REPUBLIC OF THE PHILIPPINES Department of Budget and Management Malacafang, Manila Florencio B. Abad Secretary October 18, 2010 MEMORANDUM FOR : The Honorable Members of the Cabinet SUBJECT : Primer on Multi-Year Obligational Authority (MYOA) The DBM OSEC has prepared a primer on the Multi-Year Obligational Authority (MYOA) which may serve as your reference when entering contracts for long term programs or projects — whether locally funded or foreign assisted. Should you need further information regarding the matter, please call our office at (02) 490-1000 local 2301 and look for Ms. Lani Villanueva. Thank you. DOST-OSEC thai ogee} 060203 BES ieee! cnurmen Sec ne Teeny 21F DBM Buieing 2, Gen Soleo St, Malacaftong, Manila 490 1000 acl 2601 | foshadgaaon gow ph BREE eeeDepartment of Budget and Management Office of the Secretary es in Contr: A Primer on the Multi-Year Obligational Authority (MYOA) Prior into entering into a contract for a program or project which will take more than one year to complete, national government agencies must first secure a Multi-Year Obligational Authority (MYOA) from the Department of Budget and Management (DBM). Section 33 of the General Provisions of the FY 2003 General Appropriations Act (GAA) under RA 9206, as Re-enacted states that “in the implementation of multi-year projects, no agency shall enter into a multi-year contract without a Multi-Year Obligational Authority issued by the DBM for the purpose. Notwithstanding the issuance of the Multi-Year Obligational Authority, the obligation to be incurred in any given calendar year shall in no case exceed the amount programmed for implementation during said calendar year.” This provision is now in Section 26 of RA 9970/ GAA 2010. Definition Multi-Year Obligational Authority (MYOA) - refers to an authority issued by the DBM to enable an agency to enter into a multi-year contract whether for Locally Funded Projects or Foreign Assisted Projects. A multi-year project (MYP) - is a program or project which will take more than one year to complete, including suppliers’ credit, These may be classified into the following: a) MYPs with appropriations available in full during the first year of implementation; b) MYPS that require multi-year appropriations; and ©) Annual Recurring Projects/Activities that require multi-year appropriations, Guidelines and Procedures on Entering into a Multi-Year Contract A MYOA shall be issued to an agency: (That voluntarily commits to give priority and include the annual budgetary requirements of the multi-year project in its budget proposal within the prescribed budget ceiling (ii) Whose funding strategy indicates that the annual budgetary requirement of the multi-year project may be accommodated within the annual budgetary ceiling of the agency over a period of time.Documentary Requirements A prerequisite for the issuance of a MYOA is a submission of the following documentary requirements: a. Request for MYOA including a confirmation on the commitment of the Agency b. Funding Strategy/Medium Term Expenditure Program (MTEP) — this refers to a forward cstimate/financial plan with a term of three to five years of the agency’s yearly priority programs, activities and projects within a given/assumed budget ceiling c. Investment Coordination Committee/NEDA Board approval for Locally Funded Projects costing more than P300 Million, and for all Foreign Assisted Projects. Note: ICC review/decisions now cover programs/projects of national line agencies with total cost of PhP500 million and above, regardless of financing. ICC Guidelines and Procedures Section III (Scope of ICC Review Decisions) and Section IV (m) (Procedures) pursuant to ICC policy issuance dated 4 March 2005 raised the ICC project cost floor to PhP500 million. d. Approved loan agreement for Foreign Assisted Projects e. All other prior clearances and authorization as may be required under existing law, policies, rules and regulations For projects with several components or categories In cases where the project has several components, the allocation per component shall be attached to the MYOA. In cases where the project has several categories such as civil works, vehicles, equipment and materials, consultancy, training, operation and maintenance, taxes, loan charges, contingencies and others, the allocation per category shall be attached to the request for MYOA. Procurement of a Multi-Year Contract All procurement activities should be within the total project cost and categories reflected in the MYOA. Multi-Year Projects for which the initial funding — sourced from either the existing/current year’s budget or the National Expenditure Program (NEP) ~ is not sufficient to cover the total cost of the project, it is required that a MYOA must already have been issued prior to commencement of any procurement activity,Forward Obligational Authority not a basis for entering into a contract The Forward Obligational Authority (FOA) being issued for Foreign Assisted Projects, which certifies that funds shall be made available to cover total project cost shall continue to be used for loan negotiation purposes only but not as basis for entering into a contract. National Government Obligations under MYOA Notwithstanding the issuance of a MYOA, obligations to be incurred in any given calendar year shall in no case exceed the programmed appropriations released by the DBM or of any authorized realignment/augmentation from savings consistent with the scrap and build policy. The liability of the government to liquidate obligations shall only be to the extent of the programmed appropriation released for the purpose. The DBM shall confirm the availability of funds through the issuance of the Agency Budget Matrix (ABM) or Special Allotment Release Order (SARO) as basis for incurrenee of obligations for any particular year(s). ‘ear Contracts to be entered Accordingly, a standard condition shall be stipulated in all Mul into by the agency with a third party, as follows: “Notwithstanding the approval of this multiyear contract, it is understood that the agency ‘may only be held liable for the payment of obligations incurred for that portion of the contract covered by authorized appropriations for the program, activity or project herein described. It commits, however, to include the funding requirements for the remaining Portions of the contract in its annual budget proposals until the program, activity or project is completed. Sources: DBM CIRCULAR LETTER No. 2004-12 “Guidelines to Implement Section 33 of the General Provisions of the FY 2003 General Appropriations Act (GAA) under RA 9206, As Re-enacted.” GOVERNMENT PROCUREMENT POLICY BOARD (GPPB) CIRCULAR 01-2009 “Guidelines Clarifying the Procurement Activities which may be Undertaken Without an Issued Allotment.” ICC Guidelines and Procedures