CIOB proposals for upcoming Cabinet paper to protect 1 m jobs

The Sri Lankan construction industry, which employs 650,000 people directly and 325,000 people indirectly, has repeatedly voiced its concerns at this current, most critical era in Sri Lankan construction.   

The Ceylon Institute of Builders (CIOB), and many other industry professionals have made the following requests to save the livelihood of its approximately 1 million direct/indirect employees: 

1) Immediate action to be taken – each day that contractors work, we are losing and descending further into debt. Therefore, we have decided to temporarily halt all projects, for a short period to reassess and identify ways of working. During this time outstanding bills can be settled, and balance work can be resumed according to a cost-plus system. If the client cannot afford it, we must reduce the scope of work. Or else instead of abandoning the project, complete it up to a point that the structure/building is usable or operational. If the project is abandoned, the contractor must pay their portion of profit. Alternatively, if the project is continued, advance payments should be increased accordingly. 

2) Advise banks not to encash bonds and guarantees during this period, because contractors cannot control the obstacles that hinder their contract performance. 

3)  Forex problem, material shortage, and price hike: To negotiate a specific credit line with India and China to import construction-related materials.  4) Price escalation: Use the CIDA formula to compensate for price escalations (with 20% ceiling) contract price, as reimbursement computed from the formula doesn’t match with the actual additional cost incurred due to unprecedented price hikes prevailing these days. Therefore, we request to:  

a) Remove the existing 20% compensation ceiling.

b) Or by either:

1. Using the CIDA price escalation formula for minor works (F- 0.869 (V-Vna) * (1tc-1tb)/1tb) and use the most current and latest price indices, including transport and labour charges.

2. Decide on an agreed increment for the total project (for example: 20% increment was given for certain road projects). As such, set increments on a project-category basis, such as by 30-35%. 

c) Reimburse actual additional costs incurred (by conventional method) project by project basis where none of the above methods are applicable.

5) Instruct clients to grant time extensions (EOT) for all projects without imposing Liquidated Damages for the year 2022.

6) Extend moratorium repayment and bank-loan repayments for the construction industry for the year 2022.

7) New projects – Only award necessary projects. Before awarding them, ensure that there is a pre-set financial agreement so that the contractors’ cash flow is not disrupted.  

8) Abolishment of negative list of construction materials, including lifts, air conditioners, all kinds of pumps and pool equipment, electrical fittings, solar, CCTV systems, ELV systems, data systems, etc.

9) Due to the fuel hike either an extra 2.5% should be added to the project cost, or the fuel cost should be included in the preliminary items.  

10) Internal issues – Officers and personnel involved in the approval process should be reasonable and efficient. A drastic change should take place here, such as to reduce the maltreatment towards contractors and the dragging of projects for extended periods of time.