscal prudence in public spending. While VOP remains a potential recourse, the emphasis on verifiable data reflects efforts to prevent abuse of adjustment mechanisms.

Industry observers note that the DOSM’s role in validating price fluctuations is critical, particularly as construction costs remain sensitive to global supply chain disruptions and commodity price volatility. Contractors, meanwhile, face mounting operational costs, including fuel, wages, and logistics, which can erode profit margins on fixed-price government contracts.

The call for evidence-based VOP applications also aligns with broader efforts to enhance transparency in public procurement. By requiring detailed cost documentation, authorities aim to distinguish between genuine price shocks and opportunistic claims, ensuring that adjustments are granted only where demonstrably justified.

Looking ahead, the government’s willingness to consider VOP applications—provided sufficient evidence is presented—may provide some relief to contractors operating in a high-cost environment. However, the onus remains on industry players to furnish accurate and comprehensive data to support their requests.

For now, the DOSM’s latest price assessments suggest that while some materials have seen localized increases, the overall trend remains moderate. This data-driven approach is expected to guide future VOP evaluations, reinforcing the need for contractors to align their claims with official statistics.

As Malaysia’s construction sector continues to navigate economic uncertainties, the interplay between material costs, government policies, and industry sustainability will remain a key focus. Stakeholders are likely to watch closely for further updates on VOP applications and DOSM’s role in validating price adjustments.