DTI-CIAP leads the way to address challenges in local construction contracting

The Construction Industry Authority of the Philippines (CIAP)[1]embarks on a new partnership with private sector organizations and associations in advocating fair and equitable contract conditions in the local construction industry.

The construction sector has been dubbed as the country’s “nation-builder”, which generates huge revenues and investments. It plays an important role in the country’s overall infrastructure development, which is one of the priorities of President Bongbong Marcos under his Build Better More program comprising of 194 infrastructure projects. With these, it is expected that more construction project contracts will be entered into in the coming years.

These construction projects, however, are accompanied with risks, which both contractors and project owners must address. Fair and equitable contractual terms and conditions are crucial to balanced risk sharing, defining parties’ rights and duties, and maintaining the long-term viability of the construction sector.

Disputes often arise out of inequitable contractual arrangements in the construction industry, resulting in project abandonment, significant losses, and even bankruptcy, therefore posing a danger to the industry’s sustainability.

According to the Construction Industry Arbitration Commission (CIAC), some of the arbitration cases lodged with them relates to breaches of contracts. These disputes have a dire effect on micro and small domestic/local contractors, who, in good faith, rely on these agreements with their clients, unknowingly engaging in unfair and/or inequitable contracts.

In order to eliminate or reduce these contractual problems, and to assist the industry, especially micro and small domestic/local contractors, CIAP rolls out an advocacy campaign on the adoption and use of a standardized set of conditions of contract for private construction.

The CIAP, through one of its implementing arms, the Philippine Domestic Construction Board (PDCB), approved and published the revised CIAP Document 102, otherwise known as the Uniform General Conditions of Contract for Private Construction.

The CIAP Document 102 is intended to provide guidance to parties in drafting their respective private construction contracts, and its provisions are intended to serve as the recommended procedures, guidelines, and criteria to be used in the implementation of the contract, most especially in the interpretation of any ambiguities and omissions of stipulations in the contract.

DTI Undersecretary and CIAP Alternate Chairman Ireneo Vizmonte said that CIAP Document 102 continues to encapsulate the recommended terms and conditions in construction contracts, and reflect the usages, customs, and best practices in the construction industry.

The usage of this document follows the premise that customs of usage of trade is a source of law, hence, judicial courts and quasi-judicial bodies such as CIAC recognizes the use of CIAP Document 102 as reference in resolving construction disputes.

In a statement, Atty. Marco Maat, DTI-CIAP Executive Director, said that CIAP recognizes stronger collaborations between government and the private sector to initiate compelling policy reforms such as the CIAP Document 102.

“We are hopeful that this initiative will greatly contribute to the enhancement of contractual relations in the construction industry, especially in private contracting,” Maat said.

Through the signing of a Memorandum of Agreement (MOA) last July 18, 2023, the government and the private sector shall engage in active promotion for the adoption and use of the document among industry stakeholders. The launch and commitment pledge for CIAP Document 102 marks the roll out of its advocacy campaign, which will involve the conduct of a series of promotional activities, comprehensive training on CIAP Document 102, and institutionalization of the document as part of contract management courses for engineering students.

“CIAP Document 102 was made possible through collaboration and partnerships,” as stated by PDCB Executive Director Doris Gacho during the MOA signing.