NOTE: THIS STORY WAS FIRST PUBLISHED IN THE BOHOL CHRONICLE’S SUNDAY PRINT EDITION.
The combined sixty-six strong members of the Bohol Contractors Development Organization, Inc. and the Association of Bohol’s Construction Companies, Inc. strongly urged Acting Secretary Roger G. Mercado of the Department of Public Works and Highways to revisit the process for the approval of all price escalation of contract requests “considering the severity of the current situation (extreme oil price hike) that is presently besieging the construction industry.
Mercado immediately responded to the call of the contractors through the issuance of a Department Order No. 63, series of 2022 after the receipt of an earlier initial urgent letter of request as a show of a “desperate attempt to stay in our business.”
A staggering estimate of P4 billion worth of public work projects is in peril as local contractors are desperately trying to determine the best way to mitigate the runaway construction costs besieging the industry with its leading price indicator, diesel fuel, the main driver of construction equipment, hovering at more than PhP92.00 per liter and is predicted to breach the P100.00 per liter mark soonest.
The mounting cost for oil, aggregates, cement, steel bars, and other related materials has already breached 80% of the direct cost.
The Bohol contractors pointed out that the determination of the “extraordinary circumstances” under the DPWH Claims Manual and Department Order No. 60, series of 2017 “appears to have a bottleneck since the sole authority to determine the extraordinary clause is centralized with the National Economic and Development Authority (NEDA) that causes unnecessary delay and would fearfully cause the eventual closure of our business due to extreme losses.”
The contractors appealed to Mercado to modify the determination of the “extraordinary circumstances” clause to a local office under the direct supervision and control of NEDA instead of solely being left to the country’s premier socioeconomic planning body.
The Bohol contractors believe that the process of requesting price escalation will be decentralized and “processing will hopefully be faster.”
A possible way of decentralizing the escalation contract price request is to explore how to expeditiously address contract price adjustments during the period of extraordinary circumstances without the necessity for each contractor to individually seek NEDA confirmation of price escalation, according to some contractors.
Price escalation refers to an increase in the contract price during contract implementation on the basis of the existence of “extraordinary circumstances” as determined by the NEDA and upon the prior approval of the Government Procurement Policy Board (GPPB).
It’s a desperate race between the approval of the price escalation of the contract’s request and the runaway prices of construction materials over the imminent stoppage of projects as contractors watch helplessly and dig into their pockets to mitigate the losses to save the lifespan of the projects. (Chito M. Visarra)