Zamboanga Contratistas deny causing delays in infra projects Print
Monday, 28 May 2018 13:25

The Los Contratistas dela Ciudad De Zamboanga yesterday debunked claims made by certain sectors that it is causing delays in the bidding and implementation of infrastructure projects in Zamboanga City and the entire Zamboanga Peninsula with the filing of a case in court against the Department of Public Works and Highways (DPWH).

The case filed against the Department of Public Works and Highways (DPWH), the contractors explained, is a special civil action for a declaratory relief that sought the immediate nullification of the Department Order No. 197 series of 2016 entitled “Revised Guidelines in the Preparation of the Approved Budget for the Contract or ABC”, particularly section B.5. which fixes the Valued Added Tax (VAT) as component of indirect cost at (5%) of the sum of the estimated direct cost (EDC); overhead, contingencies and miscellaneous (OCM); and profit it being contrary to law and detrimental to the construction industry.

Under the law, appropriate VAT is 12% which the Bureau of Internal Revenue (BIR) per Revenue Memorandum Circular (RMC) no. 85-2017 dated October 11, 2017 upheld it in the preparation of ABC for government projects.

The contractors maintained that the use of 5% instead of 12% VAT in computing the ABC under D.O. 197 would make the total cost of all the DPWH projects deficient by seven (7%) percent. This deficiency will have to be shouldered by contractors doing business with DPWH.

To recall, on December 15, 2017 the Regional Trial Court Branch 17 issued a Temporary Restraining Order (TRO) enjoining respondent DPWH Secretary and all other officers acting under his authority to desist from implementing section B.5 of DPWH D.O 197 series of 2016 and instead abide the revenue memo circular no. 85-2017 which mandates the use of appropriate VAT rate of 12% in the preparation of ABC.

On January 25, 2018, the court granted the application for a Writ of Preliminary Injunction (WPI) pending litigation of the merits of the main case, subject to the posting of an injunction bond in the amount of 5 Million Pesos after the required bond was posted, the judiciary also issued on January 11, 2018, a writ of preliminary injunction enjoining the DPWH from further implementing the department order.

The contractors pointed out that the TRO does not seek to stop the bidding and implementation of government projects but merely to enjoin the further implementation of the department order and DPWH, instead apply the 12% VAT rate in computing the ABC.

They clarified DPWH is not prevented from bidding and implementing infrastructure projects as long as they will use the prescribed 12% VAT in computing the ABC as it only involves a simple recomputation of the estimated cost (ABC) of the projects.

The group maintained that there is an urgent need to nullify the use by DPWH of 5% VAT in computing the ABC because the Commission on Audit (COA) has adopted D.O. 197 as their basis in the audit/review of cost reasonableness of all infrastructure projects implemented by other government agencies.

Local government units to include Zamboanga City and Sibugay Province and government owned and control corporations like Philippine Ports Authority and National Power Corporation are following the 12% VAT as provided by law in computing the cost of their projects (ABC) for bidding as it would surely incur audit disallowance as their projects would be “overpriced” by at least 7% (12-5% VAT per DPWH D.O. 197). (L.E.)