3. Provisioning for Contingent Liabilities

Not providing for contingent liabilities from the agreement is not a feasible option given the complexity and risks associated with PPPs. The only other way is to provide for contingent liabilities but with an adequate plan in place to address such liabilities if they occur. The ideal scenario would be for the public entity to obtain all necessary budgetary approvals and put in place a plan to address the contingent liabilities before providing for this in agreements/contracts.

The process of managing contingent liabilities needs to be put in place starting with the approval of the project to be developed, analysis of the project benefits to society and its development through the PPP route and the reporting and monitoring mechanism during the project implementation stage. The diagram given below sets out the process of management of contingent liabilities across different stages of the project lifecycle: