The Contractors’ License law, RA 4566 as amended by PD 1746, makes it mandatory for all contractors in the country to first secure a license from the Philippine contractors Accreditation Board (PCAB) before engaging in construction contracting in the country. The question is, why is it necessary and essential that all contractors license?
We will discuss and answer this question in a series of articles dealing with the various aspects of contractors licensing including who must secure contractors licenses, the technical and financial requirements for licenses, required additional training, etc.
The purpose of RA 4566 and contractors’ licensing is twofold:
- To ensure, for the safety of the public, that only qualified and reliable contractors are allowed to undertake construction in the country; and
- To promote for the benefit of the public and private sectors and for the national interest, the orderly growth of the contracting sector and the upgrading of construction capability.
The safety of the public is the primary function of any government and the requirement that all contractors must have a license issued by PCAB flows directly from this responsibility. All Legislation and Government Issuances dealing with construction as well as many other laws are premised on all contractors being licensed. When all contractors are not licensed, the government fails the general public.
There are essentially only two exemptions from licensing for contractors:
- Contracts of Php10,000 or less subject to a maximum total value of Php25,000 per year; and
- Projects owners constructing without the use of a contractor provided that the structure is for personal use/occupation only and not intended for sale, lease, commercial/industrial use or any other income generating purpose.
In short, whether it is a contract for the supply and installation of an air conditioning unit or the construction of a power plant, the contractor is required to to first secure a license from PCAB. Project owners constructing without the services of a contractor, unless exempted, must first secure a Special License (for a single project) from PCAB.
The exemptions will be fully dealt with in a separate article in this series.
What standards must a contractor meet to qualify for a PCAB license?
Professional qualification is not the only requirement in the issuance of a contractors’ license. Contractors are Classified and Categorized based on their technical qualifications and experience on the one hand and financial capability on the other.
Technical experience is attained through the experience of its Sustaining Technical Employees who shall be technology professionals licensed by the Professional Regulation Commission and of academic discipline relevant to the classification of intended assignment with a minimum of 3 years experience of construction implementation and knowledge of Philippine construction-building codes and ordinances, labor safety codes and other laws applicable to construction operation. Financial capacity is gauged by the stockholders’/owner’s equity or net worth including equipment capacity. In both cases the minimum requirement for qualification must be met.
The minimum financial requirement in the case of General Engineering and General Building Classifications in a net worth of Php900,000 and in the case of Specialty Classifications, Php45,000. Contractors, dependent on its license Category (AAA to E) shall have a minimum of 1 STE (in some cases no STE is required – this will be dealt with in another article in this series).
A contractor must also, by virtue of his Authorized Managing Officer (AMO) or by himself, if a sole-proprietor-applicant, have at least 2 years of experience in the construction industry, and knowledge of the building, safety, health and lien laws of the Republic of the Philippines and the rudimentary administrative principles of the contracting business.
The AMO or Sole Proprietor must complete the 2 day AMO seminar and pass the license examination. The Sole Proprietor or, in the case of corporations and partnerships, a senior management executive or senior STE (with 5 years experience and holding the position of manager) must complete the 40 hour Construction Occupational safety and Health (COSH) course for Site Safety Officers. With effect of Contracting Fiscal Year (CFY) 2014-2015 each contractor must also have at least one STE who completed
the COSH course.
Contractors must also be registered with SSS, PagIBIG and PhilHealth.
There is nothing mystical, difficult or expensive about securing a PCAB license. The License Fee for a Category E license is Php670 and, at the top of the scale, approximately Php26,000 for a Category AAA license. The ease of application will be dealt with in a subsequent article in this series.