Laiban deal requires RP’s ‘performance undertaking’

Our latest report reveals that apart from a “take or pay” clause, the confidential joint venture agreement between the Metropolitan Waterworks and Sewerage System (MWSS) and San Miguel Corporation on the P52-billion Laiban dam project carries yet another stricture – a performance undertaking.

The PCIJ does not have a copy of the JVA but has established this point of fact from the seven-page memorandum of the Office of the Government Corporate Counsel (OGCC) to the MWSS Board of Trustees.

The OGCC memo dated June 16, 2009 states that, “MWSS is obliged to submit the performance undertaking of the Republic of the Philippines to secure MWSS’ performance of its obligations (including but not limited to payment obligations and buy-out obligations under the Agreement).”

A performance undertaking is a guarantee issued by the Republic that the state agency involved in a project will comply with all its obligations to the contractor, typically a private company.

In many past projects, such undertakings have compelled the government to either assume the multi-billion-peso debts or allot huge budget subsidies for obligations incurred by state agencies.