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Stricter Requirements and Penalties for Contractors Imposed

This article talks about Republic Act No. 11711 which amended the old Contractor’s License Law, and increased the fines and penalties, clarified the validity of license to operate and granted longer renewal periods for contractors in good standing.


Republic Act No. 4566, or the Contractor’s License Law


Republic Act No. 4566, otherwise known as the Contractor’s License Law, was recently updated with bigger and bolder fines and requirements. The update merely dealt with an increase in the penalties and fines stated under the Contractor’s License Law, which was passed in 1965.


Republic Act No. 4566 is certainly still good law, with only a few provisions revised or repealed. This law defines a contractor as synonymous with the term “builder”, and includes general engineering contractors, general building contractors, and specialty contractors.


The Contractor’s License Law covers individuals, firms, partnerships, corporations, associations or other organizations, who undertake or offer to undertake or purport to have the capacity to undertake or submit a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith. The term contractor includes subcontractor and specialty contractor.


Amendments to the Contractor’s License Law Introduced by Republic Act No. 11711


Among the changes introduced to the Contractor’s License Law under Republic Act No. 11711 which the covered “builders” will appreciate, is the clarification that the license to engage in business as a contractor shall be valid for one (1) year from the date of issuance. Previously, the validity of the license was for the remainder of the fiscal year.


Under the original law, the penalty imposed was a fine of not less than Five Hundred Pesos (P500.00) but not more than Five Thousand Pesos (P5,000.00). These amounts were obviously significant in 1965, when the original law was enacted. Moreover, the original law enumerated the acts which subjected the malefactors to the original fine. These acts are stated as “[a]ny contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate, or license…”.


Under Republic Act No. 11711, the amendatory law, new prohibited acts were introduced, as follows:


“Section 35. Prohibited Acts. The following are prohibited under this Act:


“(a) Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to constructs, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in the Philippines shall be penalized with a fine of not less than One hundred thousand pesos (P100,000.00) but not more than Five hundred thousand pesos (P500,000.00) plus the equivalent of one-tenth of one percent (1%) of the project cost. Furthermore, the offending party shall be prohibited from obtaining a contractor’s license for a period of one (1) year from the time that party is found guilty under this provision.


“(b) The same fine under the preceding subsection shall be imposed upon two (2) or more licensees, each of whom has been issued a license to engage separately in the capacity of a contractor but shall jointly submit a bid or otherwise act in the capacity of a contractor without securing an additional license for acting in the capacity of such a joint venture or combination in accordance with the provisions of this Act. The licenses of the offending parties shall be automatically revoked and they shall be prohibited from obtaining a contractor’s license for a period of one (1) year from the time the licensees are found guilty under this provision.


“(c) It shall be unlawful for any person who is a managing partner, officer, or employee of a licensed partnership, corporation, firm, association or other organization to individually engage in the contracting business or individually act in the capacity of a contractor within this jurisdiction without having a license in good standing to so engage or act. Anyone found to be in violation of this provision shall be penalized with a fine of not less than One hundred thousand pesos (P100,000.00) but not more than Five hundred thousand pesos (P500,000.00) plus the equivalent of one-tenth of one percent (0.1%) of the project cost. Furthermore, the offending party shall be prohibited from obtaining a contractor’s license for a period of one (1) year from the time that party is found guilty under this provision.


“(d) Any person who shall present or file the license certificate of another, give false evidence of any kind to the Board, or to any member thereof, in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license shall be penalized with a fine of not less than Five hundred thousand pesos (P500,000.00) but not more than One million pesos (P1,000,000.00) and the penalty of imprisonment of not less than one (1) year but not more than six (6) years. The penalties provided in this section are without prejudice to any liability for the violation of any of the provisions of The Revised Penal Code, as amended, or other special laws.”


The new law also increased the fees to be collected for securing the Contractor’s License, with authority to increase the rates every three (3) years, subject to a ceiling of fifteen percent (15%) per increase.


Longer renewal periods were also installed under the new law, now allowing contractors who have been operating in good standing for twenty-five (25) years or more to renew its license every three (3) years instead of the customary annual license renewal required.


Source: NDVLaw

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