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Contractors leave projects as firms dither on prices

Many contractors abandoned projects in the face of high construction costs in the first half of this year, Thai Contractors Association Under HM the King's Patronage's director Danuch Yontararak said. During a seminar, "How constructors and property developers can do business when raw-material costs are rising", organised by Krungthep Turakij last week, Danuch said the association did not have the exact number of projects that were left incomplete by contractors. The association has been trying to convince developers to factor in the rise in construction costs into existing contracts with builders. Because most contracts were signed last year, the rise in costs this year has made earlier estimates unviable. Therefore, contractors are seeking to revise the contracts. If developers do not revise contracts, contractors may opt out of projects to cut losses, Danuch said. The government has allowed for revision of prices by 4 per cent to 8 per cent in view of the increased construction costs. However, most private companies have stuck to earlier contracts, forcing contractors to leave projects incomplete in the first half, Danuch said. Contractors are also trying to cut expenses by hunting for alternative raw materials and tweaking construction processes, he said. Ascon Construction managing director Pattanapong Tanumathaya said his company has been negotiating price revisions with developers it has signed contracts with. "Some understood the business situation and agreed to revise the existing contract. But some didn't understand and didn't want to change the contract. As a result, we have had to complete projects at a loss," he said. Ascon cannot abandon projects because it is listed on the stock exchange, he said. But most small- and medium-sized contractors with low cash flow have no such compunction, he said.

 

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