The House Committee on Trade and Industry on Tuesday approved a measure imposing fines to contractors who engage in joint ventures without first obtaining an additional license and complying with other eligibility requirements.
In committee-approved House Bill 1911, Deputy Speaker Aurelio Gonzales Jr. of Pampanga said his proposal seeks to amend Republic Act 4566, or the Contractors’ License law, as amended by Presidential Decree 174.
In order to rectify existing infirmities in Republic Act 4566, the bill seeks to propose a fine of not less than P50,000 if the cost of the project is not more than P500 million, and a fine of not less than P500,000 if the cost of the project is more than P500 million.
The bill said the penalty shall be imposed to contractors who engage in joint ventures without first obtaining additional license and any other eligibility requirements as provided under the law. In addition, the bidder shall also be automatically disqualified for award of contract.
Since the law’s enactment in 1965, Gonzales said the existing fees as stipulated the law has yet to be amended.
The measure increases the original license fee to P5,000 (from the current P50), the examination of an applicant to P6,000 (from the current P60) and the annual renewal to P5,000 (from the current P50).
“Higher fees for licensing, registration of application and renewal shall be implemented to address inflation and rising operational costs and expenses of the PCAB [Philippine Contractors Accreditation Board] support additional mandates and services, and other developmental programs, projects and advocacies by the PCAB,” Gonzales said.
The bill also said a license shall now be valid for one year from its issuance. It also may be renewed by filing an application for renewal at least one month before its expiry date to the board accompanied by the annual renewal fee and such other documents as may be required by the board.
For his part, PCAB Executive Director Herbert Matienzo, during the hearing, said the passage of the bill is “very timely.”
“Under the current law, the penalty for every contractor who is operating without license is only 5,000 per year. This amount is not that big and it somehow encourages constructors to continue doing what are they doing without obtaining a license because P5,000 is small for them,” Matienzo said.
Moreover, Department of Public Works and Highways (DPWH) Assistant Secretary Eugenio Pipo Jr. said the current penalty is so meager that the contractors are even willing to just pay the penalty of P5,000 for failure not to renew their licenses.
“We think that numerous contractors are now engaging the services of another contractor and that takes the form of subletting or that takes a form of a joint venture. Subletting needs also the license of the constructors and there should be pre-qualification of subconstructors,” he said.
Pipo said “I was telling before the ‘not so good practice’ that somehow constructors tend to sublet for a part of the contract…and this practice should not be tolerated.”
“[But] we are very strict, we require all the constructors prior to the submission of bids to submit eligibility [showing] that they must have a renewed constructor license. Even in a joint venture, we need to have joint venture license prior to the bidding,” he added.
However, National Economic and Development Authority (Neda) Assistant Director Richard Emerson Ballester said the agency believes that additional fees and penalties would only be additional burden to industries.
He said it will also hamper the implementation of the Ease of Doing Business and will limit competitiveness in the construction industry.
“Recognizing this [approval at the committee level] and if passed into law, it will take effect amid the pandemic,” Ballester said.
Meanwhile, the bill will now be transmitted to the plenary for another round of deliberation.