INTRODUCING RESULTS-BASED APPROACHES
INTO PUBLIC SECTOR MANAGEMENT PROCESSES:
The Philippine Experience
A Paper Presented
by
SECRETARY EMILIA T. BONCODIN
Department of Budget and Management
Philippines
2nd International Roundtable on Managing for Development Results
Marrakech, Morocco
05 February 2004
Ladies and gentlemen, good morning.
I am going to report on the Philippine experience in introducing results-based
approaches into our public sector management processes.
Philippine Public Sector Management Reform Program
Public sector reform has been a battlecry of all governments since the end of the
ousted Marcos government in 1986. Several reform initiatives have been undertaken,
with dramatic results, in opening up the economy and relaxing the stronghold of
government in many sectors.
Public sector management reform intensified in the middle 1990’s when the
administration of then President Ramos advocated a government that steers, not
rows. It was also the time when results-orientation became the key ingredient of the
reform program.
Key dysfunctions. The intensive campaign for management reform was in direct
response to the many dysfunctions in the bureaucracy. The key ones are:
Operational leakages, referring to the perceived graft and corruption in the
bureaucracy; weak corporate and regulatory environment; weak public
institutions, particularly in the enforcement of laws; poor incentive structure
within the bureaucracy as well as in the private sector; and the complaints against
government’s slow response capability to changing situations and needs of
the public.
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These dysfunctions resulted in government’s inadequacy to provide enough
resources for basic services. They contributed to the country’s deteriorating fiscal
position, and to its slow and unstable growth, which eventually led to a poverty-level
that remains high among middle-income developing countries.
The answer. The Philippine public sector program encompasses several sectors in
the bureaucracy. For our purposes, however, I will focus on one key sector - public
expenditure management (PEM) - covering all levels of the public sector, from the
national government to the corporate sector and the local governments.
The goal. The PEM component of the reform program focused on a key result in no
uncertain terms: to reduce poverty in the long term by addressing two of the key
dysfunctions earlier discussed - to respond to the inadequacy of resources for
basic services, and to arrest the deteriorating fiscal position of government.
Public Expenditure Management: Focus on Results
Public Expenditure Management (PEM), as a major component of the reform
program, made use of the following mechanisms:
1. Use of the budget as instrument for ensuring desired results which
means that the principal tool to enforce the PEM program was through the
government budget.
2. Strengthening of existing incentive structures to advocate and
implement reforms.
3. The enlistment of civil society, particularly in monitoring results; and
4. Finally, the establishment of clear targets and assessment mechanisms to
ensure transparency in terms of disseminating the desired results as well as the
monitoring of such results.
PEM framework. Our PEM program followed the framework advocated by the
World-Bank. The framework called for the pursuit of the following objectives:
•
•
•
Fiscal discipline, or living within our means;
Allocative efficiency, or spending money on the right things; and
Operational efficiency, or obtaining the best value for money.
Major reform initiatives. The PEM program was spearheaded in 1998 by the
Philippine Department of Budget and Management (DBM) jointly with the National
Economic and Development Authority (NEDA), the highest economic planning
agency in the Philippine government, and the Department of Finance (DOF). The
major reform initiatives carried under the program were the following:
In fiscal discipline, we established a more realistic medium-term fiscal plan (MTFP)
and assessed contingent liabilities and other fiscal risks.
In terms of allocative efficiency, we refined the medium-term public investment
program (MTPIP) to clearly define the public investment priorities of the public
sector over the next six (6) years.
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We also established the organizational performance indicator framework (OPIF),
which I will discuss in more detail later on. But, essentially, the OPIF is a scheme
whereby programs and projects are ranked and funded in terms of their priority and
relevance to the desired outcomes.
In terms of operational efficiency, we established two mechanisms for
programs/projects review. One is the SEER, which focuses on prioritizing broad
sectoral programs. The other is the agency performance review (APR), which
focuses on reviewing the program accomplishment of specific agencies.
In tandem with these review mechanisms, we advocated and implemented
procurement reform and put in place a new government accounting and
auditing system to replace a 50-year old system, thus modernizing the way
government reports its financial position.
We are now undertaking a compensation review. We have completed a program
to reengineer the bureaucracy, and will be implementing said program this year.
Significant strides have also been made along reforming the judicial system, in
electoral campaign reform, in peace and order, and in regulatory reforms.
Coupled with these reforms is the intensified push for investments in IT and the
promotion of IT-based services.
The installation of the results-based approach can be better appreciated by looking
at this diagram.
MEDIUM-TERM EXPENDITURE
FRAMEWORK
Medium-Term
Philippine Development
Plan
FISCAL
INVESTMENT
Medium-Term
Public Investment
Program
Medium-Term
Fiscal Plan
Organizational
Performance Indicator
Framework
Annual Budget
Sectoral
Effectiveness
and Efficiency
Review
Agency
Performance
Review
Incentive Structure
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Medium-Term Philippine Development Plan
The Medium-Term Philippine Development Plan (MTPDP) serves as the
blueprint for Philippine development and is the overall guide for the economy in the
next six (6) years.
The components. There are two (2) major components: fiscal and investment.
On the fiscal side, the MTFP serves as guide for ensuring fiscal sustainability. This
accounts for the fiscal targets on a macro level and the broad measures to attain a
sustainable fiscal position, eventually reflected in the annual budget submitted to
and approved by Congress.
On the investment side is the MTPIP. Using the OPIF, public investment programs
that best contribute to the medium-term development goals are identified, prioritized,
funded, and implemented.
In the course of program/project implementation, government undertook SEER and
APR to assess the progress/performance of programs and agencies.
The MTFP. May I now elaborate on the major outputs of the MTEF. One is the
MTFP.
The MTFP, as earlier indicated, is our fiscal blueprint for a six-year period. It has the
following features:
•
An explicit statement of medium-term fiscal targets in terms of deficit
reduction, revenue and disbursement, and overall debt management strategy.
•
An estimate of the cost of ongoing and committed programs that impact
on the medium-term position of the government. This cost estimate is the budget
baseline and gives the government information on the budget flexibility available
over the medium term.
•
A clear set of rules for updating revenue and cost estimates that might
impinge on the credibility of the medium-term fiscal target.
On the basis of the MTFP, government has drafted a Fiscal Responsibility Bill the
initial draft of which was submitted to Congress last year.
By way of information, the current MTFP calls for balancing the national budget by
2009, and reducing the public debt to GDP ratio to a more comfortable 55.03%.
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Highlights of the MTFP are shown in the following table:
Particulars
2003
2004
2005
2006
2007
2008
2009
NG Deficit (% of GDP)
4.6
4.2
3.6
2.9
2.1
1.2
0.2
Public Investment (% of GDP)
(Capital projects)
2.7
2.2
1.8
2.0
1.9
2.1
2.2
69.1
66.9
65.1
63.1
61.5
58.1
55.0
Public Debt to GDP ratio
(NG Outstanding Debt)
The MTPIP. A companion document to the MTFP is the MTPIP. This lists down the
broad investment requirements supporting the growth, allocative, and
distributive functions of the public sector. It identifies the programs and projects that
will be pursued over a six year period, duly published as a public document. It
likewise identifies possible funding modes for some programs or projects in the
pipeline.
The current MTPIP shows the following investment requirements over the medium
term, with indications of possible funding sources to be directly financed by the
public sector budget.
MEDIUM-TERM PUBLIC INVESMENT PROGRAM
In Billion Pesos
200
150
100
50
0
2003
2004
2005
Total
2006
ODA
2007
2008
2009
Others
Organizational Program Indicator Framework (OPIF)
The key to results-based approach is the OPIF, the strategy whereby government is
able to establish priority expenditures, identify targets, assess accomplishments, and
report results.
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OPIF goals. The OPIF aims to:
•
•
•
•
•
Shift to output/outcome performance indicators;
Clarify expected performance and accountability of government agencies;
Encourage agencies to focus efforts on the delivery of outputs relevant to goal;
Establish integrated performance management system where organizational
performance targets cascaded down to lower level units and used as basis of
performance-based compensation; and
Report to the public and to Congress in clear terms the outputs of
departments/agencies.
OPIF process. The OPIF process involves the following:
•
Identification of desired outputs and outcomes by both the line agency
and the oversight agencies of government (i.e., DBM, NEDA, DOF) on a parallel
basis;
•
Identification of major final outputs (MFOs), measured in terms of
Quantity, Quality, Timeliness, or Cost;
•
Conduct of Harmonization workshops to ensure a clear understanding of
targets at both agency and oversight levels;
•
Identification of programs/projects that contribute to the realization of
MFOs;
•
Identification
outcome; and
•
Determination of performance indicators for each MFO.
of
programs/projects
that contribute
to the desired
After the determination of performance indicators, they are then widely desimenated.
These PIs become the gauge by which performance of the program or agency will
be measured.
The application of the OPIF process was quite long and tedious, involving so many
workshops, harmonization sessions, and training sessions for both line and oversight
staff and officials. The outcome, however, was encouraging.
Just to illustrate, in the case of one agency, the Land Transportation Office (LTO),
which is a government agency tasked to undertake licensing of motorists in the
Philippines, the agency identified its desired outcome as road safety, i.e., less
incidence of road accidents. The MFO is drivers licensing services. The agency then
defined the PIs in terms of quality and timeliness, specifically the percentage of
licenses issued in accordance with operating and timeliness standards. The LTO
targeted this performance measure in terms of an acceptable client satisfaction rate.
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The LTO-OPIF may be appreciated better this way.
ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK:
Example: LTO
Outcome
-
Road safety (less incidence of road accidents)
MFO
-
Licensing services (Drivers)
Performance indicators:
Quality
standards;
client satisfaction
% of licenses issued in accordance with operating
Timeliness
standards
% of licenses issued in accordance with timeliness
-
OPIF status. We do not have the exact figures for the number of agencies
categorized under various stages of the OPIF process. But we do have examples of
agencies under each stage/level.
Agencies in advance stage of the OPIF process




Agriculture sector agencies (Agriculture, Agrarian Reform, Environment and
Natural Resources)
Social Welfare
Labor and Employment,
Education
Agencies in intermediate stage of OPIF



Health
Internal Revenue
Customs
Agencies in the early stage

Infrastructure agencies
To date, six (6) major departments have substantially completed the OPIF process.
Five (5) others are in the intermediate stage, while most of the other agencies are in
the early stages of the process.
Sectoral Effectiveness and Efficiency Review (SEER)
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SEER features. Having established a framework for targeting outcomes, we
likewise started a process of performance assessment. One is through the SEER,
which is a system of evaluating the effectiveness and efficiency of the programs and
projects of an agency and their actual contribution to the desired outcomes. It
allows the government to review priorities to determine what will be carried on,
what will be discontinued or downscaled over the medium term, and eventually to
redirect resources to strategic programs.
SEER process. The SEER process involves wide consultations, with the oversight
agency sitting down with the implementing agency in sectoral workshops, applying
agreed criteria using an OPIF-like approach but on a broad sectoral basis.
Results are presented and submitted to Cabinet Committee for approval and become
major inputs to the budget, and to the Public Investment Plan.
SEER results. We conducted our first SEER in 2001, followed by a more intensive
ODA portfolio review in 2003 with the following results:
•
•
•
•
Cancellation of excess financing for six (6) projects;
Termination of one project;
Restructuring of 30 projects; and
The continuation of all other projects as scheduled.
Agency Performance Review (APR)
The Agency Performance Review (APR) is a more detailed assessment of specific
agency performance focusing on the budget utilization performance of agencies.
Agencies are given a set of criteria by which their budget performance is rated,
reported, and becomes an input to the succeeding budget allocation process.
APR results. In 2002, the Budget Department conducted the first ever APR in all
agencies of government. The idea is to assess progress of budgets utilization and
the need for further fund releases to agencies. Due to the very tight budget position,
most got ratings of close to outstanding. In 2003, in the second APR, low-budget
agencies were exempted from the APR. The result was a turnaround from that of
the previous year: most agencies rated satisfactory, 2 notches below outstanding.
Incentive Structures
Underlying the MTEF framework is the incentive structure that provides the
impetus to the installation and sustainability of the entire results-based approach to
public sector reform.
Features. The incentive structure includes the following features: provision for
greater flexibility in exchange for financial discipline hurdles, including the
use of savings from procurement and streamlining activities, creation of one-liner
budgets, and expenditure autonomy for low-budget agencies.
Use of savings as an incentive simply means that agencies able to save funds from
streamlined activities were allowed to keep those and to use them for their priority
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undertakings. One-liner budgets mean that instead of itemizing the various
accounts in their budget, agencies were given autonomy in allocating funds assigned
to them. In the case of agencies whose budgets are small, they were given
expenditure autonomy in managing their budget subject to certain guidelines.
Another feature is performance-based management which involves the design
of a compensation system that is related to the performance not only of the
individual but also that of the unit or agency to which that individual belongs.
We have also introduced the collective negotiation agreement (CNA) where
rank-and-file employees are given the opportunity to negotiate certain improvements
in their work environment and enjoy certain incentives subject to the
accomplishment of negotiated improvement plans.
Key Accomplishments
After close to five years, our expenditure management reform program has
accomplished the following major tasks:
In planning and budget processes, we have:
1.
2.
3.
4.
5.
6.
Linked Budget to Planning starting in 1999;
Changed from input-based to outcome-based budgeting in 2002 Budget Call;
Formulated budget strategy as precondition to approval of new foreign loans in
2001;
Conducted first Sectoral Effectiveness and Efficiency Review (SEER) 2001;
Conducted first Agency Performance Reviews (APRs) in 2002; and
Conducted ODA Portfolio Review in 2003.
In reengineering the bureaucracy, we have:
1.
2.
Formulated a Reengineering Plan for the Bureaucracy; and
Reengineered key regulatory agencies: financial markets, energy, and ICT.
In capability building (1999-2003), we have undertaken workshop and training
programs in 18 oversight agencies and in three (3) major and 17 minor agencies.
Finally, we have documented the 2001 Budget Preparation process, particularly its
Performance Orientation. The Public Expenditure Management Manual is expected to
come out by June 2004. We have also documented the 2002 APR and completed the
Public Expenditure, Procurement and Financial Management Review with World Bank
(WB) and Asian Development Bank (ADB).
Challenges
To be sure, the task remains a challenge, but not an insurmountable one. Installing
a results-based approach is a test of three Ps: persistence, perseverance and
partnership.
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The remaining tasks include:






Refining multi-year resource constrained planning;
Completing inventory of contingent liabilities;
Enhancing the predictability of revenues;
Cascading performance management system down to personnel appraisal;
Shifting to a performance based compensation system; and
Advocating PEM reforms in Congress.
Persistence, because one needs to vigorously pursue, despite the many obstacles,
the objective of the program. Perseverance, because it is a test of patience, fortitude
and compassion, all at the same time. And partnership, because it takes government,
non-government, as well as private sector stakeholders, working together towards a
common goal, to successfully implement a revolutionary program such as the PEM
Reform.
Moving forward
We are looking towards accomplishing the remaining tasks, and committed to
making PEM fully operational by 2007.
The tasks we have completed so far and will be completing from 2004 to 2007 are
shown in the following table:
2004
2005

limited budget 
autonomy

compensation
review

reengineering
the bureaucracy
2006
expanded
budget
autonomy
 PEM
substantially
operational

initial
implementation
of compensation
reform
 alignment of
agency with
individual
performance

reengineering
the bureaucracy
2007
 PEM
fully
operational
The tasks remain daunting but there is no turning back. We hope the international
community will continue to support the Philippine government’s endeavor to
establish a fully operational results-based Public Expenditure Management System.
Thank you and good day!
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