Price Escalation

PD 454 which was enacted prior to PD 1594, was where the phrase “direct acts of the government” was explained to cover the increase of prices during the effectivity of a government infrastructure contract. The phrase was first used in Republic Act (RA) No. 1595, which was amended by PD 454. The latter amended R.A. No. 1595 by supplying the meaning of the phrase “direct acts of the government” and expressly including the increase of prices of gasoline within the coverage of that phrase. Consequently, when PD 1594 reproduced the phrase without supplying a contrary or different definition, the definition provided by the earlier enacted PD 454 was deemed adopted by the later decree. Thus, proof of an increase in fuel and cement price and a subsequent increase in the cost of labor and relevant construction materials during the contract period are considered a compliance with the IRR requirements for a claim for price escalation (Philippine Economic zone Authority Vs. Green Asia Construction & Development Corporation, etc., G.R. No. 188866. October 19, 2011).