The Executive Yuan’s Public Construction Commission ("PCC") announced on July 24, 2018, an amended template for public construction procurement contracts. The major changes are as follows:1. Article 2, "Object of Performance and Location": In order to support the Executive Yuan's promotion of recip
The Executive Yuan’s Public Construction Commission ("PCC") announced on July 24, 2018, an amended template for public construction procurement contracts. The major changes are as follows:
1. Article 2, "Object of Performance and Location": In order to support the Executive Yuan's promotion of reciprocal economy, Subparagraph 5 was added to provide that government agencies may incorporate recycled pellets in public constructions. Agencies are encouraged to amend their contracts to incorporate such use.
2. Article 3, "Payment of the Contract Price": With respect to Subparagraph 1 regarding payment methods, specifically the portion dealing with price adjustments, the amendment refers to the amendment to Article 32 of the Essential Requirements of Procurement Contracts. The "contract price" and the "gross price" will refer to the "totals of the subtotal amounts of all related items before and after adjustments."
3. Article 4, "Adjustment to Contract Price": With respect to a “price reduction," the language of Subparagraph 1, Item 1, is modified. A certain percentage of the contract unit price is first multiplied by the number of unaccepted items to calculate the respective reduction amount and penalty amount for each item. A separate part deals with the calculation methods for the reduction amounts not having to do with unaccepted dimensions or materials. The reduction amounts and penalty for the items to be calculated separately from the contract price are stated in Item 3 of Subparagraph 1. As for Item 2 of Subparagraph 1, the end of the original option stated that the total amount of price reduction and penalty is limited to the "contract price of such item," and in practice, such language often cause disputes. Hence, it is amended in reference to PCC's letter Gong-Cheng-Chi-Zi No. 10400379720, dated January 14, 2016 (available on PCC's website), to clearly provide that the total amount of price reduction and penalty is limited to the "amount of such item."
4. In Item 6 of Subparagraph 1, "method of price adjustment," of Article 5, "contract payment terms," originally there were three options: 1) "overall project price index," 2) "increase percentages of individual project item price index, project sub-category price index, and overall price index," and C) "no adjustments according to price index." In practice, however, most agencies choose to use the overall price index as the basis for their price adjustments, which has difficulty fully reflect cases where only a few individual items experience extreme price changes. This amendment deletes options 1 and 3. Agencies may list on the tender documentation the materials whose price will be adjusted according to their individual price index. If no such materials are listed, it is assumed that they are ready-mixed concrete, rebar, steel plate, shape steel, and asphalt concrete. Subsection 2 is also amended to state that for those contracts in which sub-categories for price index adjustment are not listed for each phase of the project, prices shall be adjusted according to the sub-categories in the overall construction project.
5. In Article 9, "Project Administration," regarding the hiring of foreign workers: Subparagraph 13 (1): The "Regulations Governing the Hiring of Foreign Construction Workers in Major Economic and Construction Project Invested by Private Institutions and Approved on Per Project Basis or Tendered by Government Agencies or Public Business Institutions" and the "Standards for Identifying Change of Workplace for Foreign Workers Appointed by Their Employers to Work in Jobs as Provided in Items 8 to 10 of Subparagraph 1 of Article 46 of the Employment Service Act" already provide applicable rules for hiring and transfer (change of work place) of foreign workers. Therefore, the text is amended for clarification purposes; (2): Based on the resolution of the PCC meeting on the "Guidelines Governing Agencies' Construction Procurement Deduction of the Cost Difference between Domestic and Foreign Construction Workers" on May 14, 2018, the method for deduction of cost difference is stated; (3) It is stated that for any contractors using foreign workers illegally, the agency shall deduct such worker's corresponding (domestic) pay from the contract price.
6. The options of "comprehensive construction insurance" and "comprehensive installation construction insurance" in Subparagraph 1 of Article 13, "Insurance": Sometimes agencies may require the contractor to insure both options and contractors are troubled by such requests. Hence the language is amended to state that the agency shall choose one of the options depending on the nature of the project. Sub-Items (1) and (2) of Item 1 of Subparagraph 2 are amended to state that the scope of a comprehensive insurance include "loss of construction property" and "third party liability." Item 2 of Subparagraph 2 is also amended. In practice, agency employees often feel perplexed about whether to perform the contract since they see that the exclusions listed in the insurance policy provided by the contractor is different from that in the contract. Such provision regarding exclusions is therefore deleted and the provision is amended to state that the insurance policy shall be approved by or kept on the record for the competent insurance authority, and that without the agency's consent, the contractor shall not restrict the scope of insurance by adding additional exclusions.
7. Subparagraph 3 of Article 20, "change and transfer of contract": sometimes, contractors complain that the procedure for contract change takes too long and adversely affects their rights. This amendment states that the agency shall state the time limit for change of contract price. If there is no limit stated, it is assumed to be three months.
8. Article 22, "dispute resolution," added the mechanism of a dispute resolution panel to the list of alternative dispute resolution mechanisms ("ADR"). This is the first time that the PCC's Public Construction Procurement Contract Template adopts such a mechanism. This amendment provides guidelines with respect to the composition, way of meeting, whether a mediation is successful, etc., and represents a different way of resolving conflicts between the agency and the contractors. The benefit of this mechanism is the reduction of the likelihood and the costs of future litigation. However, how this mechanism will operate in the future and its effectiveness remains to be seen.
9. For a detailed description of the provisions, please refer to the attachment, "Comparison Table of the Amended Provisions of the Public Construction Procurement Contract Template Dated July 24, 2018."
Attachment: Comparison Table of the Amended Provisions of the Public Construction Procurement Contract Template Dated July 24, 2018 (Chinese Version)
