The Committee is pleased to present its 2025 White Paper recommendations, reflecting our continued commitment to supporting Taiwan’s infrastructure development through practical insights and alignment with international best practices.

Amid ongoing challenges that restrict broader global engagement with Taiwan, we offer constructive suggestions for fostering a more open, competitive, and innovative environment. Our recommendations also aim to enhance contractual fairness, improve market dynamics in the renewable energy sector, particularly the Battery Energy Storage System (BESS) market, and address workforce mobilization challenges. More than technical or legal issues, these are essential steps toward strengthening Taiwan’s position as a resilient, investment-friendly, and globally connected economy.

As Taiwan pursues ambitious energy transformation initiatives and large-scale public infrastructure projects, the participation of international engineering, procurement, and construction companies becomes more critical than ever. We look forward to continued collaboration to help Taiwan achieve its national infrastructure, energy, and sustainability goals.

The Committee extends its sincere appreciation to the Public Construction Commission (PCC) for convening the first high-level, in-person meeting with Committee representatives, which provided a productive and collaborative environment for open dialogue. We are encouraged by the PCC’s positive response to our recommendations and look forward to building on this momentum in the years ahead.

Suggestion 1: Remove the reference to Article 227-2 of the Civil Code from Public Construction Committee model contracts.

In the 2023 edition of the White Paper recommendations, we emphasized the critical need for fair and balanced terms and conditions in the PCC’s model contracts, aligned with standard international practices. This alignment is essential to create a healthy commercial framework that supports foreign and domestic companies participating in public project tenders in Taiwan.

The Committee has observed that among the 12 types of PCC model contracts, 10 include amendments under the “Rights and Liability” clause as outlined in Article 227-2 of the Civil Code. Article 227-2 allows contract terms to exclude liability for certain types of damages. However, when broadly applied, it may shift risk unfairly to contractors and reduce the legal balance in public contracts.

The inclusion of this article in the PCC model contracts effectively excludes injurious performance from the total liability cap, a departure from the original legislative intent of the clause. This deviation raises concerns about the balance of rights and responsibilities between project owners and contractors and its implications for contractors engaging in public projects under these contracts. Previously, the clause was crafted to limit exemptions to instances of “willful misconduct or gross negligence, or torts against a third party.” The broadened conditions now introduced by Article 227-2 undermine the foundational legal principles of balanced rights and responsibilities intended to govern contracts.

Moreover, the language introduced is vague and starkly contrasts with the liability and risk-sharing provisions set in internationally recognized model contracts, such as the United Kingdom’s New Engineering Contract and the model contracts established by the International Federation of Consulting Engineers. Such misalignment with international contracting standards may deter foreign companies from participating in public tenders in Taiwan. This outcome would be particularly unfavorable considering Taiwan’s ongoing infrastructure and energy development initiatives, which stand to benefit significantly from the experience and technical expertise of international engineering and construction contractors.

The Committee welcomed the response provided by the PCC at the cross-ministerial meeting convened by the National Development Council in February, indicating that this issue would be addressed in the near future. We sincerely hope that the reference to Article 227-2 of the Civil Code will be removed and that the model contracts will be restored to the international standards that were in place prior to the PCC’s amendments in 2019. Removing the recently added language from the 10 revised model contracts would help create a more balanced contractual framework and encourage greater participation by international companies in Taiwan’s infrastructure sector. Clarifying and limiting liability in line with international norms will also reduce legal uncertainty, support investment predictability, and enhance Taiwan’s appeal as a destination for high-quality infrastructure development.

Suggestion 2: Take concrete steps to foster a more favorable environment for international companies to participate in government procurement projects.

Various obstacles continue to discourage the participation of international engineering, procurement, and construction (EPC) firms in Taiwan’s government procurement projects, as highlighted in the 2024 White Paper. To address these challenges and foster a more welcoming environment for international participants, we recommend the adoption of the following measures:

1. Extend the procurement tendering cycle. Extending the tendering cycle would support greater engagement from international contractors and encourage innovation in project delivery. Under current practices, the period typically allocated for the preparation of price proposals is limited to between two and three months. This timeframe is insufficient for contractors to conduct a thorough evaluation of project details and to develop a firm fixed price, particularly for large-scale projects where the contract value may exceed 1 billion U.S. dollars.
   A short tendering period may discourage contractor participation or lead to the inclusion of price contingencies to account for scope uncertainties. The limited duration also restricts the ability of companies to propose value-engineering solutions or alternative approaches that could reduce costs and accelerate construction schedules. In particular, the procurement cycle for critical energy projects should provide sufficient time for bidders to properly evaluate the project specifics and develop a robust, cost-efficient proposal.
2. Encourage early contractor involvement (ECI). To promote innovation, the Committee urges the government to invite industry participation in reviewing critical gas-to-power project details prior to the issuance of the formal request for proposal package. ECI enables the contracting community to engage at an early project stage rather than after bidding, allowing for value-engineering suggestions and innovative solutions to be considered and incorporated into the Request for Proposal. International experience, including in Australia, Singapore, and the United Kingdom, demonstrates that ECI can lead to substantial improvements in cost control, design optimization, and on-time delivery. ECI is increasingly recognized as a global best practice for large-scale infrastructure delivery.
3. Provide “cash-neutral” payment terms. Delivering a project valued at over a billion U.S. dollars presents significant financial challenges. Under international practice, project owners typically adopt a payment scheme that allows contractors to maintain a “cash-neutral cash flow” throughout project execution (meaning payments to contractors match the timing and size of their project expenses), rather than having a “cash-negative” position (requiring contractors to front significant costs, which can deter participation or inflate bids). This approach is based on the principle that government entities generally have a lower cost of funds than private contractors.
   When contractors are required to operate under negative cash flow conditions, they incur additional financing costs, which are reflected in higher bid prices. Moreover, capable and selective contractors may choose not to participate in such projects due to the unfavorable financial terms. Establishing milestone-based payments or advance payment mechanisms, as seen in international contracts, would help reduce pricing risk and encourage broader participation.
4. Select representative protest cases and issue corrective opinions to the relevant tendering agencies. Particular attention should be given to types of cases that have been repeatedly raised by foreign EPC firms. One such issue involves the qualification of “national team” entities as lead members of joint venture teams. In practice, these entities may lack sufficient financial capacity, project management expertise, or technical qualifications, yet are still permitted to lead consortia on major infrastructure bids. This may undermine the fairness and competitiveness of the tender process, discourage qualified foreign bidders, and increase project risk.
   Issuing corrective guidance in such cases would help clarify eligibility requirements, strengthen transparency, and ensure a level playing field for all participants.

Suggestion 3: Address challenges constraining energy storage development.

Rising electricity demand, particularly from Taiwan’s globally critical semiconductor industry, makes power system reliability a national priority. At the same time, Taiwan’s commitment to achieving net-zero carbon emissions by 2050 underscores the urgent need to accelerate the energy transition.

Energy storage systems (ESS) are essential to this transformation. As a pivotal grid infrastructure, ESS can enhance power system flexibility, support renewable energy integration, and reduce reliance on imported fossil fuels. ESS refers to any technology that stores electricity from the grid and discharges it later to provide energy, capacity, and support services, helping balance supply and demand.

However, the lack of integrated long-term planning, market transparency, and clear investment signals remains a primary constraint. Addressing these planning-related issues is fundamental to unlocking the full value of ESS in Taiwan’s energy system.

1. Provide long-term planning and transparency. Clear, long-range planning and transparent data sharing are essential to guide investment, build investor confidence, and align stakeholder expectations.

   ．Conduct Integrated Resource Planning (IRP) and Grid Expansion Planning based on realistic scenarios, cost models, and dispatch merit orders.
   ．Publicly disclose the planning outcomes, assumptions, and methodologies to support market participation and reduce investment risk.
   ．Align energy policy with these long-term plans and setting measurable targets for market liberalization, renewable integration, and capacity procurement.

2. Enable the full capabilities of ESS. Taiwan’s current market structure significantly limits the ability of ESS to deliver critical services and generate sustainable returns. These constraints pose risks not only to the bankability of ESS projects but also to Taiwan’s broader energy resilience and decarbonization goals.
   Battery Energy Storage Systems (BESS), the most widely deployed form of ESS in Taiwan, are currently limited to participating in ancillary services markets, specifically Dynamic Regulation (dReg), Enhanced Dynamic Regulation (E-dReg), and Static Regulation (sReg). While state-owned Taiwan Power Co. (Taipower) has announced the creation of a capacity market, trading activity has yet to begin, and historical volumes and pricing remain at zero. Furthermore, although Taipower has proposed a Virtual Power Plant (VPP) market to absorb excess capacity in the dReg segment, particularly in the northeastern region, this market is not yet operational. However, details of the VPP (which would aggregate multiple small-scale energy resources such as batteries or rooftop solar to function like a single power plant in the electricity market), including implementation rules, design parameters, and timelines, remain unclear, creating uncertainty for potential participants.
   Additionally, BESS assets are not yet qualified to act as both buyers and sellers of electricity, nor are they formally recognized as transmission assets under existing regulations.

   ．Fully enable ESS to participate in all relevant market segments, including energy, capacity, and ancillary services (support functions), as both buyers and sellers.
   ．Recognize ESS as transmission assets where appropriate, consistent with international standards, such as those outlined in FERC Order No. 841 in the United States.
   ．Allow market access through both centralized mechanisms and bilateral contracts to ensure commercial flexibility and viability.

3. Continue Taiwan’s electricity market liberalization. A transparent, competitive, and fully open electricity market is essential to achieving system efficiency, investment certainty, and long-term decarbonization goals.

   ．Fully liberalize the electricity market by expanding beyond renewables-only transactions to include the establishment of a wholesale market, spot market, and balancing market, each aligned with distinct operational timeframes. The earlier-mentioned VPP market proposal by Taipower should be accompanied by a clear implementation roadmap, including timelines and design details, to allow industry preparation and participation.
   ．Introduce markets for spinning reserve, inertia response, black start, voltage control, and special protection schemes to enhance grid reliability.
   ．Establish a functioning capacity market, modeled on international practices in Japan, the United Kingdom, and the United States, to secure long-term investment and ensure adequate resource availability.

4. Strengthen the regulatory and institutional framework. Robust regulation and independent oversight are key to investor confidence and market fairness.

   ．Uphold Article 6 of the Electricity Act and maintain a clear timeline for the separation of generation from transmission and distribution.
   ．Establish an independent electricity market operator (Taiwan Power Exchange) and regulator to ensure transparent, non-discriminatory participation and prevent resource prioritization in favor of state-owned entities.
   ．Update the Taiwan Renewable Energy Certificate system to recognize renewable energy that is stored and discharged through ESS, thereby incentivizing renewable–storage integration.

By advancing planning, regulatory clarity, and full market access, Taiwan can unlock the full potential of energy storage to support energy security, grid modernization, and climate goals while fostering a vibrant and competitive investment environment.

Suggestion 4: Align government procurement contract provisions with international standards.

1. Include internationally aligned dispute resolution clauses in model contracts. The Committee recommends that government model contracts include provisions allowing both parties to agree to arbitration under International Chamber of Commerce (ICC) rules following mediation administered by the PCC. This structure reflects international best practices and is already incorporated in contracts between Taipower and international contractors. The ICC arbitration framework is widely recognized and used in cross-border contracts and would enhance the fairness, neutrality, and enforceability of dispute resolution mechanisms in Taiwan’s public procurement agreements.
2. Establish payment assurance mechanisms for owner-issued variation instructions. The Committee recommends that government contracts with state-owned enterprises include mechanisms allowing contractors to reach initial financial agreement with the client regarding owner-issued variation instructions (directed changes). Implementing this change would help ensure timely payments and reduce the financial burden on contractors, who are currently required to finance such changes until project completion.
   Under the current model, contractors may be required to absorb the full cost of additional labor, materials, and time-related expenses without any interim payment mechanism. For example, on a NT$3 billion (US$100 million) infrastructure project, a 10% variation order valued at NT$300 million (if not compensated until final reconciliation) can require the contractor to finance tens of millions of NT dollars for over a year. This can result in severe cash flow pressure, particularly for small to mid-sized contractors.
   Consequences observed in comparable markets include:

   ．Delayed payment to subcontractors and suppliers, creating a ripple effect throughout the local construction ecosystem.
   ．The need to secure short-term financing at high interest rates, raising overall project costs.
   ．Reduced willingness of experienced companies to bid on future government projects due to high working capital risks.
   ．In some international cases, insolvency of contractors is unable to sustain large unfunded variations.

   Implementing payment assurance mechanisms, such as provisional approval processes, milestone-based reimbursements, or interim certificates, would help ensure timely compensation, reduce financial risk, and improve project delivery by enabling contractors to focus on performance rather than financing gaps.
   The Committee further recommends that model contracts incorporate pro forma clauses specifying the payment timing and method for variations, enabling contractors to account for potential financing costs in their bid proposals. Prior to contract execution, clients and contractors should have the option to amend the contract with mutually agreed payment terms for variations.
   Such mechanisms are standard in FIDIC contracts, where Clause 13 (Variations and Adjustments) provides for interim valuation of variations and progressive payments. Aligning with this approach would reduce contractor risk, lower overall project costs, and bring Taiwan’s contract practices in line with internationally accepted norms.

Suggestion 5: Strengthen workforce and labor policies to support critical infrastructure projects.

1. Adjust overtime policies for skilled foreign construction workers on critical projects. The Committee urges state-owned enterprises (SOEs) to collaborate with the Ministry of Labor (MOL) to introduce greater flexibility in the application of overtime limits for skilled foreign construction workers. Given Taiwan’s limited pool of domestic skilled labor and the growing demands of large-scale infrastructure projects, current overtime limits may be insufficient to meet project needs.
   Under the Labor Standards Act (LSA), overtime is limited to 46 hours per month, with possible extensions to 54 hours per month and 138 hours over three months, subject to labor union or labor-management approval. However, these limits may not be suitable for critical projects requiring sustained workforce deployment. By comparison, international norms adopted by countries such as the Philippines, Singapore, and Vietnam often permit foreign skilled workers to work six days per week and ten hours per day.
   The Committee recommends either including skilled craft workers among the categories eligible for overtime extensions beyond the current 46-hour monthly cap, similar to allowances for engineering or design professionals, or creating a formal mechanism allowing SOEs and contractors to apply for temporary overtime extensions on designated national projects. As an interim measure, the Committee suggests adjusting the current limit to 60 hours per month and 160 hours over three months for the duration of the labor shortage.
2. Streamline workforce mobilization to address skilled labor shortages in major infrastructure projects. Meeting the labor demands of large-scale infrastructure and energy projects requires close collaboration among SOEs, government authorities, and both domestic and international contractors. While current regulations may not fully address the specific needs of major construction projects, international best practices such as those outlined by the International Labour Organization (ILO) can serve as a reference for enhancing workforce planning and deployment. To improve labor mobilization, the Committee recommends the following actions:
   a.)    Convene a joint meeting among representatives of the MOL, PCC, and AmCham to facilitate dialogue on workforce mobilization challenges and solutions.
   b.)    Pre-qualify labor brokers who have experience mobilizing large numbers of foreign skilled construction workers.
   c.)    Allow foreign welders to register for qualification using a passport, with the condition that a temporary Alien Resident Certificate must be obtained before the scheduled test date.
   d.)    Permit foreign welders to begin work on-site after passing the practical test, while continuing to fulfill theory testing requirements.
   e.)    Consider establishing temporary craft accommodations near major energy project sites to meet health and welfare standards and enable earlier worker deployment.

Aligning Taiwan’s labor policies and contractual frameworks with international standards will help ensure timely workforce availability, maintain fair labor practices, and enhance Taiwan’s competitiveness in delivering complex infrastructure projects.