Author: Jenny Liao

This is the fifth article in our team’s series on Taiwan Construction Disputes. This time, we turn the lens to another issue that may not be immediately apparent when an accident occurs, but can have serious consequences for public works contractors: how a major occupational accident at a construction site can evolve from an occupational safety and health matter into the risk of being listed in the Government Procurement Gazette, thereby triggering debarment under Taiwan’s Government Procurement Act.

Photo by Joe Holland on Unsplash

When an accident occurs at a construction site, contractors usually focus first on the immediate issues: whether the incident must be reported to the competent authorities, cooperating with labor inspections, handling work suspension and resumption, assisting injured workers and their families, improving site conditions, and dealing with potential civil and criminal liability. These are the issues that usually demand immediate attention when an accident occurs. In public works projects, however, there is another line of risk that is easily overlooked: the same workplace accident may also trigger proceedings under Article 101 of the Government Procurement Act, which may ultimately lead to the contractor being listed in the Government Procurement Gazette and, under Article 103, prohibited for a statutory period from participating in government tenders, being awarded government contracts, or acting as a subcontractor.

For contractors, this is not simply a matter of managing an accident on a single project. It goes directly to whether they can continue participating in the government procurement market. For contractors that rely heavily on public works projects, the consequences of debarment may far exceed the compensation, work stoppage, or delay costs arising from the accident itself. For international contractors, a debarment record in Taiwan may also have implications beyond the Taiwan project itself, potentially creating a significant burden for the parent company or the wider group when bidding for major public works projects in other jurisdictions.

What Constitutes a “Major Occupational Accident”?

Neither the Occupational Safety and Health Act (the “OSH Act”) nor the Enforcement Rules of the Occupational Safety and Health Act (the “OSH Act Enforcement Rules”) expressly defines the term “major occupational accident” as such. The Enforcement Rules of the Labor Inspection Act, however, define the term as used in Article 27 of the Labor Inspection Act. The official English version uses the term “severe occupational accidents.” Article 31 of the Enforcement Rules provides:

“Severe occupational accidents referred to in Article 27 of the Act mean one of the following occupational accidents:

1. Accidents involving death;
2. Accidents causing injuries to three people or more;
3. Accidents causing injuries to one person or more and requiring hospitalization as the result of chemical substance leakage of ammonia, chlorine, hydrogen fluoride, phosgene, hydrogen sulfide, sulfur dioxide;
4. Other accidents specified and announced by the central competent authority.”

As to the second category, “accidents causing injuries to three people or more,” the Enforcement Rules of the Labor Inspection Act provide no further explanation. In practice, however, the applicable standard is consistent with Paragraph 1, Article 48 of the OSH Act Enforcement Rules, under which the term refers to the same accident occurring at the workplace and causing a total of three or more workers to suffer from permanent full disability, permanent partial disability, or temporary full disability. The Ministry of Labor further provides definitions of “permanent full disability,” “permanent partial disability,” and “temporary full disability” in the “Glossary of Statistical Terms” for occupational accident reporting under the OSH Act.

When a major occupational accident occurs on a public works site, such as a fatal accident or one involving three or more affected workers who meet the criteria discussed above, it is likely to attract significant attention from both the labor authorities and the procuring entity. Contractors must of course take the ensuing investigation, settlement, compensation, and related issues seriously. More importantly, however, such an accident may also become linked to the Government Procurement Act and affect the contractor’s future eligibility to participate in government procurement.

A Major Occupational Accident Does Not Automatically Lead to Debarment, but It Can Trigger the Government Procurement Act Process

Paragraph 1, Article 101 of the Government Procurement Act sets out the circumstances in which a procuring entity must notify a contractor and the contractor’s name may ultimately be published on the Government Procurement Gazette. Once published, the contractor becomes subject to the debarment consequences prescribed in Article 103. Importantly, none of the listed grounds provides that the occurrence of a major occupational accident, by itself, results in debarment. In other words, a major occupational accident is not an independent statutory ground for debarment under the Government Procurement Act.

In practice, however, a major occupational accident on a public works project may still be brought within Subparagraph 8, Paragraph 1, Article 101 of the Government Procurement Act, which applies where there is “failure to pass inspection or acceptance, and the circumstances are serious.” This connection may arise through the Ministry of Labor’s Guidelines for Strengthening Occupational Safety and Health Management in Public Works and its Principles for Handling the Debarment of Contractors that Fail to Provide, or Provide Defective, Occupational Safety and Health Facilities Required under Public Works Contracts, Resulting in a Major Occupational Accident (the “Major Occupational Accident Debarment Principles”), as well as through the relevant procurement contract documents and the findings of the labor inspection authority following a major occupational accident.

As a matter of principle, whether the labor inspection authority refers the matter to the procuring entity or the procuring entity initiates its own review, the procuring entity must still assess the facts of the case and the relevant contractual requirements, and then determine whether the statutory requirements of Subparagraph 8, Paragraph 1, Article 101 are satisfied.

More specifically, under Point 3 of the Major Occupational Accident Debarment Principles, when a labor inspection authority conducts an inspection following a major occupational accident on a public works project, it must determine whether the contractor has put in place the relevant occupational safety and health facilities required under the procurement contract documents. The Principles further provide that, where specified circumstances are met, the labor inspection authority must refer the matter to the procuring entity for a determination as to whether the circumstances fall within Subparagraph 8, Paragraph 1, Article 101 of the Government Procurement Act.

Importantly, however, Point 4 of the same Principles goes a step further. It provides that, if the procuring entity finds no inconsistency between the facts referred to it by the labor inspection authority and the actual circumstances, it “shall determine, on that basis, that there has been a failure to pass inspection and that the circumstances are serious,” and shall proceed in accordance with Articles 101 and 102 of the Government Procurement Act. In other words, while Point 3 asks the procuring entity to determine whether the circumstances fall within Subparagraph 8, Paragraph 1, Article 101, Point 4 further provides that, once the procuring entity accepts the factual findings of the labor inspection authority, it must treat the case as one involving “failure to pass inspection, and the circumstances are serious.” Under the Principles, this significantly narrows the procuring entity’s room to determine whether Subparagraph 8, Paragraph 1, Article 101 is satisfied.

Accordingly, once the labor inspection authority refers the matter to the procuring entity under the Major Occupational Accident Debarment Principles, the contractor faces a real risk of debarment under the Government Procurement Act.

Even where the labor inspection authority does not make such a referral under the Principles, Point 5 provides that, if the procuring entity itself considers that there has been “failure to pass inspection, and the circumstances are serious,” it may still proceed under Article 101 of the Government Procurement Act on its own initiative.

In this context, once a major occupational accident has occurred on a public works site, the accident will often raise questions as to whether applicable occupational safety and health requirements or contractual obligations were properly complied with. For example, there may be questions as to whether scaffolding was properly erected or whether workers had properly secured their safety lanyards. These issues will generally be reflected in the labor inspection report prepared after the accident.

The more difficult question arises once a major occupational accident enters the Article 101 process under the Government Procurement Act. Whether the contractor can ultimately avoid debarment will often turn on whether the statutory standard of “failure to pass inspection, and the circumstances are serious” under Subparagraph 8, Paragraph 1, Article 101 is found to have been met in subsequent proceedings. That standard itself leaves considerable room for interpretation and evaluation, making the risk of debarment difficult to assess with certainty in advance.

If the determination that the contractor falls within the foregoing circumstances ultimately stands following any objection or complaint proceedings under Article 102, or if the contractor does not timely pursue those procedures, its name will be published on the Government Procurement Gazette. The legal consequences are direct. Under Article 103 of the Government Procurement Act, the contractor is prohibited, for the applicable statutory period, from participating in government tenders, being awarded government contracts, or acting as a subcontractor. This is what is generally referred to in practice as “debarment.”

Whether the Accident Qualifies as a Major Occupational Accident Matters, but It Is Not the Only Battleground

In cases involving a fatality, whether an accident qualifies as a major occupational accident is usually relatively straightforward. Where there is no fatality and the determination instead turns on the number of affected workers, however, the analysis involves more than simply counting how many people were injured.

It may also require considering whether the affected workers meet the criteria for permanent full disability, permanent partial disability, or temporary full disability, and whether the statutory numerical threshold has been reached. For example, temporary full disability may turn on whether the injured worker is unable to continue his or her normal work and must temporarily leave the workplace. From a contractor’s perspective, the practical reality is that once the labor inspection authority has completed its inspection and determined that the accident constitutes a major occupational accident, challenging that determination successfully in subsequent proceedings may be difficult.

Accordingly, the first line of defense against debarment risk under the Government Procurement Act is still sound site safety management before an accident occurs. When undertaking public works projects in Taiwan, contractors should, from the outset, treat occupational safety and health systems, management of subcontracting arrangements, controls for high-risk work, and proper documentation as part of both contract performance and the management of government procurement eligibility risks, rather than merely as matters of construction or site management. Even if an accident does occur, however, debarment is not inevitable. A major occupational accident is only the entry point into the risk pathway; whether the case ultimately falls within Subparagraph 8, Paragraph 1, Article 101 still requires a case-specific assessment.

Contractors may still address the factors relevant to the seriousness assessment under Paragraph 4, Article 101, including the extent of any loss or damage suffered by the procuring entity, the degree of responsibility attributable to the contractor, and post-accident improvement and remedial measures, as well as the other elements required under Subparagraph 8, Paragraph 1, Article 101. These materials may help demonstrate that the case has not reached the level that warrants debarment.

Once the Article 101 Process Begins, How the Contractor Responds Matters

Paragraph 3, Article 101 of the Government Procurement Act requires the procuring entity, before issuing a notice under Paragraph 1 of the same Article, to give the contractor an opportunity to present its views orally or in writing. Accordingly, when a major occupational accident is brought within the framework of Subparagraph 8, Paragraph 1, Article 101, the contractor will have an opportunity to present its position to the procuring entity before the formal notice under Paragraph 1 is issued.

At this stage, however, the contractor needs to prepare more than a factual account of how the accident occurred. It should also organize and present materials concerning its performance of the contract, occupational safety and health management measures, inspection records, training records, the degree of responsibility attributable to the contractor, post-accident improvement and remedial measures, and the reasons why the case does not satisfy Subparagraph 8, Paragraph 1, Article 101, which applies where there is “failure to pass inspection or acceptance, and the circumstances are serious.”

These materials may be important throughout the proceedings, including in any review by the procuring entity’s working and review group, in the objection process, and in complaint proceedings before the Complaint Review Board for Government Procurement.

In one matter handled by our team, after the procuring entity initiated the Article 101 process, the contractor continued to supplement the record with information concerning its occupational safety and health management at the site, the measures taken to strengthen safety management after the accident, and information addressing potential losses and other impacts on the procuring entity. Ultimately, after reconsidering the relevant materials, the procuring entity determined that the requirement that “the circumstances are serious” under Subparagraph 8, Paragraph 1, Article 101 had not been met, and the matter therefore did not result in debarment.

The lesson from this experience is that, once the Article 101 process begins, a contractor should not take a purely reactive approach. It should proactively organize and present the relevant materials concerning the accident, its contract performance, safety management records, and post-accident improvement and remedial measures. Whether the accident constitutes a major occupational accident is one issue; whether it reaches the debarment threshold under Subparagraph 8, Paragraph 1, Article 101 is another. The latter requires a separate assessment of whether the statutory standard of “failure to pass inspection or acceptance, and the circumstances are serious” is met.