PHILIPPINE CONTRACTORS ACCREDITATION BOARD VS. MANILA WATER CO., INC.
OPENING UP THE CONSTRUCTION INDUSTRY TOWARDS GLOBAL COMPETITIVENESS
The Supreme Court issued a Decision dated 10 March 2020 in G.R. No. 217590 entitled “Philippine Contractors Accreditation Board vs. Manila Water Company, Inc.” effectively allowing foreign contractors equal footing with domestic construction companies. This case originated from the Petition for Declaratory Relief filed by Manila Water Company, Inc. before the Regional Trial Court of Quezon City, Branch 83 seeking to invalidate Section 3.1, Rule 3 of the Revised Rules and Regulations Governing Licensing and Accreditation of Constructors in the Philippines or the Implementing Rules and Regulations of Republic Act No. 4566, otherwise known as the Contractors’ License Law. This is because the petitioner, Philippine Contractors Accreditation Board (“PCAB”) refused accreditation for regular license the foreign contractors of respondent Manila Water.
Under Section 3.1, Rule 3 of the IRR of RA 4566, the PCAB limited the issuance of regular contractor’s license to Filipino citizens and corporations (at least 60% owned by Filipinos):
“Rule 3 CONTRACTOR’S LICENSE
Section 3.1 License Types
Two types of licenses are hereby instituted and designated as follows:
- Regular License
‘Regular License’ means a license of the type issued to a domestic construction firm which shall authorize the licensee to engage in construction contracting within the field and scope of his license classification (s) for as long as the license validity is maintained through annual renewal; unless renewal is denied or the license is suspended, cancelled or revoked for cause (s).
The Regular License shall be reserved for and issued only to constructor-firms of Filipino sole proprietorship, or partnership/corporation with at least sixty percent (60%) Filipino equity participation and duly organized and existing under and by virtue of the laws of the Philippines.
- Special License
‘Special License’ means a license of the type issued to a joint venture, a consortium, a foreign constructor or a project owner which shall authorize the license to engage only in the construction of a single specific undertaking project. In case the license is a foreign firm, the license authorization shall be further subject to condition (s) as may have been imposed by the proper Philippine government authority in the grant of the privilege for him to so engage in construction contracting in the Philippines. Annual renewal shall be required for as long as the undertaking/project is in progress, but shall be restricted to only as many times as necessary for completion of the same.
The following can qualify only for the Special License:
ba) A joint venture, consortium or any such similar association organized for a single specific undertaking/project;
bb) A foreign firm legally allowed by the proper Philippine government authority to undertake construction activities in the Philippines.
bc) A project owner undertaking by himself, sans the service of a constructor, the construction of a project intended for sale, lease, commercial/industrial use of any other income generating purpose.”
The Supreme Court held that the above-cited assailed provision of the IRR of RA 4566 is void since while Section 17 of RA 4566 allows PCAB to create classifications of contractors, Congress did not intend to discriminate against foreign contractors. The Court held that while Section 16 of RA 4566 allows classifications as to branches: (a) general engineering contracting; (b) general building contracting; and (c) special contracting, there is nothing in the law which empowers PCAB to create nationality-based classifications. The Supreme Court also brushed aside the argument of PCAB that Section 14, Rule XII of the 1987 Philippine Constitution limits the practice of all professions to Filipino citizens. The Court held that the “profession” under the aforesaid provision refers to the practice of natural persons of a certain field in which they are trained, certified, and licensed. Being a licensed contractor does not automatically qualify within the ambit of the Constitution as “profession” per se.
Voting 14-1, the Supreme Court also cited the case of Tatad vs. Angara, G.R. No. 118295 (02 May 1997), when it held that “the constitutional policy of a ‘self-reliant and independent national economy’ does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither ‘economic seclusion’ nor ‘mendicancy in the international community.” The Court, under the ponencia of Justice Alexander Gesmundo, also heavily relied on the Amicus Curiae Brief of the Philippine Constitution Competition which took the position that the PCAB regulations are anti-competitive and restrictive and held that “absent any showing that the competition expected in the construction industry, we should open the same to foreigners, would be unfair to our citizens, the industry should not be restricted to Filipinos only.” Clearly, this ruling of the Supreme Court allowing entry of foreign construction companies in the Philippine market will usher global competitiveness. Our domestic cosntruction companies will surely learn, if not be forced, to innovate and keep up with international standards. Influx of foreign contractors may also generate jobs with better pay for our construction workers and will prevent exodus of highly-competent construction professionals in the Middle East and other parts of the world.