Thursday, December 16, 2004

"5 Class F Contractor can becomes 1 Big A" says Samy Vellu

Samy calls 40,000 Class F Contractor to merge into 8,000

Datuk Seri Samy Vellu has suggested that the 40,000-odd Class F contractors merge into about 8,000 companies to bid for major government projects. He said it would be difficult for contracts to be given to individual Class F contractors. “We want to help the Bumiputra contractors but they also need to have vision and merge to get the projects,” Samy said.

I had the opportunity to talk to a few Class F contractors on this matter to see their reaction to the suggestion. The reaction are that:

As Class F contractors, they are short of funds and even if 5 were to merge into 1 as suggested, it would only equal to one bigger poorly financed contractor and they would still be unable to compete with the big boys who had the resources and connections. If 5 of them merge, and try to tender for a big contract, say, Class A or B, (for contracts that are $10 million and above), the performance bond alone would amount to $500,000 for a $10 million contract (5% of contract sum), of which they will not be able to afford. Class F contractors are companies below $10,000 paid up capital and 5 of them will add up to $50,000 paid up (and the paid-up had been fully utilized for setup of office and administration).

It can only be viable merger if the government will waive the performance bond and advance payment bond. That, the Government had to decide if they are absolutely sincere to help the Class F contractors.

Apart from the above issues, the main problems with current Class F contractors is the lack of projects for the 40,000-odd contractors. Big or mega projects are awarded to gaint contractors who would not sublet to Class F contractors due to lack of experience and resources. At such, they had to depend on small projects of which the income from their project will not suffice to cover their expenditure.

If the Government wants the Class F contractors to succeed, there is a need to look into the funding of their operation and providing free training and guidance to them over a period of time so that they will grow in their knowledge and competencies, at the same time, make a little extra money to feed their family, and hopefully, any extra cash leftover, will be used to increase their working capital.

Would the Government be willing to provide the needs of these contractors, or are they going to keep talking and suggesting solutions that are insidious?

Cakap Boleh, Bikin Tak Boleh. 1+1+1+1+1 = 1 Big F

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