The Cabinet approved measures to ease the impact on government contractors from the Middle East crisis by temporarily relaxing the calculation of the K-value, helping to sustain business liquidity, and reaffirmed the government's commitment to supporting both SMEs and citizens' livelihoods.
On 19 May 2026, Ms. Ratchada Thanadirek, spokesperson for the Prime Minister's Office, announced that the Cabinet meeting on that day approved relief measures for government contractors affected by the conflict in the Middle East region. These measures aim to reduce cost burdens and maintain liquidity for businesses impacted by rising energy prices, transportation costs, and material expenses.
The measures provide assistance to government contractors during a period of volatile costs, especially construction companies and suppliers working on government projects, many of which are SMEs facing cash flow constraints. If rising costs continue to pressure them, it may affect project delivery, employment, and local economic activities.
Ms. Ratchada explained that the key point of the measure is a temporary relaxation of the method for calculating compensation for construction work under adjustable-price contracts, known as the K-value. The deduction rate is adjusted to plus or minus 2 percent, down from plus or minus 4 percent, for contracts delivering work between 28 February and 30 September 2026. This aims to better reflect changing price conditions. Additionally, the price index from the month when the head of the government agency approves the baseline price will be used instead of the index from the bid opening month, ensuring calculations align with actual costs amid rapidly changing energy and material prices.
The K-value formula is a mechanism to calculate compensation for cost changes during project execution, such as fluctuations in oil, construction materials, and energy costs. If costs rise beyond the set limit, the government pays additional compensation to contractors proportionally. Conversely, if costs decline, the compensation is reduced accordingly, ensuring fairness for both parties.
The Prime Minister's Office spokesperson noted that similar measures were used during the subprime economic crisis to support businesses and mitigate shocks from volatile costs. Reintroducing this tool now adapts a proven approach to address the current energy crisis impact.
"With global energy prices remaining high and volatile, the Prime Minister emphasizes policies to alleviate impacts across all groups, including sustaining consumer purchasing power and supporting businesses, especially SMEs. When businesses maintain liquidity, government projects can proceed, employment is sustained, and citizens retain purchasing power, allowing the economy to move forward," she said. . Ms. Ratchada said