G.R. No. 217590, March 10, 2020
Philippine Contractors Accreditation Board, Petitioner, v. Manila Water Company, Inc., Respondent.

FACTS

Respondent Manila Water Company, Inc. filed a petition for declaratory relief challenging the validity of Section 3.1, Rule 3 of the Implementing Rules and Regulations (IRR) of Republic Act No. 4566, issued by petitioner Philippine Contractors Accreditation Board (PCAB). The assailed provision created two types of contractor’s licenses based on nationality: (a) a “Regular License” reserved for constructor-firms with at least 60% Filipino equity, and (b) a “Special License” for joint ventures, consortia, or foreign firms, which authorizes engagement only in a single specific project. Respondent argued that PCAB usurped legislative power under Section 10, Article XII of the 1987 Constitution by reserving certain areas of investment to citizens, and that the provision was an improper exercise of rule-making power as it created requirements not found in and contrary to RA 4566. PCAB countered that the provision was consistent with the Constitution as it merely regulated, rather than prohibited, foreign contractors, and was necessary for monitoring and enforcing liability against foreign entities. PCAB anchored its authority on Sections 5 and 17 of RA 4566.

ISSUE

Whether Section 3.1, Rule 3 of the IRR of RA 4566, which creates nationality-based classifications for contractor’s licenses, is valid.

RULING

The concurring opinion agrees with the ponencia’s ruling that the assailed provision is null and void. It clarifies that Section 3.1 did not violate Section 10, Article XII of the Constitution, as it does not prohibit foreign contractors from engaging in the Philippine construction industry but merely imposes a more stringent, restrictive license (Special License) compared to that available to domestic firms (Regular License). Thus, there was no usurpation of Congress’s power to reserve certain investment areas to citizens. However, PCAB exceeded its delegated authority under RA 4566. While Sections 5 and 17 of RA 4566 grant PCAB the power to issue licenses and adopt rules to effect the classification of contractors, the phrase “to effect the classification of contractors” in Section 17 must be read in relation to Section 16, which enumerates the statutorily-mandated classifications for the contracting business: general engineering contracting, general building contracting, and specialty contracting. PCAB’s authority was confined to implementing these classifications and their sub-classifications. By creating nationality-based license types, PCAB went beyond the prescribed classifications under the law. An administrative agency’s rule-making power is limited and defined by the statute conferring it; regulations that alter or amend the statute are void. Therefore, Section 3.1, as well as its correlative provisions, is invalid for having been issued in excess of PCAB’s delegated legislative authority.