Presidential Decree No. 454 (PD 454) — AMENDING THE PROVISIONS OF SECTION 10(b) OF REPUBLIC ACT NO. 5979 TO AUTHORIZE ADJUSTMENT OR CONTRACT PRICES FOR GOVERNMENT PROJECTS UNDER CERTAIN CONDITIONS
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. 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.
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.
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.
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.
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
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
