Saint Mary’s University

School of Engineering, Architecture and Information Technology

Bayombong, Nueva Vizcaya

PART I – ENGINEERING LAWS

PRESIDENTIAL DECREE NO. 1594 – Prescribing Policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts

The following may become contractors for government projects:

a) Filipino Citizens (Single Proprietorship) or Partnership or Corporation duly organized under the
laws of the Philippines and at least 75% of the capital stock of which belongs to Filipino Citizens.

b) Contractors forming themselves into a joint venture i.e., a group of two or more contractors that
intend to be jointly and severally responsible for a particular contract, shall for the purpose of
bidding/tendering comply with Letter of Intent (LOI) 630, and aside from being currently and
properly licensed by the Philippine Contractors Accreditation Board (PCAB), shall comply with the
provisions of R.A. 4566 and its Implementing Rules and Regulations, provided that joint ventures
in which Filipino Ownership is less than 75% may be prequalified where the structures to be built
require the application of techniques and/or technologies which are not adequately possessed by
a Filipino entity as defined above.

c) Foreign contractors for internationally bid foreign-assisted projects as may be required by foreign
financial institutions.

Each office/agency/corporation shall have in its head offices a Prequalification Bid and Award Committee
(PBAC) which shall be responsible for the conduct of prequalification, bidding, evaluation of bids and
recommending awards of contracts. Each committee shall be composed of the following:

a) Chairman (regular) – at least third ranking official of the office/agency/corporation.

b) Executive officer and Secretary (regular) – legal officer of the office/agency/corporation.

c) Member (regular) – technical member designated by the head of office/agency/corporation.

d) Member (provisional) – at least two, with experience in the type of project to be bid and in project
management, duly designated by the head of office/agency/corporation on a project to project
basis.

e) Members from the private – to ensure the transparency of bidding process, one qualified
representative from a constructor’s association duly recognized by the Construction Industry
Authority of the Philippines (CIAP) and one qualified representative from any of the following
organizations:

1) End-user group or non-governmental organization to be designated by the head of

office/agency/corporation.

2) Association of Certified Public Accountants or Civil Engineers duly recognized by the

Professional Regulations Commission. Both representative shall be non-voting.

1|CE – 318 Prepared By: Engr. Juniffen I. Tacadena

 Saint Mary’s University
School of Engineering, Architecture and Information Technology
Bayombong, Nueva Vizcaya

Government Owned and Controlled Corporations (GOCCs) shall organized their own PBAC, the members
of which shall be appointed by their respective boards preferably along the same line as the other
government offices.

Note: GOCCs are also government offices. Example are Philhealth, SSS, GSIS, NIA, etc.

Non-infrastructure agencies – that is agencies other than the DPWH and DOTC, their attached agencies
and other Infrastructure corporations – that do not possess an in-house technical capability to constitute
their own PBAC shall cause the designation of either of the two infrastructure departments mentioned
above whichever is concerned, to undertake the prequalification, bid and award services as well as the
preparation of project plans and designs and supervision of construction.

Documents or papers that comprise the Pre-C (Contractor’s Confidential Prequalification Statement for
the project)

1) Credit line issued by an authorized bank in an amount equal to the average operating expenses
of the project for two (2) months or ten (10%) of the total project cost, whichever is lesser.

2) Proposed organizational chart for the project.

3) List of key personnel employed or to be employed in the project with complete qualification and
experience data sheet.

4) Statement of all relevant completed construction projects in the last three (3) years, government
and private. The statement shall include the nature and value of the project, original and actual
project schedule, the location of the project, and the name and address of the owner. It shall be
supported by certificates of completion and/or owner’s acceptance.

5) Detailed statement showing a list of all on-going construction projects, government and private,
as well as awarded and/or approved contracts not yet started. This statement shall include the
nature and the value of the project, percentage of time elapsed, percentage of physical
accomplishment, scheduled date of completion, the location of the project and the name and
address of the owner. It shall be supported by certificate of completion and/or owner’s
acceptance, notice of award and/or notices to proceed issued by the owner.

6) List of relevant equipment owned and those pledged exclusively for the project supported by
certificate of ownership/registration with the Land Transportation Office (LTO).

7) List of relevant equipment contracted to be leased or purchased and those pledged to be used
exclusively for the project supported by certified copies of contracts of lease and/or affidavit of
pledges and pro-forma invoice, if to be purchase.

Three types of tender:

1) Open/public Bidding
2) Negotiated Bidding
3) Simplified Public Bidding

2|CE – 318 Prepared By: Engr. Juniffen I. Tacadena

 Saint Mary’s University
School of Engineering, Architecture and Information Technology
Bayombong, Nueva Vizcaya

The bidders bond shall accompany the original copy of the bid in the form of cash, certified check,
manager’s check or bank draft/guarantee confirmed by a local bank against any reputable bank or letter
of credit issued by a commercial bank or surety bond, callable on demand, issued by a surety or insurance
company duly accredited by the Office of the Insurance Commission or any combination thereof as may
be required by the head of office/agency/corporation concerned.

Note: kailangan ng bond kasi ito ang parang nagsisilbing security ng office/company na hindi sila
tatakbuhan ng contractor kung sakaling Manalo yung contractor. Marami kasing mga contractor, na
kapag alam na nilang nalulugi na sila ay tatakbuhan na lang yung project or magdedeclare sila ng
bankruptcy.

AAE – stands for Approved Agency Estimate

AGE – Allowable Government Estimate. AGE is equal to one half (1/2) of the sum of the AAE and the
Average of all responsive bids.

Responsive Bid – it is a bid that is not greater than 120% of the AAE or lower than sixty percent (60%) of
the AAE.

The bidding shall be declared a Failure in the event that any of the following conditions should occur:

1) When no bids are received

2) When all bids received are higher than 120% of the AAE or lower than 60% of the AAE.

3) Failure to award the contract within the limits prescribed under section IB 10.4.1-1.

Unbalanced Bid – it is a bid containing one or more pay items that are 30% higher than the unit AGE in
respect to major items whereas other pay items are lower than the unit AGE.

Major Item – it is a pay item representing at least 20% of the AAE or the first two items having the highest
of the AAE or those indicated/specified in the Instructions to Bidders (IB)

To guarantee the faithful performance of the contractor, he shall post upon the signing of the contract a
performance security in accordance with the following schedule:

a) Cash, manager’s check, cashier’s check irrevocable letter of credit, bank draft – 5% of the total
contract price.

b) Bank Guarantee – 10% of the total contract price.

c) Surety Bond – 30% of the total contract price.

Quantity overruns or underruns of not more than 15% of the estimates per major pay item and 25% per
minor pay item in the Bill of Quantities need not be covered by Change Order provided that the same is
authorized by the Approving Authority for the contract.

3|CE – 318 Prepared By: Engr. Juniffen I. Tacadena

 Saint Mary’s University
School of Engineering, Architecture and Information Technology
Bayombong, Nueva Vizcaya

A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if
the aggregate amount exceeds 25% of the escalated original contract price. A Supplemental Agreement
may likewise be entered into for works immediately beyond the project limits but are immediately
abutting the project under the same terms and conditions as the original contract provided that it does
not exceed 100% of the escalated original contract price less the cost of mobilization and provided further
that funds are certified as available and subject to approval by appropriate authority.

Advance Payment – The contractor can ask for an Advance Payment as long as it is not a negotiated
bidding. A government shall, upon a written request of the contractor which shall be submitted as a
contract document, make an advance payment to the contractor in an amount equal to 15% of the total
contract price, to be made in lump sum or at the most, two installments according to a schedule specified
in the Instructions to Bidders (IB) and other relevant Tender Documents.

Liquidated Damages – where the contractor refuses or fails to satisfactorily complete the work within the
specified contract time, plus any time extension duly granted, the contractor shall pay the government an
amount to be determined in accordance with the following for each calendar day of delay, until the work
is completed and accepted or taken over by the government:

𝐶𝑃
𝐿𝐷 = 0.75 𝑥
𝐶𝑇
Where: LD – Amount of liquidated damages for each calendar day of delay
CP – total contract price minus the value of completed portions of the contract certified by the
government office concerned as usable as of the expiration of the contract time, in pesos.
CT – contract time plus any time extension duly granted to the contractor, in calendar days

Note: in no case however, shall the total sum of LD exceed 15% of the Total Contract Price, in which event
the contract shall automatically be taken over by the office/agency/corporation concerned or award the
same to a qualified contractor through negotiation and the erring contractor’s performance security shall
be forfeited.

4|CE – 318 Prepared By: Engr. Juniffen I. Tacadena