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Enhancement Measures taken by Public Construction Commission to Improve the Construction Industry Environment

Dr. Jenn-Chuan Chern
Minister of PCC

Ever since the appointment as Minister of PCC in Feb 2012, I have taken the initiative to communicate and interact actively with the industries and frontline civil servants. On February 6 and July 17, 2012, I invited leaders and chairs of renowned associations, institutions and academies related to the construction sector to PCC for exchange of views in order to establish the partnership between the government and the industry, as well as to exchange views on the“Program for Better Public Works” and the reorganization of PCC. On November 5, more than 400 representatives from the industrial, academic, and governmental sectors attended the “National Conference for Better Public Works”. On September 6, the “Program for Better Public Works” was presented in the cabinet meeting. This program is one of the major pillars of the Cabinet’s “Economic Power-Up Plan”, and is aimed to stimulate the development of Taiwan’s economy and industry, as well as to improve the overall procurement environment for the public works. Several enhancement measures have been adopted to make the industrial environment better, including the selection of good performing teams for planning and design services, the establishment of reporting system for delayed payments without justification, the implementation of anti-corruption mechanism for public works, the elimination of poor quality construction works, and the enhancement measures of resolving contract disputes.
I. Selection of good performing teams for planning and design services
In order to facilitate the development of good domestic suppliers and improve the country’s competitiveness, the PCC encourages procuring entities to award to the most advantageous tender for engineering services, instead of the lowest tender. Government entities were also informed in PCC’s instruction dated Jun 13, 2012 that, for engineering services bidding which basic design drawings are involved for competition, the award method of the lowest tender set forth in Article 64-2 of the Enforcement Rules of the Government Procurement Act shall not apply.
Since the implementation of this measure from the beginning of 2012, the percentage by cases of selecting engineering service suppliers based on the most advantageous tender has been raised from 63% in January to 76.21% in October (the percentage by value from 71% to 87.81%). The percentage of such procurement conduced by New Taipei City Government even achieves 91%. Entities may also conduct their engineering service procurement through inter-entity supply contracts or open contracts. The statistics of Government e-Procurement System shows that more than 400 procurement projects have been awarded by inter-entity supply contract or open contract in 2012. 
In regard to the information services procurement, the PCC co-organized a series of promotion conferences with local governments in northern, central, southern, and eastern Taiwan from May to July, 2012. The percentage by cases of information services procurement awarded by the most advantageous tender has been raised from 41.31% to 61.16% after the conferences. The percentage by value has been increased from 60.68% to 76.13%, which is an outstanding achievement.
II. Establishment of reporting system for delayed payments without justification
Premier Sean Chen of the Cabinet held a meeting with owners of small and medium-sized enterprises on October 4, 2012. In the meeting, there was a voice from the industrial sector that some of the government entities delay their payments without justification. The same complaint was made by the construction industry association and the small and medium-sized construction company association as well.
To provide suppliers a quick and convenient channel to report delayed payments by government entities without a good cause, the PCC established on November 1, 2012, a “Reporting System for Delayed Payments Without Justification” on its website www.pcc.gov.tw. Each reporting case will be looked into and tracked by the PCC until payment is made. The delayed payment of each government entity will be disclosed online for the effects of warning among entities. By doing so, the PCC expects to provide an open, transparent, and reasonable environment to the construction sector. Until December 23, 2012, 41 cases were received and the related entities were requested to response to the complaints promptly. Payments have been made for some of these cases.
In addition, the progress data provided by government entities in the “Public Works Information Management System” will be improved by including the status of payment. The PCC will look into those projects with abnormal correlation between the progress of implementation and payment in order to facilitate payments on schedule.
III. Implementation of anti-corruption mechanism for public works
The Government Procurement Act is enacted to facilitate efficiency and prevent corruption. Several anti-corruption measures have been embodied therein, including regulations such as openness and transparency, internal and external auditing and monitoring, confidentiality, conflict of interest, and lobbying.
Recently, there were some government procurement scandals involving bribery between contractors and civil servants in charge of public works. The investigation of them resulted in a conservative attitude among civil servants toward the efficiency of government procurement. To help civil servants stay away from external interference during procurement process, stick to their duties, and accomplish their tasks with quality on time, the PCC promotes the “Program for Better Public Works”, dedicating to establish a public works environment that is clean, justice, and reasonable, and that the act is understood, obeyed, and respected. 
On May 14, 2012, the PCC co-signed with representatives from domestic construction industry associations and banking business the “Anti-Corruption Declaration for Public Works” as an effort showing the willingness to eliminate corruption in the construction sector and create a clean public works environment. In addition, PCC worked together with the Agency Against Corruption, Ministry of Justice for 4 “Anti-Corruption Conferences for Public Works” in northern, central, southern, and eastern Taiwan. These conferences were held at Changhua County Government on November 12 (central session, 216 participants), Hualien County Government on November 20 (eastern session, 206 participants), New Taipei City Government on December 6 (northern session, 359 participants) and Kaohsiung City Government on December 7 (southern session, 285 participants) to present the existing anti-corruption measures and quality control circle of clean government. By doing so, the PCC aims to inspire civil servants’ spirit to be capable, willing, and courageous enough to do their jobs, without fearing the investigation of public prosecutors at any time.
To help the investigation of public prosecutors on public works scandals, the PCC has designated a contact point (02-87897630, Senior Specialist Chang, Chao-Chi) dedicated to assist in the investigation efforts. Additionally, government entities or civil servants who feel wrongfully accused may call for assistance through: 02-87897647, 87897648 (government procurement), 02-87897530 (dispute settlement), 02-87897548 (procurement auditing and malpractice reporting), email secr@mail.pcc.gov.tw , or fax 02-87897800.
IV. Exclusion of abnormal low bid price and elimination of poor quality construction works
In the past, there were reports on bribery of civil servants. There were also complaints from the contraction industry that untrustful ready-mixed concrete suppliers colluded with contractors by mixing inappropriate materials into the concrete, thus resulting in poor quality of public works. In addition, tenders with abnormal low prices in order to win the tender were frequently occurred in public works conducted by the local governments. Statistics show that 99.83% of government’s construction projects were awarded by the lowest tender, and therefore, it is common to see abnormal low price competitions and poor contract performance. In line with the existing “3-tier Quality Management System for Public Works”, the PCC has launched the “Program of Eliminating of Poor Quality Public Works” intended to improve the quality of public works, and to discourage the tenders of abnormal low price.
In order to verify material strengths by conducting on-site sampling for material tests, and to deter the contractor’s opportunistic behaviors, the PCC has taken concrete samples from 44 construction projects contracted by 22 local entities, targeting on projects with abnormal low price, awarded to contractors with unsatisfactory history, or with low performance record evaluated by the construction work surveillance unit, for material and strength tests from October to December, 2012.
For those found not in conformity with the requirement specified in the contract, the entities in charge shall rectify them according to contract terms, e.g. to re-do the work. These cases will also be referred to the Central Procurement Supervision Unit for follow-up review. Any dishonest instance related to corruption found in the process will then be referred to the justice department for investigation. The suppliers will also be debarred for tendering according to Article 103 of the Government Procurement Act, and the jobsite staffs involved, such as quality control staffs, professional engineers and architects, will be subject to disciplinary actions.
Until December 23, 2012, 38 out of 44 samples were tested. Among them, 3 samples from projects in Jianshi Township of Hsinchu County, Jingsha Township of Kinmen County, and Nangan Township of Lienchiang County, failed the material tests. Each entity was demanded to take necessary actions based on contract terms. 144 meters of retaining structure in the project of Jianshi Township of Hsinchu County were demolished as the contract required.
V. Enhancement measures for resolving contract disputes
To help resolve disputes between suppliers and entities in a timely manner, several measures are taken or initiated, including the improved measures for the mediation of contract disputes, the encouragement of government entities to resolve contract disputes by arbitration, and the amendment to the Government Procurement Act.
For the improvement measures for mediation of contract dispute, both parties to the dispute are allowed to recommend mediators for consideration by the PCC’s Complaint Review Board for Government Procurement (CRBGP) from August 1, 2012, in order to encourage mutual agreement in resolving the dispute. The “Regulations Governing the Charging of Mediation for Procurement Contract Disputes” were amended on August 3, 2012, to reduce the fees on applicants. Now, the ceiling amount of mediation fees is NT$ 200,000, provided that the application was withdrawn within a certain period of time.
With respect to the promotion of arbitration, the PCC revised in June 2012, 6 model contracts related to public works by adding clauses encouraging settlement by arbitration. The PCC cooperated with the relevant Arbitration Associations on providing 8 workshops by the end of 2012 as an effort to encourage government entities to resolve disputes by arbitration, an alternative procedure commonly applied around the world. 150 to 400 civil servants participated in each of the workshops. As a cooperative action for the mechanism above, the Ministry of Transportation and Communications established a “Database of Recommended Arbitrators for Dispute Settlements of the Subordinate Agencies of the MOTC”, containing 130 experts as the basis for the selection of arbitrators for the MOTC agencies. Also, the “Recommendation Board for Arbitrators of Subordinate Agencies of the MOTC” was officially kicked-off on November 1, 2012.
The draft amendment to the Government Procurement Act with respect to contract dispute settlement include: (1) Article 85-1, which specifies that the “mediation before arbitration” practice is expanded to apply to engineering services, and that the CRBGP “shall” provide mediation suggestions for the contract disputes regarding construction contracts and engineering service contracts in order to maximize the functions of mediation; (2) Article 86, in which the upper number of CRBGP members is increased from 25 to 35 for the consideration of better quality and efficiency in dealing with disputes; and (3) Article 101, in which (a) the essential requirement constituting a “major” circumstance is added to some subparagraphs debarring suppliers from participating the procurement for the purpose of not being too harsh on suppliers; (b) the bribery-giving supplier is incorporated as one of the circumstances of debarring by taking into consideration the latest version of Agreement on Government Procurement adopted by the Committee on Government Procurement of the world Trade Organization on March 30, 2012; and (c) the principle of no double sanctions against one circumstance on debarring a supplier.
VI. Conclusions
Facing the public demands for high quality of public works and in response to the expectation of the industrial sector for better construction environment, the PCC will continue to communicate with the industrial sector and take their opinions into consideration professionally, humbly, and service-oriented. The PCC will continuously review the laws and regulations, and improve the environment for the implementation of public works. The ultimate goal is to improve the quality of public works and the international competitiveness of the industry, to map out the future vision of Taiwan’s construction industry, and to help the industry to reach out to the world market.