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;chanroblesvirtualawlibrary
WHEREAS, under the 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; chanroblesvirtualawlibrary
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 unforeseen contingencies;chanroblesvirtualawlibrary
WHEREAS, because of these unprecedented increase in the prices of
commodities, materials and supplies, the completion of government
projects 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;chanroblesvirtualawlibrary
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 increase in the costs of completing the projects;chanroblesvirtualawlibrary
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;chanroblesvirtualawlibrary
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:cralaw:red
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 project is hereby authorized, should any or both of the
following conditions occur:cralaw:red
(a) 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;chanroblesvirtualawlibrary
(b) 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 price.
The increase or decrease in the contract price shall be determined by
application of the appropriate official indices.
Section 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. 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 certain specific
items the agreed provisions shall govern but only in respect to the
items specified.
Section 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. chanroblesvirtualawlibrary
*Section 6. 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.
* Copied verbatim from documents obtained directly
from Bureau of Printing publication (missing Section 5).
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