MANILA, Philippines — The Department of Public Works and Highways (DPWH) will go after the bonds, warranties, and performance securities which bind erring contractors to guarantee the faithful performance of their contracts to ensure the return of public funds wasted on ghost and substandard flood control projects.
Public Works Secretary Vince Dizon said over the weekend that the move is part of the DPWH’s efforts to ensure that erring contractors will not only go to jail but will also return the billions of pesos they stole from taxpayers through ghost and substandard flood control projects.
Dizon explained that flood control projects have a warranty as stipulated in the contract agreement with the DPWH after they won the bidding and given the notice to proceed.
“Flood control projects have a warranty period of five years. It’s just like when you buy a television with a warranty, it has to be replaced if defective,” he said.
As per the Construction Industry Authority of the Philippines, the usual coverage of these bonds is 15% of the contract amount for performance, and 15% for payment bond, translating to 30% for a combined performance bond. Usually, performance bonds are based on the amount of the down payment given to the contractor. The performance bond expires upon the completion of the contract or upon issuance of the certificate of completion.
There is also a performance security bank guarantee for a construction contract between a contractor and the DPWH. The bank guarantee establishes that the bank will pay the department up to the amount specified if the contractor fails to meet its obligations under the contract.
Said guarantee is valid until the department issues its certificate of acceptance after the defects liability period ends and the contractor submits the required warranty security.
