Prescribing Policies, Guidelines, Rules And Regulations For Government Infrastructure Contracts

Case Overview and Summary

POLICY OBJECTIVES

- Achieve maximum efficiency in project implementation and minimize costs and variations through sound contract management practices. (Section 1a)
- Promote healthy partnership between government and private sector for national development. (Section 1b)
- Enhance growth of local construction industry and optimize use of indigenous manpower, materials, and resources. (Section 1c)

DETAILED ENGINEERING

- No bidding or award of contract unless detailed engineering investigations, surveys, and designs are sufficiently carried out per standards to minimize overruns, underruns, change orders, and extra work orders. (Section 2)
- Detailed engineering documents must be approved by relevant Minister (Public Works, Transportation and Communications; Public Highways; or Energy). (Section 2)

PREQUALIFICATION OF PROSPECTIVE CONTRACTORS

- Legal Requirements:
    - Licensed contractor for current year (Republic Act No. 4566)
    - Paid privilege tax for current year
    - Comply with Administrative Order No. 66 and other pertinent laws (Section 3a)
- Technical Requirements:
    - Competence and experience in managing similar projects
    - Competence and experience of key personnel
    - Availability and commitment of equipment (Section 3b)
- Financial Requirements:
    - Meet net worth and liquid asset requirements
    - Allowed to cover net worth deficiency through bank line of credit (Section 3c)
- Promote maximum participation of eligible Filipino contractors (Section 3d)

BIDDING

- Construction projects generally undertaken through competitive public bidding (Section 4)
- Administration/force account or negotiated contract allowed in exceptional cases with approval (Section 4)
- Bidder's bond required to guarantee successful bidder enters into contract and provides performance bond (Section 4)

AWARD AND CONTRACT

- Award to lowest prequalified bidder whose bid complies with terms and is most advantageous to government (Section 5)
- Contractor must post performance bond prior to award (Section 5)
- Awards and contracts subject to approval of relevant Minister (Section 5)

ASSIGNMENT AND SUBCONTRACT

- Contractor cannot assign, transfer, pledge, subcontract, or dispose of contract without Minister's approval (Section 6)
- Subcontract approval does not relieve main contractor's liability or create contractual relation between subcontractor and government (Section 6)

CONTRACTOR RESPONSIBILITY

- Contractor fully responsible for contract work until final acceptance by government (Section 7)
- Contractor responsible for damage or destruction of works except force majeure (Section 7)
- Contractor responsible for safety, protection, security, and convenience of personnel, third parties, public, works, equipment, and installations except force majeure (Section 7)

ADJUSTMENT OF CONTRACT PRICE

- Minister may authorize adjustment if labor, equipment, material, and supply costs increase or decrease due to direct government acts during contract effectivity (Section 8)
- Adjustments made using formulas established in rules and regulations (Section 8)

CHANGE ORDER AND EXTRA WORK ORDER

- Change order or extra work order allowed only for works necessary for project completion and within general scope of contract (Section 9)
- All change orders and extra work orders subject to Minister's approval (Section 9)

INSPECTION AND CONSTRUCTION

- Government inspects contract work in progress to ensure compliance with standards and requirements (Section 10)
- Contractor held responsible for acceptability of finished works and must promptly replace materials and correct works failing to meet requirements (Section 10)

GOVERNMENT'S RIGHT TO TAKE OVER

- Government may take over contract work if contractor abandons, unduly delays, becomes insolvent, assigns assets for creditors' benefit, is adjudged bankrupt, assigns contract without approval, or violates terms (Section 11)
- Government must give due notice to contractor and sureties before taking over (Section 11)

IMPLEMENTING RULES AND REGULATIONS

- Minister of Public Works, Transportation and Communications as lead official, Minister of Public Highways, Minister of Energy, and NEDA Director-General shall jointly promulgate implementing rules and regulations (Section 12)
- Once approved by President, rules and regulations applicable to all government infrastructure and construction contracts (Section 12)

SEPARABILITY CLAUSE

- If any provision is held unconstitutional, other provisions remain valid (Section 13)

REPEALING CLAUSE

- All conflicting Acts, Charters, Decrees, Letters of Instructions, Executive Orders, Proclamations, rules and regulations repealed or modified accordingly (Section 14)

EFFECTIVITY

- Decree takes effect immediately (Section 15)