Public Construction Commission, Executive Yuan (the “PCC”) promulgated a ruling, Kon-Chen-Chi- Tzu No. 10100474650 dated Dec.21, 2012, which provides that according to Paragraph 1, Article 46 of Government Procurement Act (the “GPA”), an entity should reasonably itemize insurance in order to reflect the actual costs incurred by tendering contractors. The PCC also suggested the entity to combine insurance premium with the profits and management fees under an individual item as to avoid any potential disputes between the parties to the construction contract that arises from separately itemizing insurance premium from others.
Furthermore, the entity should pay insurance premium according to the terms expressly set forth in the contract which is awarded or the principles revealed by the PCC in absence of such express terms. Such PCC’s principle is that “where the entity should procure insurance according to the terms of lump-sum contract, the entity shall pay the contractor pursuant to the contract if the actual cost incurred by the contractor for insurance is nevertheless less than the itemized amount provided in the contract.” For contract which hasn’t been awarded, the entity should not stipulate in the tender documents that the contractor shall return the amount of discrepancy if the contractor’s actual cost of procuring insurance is less than the itemized amount, while the entity shall not reimburse the amount of discrepancy if the contractor’s actual cost of procuring insurance exceeds the itemized amount, as to avoid violation of Article 24 of the Fair Trade Act and to comply with the principles of fairness and reasonableness under Paragraph 1, Article 6 of the GPA.