Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
SEVENTEENTH CONGRESS
‘Third Regular Session

8259

House Bill No.

Introduced by Rep. ARTHUR C. YAP

AN ACT
AMENDING INVESTMENT RESTRICTIONS IN COMMONWEALTH ACT
NO. 541, AS AMENDED BY LETTER OF INSTRUCTIONS NO. 630,
AND FOR OTHER PURPOSES

EXPLANATORY NOTE

Commonwealth Act No. 541 (C.A. 541), also called “An Act to
Regulate the Awarding of Contracts for Construction or Repair of Public
Works,’ was enacted in 1940, 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. Clearly, the principle
of competitiveness enshrined in the 1987 Constitution and in the
Philippine Competition Act was diluted and not a priority in the minds of
the then National Assembly when a domestic preference policy was
adopted by the Government in the awarding of public works projects to
the local construction industry.

For seventy-eight years, such domestic preference policy has
confined competition in the construction industry within our territorial
boundaries and has discriminated in favor of domestic businesses with
substantial market power and political influence. Between 2010 and 2015,
public construction grew by 8% while private construction grew by 58%.!
‘The lack of genuine competition in the public construction industry

impairs public welfare as there are fewer incentives for existing domestic

’ Philippine Competition Commission's Policy Note No. 1, Series of 2017, entitled “Anti-
Competitive Effects of Regulatory Restrictions: The Case of the Construction Sector.”


firms to innovate and puts at risk the delivery of reliable, safety-compliant
and quality public works.

Accordingly, 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. In this light, this bill 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. It is hoped that the enactment of this measure will
encourage and attract foreign firms possessing the capacity to construct
vital projects and capable of sharing technical expertise with local firms to
enter the Philippine construction market.

This is the House counterpart of the Senate Bill of Senator Sherwin
Gatchalian. The passage of this legislation is earnestly sought.

ATTY. c. YAP


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Republic of the Pi
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
Third Regular Session

House Bill No. 8259

Introduced by Rep. ARTHUR C. YAP

AN ACT
AMENDING INVESTMENT RESTRICTIONS IN COMMONWEALTH ACT
NO. 541, AS AMENDED BY LETTER OF INSTRUCTIONS NO. 630,
AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTION 1. A new Section 1 of Commonwealth Act No. 541 (C.A.
541), also known as “An Act to Regulate the Awarding of Contracts for
the Construction or Repair of Public Works,” as amended by Letter of
Instructions No. 630, is hereby inserted to read as follows:

“SEC. 1. STATEMENT OF POLICY. - THE STATE
RECOGNIZES HOW VITAL THE EFFICIENT DELIVERY OF
RELIABLE, SAFETY-COMPLIANT AND QUALITY PUBLIC
WORKS TO NATIONAL DEVELOPMENT. IT ALSO
RECOGNIZES THAT HEALTHY COMPETITION CAN FURTHER
DEVELOP THE CONSTRUCTION INDUSTRY AND OPTIMIZE
THE CONSTRUCTION CAPABILITY OF THE COUNTRY TO
EFFICIENTLY DELIVER SUCH PUBLIC WORKS.

IT IS THUS THE STATE’S POLICY TO EXTEND EQUAL
OPPORTUNITIES TO ELIGIBLE AND QUALIFIED BIDDERS TO
PUBLIC WORKS PROJECTS OF THE GOVERNMENT AND TO
ATTRACT DOMESTIC AND FOREIGN INVESTMENTS IN THE
CONSTRUCTION INDUSTRY TO IMPROVE MARKET
DYNAMISM, ENCOURAGE INNOVATION AND REWARD GOOD
PERFORMANCE.”

SECTION 2. Section 1 of C.A. 541 is hereby renumbered and
amended to read as follows:

SEC. [4] 2. All Branches, offices, and subdivisions of the

Government and all government-owned or controlled

companies, authorized to contract and make disbursements

for the construction or repair of LOCALLY-FUNDED public

works, INCLUDING THE CONSTRUCTION OF DEFENSE-


RELATED STRUCTURES, shall EXTEND EQUAL
OPPORTUNITIES — |give—preferences} in awarding OR
NEGOTIATING contract for such works to ELIGIBLE AND
QUALIFIED FILIPINO AND FOREIGN [Filipino-or-American|
contractors. (Snktir beret cee

allowed.]

SECTION 3. Section 2 of C.A. 541 is hereby repealed.

SECTION 4. Separability Clause.- If any portion of this Act is
declared invalid or unconstitutional, the portions or provisions which
are not affected shall remain valid and subsisting.

SECTION 5. Repealing Clause.- All laws, decrees, executive
issuances, rules and regulations inconsistent with this Act are hereby
repealed or modified accordingly.

SECTION 6. Effectivity. — This Act shall take effect fifteen (15) days
after its publication in the Official Gazette or in a newspaper of general
circulation.

Approved.