The Department of Finance (DOF) has proposed the creation of a risk management office (RMO) that will identify and evaluate contingent liabilities and other risks assumed by the government in relation to public private partnership (PPP) projects.
In a statement, Grace Karen G. Singson said on Tuesday, March 22, that there is a need for an RMO to strengthen the government’s capability in evaluating contingent liabilities or commitments to future expenditures if uncertain events occur.
Singson 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 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.
Singson proposed that the RMO will identify and evaluate contingent liabilities and other risks assumed by the government in relation to PPP projects.
RMO shall also recommend risk mitigation measures and provide assistance to the Development Budget Coordination Committee in the implementation of the risk management program.
In addition, the proposed office is expected to strengthen the evaluation of proposals requiring sovereign guarantees, and provision for concessionaire claims.
Aside from RMO, Singson also recommended that the National Economic and Development Authority Board issue a resolution institutionalizing the assessment of risks, government guarantees and contingent liabilities in the evaluation of project proposals brought before it for approval.
To recall, President Duterte ordered the DOF to review a dozen big-ticket PPP contracts "with the end in view of abrogating or revising the provisions that are prejudicial and onerous to the Filipino people.”
PPP contracts that were reviewed include LRT1 Cavite Extension and Operations and Maintenance Project, MRT Line 7, Muntinlupa-Cavite Expressway, NLEX-SLEX Connector Road, Bulacan Bulk Water Supply Project and the Southwest Integrated Transport System Phases 1 and 2.
The DOF is also currently evaluating around 40 PPP proposals submitted to the Investment Coordination Committee (ICC) of the NEDA during the Duterte administration, which have not been acted upon yet.