AMENDING THE PROVISIONS OF SECTION 10(b) OF REPUBLIC ACT NO. 5979 TO AUTHORIZE ADJUSTMENT OR CONTRACT PRICES FOR GOVERNMENT PROJECTS UNDER CERTAIN CONDITIONS

• Number: Presidential Decree No. 454
• Sections: 6

Preamble

WHEREAS, the present provisions of Section 10 (b) of

Republic Act No. 5979 allow the adjustment of contract prices if during

the effectivity of the contract, the cost of labor, materials and

supplies for construction should increase due to acts of the government,

such as increase in the minimum wage, imposition of additional taxes on

construction materials, etc;

WHEREAS, under existing government policies, adjustment of

contract prices is effected only after the completion of the project

involved and subject to the approval of the Adjustment Committee

composed of the Auditor General, as Chairman and the Secretary of Public

Works, Transportation and Communications and the Budget Commissioner as

Members;

WHEREAS, because of continuing worldwide economic

dislocations resulting not only in the scarcity of commodities,

materials and supplies, but also in unprecedented variances in the costs

thereof, the provisions of the existing law governing the adjustment of

contract prices for government public works projects have become

inadequate, as it does not contain any provision for these unforseen

contingencies;

WHEREAS, because of these unprecedented increases in the

prices of commodities, materials and supplies, the completion of

government project in accordance with target schedules has been

jeopardized as contractors by reason of unbearable financial burden are

lagging behind schedules and/or are defaulting in discharging their

contractual obligations, causing impairment of the country's economic

program, as well as, requiring that the government take over and

complete projects in default at substantially higher costs;

WHEREAS, to assure the expeditious and successful completion

of government public works projects, the government realizes the need

for revising the existing contracts to take into consideration the

unprecedented increases in the costs of completing the projects;

WHEREAS, unless workable price adjustment mechanisms are

provided in the contracts; contractors will tend to excessively provide

for price contingencies resulting in unnecessarily high bids to the

Government;

WHEREAS, contracts awarded at peaks of abnormal prices will

result in higher costs not otherwise recoverable by the government when

prices normalize; and

WHEREAS, the Government feels that amendment of the existing

escalatory clause is a fair and equitable way of dealing with the

situation.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution,

do hereby decree and order:

Section 1

SECTION 1. The provisions of Section 10 (b) of Republic Act

No. 5979 and other existing laws, or Presidential Decrees to the

contrary notwithstanding, adjustment of contract prices for public works

projects is hereby authorized, should any or both of the following

conditions occur:

If during the effectivity of the contract, the cost of labor,

materials, equipment rentals and supplies for construction should

increase or decrease due to the direct acts of the government; and for

purposes of this Decree the increase of prices of gasoline and other

fuel oils, and of cement shall be considered as direct acts of the

Government ;

If during the effectivity of the contract, the costs of

labor, equipment rentals, construction materials and supplies used

in the project should cause the sum total of the prices of bid items to

increase or decrease by more than five (5%) percent compared with the

total contract pries.

The increase or decrease in the contract price shall be determined

by application of the appropriate official indices.

Section 2

SEC. 2. The additive or deductive adjustments shall be

added to or deducted from the unit prices every six (6) months beginning

from the date of bidding.

Section 3

SEC. 3. All contracts for the construction of public

works projects existing upon the effectivity of this decree, shall be

reviewed and revised at the current costs of labor, equipment rentals,

materials and supplies in accordance herewith: Provided, That

adjustments with respect to existing contracts shall apply only to the

balance of work outstanding as of May 1, 1974 which shall be further

adjusted in accordance with Section 2 hereof: Provided, That

only bid items involving a change in prices of more than five (5%) per

cent shall be adjusted: And, provided, further, That where

existing agreements contain provisions for cost variations on certain

specific items the agreed provisions shall govern but only in

respect to the item or items specified.

Section 4

SEC. 4. The necessary rules and regulations

implementing the provisions of this Decree shall be contained in a

Letter of Implementation to be issued for the purpose.

Section 5

SEC. 5. This Decree shall take effect upon its approval.

Done in the City of Manila, this 14th day of May in the year

of Our Lord, nineteen hundred and seventy-four.

(Sgd.)

FERDINAND E. MARCOS

President of the Philippines

By the President:

(Sgd.)

ALEJANDRO MELCHOR

Executive Secretary