SEVENTEENTH CONGRESS OF THE ]

REPUBLIC OF THE PHILIPPINES ]
Third Regular Session ]
18 AUG -2 P6 5S
SENATE ne ¢
8.B. No. 1907 ~

Introduced by SEN. WIN T. GATCHALIAN

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 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 const

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



24

Senste
Republic of the Philippines
SENATE

‘Dice of the Sreceetaep

"18 AUG -2 P655
SEVENTEENTH CONGRESS

Third Regular Session
ie A
Senate Bill No. 1907 fe

Introduced by Senator Sherwin T. Gatchalian

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

[Filipine-or-American] contractors. [and-demestic-entities when
: Sader 4 -

‘That-or_the-construction-of land, air,and_sea-coast-defenses,
arsenals,—barracks,depots,_hangars,_landing_fields,_quarters,
hospitals,and-all other_buildings-and-s es-required forthe
national_defense—of_thePhilippines,_no—foreign—bids—shall_be
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.