Announcement of construction material prices

Báo Thừa Thiên Huế•15/06/2023

"No more profit, just holding on."

These phrases best reflect the sentiments of construction contractors today. Not only are small businesses affected, but the "big players" in the construction industry share the same feelings. The difficulty for construction companies is that it's very difficult to adjust prices or extend construction schedules for contracts they've already won, meaning they're working without profit, or even incurring heavy losses with the current rising cost of materials.

Mr. Tran Quang Anh, Deputy Director of Thua Thien Hue Road Management and Construction Joint Stock Company (Road Construction Management), shared that the company has a long-standing reputation in the transportation sector, but has never faced difficulties like the present. The challenge lies in the fact that construction material prices were low during the bidding process, but during project implementation, the prices of construction materials (sand, soil, stone, steel, engine oil, etc.) doubled. Meanwhile, prices are not adjusted, and investors only settle payments based on the prices announced by the joint departments of Construction and Finance.

On average, the Road Construction Management Joint Stock Company bids on and constructs around 10 projects each year. For example, at this time, the company is constructing the Phu My - Thuan An road, the road west of Tam Giang estuary, and the two bridge approaches to the Huong River overpass, as well as Provincial Roads 10D and 10E…

According to Mr. Tran Quang Anh, the cost of embankment soil alone for the Phu My - Thuan An road (over 1.2km long) and the road west of Tam Giang lagoon required purchasing nearly 100,000 cubic meters of K95 soil from quarries in the Thuy Phuong hill area (Huong Thuy town). The state-announced price at the time was 95,000 VND/m³; however, the actual purchase price was 185,000 VND/m³, an increase of over 90,000 VND/m³, indicating a significant loss for the company. Besides the alluvial soil, there was also a considerable amount of crushed sand used for embankment construction, with an announced price of 80,000 VND/m³, but the actual purchase price was nearly 150,000 VND/m³… Furthermore, labor costs and the cost of excavating and bulldozing machinery have doubled, forcing the company to absorb half of the losses.

The Provincial Transportation Construction Joint Stock Company has long participated in bidding for transportation projects in Thua Thien Hue and Quang Tri provinces . However, this company is now facing a dilemma when considering the difference between the announced bid prices for construction materials and the actual market prices.

The leader of the Provincial Transportation Construction Joint Stock Company explained that currently, not only has the price of steel increased, but many other raw materials such as cement, sand, and stone have also risen. Compared to the prices offered during the bidding process, this will certainly have a significant impact on signed construction contracts. In reality, the company is facing a situation where it is no longer profitable, merely maintaining operations to cover short-term and long-term costs.

"This reality has created immense difficulties for us during the project's implementation. The investor finds it hard to agree to extensions of the construction schedule or adjustments to the contract price because they are also legally bound by the project's timeline," this leader stated.

A dilemma

According to our research, the high price of construction materials is due to a combination of factors: low reserves of soil, sand, and stone; rising fuel prices; increased transportation costs; and trucks having to cut back on extended cargo beds. The increase in construction material prices is also one of the reasons why many contractors are currently in a dilemma, and many projects are behind schedule, especially bridge and road construction projects in the Green City project in Hue, eroding local public trust.

Regarding construction material prices, a leader of the District Investment Project Management Board stated that many businesses and contractors are currently avoiding bidding on construction projects because they see immediate losses due to the discrepancy between published and actual prices, yet they have no way to adjust the published prices to closely match market prices.

The leaders of the Provincial Project Management Board for Investment and Construction of Transportation Works stated that, for a long time, the unit has implemented bidding processes in two ways: either selecting a package or adjusting the price. For package contracts, the unit price is fixed, so recently, the unit has received many complaints from businesses regarding the unit price set by the State being lower than the actual market price.

It is true that businesses are complaining about difficulties; however, from a state management perspective, project management boards and investors all rely on the prices published by the joint departments of Construction and Finance to determine the bid package price, which serves as the basis for organizing bidding, signing contracts, making payments, and accepting projects using state capital.

According to a representative from the Department of Construction, the price announcement is based on documents, information, and invoices sent from various localities. However, each quarry (soil, stone, sand, etc.) submits different prices, and the assessment relies on information sent from these units and localities to ensure reliability for the announcement.

The fact that the published prices of construction materials are lower than market prices has been recognized by relevant departments and agencies. This is a key indicator not only for the Construction and Finance sectors but also a common issue for the province that needs prompt attention and resolution to prevent businesses and contractors from falling into the predicament they are currently facing.

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