Greater competition in gov’t infra projects under proposed bill

August 10, 2018



Denny Mata

Senator Win Gatchalian has filed a bill to remove investment restrictions in a 78-year-old law that prevent foreign contractors from bidding on locally-funded government public works projects.

Gatchalian said that in filing Senate Bill No. 1907, he seeks to “provide a more level playing field and extend equal opportunities to eligible and qualified domestic and foreign bidders to participate in the bidding by the government for public works projects.”

“This bill should be considered in the context of positioning the Philippines more competitively and attracting new investments in the construction industry, to enable the government to deliver the much-needed infrastructure that would support the country’s initiatives in providing a business climate conducive to investments in the country,” he said.

bluprint planning new clark city build build build infra projects bidding
Photo from Build Build Build Facebook page

SB 1907 amends Commonwealth Act No. 541 (CA 541) or “An Act to Regulate the Awarding of Contracts for Construction or Repair of Public Works,” to extend equal opportunities in awarding or negotiating contracts to eligible and qualified domestic and foreign contractors.

Under the current state of the law, only firms with 75% Filipino ownership or more are allowed to bid on locally-funded public works.

“This amendment is timely and very much needed given that the current thrust of the government is infrastructure development via the Build, Build, Build Program,” said Gatchalian, the chairman of the Senate Committee on Economic Affairs.

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“The reason we have traffic jams is because we are sorely lacking in roads and bridges, hence the need for a massive infrastructure program. But for simultaneous construction to happen, we need to have foreign contractors who can also participate in government projects,” he added.

The lawmaker said CA 541 was enacted on May 26, 1940, “at a time when the Philippines was still transitioning to full independence, setting up its own government, promoting local capital and industrialization, and establishing the basis for national defense while World War II was looming.”

infra projects bidding Mactan Cebu International Airport Terminal 2 by IDA Hong Kong
The Mactan Cebu International Airport Terminal 2 by IDA Hong Kong. Photo by Patrick Kasingsing

“Clearly, the principle of competitiveness enshrined in the 1987 Constitution and in the Philippine Competition Act was not a priority in the minds of the National Assembly that enacted CA 541, during a time when a domestic preference policy was adopted by the government in the awarding of public works projects to the local construction industry,” he said.

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Gatchalian said this domestic preference policy has confined competition in the construction industry within the Philippines for 78 years and has discriminated in favor of domestic businesses with substantial market power and political influence.

He also noted that between 2010 and 2015, public construction grew by only 8 percent while private construction grew by 58 percent.

“The lack of genuine competition in the public construction industry impairs public welfare as there are fewer incentives for existing domestic firms to innovate and puts at risk the delivery of reliable, safety-compliant and quality public works,” he said.

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