PROCUREMENT CAPACITY ASSESSMENT Report and Recommendations

Transcription

1 Additional Financing of Northern Rural Infrastructure Development Sector Project (RRP LAO 42203) PROCUREMENT CAPACITY ASSESSMENT Report and Recommendations Proposed Project Name: Northern Rural Proposed Amount (US$): $30.0 million Loan Infrastructure Development Sector Project Additional Financing Executing/Implementing Agency: Source of Funding: Asian Development Fund Ministry of Agriculture and Forestry, Department of Planning and Cooperation Assessor: Fact-finding Mission Date: 24 March 2016 Sector/Agency Procurement Assessment Risk Assessment: Criterion Risk A. Legal and Regulatory Framework B. Institutional Framework and Management Moderate Capacity C. Procurement Operations and Market Practices D. Integrity and Transparency of the Sector Public Moderate Procurement System OVERALL RISK RATING -Moderate A. Overview 1. Legal and Regulatory Framework 1. Procurement procedures in Lao PDR are regulated under Decree No. 03/PM and its associated implementing rules and regulations (IRR) 0063/MOF (2004) and 0861/MOF (2009). The Ministry of Finance (MOF) Procurement Manual (2009) prepared by MOF s Procurement Monitoring Office (PrMO) provides further guidance on procurement procedures. The legal framework is explicit and comprehensive. Article 12 of IRR 0063/MOF clearly states that in the case of conflicting provisions, the procurement procedures of donor agencies/development partners take precedence over Decree No. 03/PM or its associated IRRs. As a result, ADB projects, including those in the agriculture sector, are designed and implemented in accordance with ADB s Procurement Guidelines (April 2015, and as amended from time to time). Competitive bidding in the sector is consistent with or better than that generally evident in the country, and all of the Executing Agency s (EA) procurement for national competitive bidding (NCB) work is through open competitive bidding. State-owned enterprise (SOE) may bid if they are legally and financially autonomous and are not dependent agencies of the purchaser/employer, as per ADB guidelines. The inherent risks associated with the country's legal and regulatory framework governing procurement procedures are therefore minimal and classified as "". B. Institutional Framework and Management Capacity 2. There is limited procurement planning in budget formulation, as the amount of budget allocated is uncertain for Government-funded projects. For donor-funded projects, budget allocation is considered in conjunction with procurement plans, and is required under the Budget Law. MOF s PrMO has the remit of providing national oversight to procurement in all sectors. In addition, the Project Management Division (PMD) within Ministry of Agriculture and Forestry s (MAF) Department of Planning and Cooperation (DOPC) is also tasked with procurement for the sector. At this stage, both the PrMO and PMD have limited capacity and resources, and tend to rely on dedicated project-specific project management units and the procurement regulations of donors, such as ADB. At the project level, procurement is generally supported by adequately experienced consultants. Given the issues above, the institutional framework and management capacity at present is assessed as Moderate. C. Procurement Operations and Market Practices 3. Existing mechanisms are not a constraint to active private sector participation. World Bank has supported the Lao Business Forum where concerns can be raised. Bidding is open, and there is no

2 2 anecdotal evidence to suggest that market access is restricted. There are sufficient private sector contractors and consultants actively bidding and working on development projects to ensure prices are competitive. Arbitration for domestic companies is facilitated by the Ministry of Justice. For international companies, arbitration is through the Rules of Arbitration of the International Chamber of Commerce, with the adjudicator appointed by the Ministry of Justice. Place of arbitration is Vientiane. The risk classification for procurement operations and market practices is. D. Integrity and Transparency of the Sector Public Procurement System 4. The sector agencies have no independent internal audit function, although internal financial audits are carried out annually and reported to MOF but none for procurement audit. External audits are carried out on donor-funded projects annually, and reported to MOF and the respective donors. Agencies are required to comply with all findings and recommendations of the audit. Bid evaluations follow the national legislation and ADB/World Bank requirements, which give specific guidelines on how to address these issues during evaluation. However, the approval authorities remained with position s directions. 5. Although Decree No. 03/PM and the 2005 Law on Anti-corruption recognizes fraud or corruption as a criminal offence and makes provision for complaints against Government procuring entities, to date there are no known high-profile cases whereby a Government procurement entity has been prosecuted for corruption or sued for contractual non-performance. The overall risk classification for integrity and transparency of the sector public procurement system as it operates at present therefore is Moderate". E. Sector/Agency Strengths 6. MAF follows the provisions of national Decree 03/PM dated 09 January 2004 on Government Procurement of Goods, Construction Maintenance and Services. Article 12 of IRR 0063/MOF clearly states that in the case of conflicting provisions, the procurement procedures of donor agencies/development partners take precedence over Decree No. 03/PM or its associated IRRs. As a result, ADB projects, including those in the agriculture sector, are designed and implemented in accordance with ADB s Procurement Guidelines. 7. Market mechanisms do not appear to be a constraint to active private sector participation. World Bank has supported Lao Business Forum where concerns can be raised. Bidding is open, and there is no anecdotal evidence to suggest that market access is restricted. F. Sector/Agency Weaknesses 8. There is limited procurement planning in budget formulation (i.e. procurement capacity training) as the amount of budget allocated is uncertain for Government-funded projects. For donor-funded projects, budget allocation is considered in conjunction with procurement plans, and is required under the Budget Law. On ADB-funded projects, there is usually no cash contribution by the Government to avoid any budget availability issues. There are limited experienced and qualified procurement experts within MAF and/or locally, therefore the Project relies on the project implementation consultants (PIC) to augment procurement expertise. 9. MAF has no independent internal audit function. Consequently, external audits are carried out on donor-funded projects annually, and reported to MOF and the respective donors. G. Procurement Risk Assessment and Management Plan 10. Procurement Risk Assessment and Management Plan (P-RAMP) (sector/agency) is attached. It highlights: (i) (ii) Due to the limited capacities of PrMO and PMD, arrangements are made for the dedicated project management/procurement unit (NPMO) under the current project, together with its PIC, to continue to manage the project procurement. This arrangement has been very effective under the current project. Since MAF has no systematic and comprehensive audit of its projects, the Additional

3 3 Financing Loan Agreement will continue to require an independent financial audit of the Project each year, as is the case under the current project. H. Project Procurement Risk Assessment 1. Risk Assessment Criterion Risk A. Organizational and Staff Capacity B. Information Management C. Procurement Practices -Moderate D. Effectiveness E. Accountability Measures OVERALL RISK RATING I. Executive Summary 11. The overall risk rating for the Project is, based on the fact that NPMO and its PIC for the current project will continue to manage the Project. Otherwise, the Project needs to recruit an experienced and qualified procurement expert. The NPMO received Best Project of the Year award in 2015 for its performance on the current project. The contractual arrangements for the civil works (NCB) under the current project, Employer-Engineer (engineering design consultant) contractor, arrangement leaves PIC with no contractual authority to ensure quality control. Under the overall project, provision will be made in the civil works contract for PIC to serve as the employer s agent in overseeing civil works construction and providing quality control. J. Introduction 12. This assessment has been conducted in accordance with the Guidelines for Assessing Country, Sector and Project Procurement Risks. There is no country assessment at this stage, so this assessment has also referenced other recent project procurement risk assessments in the sector. 13. The proposed Project represents an expansion of a current project, the Northern Rural Infrastructure Sector Project, to be financed using Additional Financing. The current project is implementing 26 irrigation/access road subprojects in the provinces of Bokeo, Luang Namtha and Phongsaly; it also covers associated capacity building initiatives in Oudomxay together with these three provinces. The expansion of the current project with the support of Additional Financing will entail a further implementation of around 22 irrigation subprojects and associated capacity building initiatives, including four subproject investments in Oudomxay province. 14. The risk assessment has been conducted as part of the due diligence exercise under S-PPTA, which commenced in June 2015 and finished in April Without the guidance of any country assessment, the sector and project risk assessments were prepared with reference to other recent project risk assessments, review of procurement documentation for the current project, the experiences of Lao Resident Mission staff, and interviews with the staff of the NPMO and the Grant Implementation Consultant (GIC) for the current project. K. Overview 1. Organization and Staff Capacity a. Risk Assessment: 15. Procurement Monitoring Office, of Ministry of Finance (PrMO) oversees public procurement. However it does not have adequate capacity and resources to handle all public procurement duties. MAF

4 4 has also established a PMD within its DOPC to support its overall project management and procurement requirements. However, it is as yet a work-in-progress and needs time and resources to develop into an effective project management unit. Consequently, MAF, as in other sectors, tends to establish dedicated project management units, especially for ADB-financed projects, such as the NPMO for the current project. PMD serves as the co-secretariat to an ad-hoc procurement committee (Administration and Finance Division is the co-secretariat). For ADB-financed projects, procurement procedures follow ADB guidelines which are generally consistent with the PrMO manual covering the procurement of goods and works. In addition, ADB, World Bank and MOF/Government approved the harmonized standard bidding documents (SBD) are used for all contracts. These provide the EA with the necessary framework for good governance and effective procurement. 16. The head of the NPMO has more than 20 years experience managing government and ADBfinanced financed procurement, including several substantial international competitive bidding, NCB and quality- and cost-based selection (QCBS) contracts. NPMO has eight staff including the Project Director. Staff in NPMO have developed a good understanding of procurement and able to communicate well in English, as does the procurement committee. However, NPMO needs the resources of a GIC to assist in project management and procurement procedures. The composition of the procurement committee appears satisfactory in terms of its independence. NPMO will need to replace/augment some of its office furniture, equipment and vehicles. In summary, the approach undertaken under the current project is very suitable for the Project. 2. Information Management a. Risk Assessment: 17. NPMO maintains an adequate filing system for the current project, which will be continued under the Project. NPMO allocates adequate staff to the maintenance of its records, and the office is of a high standard, with adequate space for expansion of record keeping infrastructure. NPMO has all documents relating to the current project, and reports that it will maintain the records for a period of 10 years postcompletion of any project. 3. Procurement Practices a. Procurement of Goods and Works i. Risk Assessment: 18. NPMO has undertaken procurement for nine vehicle packages (Shopping), two office equipment packages (Shopping), and 19 civil works packages (NCB) under the current project. As a result of its involvement in leading project management, NPMO has gained considerable experience and knowledge of ADB's procurement procedures. Under the Project, NPMO will continue to undertake similar procurement activities. b. Procurement of Consulting Services i. Risk Assessment: 19. NPMO has successfully recruited the GIC for the current ADB-financed project, as well as 11 consultants qualifications selection (CQS) consulting packages for engineering design and social impact assessments. To date, there are no known cases of disputes or irregularities arising from the recruitment of the consulting packages. Evaluation and selection was through QCBS (GIC) and CQS (engineering design and social impact) based on the consultants technical knowledge, experience, academic qualifications, and financial proposals. All procedures, including QCBS and the financial evaluation, followed ADB consulting services guidelines and Decree 03/PM guidelines as appropriate. c. Payments

5 5 i. Risk Assessment: -Moderate 20. Advance payments are made available to consultants and contractors if required. The government's Procurement Manual does not prescribe a standard period for the release of contract payments and the requirement of 28 days in ADB's SBD is often exceeded for firms when requesting direct payment from ADB. Interest is not normally paid on late payments. 4. Effectiveness a. Risk Assessment: 21. Contractual performance and payments are monitored by NPMO and PIC under the current project. This will continue under the Project. A grievance redress mechanism is provided in Decree 03/PM and the 2005 Law on the Resolution of Economic Disputes. 5. Accountability Measures a. Risk Assessment: 22. Decree 03/PM and the 2006 Anti-Corruption Law provides for criminal proceedings for fraud and corruption. At the same time, ADB procurement guidelines and SBD's provide for a high-degree of accountability and transparency. The Project's Loan Agreement and project administration manual (PAM) also have specific provisions against fraud and corruption, including requirements to adhere to ADB s Anticorruption Policy. In line with Decree 03/PM, all aspects of the bidding and contract award process require approvals by the Procurement Committee. ADB s prior review for all NCB contracts provide for an additional measure of oversight and MOF authorization is required for contract payments. From pre-bid meetings to final bid evaluation, the minutes of the procurement committee meetings provide a narrative of the bidding process and an audit trail. L. Strengths 23. NPMO has proven track record on project management and procurement under the current project, as reflected in its award of ADB s Best Project of the Year award in NPMO will continue to manage the Project. 24. PIC also has a proven track record of supporting and working closely with NPMO on all project management and procurement matters. The EA has requested, and ADB has agreed, that GIC will continue to implement all activities under the Project through a contract addendum to its existing contract for the current project. This will facilitate a seamless and expeditious expansion of activities under the current project to form the Project. M. Weaknesses 25. The contractual arrangements for the civil works under the current project, Employer - Engineer (engineering design consultant) contractor, leaves the PIC with no contractual authority to ensure quality control. Under the Project, provision will be made in the civil works contract for PIC to serve as the employer s agent in overseeing civil works construction and providing quality control. N. Procurement Risk Assessment and Management Plan (Project) 26. P-RAMP (Project) is attached. It highlights: (i) (ii) (iii) Maintain the services of the same firm as the Project Implementation Consultant through a contract variation to maintain momentum and effectiveness of project implementation. Due to the limited capacities of PrMO and PMD, arrange for the dedicated project management/procurement unit (NPMO) under the current project, together with its PIC (to continue to manage the Project. This arrangement has been very effective under the current project. Since MAF has no systematic and comprehensive audit of its projects, ensure the

6 6 Additional Financing Loan Agreement continues to require an independent financial audit of the Project each year, as is the case under the current project. (iv) Under the Project, provision will be made in the civil works contract for PIC to serve as the employer s agent in overseeing civil works construction and providing quality control. O. Project Specific Procurement Thresholds 27. Given the risk assessment for the Project, it is considered reasonable to adopt the procurement thresholds that currently apply for Lao PDR, which are described in the attached procurement plan, and which are summarized below: (i) NCB for Works - <$3.0 million, but >$100,000 (ii) NCB for Goods - <$1.0 million, but >$100,000 (iii) Shopping for Works - <$100,000 (iv) Shopping for Goods - <$100,000 P. Procurement Plan 28. The procurement Plan is attached. In summary, the expected procurement will consist of (i) about 22 NCB contracts for civil works; (ii) one NCB contract for vehicles; (iii) one Shopping package for motorcycles; and (iv) eight Shopping packages for equipment and refurbishment. In terms of consulting services, there will be (i) seven contracts for engineering design and construction supervision (CQS); (ii) four contracts for social impact assessment (CQS); and (iii) one contract for external resettlement monitoring (CQS). Project implementation services will be provided under a contract addendum to the contract for the consulting firm under the current project.

7 7 Risk Description Legal and Regulatory Risks Table 1: Risk Assessment and Risk Management Plan (Sector) Risk Assessment There are no significant identified legal or regulatory risks for the sector. Institutional and Management Capacity Risks The PrMO and PMD do not yet have the capacity to support procurement on a large project. Substantial Mitigation Measures or Risk Management Plan Arrange for the dedicated project management/procurement unit (NPMO) under the current project, together with its PIC to continue to manage the Project. This arrangement has been very effective under the current project, which was awarded ADB s Best Project of the Year award in Procurement Operations and Market Practices There are no significant identified procurement operations and market practices risks. Integrity and Transparency of the Sector Public Procurement System MAF has no systematic and comprehensive audit of its projects. Substantial Ensure the Additional Financing Loan Agreement continues to require an independent financial audit of the Project each year, as is the case under the current project. Overall -Moderate The majority of risks have been identified as either 2 or 3 (Moderate, ). Substantial risks (1) have been managed through the measures outlined above

8 8 Risk Description Delay in Project start-up Table 2: Risk Assessment and Risk Management Plan (Project) Risk Assessment Substantial Mitigation Measures or Risk Management Plan Maintain the services of the same firm as the Project Implementation Consultant through a contract variation to maintain momentum and effectiveness of Project implementation. The PrMO and PMD do not yet have the capacity to support procurement on the Project. Substantial Arrange for the dedicated project management/procurement unit (NPMO) under the current project, together with its PIC to continue to manage the Project. This arrangement has been very effective under the current project, which was awarded ADB s Best Project of the Year award in MAF has no systematic and comprehensive audit of its projects. Substantial Ensure the Additional Financing Loan Agreement continues to require an independent financial audit of the Project each year, as is the case under the current project. Contractual responsibility on the civil works contracts is not sufficiently clear. Substantial Under the Project, provision will be made in the civil works contract for PIC to serve as the Employer s agent in overseeing civil works construction and providing quality control. Overall The majority of risks have been identified as either 2 or 3 (Moderate, ). Substantial risks (1) have been managed through the measures outlined above

9 Annex 1 9 SECTOR/AGENCY PROCUREMENT ASSESSMENT QUESTIONNAIRE Risk Ratings Extremely High High Moderate Indicators/Questions Sector/Agency Questions Score Narrative 1 1. Legislative and Regulatory Framework 1.1 Does the national public procurement law (including supporting regulations, standard bidding documents and operational manuals/guides) apply to the sector? 1.2 Is the supply market for the sector sufficiently competitive to give full effect to the national procurement law and/or open competitive tendering? Is the sector exempted by legislation from being subject to the national public procurement law? Even if subject to the national public procurement law, does the sector tend to follow it? Do agencies in the sector use government-issued public procurement manuals or guidance? Have government-issued documents been tailored to meet sector requirements? In absence of governmentissued documents, does the sector have its own standard bidding documents/guidelines? Is competitive bidding a common feature under the sector? Is there a core of suppliers in the sector who regularly submit responsive bids? What proportion, by %, of the sector s procurement is undertaken through open competitive bidding? What is the average number of bidders for publicly bid contracts? 3 The agency follows the provisions of national Decree 03/PM dated 09 January 2004 on Government Procurement of Goods, Construction Maintenance and Services as a minimum. This has been reviewed by ADB and found to be acceptable. Article 12 of IRR 0063/MOF clearly states that in the case of conflicting provisions, the procurement procedures of donor agencies/development partners take precedence over Decree No. 03/PM or its associated IRRs. As a result, ADB projects, including those in the agriculture sector, are designed and implemented in accordance with ADB s Procurement Guidelines. 3 Competitive bidding in the sector is consistent with or better than that generally evident in the country and, on ADBfunded projects, always follow ADB s SBDs. On the current project, the number of bidders per NCB package ranged from 2 to 10, with 4-5 being the average. The number of disqualified bids ranged from 0 to 4, with the average being 2-1 Describe how the sector meets the guidance applicable to the score allocated, or other justification for the score.

10 10 Annex 1 Indicators/Questions Sector/Agency Questions Score Narrative 1 Do EAs tend to make sufficient 3. efforts to attract bids (eg. adequate advertising, bidding periods)? Is there availability and quality of suppliers, labor force and/or related goods and services in the domestic market? All of the EA s procurement for NCB work is through open competitive bidding. The EA (MAF) advertises in all major local newspapers for NCB bids. 1.3 If there is a sector specific legal framework, does it support nondiscriminatory participation, transparent tender processes (including advertisement, tender documentation, tender evaluation, complaints mechanism)? 1.4 Is the sector subjected to excessive regulation or government control such that competition is limited or non-existent? Has the sector adopted nondiscriminator, transparent tender processes? What is the average number of bidders for publicly bid contracts? Does the sector apply a domestic preference scheme? Does the sector require preregistration of bidders? Are there acceptable provisions in the sector for the participation of State Owned Enterprises? The supply/demand situation in the sector is approximately in balance, giving reasonable bid prices. 3 The sector follows national legislation and the provisions of ADB s SBDs. For the number of bidders per contract, please refer to 1.2 above. 3 National preference scheme is applied. Article 12 of 0063/MOF states that the procurement procedures of donor agencies take precedence over any conflicting provision in Decree No. 03/PM or the IRRs. The sector is no longer able to apply a domestic preference scheme on donor-funded projects. Governmentfunded projects are too small to attract any international bids. On ADB-funded projects, the EA follows ADB s Small Works contract format, which provides for post-qualification. SOEs may bid if they are legally and financially autonomous and are not dependent agencies of the purchaser/employer,

11 Annex 1 11 Indicators/Questions Sector/Agency Questions Score Narrative 1 2. Institutional Framework and Management Capacity 2.1 Is the procurement cycle in the sector required to be tied to an annual budgeting cycle (i.e. can a procurement activity commence only when budget has been duly appropriated for it? Are procurement plans in the sector prepared on as part of the budget planning and formulation process? Do systems and processes in the sector or key agencies in the sector require certification of availability of funds before solicitation of tenders? as per ADB guidelines. 1 There is limited procurement planning in budget formulation, as the amount of budget allocated is uncertain for Government-funded projects. For donorfunded projects, budget allocation is considered in conjunction with procurement plans, and is required under the Budget Law. 2.2 Does the system foster efficiency through the use of adequate planning? 2.3 Does the procurement system in the sector feature an oversight/regulatory body? Does the sector, or key agencies in the sector, have a formalized procurement planning process(s)? Does the sector fall under the remit of the national oversight/regulatory body? If a national body does not exist, is there a sector-specific body that oversees/regulates procurement? On donor-funded projects, there is usually no cash contribution by the Government to avoid any budget availability issues. 2 Due to inadequate budget availability, the Government has been limited towards forward planning, as budget is not always certain. Annual procurement plans are tentative and depend on the amount of budget received. Donor-funded projects always have forward plans and annual procurement plans adequately funded. 2 MOF s Procurement Office (PrMO) has to provide national oversight in procurement for all sectors. In reality, it provides an advisory function, with little or no supervisory or enforcement role. In addition, the Project Management Division (PMD) within MAF s Department of Planning and Cooperation is also tasked with procurement for the sector. At this stage, both the PrMO and

12 12 Annex 1 Indicators/Questions Sector/Agency Questions Score Narrative Is there a public procurement capacity development or professionalization program? What proportions of procurement-related officers and staff in the sector have been trained under the national or sector capacity development program or participated in any formal procurement training program? PMD have limited capacity, and tend to rely on dedicated projectspecific project management units and the procurement regulations of donors, such as ADB. 2 There is no capacity development program per se for PMD, although ADB has provided some training. More training is needed. At the project level, procurement is supported by adequately experienced consultants. 3. Procurement Operations and Market Practices 3.1 Is private sector competitive, well organized and able to access the sector market? 3.2 Do measures exist in the sector to ensure the adequacy and accuracy of cost estimates before bidding, and to manage contract price variations? Is the private sector well organized and able to access the sector market? Do civil society organizations regard public procurement in the sector to be open and accessible to the market? What percentages of contracts are awarded for values less than the original cost estimates? What percentage of contract variations amount to a cumulative impact of more than 10% of the original contract price? 3 Mechanisms do not appear to be a constraint to active private sector participation. World Bank has supported Lao Business Forum where concerns can be raised. Bidding is open, and there is no anecdotal evidence to suggest that market access is restricted. 3 Out of a total available sample of 19 subproject contracts (NCB) under the current project, only one was over estimate by +1.0%. All others were below estimate, ranging from -0.5% to -14%. Out of a total of 19 subprojects there has been only one with a contract variation amounting to a cumulative impact of more than 10% of the original contract price. 3.3 Is there a Are there sector-specific 3 Arbitration for domestic companies is facilitated

13 Annex 1 13 Indicators/Questions Sector/Agency Questions Score Narrative 1 mechanism in the sector to receive and handle observations, complaints and protests? procedures to receive and handle observations, complaints and protests? Are complaints and protests in the sector processed within the maximum time limit provided for in the law? Have bidders used the complaint and protests mechanisms? by the Ministry of Justice. For international companies, arbitration is through the Rules of Arbitration of the International Chamber of Commerce, with the adjudicator appointed by the Ministry of Justice. Place of arbitration is Vientiane. There have been no identified cases to date in the sector. 4. Integrity and Transparency of the Sector Public Procurement System 4.1 Is there a formal internal control and audit framework in the sector? Do key agencies in the sector have an independent internal audit function? Do key agencies in the sector have adequate internal control mechanisms to oversee the procurement function? Are key agencies in the sector subjected to regular performance or value for money audits? Are key agencies in the sector subjected to annual financial audits? 1 The sector agencies have no independent internal audit function. However, internal financial audits are carried out annually, and reported to MOF. External audits are carried out on donorfunded projects annually, and reported to MOF and the respective donors. Agencies are required to comply with all findings and recommendations of the audit. 4.2 Is information pertaining to public procurement in the sector easy to find, comprehensive and relevant? Are internal or external audit findings/recommendations acted on in a timely fashion? What percentage of bids is published in a medium that is easily and freely accessible? Can bidders easily and freely access bid information? What is the percentage of contract awards announced in medium that is easily and freely accessible? Are third party observers invited to attend public biddings? 2 All the bids under NCB are published in local newspaper three times per bid over a bidding period of 30 days. Contract awards are not announced, except to the participating bidders. No specific invitations are sent out to third party observers; bidders only.

14 14 Annex 1 Indicators/Questions Sector/Agency Questions Score Narrative Does the sector have ethics and anticorruption measures in place? Are there sector-specific procedures to verify a bidder s legitimate existence, track records, financial capacity and capacity to complete the job? Are there sector-specific procedures to rate performance and/or debar bidders, supplier, contractors and consultants for ethical or integrity violations? Does the sector, or key agencies in the sector, maintain a register of debarred suppliers, contractors and consultants? Are there sector-specific integrity principles and guidelines? 2 Bid evaluations follow the national legislation and ADB/World Bank requirements, which give specific guidelines on how to address these issues during evaluation. Bid evaluation reports are used as a reference for the subsequent evaluations. Risk Assessment: Criterion Risk A. Legal and Regulatory Framework B. Institutional Framework and Management Moderate Capacity C. Procurement Operations and Market Practices D. Integrity and Transparency of the Sector Public Moderate Procurement System OVERALL RISK RATING -Moderate

15 Annex 2 15 PROJECT PROCUREMENT RISK ASSESSMENT QUESTIONNAIRE QUESTION RESPONSE RISK 2 A. ORGANIZATIONAL AND STAFF CAPACITY PROCUREMENT DEPARTMENT/UNIT A.1 Does the agency or Government have a Procurement Committee that is independent from the head of the agency? A.2 Does the agency have a procurement department/unit, including a permanent office that performs the function of a Secretariat of the Procurement Committee? A.3 If yes, what type of procurement does it undertake? A.4 How many years experience does the head of the procurement department/unit have in a direct procurement role? A.5 How many staff in the procurement department/unit are: (i) full time (ii) part time (iii) seconded A.6 Do the procurement staff have a high level of English language proficiency (verbal and written)? The Department of Planning and Cooperation (DOPC) has a Procurement Committee, which is used for the current project and will continue to be used for the Project. It comprises members from MAF and Ministry of Finance, and is chaired by the Deputy Director General of DOPC. Yes, the EA has a Project Management Division (PMD) within the DOPC which leads the procurement process. The Head of the Finance and Administration Division serves as the secretariat to the Procurement Committee. For the current project, the National Project Management Office (NPMO) serves as the co-secretariat. This arrangement will continue under the Project. PMD undertakes small-scale Shopping contracts, and the recruitment of individual consultants for some projects. For the current project, NPMO undertakes all procurement, as it will for the Project. The Head of PMD has 6 years. Individual consulting assignments provide support to the process of procurement. The Project Director of PMD is very experienced in procurement, and the project Director of NPMO who leads the procurement process under the current project, and will lead under the Project, has over 20 years experience in procurement. PMD has 11 full-time staff with limited experience in procurement since PMD has not long been established. NPMO has eight staff including the Project Director, and is assisted by the Grant Implementation Consultant (GIC) on all matters including procurement under the current project. This resource arrangement will continue under the Project. The Head of PMD is proficient. Among the staff, four can speak and write English. All NPMO staff and GIC personnel can speak and write in English. 2 Questions indicated with * are associated with potentially High or Substantial risks due to the impact being High, therefore the strategy for managing those risks should be addressed in the Project Procurement Risk Analysis (Appendix 3).

16 16 Annex 2 QUESTION RESPONSE RISK 2 A.7 Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project? A.8 Does the unit have adequate facilities, such as PCs, internet connection, photocopy facilities, printers etc. to undertake the planned procurement? A.9 Does the agency have, or have ready access to, a procurement training program? A.10 At what level does the department/unit report (to the head of agency, deputy etc.)? A.11 Do the procurement positions in the agency have job descriptions, which outline specific roles, minimum technical requirements and career routes? A.12 Is there a procurement process manual for goods and works? A.13 If there is a manual, is it up to date and does it cover foreign-assisted projects? A.14 Is there a procurement process manual for consulting services? A.15 If there is a manual, is it up to date and does it cover foreign-assisted projects? PROJECT MANAGEMENT UNIT PMD staff does not yet have the capacity to serve the procurement needs of large project. The proposed resources for NPMO and the Project Implementation Consultant (PIC) under the Project will be adequate for the Project; they are very similar to those that exist under the current project. There is no need to provide these resources to PMD for the Project. NPMO however, will need to replace the facilities that were originally provided under the current Project. Accordingly provision has been made in the financing plan for these replacements. PMD is currently receiving on-the-job training under another project. NPMO staff and GIC/PIC personnel have the necessary skills to undertake the procurement under the Project, and have demonstrated these skills under the current project. PMD reports to the Deputy Director General of DOPC. The Project Director of NPMO reports to the DDG of DOPC also. The staff at PMD do not yet have clear job descriptions. At NPMO and GIC however, procurement responsibilities have been adequately defined in the PAM for the current project. This has been continued for the Project. Yes, PMD refers to the National Procurement Manual and Decree. For the Project, NPMO and GIC follow ADB s Procurement Guidelines, as they will be required to do so under the Project. The Manual was updated in May 2009, and it covers foreign-assisted projects. NPMO/PIC will follow ADB s Guidelines under the Project, which is updated from time to time. Yes, PMD refers to the National Procurement Manual and Decree. For the Project, NPMO and GIC follow ADB s Procurement Guidelines, as they will be required to do under the Project. The Manual was updated in May 2009, and it covers foreign-assisted projects. NPMO/PIC will follow ADB s Guidelines under the Project, which is updated from time to time.

17 Annex 2 17 QUESTION RESPONSE RISK 2 A.16 Is there a fully (or almost fully) staffed PMU for this project currently in place? A.17 Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project? A.18 Does the unit have adequate facilities, such as PCs, internet connection, photocopy facilities, printers etc. to undertake the planned procurement? A.19 Are there standard documents in use, such as Standard Procurement Documents/Forms, and have they been approved for use on ADB funded projects? A.20 Does the agency follow the national procurement law, procurement processes, guidelines? A.21 Do ToRs for consulting services follow a standard format such as background, tasks, inputs, objectives and outputs? A.22 Who drafts the procurement specifications? A.23 Who approves the procurement specifications? A.24 Who in the PMU has experience in drafting bidding documents? A.25 Are records of the sale of bidding documents immediately available? A.26 Who identifies the need for consulting services requirements? A.27 Who drafts the Terms of Reference (ToR) There is a fully staffed NPMO in place for the current project, and this will continue under the Project. NPMO staff has shown adequate capacity under the current project, as reflected in the Best Project of the Year award in NPMO staff will continue under the Project. Note the current project is expected to complete around 25 subprojects, and the Project is expected to complete around 22 subprojects. Facilities under the current project have been adequate, but they will need replacing for the Project. Provision has been made in the financing plan for the Project. NPMO uses ADB s standard procurement documents for all procurement activities under the current project, which have all been approved by ADB. The Project will review and update these documents where necessary, and seek ADB approval before any procurement is carried out. NPMO uses the latest harmonized procurement documents where available, which are consistent with the national legislation. Otherwise, NPMO follows ADB s requirements and checks for consistency with the national legislation. ToRs under the current project were developed in conjunction with ADB and are detailed in the PAM for the current project. ToRs for the Project have been similarly developed and follow the required format, and are detailed in the PAM. NPMO/GIC drafted the procurement specifications for the current Project following ADB s Guidelines. NPMO/PIC has adopted a similar approach. NPMO and ADB. The Project Director and the staff of PIC (formerly known as GIC under the current project). Yes. Records are maintained at NPMO. The consulting services requirements for the Project were identified by NPMO and its consultants and ADB. The ToRs for the Project were drafted by NPMO and approved by ADB. A.28 Who prepares the request for RFPs are prepared and approved by ADB as a condition of Loan approval. Any required

18 18 Annex 2 proposals (RFPs) QUESTION RESPONSE RISK 2 B. INFORMATION MANAGEMENT B.1 Is there a referencing system for procurement files? B.2 Are there adequate resources allocated to record keeping infrastructure, which includes the record keeping system, space, equipment and personnel to administer the procurement records management functions within the agency? during implementation of the Project will be drafted by NPMO/PIC and approved by ADB before procurement commences. NPMO maintains a filing system for the current project, which will be continued under the Project. Archiving for at least 5 years after project completion. The record keeping system/mechanism at PMD needs to be improved. NPMO allocates adequate staff to the maintenance of its records, and the office is of a high standard, with adequate space for expansion of record keeping infrastructure. B.3 Does the agency adhere to a document retention policy (i.e. for what period are records kept)? B.4 Are copies of bids or proposals retained with the evaluation? B.5 Are copies of the original advertisements retained with the precontract papers? B.6 Is there a single contract file with a copy of the contract and all subsequent contractual correspondence? B.7 Are copies of invoices included with the contract papers? B.8 Is the agency s record keeping function supported by IT? C. PROCUREMENT PRACTICES Goods and Works C.1 Has the agency undertaken procurement of goods or works related to foreign assistance recently (last 12 months or last 36 months)? If yes, indicate the names of the development partner/s and project/s. PMD is required to keep records for a period of 10 years. NPMO has all documents relating to the current project, and maintains the records for 5 years after project completion. Yes, for at least 5 years. Yes, on file with other procurement documents for at least 5 years. Yes, all files including all correspondence are retained. Yes, the contract file includes all invoices. NPMO operates on a basic Microsoft office platform. To date, under the current project funded by ADB, NPMO/GIC has undertaken procurement for: (i) Nine vehicle packages (Shopping) (ii) Two office equipment packages (Shopping) (iii) 19 civil works packages (NCB) C.2 If the answer is yes, what were the major challenges faced by the agency? Under the Project, NPMO/PIC will continue to undertake similar procurement activities. The EA learned that determination of the lowest evaluated and substantially Moderate

19 Annex 2 19 QUESTION RESPONSE RISK 2 responsive bid (the winning bidder) should not only be based on (i) final corrected bid price; and (ii) standard of presentation of the submitted bid. Other factors are also important such as (i) past performance; (ii) availability of personnel, equipment, financial resources, etc.; and (iii) reliability of the information being presented in the submitted bid. C.3 Is there a systematic process to identify procurement requirements (for a period of one year or more)? C.4 Is there a minimum period for the preparation of bids and if yes, how long? C.5 Are all queries from bidders replied to in writing? Working within the framework of the PAM (implementation schedule, financing plan, cost estimates and the procurement plan) and the annual budget plan (government contributions), procurement activities are reviewed and approved for each year of operation of the current project. This will continue under the Project. Yes for ADB-financed projects, based on ADB guidelines. Generally no less than 6 weeks for ICB and 4 weeks for NCB from the date of the invitation for bidding. There is no standard minimum period for bid preparation on Government financed projects. Yes, and shared with all other eligible bidders. C.6 Does the bidding document state the date and time of bid opening? Yes. C.7 Are bids opened in public? Yes. C.8 Can late bids be accepted? No. C.9 Can bids (except late bids) be rejected at bid opening? No. C.10 Are minutes of the bid opening taken? Yes. C.11 Are bidders provided a copy of the minutes? C.12 Are the minutes provided free of charge? C.13 Who undertakes the evaluation of bids (individual(s), permanent committee, ad-hoc committee)? C.14 What are the qualifications of the evaluators with respect to procurement and the goods and/or works under evaluation? Yes. Yes. For the current project, NPMO/GIC undertake the detailed evaluation, which is then considered by the Procurement Committee (ad hoc). This will continue under the Project. Both the Project Director of NPMO and the Team Leader of GIC have a good deal of experience in the evaluation of bids for irrigation works/goods, as proven under the current project. Qualifications for the Procurement

20 20 Annex 2 QUESTION RESPONSE RISK 2 Committee are specified in section 2.2 and 2.3 of Decree 03/PM dated 09 January 2004 on Government Procurement of Goods, Construction Maintenance and Services. C.15 Is the decision of the evaluators final or is the evaluation subject to additional approvals? Subject to the approval of the Procurement Committee and ADB. C.16 Using the three worst-case examples in the last year, how long from the issuance of the invitation for bids can the contract be awarded? 72 calendar days C.17 Are there processes in place for the collection and clearance of cargo through ports of entry? C.18 Are there established goods receiving procedures? C.19 Are all goods that are received recorded as assets or inventory in a register? C.20 Is the agency/procurement department familiar with letters of credit? C.21 Does the procurement department register and track warranty and latent defects liability periods? Consulting Services C.22 Has the agency undertaken foreignassisted procurement of consulting services recently (last 12 months, or last 36 months)? (If yes, please indicate the names of the development partner/s and the Project/s.) The only imported items required are the vehicles. Under the current project, processes have been developed and tested for the import of vehicles. These will be used for the Project. See C.17. Vehicles and equipment are recorded as inventory of MAF and subject to financial audit under the current project. Civil works are handed over to the district and provincial government administrations (PAFO and DAFO) following the defects liability period, and recorded in their asset holding records. NPMO/GIC are familiar with bank guarantees and performance securities, but not letters of credit per se. Letters of credit not normally used. NPMO/GIC track all warranty and defects liability periods. In the case of civil works, retention is held until the end of the defects liability period. To date, under the current project funded by ADB, NPMO/GIC has undertaken procurement for: (i) 11 consulting services packages (CQS) (ii) One Grant Implementation Consultant package (QCBS) C.23 If the above answer is yes, what were the major challenges? C.24 Are assignments and invitations for expressions of interest (EOIs) advertised? Under the Project, NPMO/PIC will continue to undertake similar procurement activities. Allocated budget in the procurement plan was too low. Yes, as required by the national legislation and ADB s Guidelines. Major newspapers Moderate

21 Annex 2 21 QUESTION RESPONSE RISK 2 supplemented by ADB web site. C.25 Is a consultants selection committee formed with appropriate individuals, and what is its composition (if any)? C.26 What criteria is used to evaluate EOIs? C.27 Historically, what is the most common method used (QCBS, QBS, etc.) to select consultants? C.28 Do firms have to pay for the RFP document? C.29 Does the proposal evaluation criteria follow a pre-determined structure and is it detailed in the RFP? C.30 Are pre-proposal visits and meetings arranged? C.31 Are minutes prepared and circulated after pre-proposal meetings? Yes. The Procurement Committee is established as ad hoc with individuals from MAF and MOF. General qualifications, related experience and others. QCBS for larger contracts, such as the GIC or PIC. CQS for smaller contracts. ICS for individuals No, but nominal fee required to cover printing costs for larger bids. Yes, the evaluation criteria is included in the RFP, and it is agreed and approved by ADB before invitation to bid. Yes, at the request of the bidders. Yes, circulated to the Procurement Committee members, including other attendants. C.32 To whom are the minutes distributed? All Procurement Committee members, and other people attended the opening session. C.33 Are all queries from consultants answered/addressed in writing? C.34 Are the technical and financial proposals required to be in separate envelopes and remain sealed until the technical evaluation is completed? Yes. Yes. For QCBS. Other methods follow ADB and Decree 03/PM guidelines. C.35 Are proposal securities required? Yes. C.36 Are technical proposals opened in public? C.37 Are minutes of the technical opening distributed? C.38 Do the financial proposals remain sealed until technical evaluation is completed. C.39 Who determines the final technical ranking and how? C.40 Are the technical scores sent to all firms? C.41 Are the financial proposals opened in public? Yes. Yes. Yes. NPMO/GIC undertake the detailed evaluation for the review and consideration of the Procurement Committee. Yes. Yes.