Budget 2027: VOP clause returns to ease diesel, bitumen cost pressure on contractors

Malaysia will reintroduce the variation of price (VOP) clause to cover rising diesel and bitumen costs for public-interest projects, among other contractor support measures in Budget 2027. The budget also raises Bumiputera procurement to RM7.5 billion and boosts home repair aid for disaster victims.

KUALA LUMPUR (Oct 9): The government will reintroduce the variation of price (VOP) clause to accommodate increases in diesel and bitumen costs, Prime Minister Datuk Seri Anwar Ibrahim announced today while tabling Budget 2027.

The measure is intended to address cost pressures affecting contractors undertaking construction work, and to help speed up implementation of projects of public interest such as quarters, schools, hostels, clinics and halls, Anwar said.

In addition, projects worth up to RM5 million involving public-interest facilities and using pre-approved plans from the Public Works Department (JKR) may be tendered through the quotation method. The government will also increase the value of government procurement reserved for Bumiputera G1–G4 contractors to RM7.5 billion, from RM4 billion this year.

For the maintenance, repair and upgrading of government facilities, the limit for direct appointments will be raised to RM200,000, while the limit for quotations will be increased to RM3 million. These measures form part of the government's broader efforts to support contractors and facilitate the implementation of public-sector projects.

The budget also provides for continued investment in infrastructure maintenance and measures to mitigate disaster risks, which include initiatives affecting residential areas. An allocation of RM1.2 billion will be provided to maintain and repair public hospital and clinic infrastructure, while nearly RM320 million will be allocated to repair and upgrade slopes, drains and ditches in local authority areas nationwide.

For flood mitigation, the government has completed six projects worth RM336 million, while another 82 projects are being implemented according to schedule. New flood mitigation projects planned for 2027 include the Kuching City Flood Mitigation Plan, the Sungai Golok flood mitigation project in Kelantan under Phase 2 of the Integrated River Basin Development Project (PLSB), and the Sungai Kemaman flood mitigation project in Terengganu.

The government will also increase home repair assistance for disaster victims from RM5,000 to RM10,000. Under its environmental initiatives, the government said severely ageing public sewerage systems on Pulau Tuba, Langkawi, Redang and Tioman would be urgently upgraded.