On June 15, 2023, the national government unified and updated the contractual risk management policy for infrastructure projects, by the issuance of Conpes 4117. The guidelines were consolidated from Conpes 3107, amended by Conpes 3133, which defined the general risk management policy, as well as the sector-specific Conpes 3760 1 and 3800 2 , 3961 3 , 4000 4 , 4028 5 , and 4047 6 .
Although Conpes 4117 applies as of its expedition, a transition regime is foreseen for projects previously submitted for approval of contingent obligations, and for those submitted within 6 months after Conpes 4117 expedition, which will maintain their structure under the previous risk policy guidelines.
Please note that Conpes 4117 seeks to establish a unified policy that not only defines risk allocation guidelines 7 but also incorporates a risk management guide at all stages of the risk management cycle.
Some key aspects of this Conpes are identified below:
1. Guidelines for the administration of the risk management cycle
A new aspect introduced by Conpes 4117 is that it defines a set of guidelines for public entities regarding each of the phases of the risk management cycle, which apply indistinctly to all infrastructure projects with private participation, as follows: (i) identification and registry of risks; (ii) categorization, classification, and assignment; (iii) qualitative assessment; (iv) quantitative assessment; (v) implementation; and (vi) risk management during the life of the contract.
Additionally, Conpes 4117 provides guidelines for the early mitigation or elimination of risks, which is considered a simultaneous and independent phase to the previously listed phases of the risk management cycle. Under this approach, public entities are instructed that not only can they transfer or manage risks, but that during the structuring phase some risks can be eliminated or reduced. This approach is known as de-risking.
As an example, this is the case of land acquisition risk, which can be eliminated if the acquisition process precedes the awarding of the contracts, as well as the risk of cost overruns associated with environmental licensing, which can be eliminated if the licensing process precedes the awarding of the contract. In addition to the above, other preparatory measures may be taken during the planning and structuring phase of a project, such as the development of sufficient studies that provide substantial information on the behavior of a given risk, which will help reduce uncertainty and therefore the perceived value of the risk.
2. Guidelines for risk allocation
The guidelines defined by Conpes 4117 are intended to guide both public and private entities in the allocation of risks involved in the development of infrastructure projects. This premise guarantees an efficient allocation of risks in a consistent manner, in accordance with the fundamental principle of efficient allocation, recognized in Article 4 of Law 1508 of 2012.
Although Conpes 4117 does not expressly state it, it is within the framework of this principle (efficient allocation of risks) that the possibility for originators of private initiative projects to present more favorable risk allocations for the contracting entity must be understood, as stated in paragraph 2 of Article 9 of Decree 438 of 2021.
Likewise, it is key to reaffirm that for each project, the allocation of risks must be foreseen and regulated in the contract -which is the appropriate instrument-. Conpes 4117 establishes this premise by stating that the allocation of risks must be explicitly incorporated in the contract and recognizes that a risk matrix is a management tool aimed at enabling the control of the incorporation of risks into the contract.
Regarding risk distribution, the Conpes clarifies the concepts of retained risk (public), transferred risk (private), and shared risk and, for the latter, recognizes that in addition to the band system, the risk may be shared through any other suitable mechanisms.
Conpes 4117 divides its guidelines into two types: (i) general ones, which are applicable to all infrastructure projects (Section 4), and (ii) specific ones, which are applicable to certain types of infrastructure, which may be complementary or exceptional to the general guidelines (Section 5).
2.1 General guidelines
Conpes 4117 identifies eight risk categories: (i) general risks; (ii) financial risks; (iii) economic risk; (iv) foreign exchange risk; (v) liquidity risk; (vi) regulatory changes; (vii) force majeure (acts of nature and geopolitical risk) and (viii) climate change. Among the aspects to be highlighted are:
- A subcategory of licenses, permits, and authorization risks is defined, in which in addition to environmental risk, cultural risk is incorporated. This type of risk is related to the obstinance of permits to use or intervene in properties with heritage value or properties of cultural interest (BIC, for its acronym in Spanish). The latter had been identified in Conpes 3961 and 4047 and grouped with social and environmental risks.
- In the category of general risks, a new risk of finding the bodies of persons presumed missing in the framework of the armed conflict is incorporated. This risk is assigned to the contracting entity. Please note, this risk could well be considered included within the “events exempting from liability” (EER for its acronym in Spanish); however, it has been identified as a particular risk.
- As part of the social risks category, resettlement management is distinguished in projects of high social complexity that are carried out in municipalities of the Territorially Focused Development Program (PDET for its acronym in Spanish) -a category created as part of the implementation of the Final Peace Agreement—This risk may be shared with the contracting state entity.
- Conpes 4117 also includes the risk of climate change, which had already been regulated by ANI in the fifth-generation concession program, as well as in airport infrastructure projects.
2.2 Specific guidelines
As for the specific guidelines, which may be complementary or exceptional to general guidelines, it should be noted that they prevail over the general guidelines.
Specific guidelines are provided for the following types of infrastructure: (i) road; (ii) port; (iii) airport; (iv) freight rail transport; (v) river and canal access; (vi) passenger rail transport; (vii) mass transportation; (viii) water treatment plants and water distribution systems; (ix) agriculture and rural development; (x) recreation and sports; (xi) urban renewal; (xii) culture; (xiii) ICT; (xiv) education; (xv) health; (xvi) public buildings/administrative units; (xvii) justice; (xviii) security and defense; and (xix) energy.
In addition to the compilation of guidelines for traditional transportation infrastructure projects -road, rail, airports, and navigable canals- specific guidelines have been incorporated for social infrastructure and other sectors, in which it is hoped to further develop the implementation of private participation projects.
