The Department of Finance (DOF) has conducted a thorough review of about a dozen big-ticket public-private partnership (PPP) contracts to minimize the state’s risks and exposure from contingent liabilities.
In a statement yesterday, the DOF said this is pursuant to the directive of President Duterte to review all contracts “with the end in view of abrogating or revising the provisions that are prejudicial and onerous to the Filipino people.”
Also, to strengthen the government’s capability in evaluating contingent liabilities, the DOF’s Privatization and Special Concerns (PSC) Office has recommended the creation of a Risk Management Office (RMO) to undertake such assessment of risks, government guarantees and contingent liabilities in the state’s joint ventures with the private sector under the PPP model.
Grace Karen Singson, DOF undersecretary and PSC Office head, made the recommendation after an evaluation of the current risk management program bared that this was being done only by an ad hoc technical working group without the necessary mandate and resources to review PPP contracts.
Currently, the DOF said provisioning for contingent liabilities is based on estimated termination payments, a low probability event, and does not account for actual claims that are frequently demanded by concessionaires during the implementation of their PPP projects.
As proposed, the RMO shall identify and evaluate contingent liabilities and other risks assumed by the government through national government agencies and government-owned and -controlled corporations in relation to PPP projects; recommend risk mitigation measures; provide assistance to the Development Budget Coordination Committee in the implementation of the risk management program; and strengthen the evaluation of proposals requiring sovereign guarantees, and provision for concessionaire claims.
Spearheaded by its PSC Office, the DOF’s extensive review was undertaken on the contracts of, among others, the Mactan-Cebu Airport Project, Maynilad Water Services Inc. and Manila Water Co., Cavite-Laguna Expressway, Clark International Airport Expansion Project and the Metro Rail Transit (MRT) line 3.
Singson said her office also studied the provisions of the contracts for the Light Rail Transit-1 Cavite Extension and Operations and Maintenance Project, MRT-7, Muntinlupa-Cavite Expressway, North Luzon Expressway-South Luzon Expressway Connector Road, Bulacan Bulk Water Supply Project and the Southwest Integrated Transport System Phases 1 and 2.
“Such extensive review of PPP projects, which we hope to be institutionalized for the ultimate benefit of our people, would ensure that the government is free from undue risks or contingent financial liabilities that would, in the end, have to be shouldered by the public in the form of more taxes or higher fees charged by the concessionaires for the use of their facilities until such time that these are turned over to the state,” said DOF Secretary Carlos Dominguez.
In addition to the review of existing PPP contracts, the PSC Office is currently evaluating around 40 PPP proposals submitted to the Investment Coordination Committee (ICC) of the National Economic and Development Authority (NEDA) during the Duterte administration that have not been acted upon yet.
These PPP proposals were awarded original proponent status by various implementing agencies.
In a resolution issued on November 2021, the ICC mandated the evaluation of information submitted by the respective implementing agencies to the ICC, and the financial, technical and legal capability of the private proponents to undertake their respective proposals.
Singson said her office also recommended that the NEDA Board issue a resolution to institutionalize the assessment of risks, government guarantees and contingent liabilities in the evaluation of project proposals brought before it for approval.