INVESTING IN THE CONSTRUCTION INDUSTRY

(source: Construction Industry Authority of the Philippines)

Across the country, the proliferation of newly built homes and on going construction of
residential houses, public works and infrastructure projects, and new commercial
establishments is highly noticeable. Among the factors that contribute to the development of
the construction industry are government expenditures for public construction activities,
pump-priming activities in the countryside, increased demand for housing and condominium
projects, and financial support from government and private financial institutions.

CONSTRUCTION PROSPECTS

Pipeline projects under the Build-Operate-Transfer and other schemes (as of 15 April
2010) are enumerated below:

Name of Project Estimated Schemes

Project Cost

Transportation
NAIA Expressway Phase II P 5.4 Billion BOT
MIAA New International Cargo Terminal P 7.5 Billion BOT
Project

Power
Batangas to Manila Natural Pipeline US $131 million To be determined
Isabela Coal Mining and Power Plant US $100 million To be determined
Project US $1,069 million To be determined
Integrated Liquified Natural Gas Terminal,
Pipeline and Power Plant
Property Development
Balog-Balog Multipurpose Project: Phase P 8.8 Billion To be determined
II BOT
Modernization PSP/BOT Project 100.00 BOO
MWSS Treated Bulk Water Supply 34.00
Metro Cebu Water District (MCWD)
Treated Bulk Water Supply

The following explains the schemes available for private entities who would like to invest in
the above construction projects:

1. Build-Operate-and-Transfer (BOT)

A contract is signed between a proponent (business operator) and the government,

which provides the terms and conditions of agreement. At the end of the term,
investment is transferred to the government. The proponent is responsible for the
total infrastructure development. To recover the investments and enable the business
to operate profitably, the proponent, under the contract is allowed to charge rentals,
fees, tolls and other charges for the use of the facility.

2. Build-Gradual-Transfer-Operate-and-Maintain (BGTOM)

A variation of the BOT scheme that provides for the gradual transfer of a specific
infrastructure project to the government
 3. Build-Own-and-Operate (BOO)

The proponent is authorized to finance, construct, own, operate and maintain

infrastructure or development facilities. In order to recover the investment as well as
operating and maintenance costs, the proponent is entitled to collect rentals, fees,
tolls plus a reasonable gain from facility-users. Proponents under this scheme may
assign facility operators.

4. Build-and-Transfer (BT)

The project proponent undertakes the financing and construction of a given

infrastructure or development facility and, after its completion, turns it over to the
government agency or LGU concerned, which shall pay the proponent on an agreed
schedule of its total investment expended on the project, plus a reasonable rate of
return thereon.

5. Contract-Add-Operate (CAO)

A contractual arrangement whereby the project proponent adds to an existing

infrastructure facility which it is renting from the government and operates the
expanded project over an agreed franchise period.

THE CONSTRUCTION INDUSTRY AUTHORITY OF THE PHILIPPINES (CIAP)

The CIAP was created on 28 November 1980 by virtue of Presidential Decree (PD)
1746, as amended by Executive Order (EO) Nos. 677, 768, 1008, and 133.

It promotes, accelerates, and regulates the construction industry. Its implementing

boards are the Philippine Contractors Accreditation Board (PCAB), Philippine Overseas
Construction Board (POCB), the Philippine Domestic Construction Board (POCB), and the
Construction Industry Arbitration Commission (CIAC).

The CIAP and its four implementing boards provide various regulatory and
developmental services for the construction industry. Generally, CIAP provides information
on industry policies, industry performance and prospects, contractors’ profiles, blacklisted
contractors, and contractors’ performance ratings.

One of its vital roles in the construction industry is the regulation of the domestic
contracting sector through the issuance of licenses to contractors and the contractors'
registration and classification by the Philippine Contractors Accreditation Board for
government projects.

Through the Philippine Overseas Construction Board, the CIAP also registers and
issues project authorization to Philippine contractors and consultants for overseas
operations. The POCB also provides market information, such as project opportunities and
country profiles, to registered overseas contractors.

Through the Philippine Domestic Contractors Board, CIAP assists various

government-tendering agencies and other concerned entities in establishing the Contractors
Performance Evaluation System (CPES) to ensure quality and safety in their construction
projects. The PDCB likewise accredits CPES evaluators and provides information on CPES
ratings and blacklisted firms.
 Lastly, the CIAP, through the Construction Industry Arbitration Commission (CIAC),
resolves construction contract disputes through arbitration and mediation/conciliation. It also
subsidizes the costs for the resolution of small claims (P1 million and below) through the
Arbitration Development Fund and accredits construction arbitrators.

REGISTRATION FOR OVERSEAS FILIPINO CONSTRUCTION AND CONSULTANCY

FIRMS

1. How does a Filipino contractor or consultancy firm register for overseas operation?

A Filipino construction contractor or consultancy firm undertaking or who intend to undertake

overseas construction projects must secure and fill-up the application forms available at the
Philippine Overseas Construction Board and submit them upon accomplishment together
with other supporting documents as may be required. The applicant must also meet the
basic criteria set by the Board.

2. What are the basic criteria for registration for overseas construction operations?

For Construction Companies

A. Must possess an appropriate and current Philippine Contractors Accreditation Board

license with at least a:
 Category AA and classification of general engineering and general
building for those applying as a general construction contractor
 Category A and a classification relevant to the specialization being
applied for those applying as a specialty contractor
 Category A for those applying as service contractor

B. One of the key technical staff must have been employed with the company for not
less than one year at the time of the filing of the application

C. It must have at least five years of continuous actual operation as a licensed

construction contractor.

D. It must have successfully completed during the immediate five years the following
type/s and size/s of projects:

E. At least one general engineering/building project costing not less than P10,000,000
for general construction contractor

F. At least one project falling within its field/s of specialization costing not less than
P5,000,000 for specialty contractor

G. A construction company applying for registration as a service contractor must have

substantial experience overseas as a labor sub-contractor or manpower service
contractor and have remitted substantial amount of foreign exchange remittances

For specialized consultancy groups

A. Minimum paid-up capital and networth of P250,000

B. At least three permanently employed staff with appropriate degrees and professional
training along the line of consultancy services offered by the company and with
an aggregate experience of 25 man-years. One of the staff must have been
actively engaged in the practice of his profession for at least 10 years. One of the
 key technical staff must have been employed with the company for not less than
one year at the time of filing of the application.

C. The applicant must submit proof that the above-mentioned members of the staff
possess the required experience and are permanently employed by the
company.

D. It must have at least five years of continuous actual operation as a specialized

consultant counted from the date of the firm's earliest contract.

E. It must have successfully completed during the immediate past five years at least
one consultancy project costing not less P1,000,000.

What are the requirements for renewal of POCB registration?

The Board shall renew the registration only of those companies, which still meet the
requirements for registration enumerated in Section 1 of this Rule and which have not
violated any provision of the Decree, the Rules and Regulations, and the terms and
conditions of their registration.

What documents does a Filipino contractor or consultancy firm need to prepare and
submit in order to register for overseas operation with the Philippine Overseas
Construction Board ?

A Filipino contractor or consultancy firm needs to prepare and submit in three copies the
following documents in order to register for overseas operation with the POCB:

1. Notarized and completed applications forms for registration (POCB Form 01)
prescribed by the Board;
2. Copy of Contractor's license issued by the Philippine Contractors Accreditation Board
(if applicable);
3. Copy of Articles of incorporation, partnership, joint venture, etc.;
4. Copy of Certificate of registration with the Securities and Exchange Commission
(SEC) and the by-laws;
5. Board resolution authorizing the filing of the application with the POCB and naming
the person empowered to act for and on behalf of the applicant; Certified list of
stockholders, indicating their respective nationality, amount subscribed and amount
paid on subscription;
6. Certified list of current directors, officers and operations personnel indicating their
respective nationality, position and status (whether full time or part time) together
with their respective bio-data;
7. Copy of audited financial statements of the applicant for the last three preceding
years. In case the application is filed six months after the latest calendar or fiscal
year, the applicant shall also submit the company's latest audited interim financial
statements;
8. Copy of Income tax returns of the applicant for the last three years of its operations
duly received by the Bureau of Internal Revenue (BIR) together with the
corresponding BIR Tax Payment Orders and CB Confirmation Receipts;
9. Certified list of the completed and on-going construction or consultancy contracts of
the applicant (POCB Form 01-A); and
10. Statement under oath that the applicant has not undertaken any contract that was
rescinded by the project owner/principal as a result of unsatisfactory performance by
the applicant.
What is the validity of the registration with POCB?

All contractors registered with the Board are required to renew their registration every two
years during the month when their applications for registration were approved.

Where does a Filipino contractor or consultancy firm intending to operate overseas

register?

Under Presidential Decree (PD) No. 1167, as amended by PD 1657 Section 7, construction
contractors and consultancy firms undertaking or those who intend to undertake overseas
construction projects shall register for accreditation at the Philippine Overseas Construction
Board, which operates under the Construction Industry Authority of the Philippines.

LICENSING AND REGISTRATION OF LOCAL CONSTRUCTORS

How to file?

 Accomplish the PCAB Application Forms properly.

 Submit to the Public Assistance Desk (PAD) for the checklisting/pre-screening of

application.

 After passing the pre-screening, application is considered filed upon payment of filing
fee of P600.

Note: Payment maybe made in cash, managers check, bank draft or postal money
order payable to the Construction Industry Authority of the Philippines-PCAB. Upon
receipt of payment, CIAP will issue an official receipt of payment. Approved
applications shall be issued the license certificate within a week after the Boards
approval. Disapproved applications shall be issued a Notice of Disapproval/Deferral
as the case may be.

 To claim License Certificate, secure an Order of Payment (OP) at the PCABs counter
and pay the appropriate fee at the CIAP cashier. The license certificate may be
picked- up personally or through a representative with appropriate authorization or
upon request may be mailed or delivered thru other means with cost for the account
of the contractor.

 All licenses shall be renewed annually on or before the expiration of their validity,
which is 30th June of each year. A license issued after the first of July is valid for the
remaining part of the year.

What are the minimum requirements corresponding to each category?

In determining a contractor's category, his qualifications must satisfy all the minimum
requirements, corresponding to the classification and category applied for, quantified and
rated according to equivalent credit points and shall be the lowest sustainable by all three
determinants as follows:
 Financial capacity
 Experience of sustaining technical employee
 Overall credit points based on the four qualification criteria
 The minimum requirements for each contractor's are shown in the PCAB
Classification and Categorization Table.
What are the types of contractor’s license?

a) Regular license - issued to a domestic construction firm (a Filipinos sole -proprietorship

or a partnership/corporation with at least 60% Filipino equity)

b) Special License - issued to a joint venture, a consortium, a foreign contractor, or a

project owner who authorizes the licensee to engage only in the construction of a single,
specific project/undertaking

What changes may be instituted on a contractor's license?

A contractor may apply/request for the following changes in his contractor’s license:
 Category upgrading
 Classification revision
 Change of Authorized Managing Officer
 Change of Business Name
 Change of Business Name and status

What changes may be instituted on a contractor?

A contractor may apply/request for the following changes in his contractor's license:
 Category upgrading
 Classification revision
 Change of Authorized Managing Officer
 Change of Business Name
 Change of Business Name and status

What is meant by a license category?

Category is the graded level of aggregate capability of a contractor with respect to his
principal classification and is based on pre-determined qualification criteria which include
financial capacity, experience of sustaining technical employees, track record, and
equipment.

What is meant by license "classification"?

"Classification" means the area of operation that a contractor can engage in based on the
technical experience of his Sustaining Technical Employee. There are three main
contracting classifications in the licensing of contractors and which are further sub-classified
accordingly:

a) General Engineering
GE-1 Road, highway, pavement, railway, airport horizontal structures, and bridges
GE-2 Flood control and irrigation
GE-3 Dam, reservoir, and tunneling
GE-4 Water supply
GE-5 Port, harbor, and offshore

b) General Building
GB-1 Building and industrial plant
GB-2 Sewerage and sewage treatment/disposal plant
GB-3 Water treatment plant and system
GB-4 Park, playground, and recreational work
c) Specialty
Sp-1 Foundation work
Sp-2 Structural steel work
Sp-3 Concrete pre-casting and pre-stressing
Sp-4 Plumbing and sanitary work
Sp-5 Electrical work
Sp-6 Mechanical work
Sp-7 Air-conditioning and refrigeration work
Sp-8 Elevator and escalator work
Sp-9 Fire-protection work
Sp-10 Waterproofing work
Sp-11 Painting work
Sp-13 Well-drilling work
Sp-14 Communication facilities

Where to file?

Applications for contractor's license may be filed directly with the PCAB Office (personally or
by mail) or through the regional/provincial offices of the DTI-Regional Operations and
Development Group.

Who may file?

Persons/entities who intends to undertake or engage into construction contracting activities

For more information, please contact the following:

Construction Industry Authority of the Philippines

2/F & 5/F, Executive Center Bldg.
369 Gil Puyat Ave., cor. Makati Ave., Makati City
Tel. Nos. (632) 895-4424/895-6826
Fax No. (632) 897-9336
E-mail: ciapdti@yahoo.com

Licensing and Registration

Construction Industry Authority of the Philippines
Tel. Nos. (632) 895-4258/897-0869
E-mail: pcab@info.com.ph

POCB Overseas Registration

Construction Industry Authority of the Philippines
Tel. Nos. (632) 896-4569/896-1831/896-1833
E-mail: pocb@skyinet.net

Arbitration/Mediation
Construction Industry Authority of the Philippines
Tel Nos. (632) 897-0853/897-9313
E-mail: ciapciac@info.com.ph

Accreditation of CPES Evaluators

Construction Industry Authority of the Philippines
Tel. Nos.: (632) 896-1801/896.0791
E-mail: pdcb_ciap@yahoo.com.ph