POSITION PAPER
[Re: Senate Bill No. 1909 ]




Presented to the

SENATE COMMITTEE ON ECONOMIC AFFAIRS



By:

UNION OF LEGITIMATE SERVICE CONTRACTING COOPERATIVES (ULSCC)






9 October 2018




The growing concern over the inability of the domestic players in the construction industry to fulfill and satisfy the present demands thereof has led the Senate to consider the liberalization of the entry of the foreign contractors into the industry ; thus, the introduction of the Senate Bill No. 1909.

The Union of Legitimate Service Contracting Cooperatives (ULSCC)  represents herein its nineteen (19) active and bona fide member-cooperatives, which are engaged in the legitimate job contracting business, many of whom are in the field of construction, with an aggregate membership of not less than 200,000 nationwide.  At present, ULSCC’s member-cooperatives are adversely affected by what it considers to be an unfair treatment under the existing law and regulations governing the construction industry and they likewise stand to be directly affected by the proposed legislative measure. In view thereof, the ULSCC, on behalf of its member-cooperatives, hereby presents its position on the proposed legislative act, expressed as follows:  


I. The proposed legislative measure should contain a provision expressly granting exemption from the requirement of PCAB  license to those DOLE registered cooperatives which provide legitimate job contracting services to principals already issued with PCAB license.
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The existing legitimate job contracting cooperatives providing services to their respective clients in the field of construction are already subject to the stringent regulations of both the Cooperative Development Authority (CDA) and the Department of Labor and Employment (DOLE).  As legitimate job contractors, they are registered either under the DOLE’s Department Order No. 18-A, Series of 2011 , or under the new Department Order No. 174, Series of 2017 , and are likewise governed by Department Order No. 19-93 .  Whether these cooperatives perform core or peripheral activities , the requirement of a PCAB License becomes superfluous because their principals, which are usually big construction companies, are already licensed by the PCAB.

The performance and outputs of the job-contracting cooperatives are subject to the close monitoring and inspection by their principals who have to make sure that these are compliant with the industry standards and best practices; otherwise, both their license and reputation shall be put in jeopardy.  Also, these job contracting cooperatives are also subject to the regular assessment by the DOLE, not only on Labor Standards and Work Arrangement, but also on Occupational Safety and Health Standards.  All these, taken together, ensure the safety of the public, which is the primary purpose of licensing, and at the same time, contribute to the orderly growth and development of the construction industry, through the abundant supply of skilled manpower organized and trained through the medium of the workers’ cooperatives engaged in legitimate job contracting, thereby upgrading the capability of the licensed contractors being served by them.   The ULSCC therefore posits that the legitimate job contracting cooperatives with DOLE Certificate of Registration, be exempt from the requirement of PCAB License, subject however to their compliance with the guidelines set by the pertinent provisions of the Labor Code of the Philippines, D.O. No. 174, D.O. No. 19-93 and other applicable laws, rules and regulations.


II. The proposed legislative measure should also contain a provision expressly allowing the cooperatives to engage in the construction business and authorizing the issuance to them of PCAB License without requiring them to convert into a corporation, as opposed to the present policy of the PCAB, which only allows the issuance of a special license (with very limited scope) to cooperatives.
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Many of the legitimate job contracting cooperatives now have the capacity to engage in the construction business as full-fledged contractors.  The problem is that the PCAB has effectively restricted their entry into the industry through the issuance of its Board Resolution No. 636, Series of 2012, which requires the cooperative to incorporate first before it may apply for PCAB license. It is respectfully submitted that the said Board Resolution constitutes an invalid exercise of legislative power in the guise of regulation.  The same is also oppressive, prohibitory and in restraint of trade. However, while judicial remedies are available to challenge the validity of such Board Resolution, it is well-within the power of the legislative branch of the government to once and for all set the rule with clarity by expressly and unequivocally affording the cooperatives the equal opportunity to engage in the business of construction as full-fledged contractors.

No less than the 1987 Constitution provides that:

“Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the under-privileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.”

“Section 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.”

Also, Republic Act No. 9520  provides that:

"ART. 2. Declaration of Policy.- It is the declared policy of the State to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice. The State shall encourage the private sector to undertake the actual formation and organization of cooperatives and shall create an atmosphere that is conducive to the growth and development of these cooperatives.

"Toward this end, the Government and all its branches, subdivisions, instrumentalities and agencies shall ensure the provision of technical guidance, financial assistance and other services to enable said cooperatives to develop into viable and responsive economic enterprises and thereby bring about a strong cooperative movement that is free from any conditions that might infringe upon the autonomy or organizational integrity of cooperatives.

"Further, the State recognizes the principle of subsidiarity under which the cooperative sector will initiate and regulate within its own ranks the promotion and organization, training and research, audit and support services relative to cooperatives with government assistance where necessary.”

There is absolutely nothing in the law which prohibits the cooperatives from engaging in the business of construction.  On the contrary, R.A. No. 9520 expressly allows the creation of service cooperatives, workers cooperatives and such other cooperatives as may be determined by the CDA.  It provides:


"ART. 23. Type and Categories of Cooperatives. – (1) Types of Cooperatives – Cooperatives may fall under any of the following types:

xxxxx xxxxx xxxxx

"(e) Service Cooperative is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services;

"(f) Multipurpose Cooperative is one which combines two (2) or more of the business activities of these different types of cooperatives;
xxxxx xxxxx xxxxx

"(t) Workers Cooperative is one organized by workers, including the self-employed, who are at same time the members and owners of the enterprise. Its principal purpose is to provide employment and business opportunities to its members and manage it in accordance with cooperative principles; and

"(u) Other types of cooperative as may be determined by the Authority.”

The State, consistent with the declared policy under the 1987 Constitution which is reiterated under R.A. No. 9520, must assist in the promotion, growth and development of the cooperatives and provide them with a favorable business climate through the passage of laws that are not contradictory to such avowed policy.

As a matter of adherence to legislative consistency and harmony, the proposed amendment to R.A. No. 4566 must likewise be in accord with Republic Act No. 10667 , which provides in its declaration of policy that:

“Section 2. Declaration of Policy. – The efficiency of market competition as a mechanism for allocating goods and services is a generally accepted precept. The State recognizes that past measures undertaken to liberalize key sectors in the economy need to be reinforced by measures that safeguard competitive conditions. The State also recognizes that the provision of equal opportunities to all promotes entrepreneurial spirit, encourages private investments, facilitates technology development and transfer and enhances resource productivity. Unencumbered market competition also serves the interest of consumers by allowing them to exercise their right of choice over goods and services offered in the market.

Pursuant to the constitutional goals for the national economy to attain a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged and the constitutional mandate that the State shall regulate or prohibit monopolies when the public interest so requires and that no combinations in restraint of trade or unfair competition shall be allowed, the State shall:

(a) Enhance economic efficiency and promote free and fair competition in trade, industry and all commercial economic activities, as well as establish a National Competition Policy to be implemented by the Government of the Republic of the Philippines and all of its political agencies as a whole;

(b) Prevent economic concentration which will control the production, distribution, trade, or industry that will unduly stifle competition, lessen, manipulate or constrict the discipline of free markets; and

(c) Penalize all forms of anti-competitive agreements, abuse of dominant position and anti-competitive mergers and acquisitions, with the objective of protecting consumer welfare and advancing domestic and international trade and economic development.”

A law that allows other juridical persons to engage in the construction business, but prohibits the cooperatives therefrom for no plausible reason and without a valid classification, is repugnant to the Constitutional right of the cooperatives to the equal protection of the law.  The Supreme Court has intoned:

“Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be treated differently, so as to give undue favor to some and unjustly discriminate against others. The guarantee means that no person or class of persons shall be denied the same protection of laws which is enjoyed by other persons or other classes in like circumstances. The equal protection of the laws is a pledge of the protection of equal laws. It limits governmental discrimination. The equal protection clause extends to artificial persons but only insofar as their property is concerned.”  

It will not only be inconsistent with the nationalistic ideals enshrined in our fundamental law, but it will also be unwise and ridiculously ironic for the State to tap the foreign contractors to fill-in the gap in the construction industry, when the cooperative sector which has manifested readiness and capability to engage in such industry is being prevented from doing so.  If the intention is to promote competition in the industry, the cooperatives must be afforded such equal opportunity and privilege.





Respectfully submitted:




UNION OF LEGITIMATE SERVICE CONTRACTING COOPERATIVES (ULSCC)