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TTCA head on TCL price hike: Contractors need to expect increases
Contractors with fixed priced contracts are supposed to protect themselves from likely price increases, said Mikey Joseph, president of the Contractors’ Association of T&T. “Jerlean John, head of Urban Development Corporation of T&T (Udecott), had said Udecott would not be entertaining price increases, which is that if there is a fixed price contract, no one can help you as you are at the mercy of the client.
“To protect yourself against that, what a contractor is supposed to do is when you are tendering on a project, if you know the project is going to take three years, you look at trends and you would see that every 18 months, Trinidad Cement Ltd (TCL) increases the cost of cement by five per cent or six per cent or whatever increases take place and you put measures in place to deal with that,” he said. In June, TCL raised its prices.
TCL stated: “TCL Premium Plus, which accounts for 95 per cent of local market share, will be adjusted by nine per cent, which is equal to a five cent increase per pound from $0.53 to $0.58, VAT inclusive. “Ordinary Portland Cement (OPC), which is used by approximately five per cent of the market, will move by 15 per cent.”
TCL justified the price hike by saying: “These price movements have resulted from continual increases in major cost components over the past 18 months, but moreso over the past six months when there has been a steady rise in the price of equipment spares, raw materials, freight rates and supplier services.” Joseph said based on the cement prices increases, without any other factors involved, he does not see any project having more than a two per cent cost increase.
“With the cement price increase alone and you look at all aspects of your projects, I do not see any project having more than a two per cent price increase. “But two per cent is a lot if your profit margin in is ten per cent,” he said. Joseph said contractors must be “prudent” and exercise good “risk management.” “You definitely are going to get price increase and look at what portion of your product would not be completed and apply the necessary cost protection measures to deal with that. Most of us tend to take from time to time.
“Sorry, but contractors, if they do not protect themselves, would get no recourse except if they definitely cannot complete their job and the client is willing to sit and listen to them,” he said. Dan Persad, president of the Quarrying Association of T&T, told the Guardian that TCL’s price hike will not have a direct impact on those in the quarrying industry. “We get the material and do make not the actual cement, so that will not directly impact us.
“But TCL’s rise in prices will have an overall impact on the building and construction industry. Those that do the building will be impacted,” Persad said.