Document of The World Bank PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 15.5 MILLION (US$23.6 MILLION EQUIVALENT) TO THE FOR A

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Procurement Services Unit South Asia Region Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 15.5 MILLION (US$23.6 MILLION EQUIVALENT) TO THE PEOPLE S REPUBLIC OF BANGLADESH FOR A PUBLIC PROCUREMENT REFORM PROJECT I1 May 23,2007 Report No: BD This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disciosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective April 30,2007) Currency Unit = Taka (Tk) Tk70... =US1 US$l S2493 = SDRl GOVERNMENT FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ADP Annual Development Program ARCS Audit Report Compliance System BAPD Bangladesh Academy for Planning & Dev. BCSAA Bangladesh Civil Service Admin. Academy CBC Communication and Behavioral Change BIAM Bangladesh Institute of Admin. & Mgmnt BIM Bangladesh Institute of Management BPATC Bangladesh Public Admin. Training Center BRAC Bangladesh Rural Advancement Committee BWDB Bangladesh Water Development Board C&AG Comptroller and Auditor General CAO Chief Accounts Officer CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment CGA Controller General of Accounts CIDA Canadian Internat l Development Agency CIPS Chartered Institute of Purchase & Supply, UK CMS Contract Management System, CPAR Country Procurement Assessment Report CPTU Central Procurement Technical Unit CSG Community/ Civil Society Groups DANIDA hiish International Development Agency DC Direct Contracting DFID Department for Internatl Development (UK) DG Director General EBS Electronic Bidding System ECNEC Executive Committee for Natl Econ. Council e-gp Electronic Government Procurement ESCB Engineering Staff College Bangladesh FAPAD Foreign Aided Project Audit Directorate FBS Fixed Budget selection FMC/ FMS Financial Mgmt Consultant/ Specialist FMRP Financial Management Reform Program GOB/ GOB Government of Bangladesh GP GrameenPhone Ltd. CC Consultative Committee IC Individual Consultant ICB International Competitive Bidding IDA International Development Association IFB Invitation for Bids IFR Interim Un-audited Financial Report Vice President Country Director Sector Director Sector Manager Task Team Leader IMED Implementation Monitoring & Evaluation Div. LGED Local Government Engineering Department MIS Management Information System MOP Ministry of Planning MTR Mid-Term Review e NCB National Competitive Bidding NGO Non-governmental Organization NS National Shopping NSAPR Nat l Strategy for Accel d Poverty Reduction OECD PATC Organization for Economic Coop. & Dev. Public Administration Training Center PDB Power Development Bdard PDO Project Development Objective PE Procuring Entity PFM Public Financial Management PIP Project Implementation Plan PMC Procurement Monitoring Coordinator PPA Public Procurement Act PPR Public Procurement Regulations 2003 PPRP Public Procurement Reform Project PROMIS Procurement Mgmt Information System PPSC Public-Private Stakeholders Council PSC Project Steering Committee QBS Quality-Based Selection QCBS,Quality- and Cost-Based Selection REB Rural Electrification Board RHD Roads and Highways Department RFP Request for Proposal SA Special Account SAC Social Accountability SBD.. Standard Bidding Documents SOE Statement of Expenditures SSS Single-Source Selection TA Technical Assistance TAL/TAC Technical Assistance Loan/ Credit Target agencies RHD, LGED, REB, and BWDB TPP Technical Project Proposal TWG Technical Working Group UNCITRAL UN Commission for Internat l Trade Law UNDP United Nations Development Program Barbara Kafka. Els Hinderdael Zafrul Islam

3 BANGLADESH PUBLIC PROCUREMENT REFORM PROJECT I TABLE OF CONTENTS FOR OFFICIAL USE ONLY Page A. STRATEGIC CONTEXT. AND RATIONALE Country and sector issues Rationale for WB involvement Higher level objectives to which the project contributes... 3 B. 1. PROJECT DESCRIPTION... :. 4 Lending instrument... : Project development objective and key indicators Project components... : Lessons learned and reflected in the project design Alternatives considered and reasons for rejection C. IMPLEMENTATION D. 1. Partnership arrangements Institutional and implementation arrangements Monitoring and evaluation of outcomeshesults Sustainability Critical risks and possible controversial aspects Credit conditions and covenants APPRAISAL SUMMARY Economic and financial analysis Technical Fiduciary Social... : $. Environment Safeguard policies Policy exceptions and readiness Annex 1: Country and Sector Background Annex 2: Major Related Projects'Financed by the WB and Other Donors Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs... ; Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11 : Project Preparation and Supervision Annex 12: Documents in Project File Annex 13: Statement of Loans and Credits Annex 14: Country at a Glance Map : IBRD35508 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

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5 BANGLADESH PUBLIC PROCUREMENT REFORM PROJECT I1 PROJECT APPRAISAL DOCUMENT SOUTH ASIA SARPS Date: May 23,2007 Country Director: Xian Zhu Sector MangerDirector: Team Leader: Zahl Islam Sectors: General Public Administration (100%) Els HinderdaeV Barbara Kafka Themes: Public expenditure, financial management, procurement Project ID: PO98146 Lending Instrument: Technical Assistance Environmental screening category: None (C) Load Credit Project Financing Data [ ]Loan [XI Credit [ ]Grant [ ]Guarantee [ 3 Other: Source Local Foreign BORROWER/RECIPIENT 1.30 INTERNATIONAL DEVELOPMENT ASSOCIATION Total Total

6 Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 Have these been approved by Bank management? Is approval for any policy exception sought from the Board? Does the project include any critical risks rated substantial or high? Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 [ ]Yes [XINO [ ]Yes [XI No Elyes [ IN0 [ ]Yes [XINO [XIYes []No [XIYes [ ]No Project development objective Re$ PAD B.2, Technical Annex 4 The PDO of the proposed project, as follow-on to the ongoing Public Procurement Reform Project (PPRP) that is scheduled to close in June 2007, is to improve performance of the public procurement system progressively in Bangladesh, focusing largely on the key sectoral ministries and targeting their implementing agencies. It would be achieved by strengthening the ongoing reform process and moving it fkther along with the following outputs: (i) enhanced capacity in creating a sustained program of developing skilled procurement professionals, (ii) strengthened management and monitoring of procurement in target agencies, (iii) introduction of electronic government procurement in those agencies and CPTU on a pilot basis, and (iv) creation of greater public awareness of a well hnctioning public procurement system by engaging civil society, think tanks, beneficiaries, and the private sector. All these actions are key elements in effective implementation of the procurement law/ regulations. Project description Re$ PAD B.3.a, Technical Annex 4 Component 1: Furthering Policy Reform and Institutionalizing Capacity Development would support the capacity development program and include certain key features of core procurement skills to institutionalize procurement capacity in Bangladesh. Component 2: Strengthening Procurement Management at Sectoral Level would support strengthening four key sectoral target agencies for improved management and monitoring of procurement (RHD, LGED, REB, and BWDB). Component 3: Introducing e-government Procurement (e-gp) would support piloting e-gp on a phased approach in the target agencies to make the system more transparent and lower costs. Component 4: Communication, Behavioral Change, and Social Accountability would support creating greater public awareness of a well hnctioning public procurement system by engaging civil society, think tanks, beneficiaries, and the private sector with the expectation of initiating a long-term process of procurement monitoring by them. Which safeguard policies are triggered, if any? Re$ PAD D.6, Technical Annex IO None. Significant, non-standard conditions, if any, for: Board presentation: None Loadcredit effectiveness: None Covenants applicable to project implementation: See Section C.6 of the PAD iv

7 1 A. STRATEGIC CONTEXT AND RATIONALE * 1. Country and sector issues 1. Investing f or good governance is a high priority for both the World Bank (WB) and the Government of Bangladesh (GOB). The WB s Country Assistance Strategy 2006 (CAS), aligned with the Govevent s National Strategy for Accelerated Poverty Reduction 2005 (NSAPR), identified governance as the major constraint preventing Bangladesh from improving the investment climate and empowering the poor, the two pillars of the CAS for accelerating the pace of poverty reduction. Governance is the focus of all sector programs the WB supports and I engages in, which address both sector and core governance issues in public procurement and public financial management. Likewise, the NSAPR highlights as strategic goals relating to good governance, the need for enhancing efficient use of resources, promoting transparency and accountability in resource use, and tackling corruption. 2. In Bangladesh, shortfalls in core governance, including inefficiencies in public procurement practices, poor financial management, corruption, and quality of civil service have led to very low expectations for public services and contributed to the high cost of doing business that, in turn, has deterred rapid private sector development. There is growing recognition within the country that improved governance, with reduction in corruption, is a prerequisite for improving the investment climate and accelerating private sector-led economic growth (see Annex 1 for firther country and sector background). 3. Public procurement is not just a mechanism for executing transactions but an integral part of the development process and a priority area for governance improvement within the overall framework of public financial management (PFM) system.. Budgets get translated into services in large part through the operation of the procurement system. Public procurement is also an arena where corrupt practices can be exposed and addressed, and successful procurement reform can help curb corruption. Widespread corruption within procurement systems is particularly damaging since it perverts public spending (generating a lower rate of return), reduces the value of public assets (bribe-givers benefit by skimping on quality), and. distorts the economy (firms invest in competing politically and not economically)., 4. The Country Procurement Assessment Report 2002 (CPAR) for Bangladesh identified procurement as the single most significant issue affecting public sector performance, with enormous wastage of money. Following the CPAR recommendations, with WB s technical assistance, the Government has been implementing a public procurement reform project (PPRP) that has successfully addressed key deficiencies in the legal and policy framework; the project is scheduled to close in June The Government established a procurement policy unit (Central Procurement Technical Unit or CPTU) within the Implementation Monitoring and Evaluation Division (IMED) of the Ministry of PIanning (MOP), issued Public Procurement Regulations in 2003, and in July 2006 passed a procurement law in the Parliament. The law and the regulations contain most features of the international good public procurement practices. 5. CPTU established a website ( where it publishes all policies and procedures, and which it uses to track procurement performance. It has been piloting with two key sector agencies a centralized performance measurement system with a set of predefined

8 2 indicators (Management Information System or MIS). To build procurement management capacity, CPTU, in collaboration with the ILO s International Training Center in Turin, Italy, and a local institute, developed a critical mass of 25 national trainers and provided training to about 1,700 staff in 260 organizations by February Though the landscape of procurement has been reshaped during the course of the last several years due to the procurement reform with harmonized procedures and the new regulations have increased substantial awareness among all stakeholders (procuring entities, bidding community, development partners), yet application of the national procurement rules has proven to be relatively inconsistent across government and within individual agencies, and actual implementation of the regulations is slow with less progress in improving tangible outcomes on the ground. In practice, there has been significant non-compliance to the rules and regulations, in particular delays in contract award, ineffective contract administration, and inappropriate bidding practices favoring collusion. The achievement of better procurement outcomes is further constrained by cross-cutting governance, institutional, and implementation issues including inadequate enforcement of regulations, incidence of fraud and corruption, and political influence. 7. A WB technical assistance credit to support a second PPRP (Public Procurement Reform Project I1 or PPRP 11) would follow up the successes of the first PPRP in laying the policy and legal foundations at the central level, with a shift of focus to address generic procurement issues in the operational, implementation, and monitoring fbnctions encountered at the sector level, in particular in the infrastructure, power, urban, and water sectors, in order to ensure sustainability of the reform efforts. 2. Rationale for WB involvement 8. The WB has consistently supported GOB S efforts to improve procurement and has incorporated procurement-related issues in all its strategic policy interventions and reviews for Bangladesh-the Country Assistance Strategy (CAS), Country Financial Accountability Assessment (CFAA), Development Policy Lending (DPL), review of Public Expenditure and Financial Accountability (PEFA) indicators, and review of institutional arrangements for public expenditure, financial management and procurement., 9. For its part, the GOB launch of procurement reform under the current PPRP has gone far to put procurement reform on the map. However, making reforms operational in Bangladesh will continue to be an intensely political matter, and reform design must take into account the local political economy and local capacity. From the outset, there was very limited international experience and therefore little guidance on how to design procurement reform in an environment where the entire public sector administration is outdated and broad reforms are needed. Thus the objective of the ongoing PPRP-the WB s first loan dedicated solely to improving procurement-was not to look for the best practice but rather a good local fit. In this the PPRP succeeded, creating a sound foundation and attracting a constituency for reform, and it can be considered as a success story and a model. 10. On the political economy front, there is a wind of change. The new Caretaker Government that came to power on January 11, 2007, has moved decisively to begin to address the governance problems and aggressively caw forward the reform agenda. It is acting to minimize the impact of black money and corruption on the political process including

9 3 procurement, and has reconstituted the Anti-Corruption Commission. The anticorruption drive and efforts to improve governance fit in well with the pursuit of the procurement reform agenda at the operational level. Furthermore, the procurement reform agenda received support from the last two elected governments belonging to two major opposition parties. The government approved the CPAR while the government supported the preparation and implementation of PPRP. 11. The WB has a comparative advantage in supporting the proposed project. It has always taken the lead role in embedding good procurement practices into the GOB S program of assistance, and has been recognized by the donor community on that account (e.g., DFID, JICA, EC, NORAD, The Netherlands, CIDA, SIDA, UNICEF). Now the country has its own harmonized procurement procedures that have been accepted for local procurement by the key donors. This harmonization effort of the WB was particularly appreciated at the Pqis Harmonization Conference 2005, As part of the local Consultative Committee (LCG),activities, the WB has been leading the sub-group in procurement. Even in sector wide-approaches (SWAPS), like the one for education sector project, led by Asian Development Bank (ADB) and financed by ten donors including the WB, the WB has played a leading role in procurement. The WB s support is therefore critical to continue with the reform process, and the proposed PPRP I1 is expected to serve as an anchor for the WB and other operations in Bangladesh. Though yet to be firmed up, DFID has shown some interest in the areas of civil society monitoring. The sectoral strengthening component of PPRP I1 would be coordinated with ADB s planned TA to IMED for strengthening project management capacity. Annex 2 presents related projects financed by the WB and other donors. 3. Higher level objectives to which the project contributes 13. The proposed project contributes to the Borrower s higher-level objectives, envisaged in the NSAPR, of improving the use of public resources with greater efficiency, transparency, and accountability, and tackling corruption, which in turn will help give better value for money and contribute to reducing poverty. The project supports the WB s core procurement function to work closely with clients to support the development of their public procurement systems. 14. The project supports both pillars o f the CAS, namely, improving the investment climate and empowering the poor. It addresses governance issues across all sector operations in Bangladesh, with particular reference to strengthening the key public sector institutions in the transport, power, urban, and water sectors. By addressing the demand-side issues, the project will help the target agencies achieve sector objectives by establishing a system of accountability and fairness in the execution of their procurement activities. Scaling up of procurement training will give procurement participants across the board the knowledge they need to operationalize what is in the law and the regulations. The specialized features of sensitizing all strata of people in the community to procurement issues and increasing public scrutiny of procurement processes and outcomes will add value by making public officials, Members of Parliament, and the bidding community more accountable for their actions. Piloting e-gp in the target agencies will increase tranpparency through disclosure of more information and substantially reduce opportunity for the use of discretionary powers in making procurement decisions, thereby increasing confidence in public sector procurement and contributing to a better investment climate.

10 4 B. PROJECT DESCRIPTION 1. Lending instrument 15. Options examined and rejected included a sector adjustment credit and an adaptable program for lending. A Technical Assistance Loan (Credit) was considered the most appropriate lending instrument because it is the one best aligned with the current first-phase reform under the ongoing PPRP. The proposed second project will be implemented over a period of five years, with one mid-term review (MTR) during project Year Three (about October 2010). An enabling procurement environment, with country s own regulatory institutional framework (procurement policy unit) combined with its procurement laws/ regulations and a critical mass of procurement professionals, provides the basis for the proposed PPRP 11. The project will target four agencies of the key sectoral ministries, chosen for the size of their procurement spending and known hereafter as target agencies : Roads and Highways Department (RHD), Local GQvernment Engineering Department (LGED), and Rural Electrification Board (REB), and Bangladesh Water Development Board (BWDB). Government would like to see the number of agencies involved increase over time, in particular, the Power Development Board (PDB), Directorate General of Food (DGF), Bangladesh Chemical Industries Corporation (BCIC), and other agencies relating to education, and health. It was agreed that such increase and its implications would be discussed at the appropriate time. 2. Project development objective and key indicators 16. The Project Development Objective (PDO) of the proposed Technical Assistance Loan/ Credit (TAL/TAC), as a follow-on project, is to improve performance of the public procurement system progressively in Bangladesh, focusing largely on the key sectoral ministries and targeting their implementing agencies. The PDO would be achieved by strengthening the ongoing reform process and moving it fbrther along with the following outputs: (i) enhanced capacity in creating a sustained program to develop skilled procurement professionals, (ii) strengthened management and monitoring of procurement in target agencies, (iii) introduction of e-government procurement in CPTU and the target agencies on a pilot basis, and (iv) creation of greater public awareness of a well functioning public procurement system by engaging civil society, think tanks, beneficiaries, and the private sector. All these actions are key elements in effective implementation of the procurement law/ regulations. 17. The project would be rated as satisfactory if the principal outcomes at the end of the project period are as follows: about 60 percent of contracts in at least three target agencies were awarded within the initial bid validity period; at least 50 percent of the target agencies have piloted electronic government procurement (e-gp) at their headquarters level for international procurement (international competitive bidding- ICB, and international consultancy); and at least 50% of the target agencies increased stakeholders engagement in following procurement issues. For a highly satisfactory rating, the corresponding figures would need to be 70 percent for the first indicator, and 75 percent for the second and third indicators each. The conceptual framework of intermediate outcome and output indicators, for which specific measurable indicators have been developed.in consultation with GOB, is outlined below and detailed in Annex 3. Indicators may be reviewed after a baseline survey has been completed and will also be reviewed at the MTR.

11 5 Intermediate Outcomes 0 Reduced delays in making contract award 0 Improved transparency and disclosure of information in procurement 0 Increased benefciary/stakeholders engagement in following procurement issues 0 Increased professionalism.in procurement Intermediate Outputs e Contracts awarded within the initial bid validityperiod (40% in Year2, 60% in Year4) e Procurement management system made functional e e-gp developed and installed in CPTU and target agencies Comprehensive communica~ion/ advocacy program developed and launched 0 Procurement professionals developed Total project cost is estimated as US$24.9 My of which the proposed IDA Credit would finance US$23.6 M. Most of project cost goes for consultants services and training (US$18.3 M). Detailed component descriptions are presented in Annex 4 and cost estimates in Annex 5. Component 1: Furthering Policy Reform and Institutionalizing Capacity Development 19. Furthering Policy Reform: The recently passed procurement law will come into effect once the enforcement rules are made effective, an activity which is in its final stage. The objective of this sub-component will be to ensure that all secondary legislation that is affected by the adoption of the law is amended and brought up to date to reflect the latest state of play including the procedures, guidelines, standard bidding documents (SBDs) or directives issued by the CPTU. The remaining SBDs for specialized procurement (e.g. health sector goods, textbooks, commodity, community contracting) are expected to be issued by December An international agency will be selected through a competitive process to undertake this task, in collaboration with an identified local institute and under overall guidance from the CPTU. 20. Institutionalizing Capacity Development: The current training program under PPRP appears to have been successful in meeting the immediate goal of training a core number of procurement officers in the new legal and regulatory procurement framework. As of Makh 2007, GOB had developed a critical mass of about 25 national trainers and trained over 1,700 officials. However, the training does not go far enough on core procurement skills such as evaluation mechanisms, contract administration, and planning, budgeting, and supply chain

12 6 management skills. In order to ensure continuity of the capacity development program not only for compliance but also for core competence skills, a medium- to long-term capacity development strategy is envisaged to provide: 0 Main procurement training course (goods and services, works and services); 0 Training ofprocurement focal person (PFP) at agency level; 0 Development of procurement core competence skills; 0 Short training courses for junior level oficers, policy makers, civil service, bidding community, and auditors; and 0 Short orientation courses. The training needs of the target agencies and a listing of proposed course descriptions are provided in the attachments to Annex 4. The government in consultation with the Bank would determine the training evaluation modality to ensure that training programs are conducted effectively. 22. To promote sustainability of the capacity development program, an incentive mechanism has been developed that includes: recognition of procurement expertise in staff performance evaluation and promotion; recognizing PFPs' contributions through their exposure abroad; recognition as local procurement trainers; allowing top performers to undertake the CIPS accreditation program; recognition as certified procurement professionals worldwide. Component 2: Strengthening Procurement Management at Sector Level & CPTU/ IMED,23. Implementation challenges at sector level: M&y factors underlie the varying degree of implementation at entity level, ranging from the limited amount of time that has elapsed since the regulations came into force to the lack of motivation within the bureaucracy to adopt new procurement procedures. Changing bureaucratic attitudes is a thorny, long-range process, but clarification of the procurement processes through training, explaining merits of procurement rules and regulations, and provision of incentives for good procurement results is expected to engage the bureaucracy productively in the reform process. 24. Strengthening sector agencies: To'achieve sectoral outcomes in terms of efficient use of resources, the project focuses on key sectoral ministries/ implementing agencies (infrastructure, transport, power, and water resources) that are carrying out bulk of public procurement and spending a large share of the public budget. The target implementing agencies are RHD, LGED, REB, and BWDB. The sub-component would address generic deficiencies in planning and budgeting, bidding process, contract management, and monitoring For each target agency, there will be a designated procurement monitoring coordinator (PMC) to oversee and monitor the PPR implementation and a group of procurement focal persons (PFPs) to provide in-house guidance and training. Each target agency will implement a series of standard protocols within the overall framework of the PPA/ PPR as described in Annex 4, the key points of which are: bidding: (a) publish invitation of bids above specified thresholds in website (CPTU); (b) allow a minimum of 21 days bidding time in national competitive bidding (28 days for large value contracts of Tk. 50 million or more), and receive and

13 7 open bids at one location save exceptional circumstances as described in the PPRiPPA (for Bank-financed project, such exception is not permissible); (c) include two outside members in the bid evaluation committee (either from public offices or from professional bodies/ universities/ beneficiaries), and submit the evaluation report directly to the approving authority within the stipulated timeline to ensure timely award ; (d) publish bidding results in website with adequate details, and introduce complaints handling mechanism. contract management: integrate the contract management system (CMS) with CPTU s PROMIS (for RHD only), and pilot electronic government procurement (e-gp); monitoring: (a) introduce procurement monitoring system PROMIS of CPTU, and provide procurement monitoring data to the CPTU and the designated M&E - consultant; (b) take initiatives to partner civil society/ beneficiary groups to help build a conducive procurement environment; and (c) post on the CPTU website punitive actions taken against bidders and/or staff for corrupt and fraudulent practices. 25. To promote the culture of good performance among the target agencies, the project envisages an incentive mechanism that includes: announcing annually an agency as Icon of the Year for best implementation of PPRPPA; recognizing the top three procuring entities of each target agency as best performers; rewarding exceptionally performing three officials handling procurement in each target agency (senior, mid., and junior); increasing budgetay allocation to agencies with better performance. Evaluation mechanism will be shared with the Bank for review. 26. Strengthening CPTU: CPTU s current staffing and logistics is overburdened and underequipped to cope with its mandate, which encompasses procurement policy formulation, monitoring of policy implementation, and expansion of its website to cover all important features of procurement information disclosure. CPTU, headed by one Director General and assisted by two Directors, has staff strength of 19. The proposed revised organization structure (attachnient to Annex 6), hded with GOB S own resources, will have 36 staff headed by the Director General and assisted by three Directors. In addition, there will be project-funded consultants/ staff. 27. Strengthening IMED s other units with Linkages to CPTU: IMED has four other units that are performing functions relating to project implementation, monitoring, and evaluation for various sectors. Procurement, as an integral part of the project implementation, thus requires strong linkage of CPTU with these other units. ADB is providing a technical assistance grant of about $USSOO,OOO for IMED project management. The proposed PPRPII will complement ADB s TA by providing support to these units with necessary infrastructure to establish computerized linkage, including hardware purchase and technical assistance.

14 8 Component 3: Introducing e-government Procurement (e-gp) 28. Governance and e-government Procurement: The public procurement system should have the trust of the business sector and the public at large based on demonstrating fair play, value-for-money, transparency, open competition, and accountability. Transparency and accountability require ready access to information. In a paper-based environment, access to information is highly restricted, while Internet access to information through implementation of e-gp can deliver highly accessible activity records and greatly reduce the cost of audit paths. 29. System Components and Functionality: Recognizing the need for quick results but also considering the risks given limited technological capacity, organization and expertise within the public and private sectors, e-gp would be implemented slowly in phases for e-bidding, e- purchasing, and e-contract management. Activities receiving project support would involve development of single web-based system, formation of an e-gp technical support unit, capacity development and training on e-gp for target agencies, and e-gp awareness campaign. To start with, the system will be piloted on a limited scale in each of the target agencies. Initially the possible areas for application of e-gp will be large consultancy assignments involving international consultants, goods/ works procured through international competitive bidding (ICB), and works of large value contracts in national competitive bidding (NCB). 30. The system will be designed and integrated centrally through a single portal at CPTU, allowing each implementing agency to log in and initiate specific independent procurement transactions. The existing MIS of CPTU will be enhanced, expanded, and integrated to form the first phase of e-gp. To maximize skills transfer, full integration with mainstream management, and long-term systems evaluation, e-gp will be developed by local consultants with the assistance of an international firm, rather than purchasing a commercial off-the-shelf system. Detailed implementation arrangements are described in the PIP. Component 4: Communication, Behavioral Change, and Social Accountability 31. The CBC & SAC component involves two separate but related sets of activities. The first focuses on creating greater public awareness of the importance of a well functioning public procurement system and the second involves the initiation of a long-term process of engaging civil society, think tanks, and the private sector in monitoring of procurement activities and outcomes. Both aim to support the implementation of reforms in public procurement through inducing behavioral change that brings recognition and acceptance of the legitimate role civil society groups can play in holding Government accountable for the proper conduct of procurement. 32. Building social awareness and understanding: Wide public support for procurement reform is important for project success, not just from the general public and civil society but likewise from policymakers, public officials, members of parliament, local politicians, and other vested interest groups. Four subcomponents have been included to support the attainment of this objective: (a) a communication strategy to raise awareness and educate Bangladeshi society in general about what procurement is and the crucial importance that it has for the proper management of public funds; (b) an education program to inform citizens, the media, and other third parties of the basics of proper procurement to expose them to the logic and usefulness of social accountability mechanisms; (c) a behavior change initiative to promote suitable conduct

15 9 throughout the procurement community (government officials and bidding community); and (d) an advocacy campaign to ensure that procurement reform remains high on the agenda of the key decision makers. All four are designed to de-mystify the procurement process and promote a shift in behavior and mind-set of all members of the community (policymakers, public officials, bidding community, civil society, community groups, politicians). 33. Engagement of beneficiary groups: This component involves the establishment of an entry point for engagement of beneficiary groups/ community support groups/ civil society groups/ non-government organizations/ business chambers/ media apex bodies (CSG) in monitoring the procurement process as well as outcomes. Social accountability is still not a well understood concept in Bangladesh. Though well known for its vibrancy and effectiveness in the delivery of services, the NGO community (and civil society more generally) in Bangladesh is still in the very early stages of engaging pro-actively in advocacy for governance reforms and in demanding greater accountability in the delivery of public goods and services. A small number of groups (comprising think tanks, NGOs, and media) have expressed interest in initiating a gradual process that can potentially lead over the medium term to wider engagement of civil society. This component focuses on a set of activities needed to initiate this process Improving public access to procurement related information; Technical training of media professionals and other interested third parties; Establishing a Government - contractor forum;and Encouraging the creation of formal arrangements. 34. CPTU can help facilitate the implementation of building social awareness subcomponent and the first three activities for the engagagement of beneficiary groups subcomponent, and it has indicated a willingness to do so. The creation of formal arrangements will require the support and explicit agreement of the GOB, which the project will endeavor to secure. This could start, for instance, with the creation of a Public-Private Stakeholders Committee (PPSC) comprising reputable individuals from civil society and the private sector and senior government officials at the Secretary level. 4. Lessons learned and reflected in the project design 35. The key problems encountered during the implementation of the on-going PPRP include implementation delays because of complex country decision process and institutional capacity constraints. Lessons learned from this and other current WB interventions in the sector and the region that have contributed directly to project design include: share procurement reform experience from different regions; form task team with more diversified mix of skills from different sectors; make suitable arrangements to improve procurement implementation capacity at the targeted procuring entity level, rather than at CPTU; involve key sectoral implementing agencies/ procuring entities through a technical working group (TWG); focus more on the demand side of reform through participation of civil society/ beneficiary groups/ stakeholders in the monitoring of procurement process and outcomes; provide electronic disclosure of procurement process information through an improved MIS and introduction of e-gp; use more realistic and relevant performance indicators; and link procurement reform with public financial management reform, anti-corruption and broader governance-related reforms. In addition, it has been observed that more attention needs to be given to promoting participation of stakeholders and behavioral change communications. Because establishment of a network of civil society/

16 10 beneficiary groups is a time-consuming process, it should be undertaken progressively using a step -by- s t ep approach. 5. Alternatives considered and reasons for rejection 36. The alternative of pursuing procurement reform through an overall umbrella of Public Financial Management Reform was considered, but rejected. DFID-funded 'Financial Management Reform Program (FMRP) of GOB deals only with financial management; while, DFID has initiated dialogue for broadening the framework of PFM to include procurement, this effort is still in a preliminary stage. Since procurement reform has already advanced in Bangladesh substantially, it advisable for these reforms to move ahead without waiting for an integrated PFM reform program. 37. A few years back, an attempt was made to design a public sector modernization project that included procurement, but the project did not materialize. While there is increasing recognition of the need to tackle the underlying governance issues in the country, securing Government commitment and ownership of a broad range of reforms in public administration or public sector financial accountability under a single framework may not materialize soon. Rather than.waiting, it was more prudent to proceed with a second procurement reform project to build the constituency for change with small but critical steps. This strategy has clearly demonstrated positive change over time. ' 38. Furthermore, there is already an agreement with the Government specifically on the priorities and approaches for continuation of procurement reform. There is, therefore, a critical need to move forward in a decisive manner so as to maintain the momentum created by the current reform process and the on-going PPRP. Based on the above, it is proposed to proceed with a follow-on reform TA credit. c. IMPLEMENTATION' 1. Partnership arrangements 39. The proposed reform interventions have been broadly agreed on by the Joint Strategic Partners (W, ADB, DFID, and Japan) within the overall framework of the WB CAS. The development partners expected the WB to take a leading role in Procurement in assisting the government in institutionalizing the various measures taken by it, including the issuance of PPR and enactment of a procurement law, to improve peformance of public procurement system. They expressed willingness to associate themselves with the Bank in its endeavors in that regard. On its part, the Bank kept them posted on the project preparation and discussions held with the government during processing of the TA components. In sizing the sectoral strengthening component, it kept in view the ADB's TA support to IMED project management, which is an important aspect of the project. The procurement process as well as outcome monitoring by the civil society/ beneficiary groups is expected to be financed out of the available trust funds, as available, while other part of the social accountability component will be implemented under the TA credit by the GOB in partnership with the stakeholders..

17 11 2. Institutional and implementation arrangements 40. PPRP I1 will be implemented over a period of five years. To ensure continuity of the reform program, CPTU within IMED will be the key implementing agency for the project while the target agencies (RHD, LGED, REB, and BWDB) will be responsible for implementation of management and monitoring of procurement actions at the agency level as envisaged under Component 2 of the project. Government would like to see the number of agencies involved increase overtime as mentioned in paragraph 15. In addition, in coordination with CPTU, the target agencies will be responsible for implementation of e-gp and social accountability activities in phases as envisaged in Components 3 and 4 respectively. The CPTU and the target agencies will prepare a Project Implementation Plan (PIP) where year-wise implementation activities would be detailed. Each target agency agreed to the proposed activities under the project and to designate preferably a full-time Procurement Monitoring Coordinator (PMC). In light of the fast increasing task and mandated functions relating to reform, CPTU s current strength will be improved in terms of staffing in accordance with the proposed structure (Annex 6), headed by one Director General (DG) and assisted by three Directors. The project has adequate logistics and TA support to both CPTU and the target agencies. CPTU has constraints in financial management (FM) capacity. A core FM team of three skilled staff, under project funding, will be in place from the start up of the project; in addition, one consultant will assist the FM team in the first year of the.project. 41. To oversee and review project activities, the Project Steering Committee (PSC), established under PPRP, will be reconstituted in line the mandated hctions in PPRP 11. To provide country-wide policy direction and anchor reform at higher level of bureaucracy, a Consultative Committee (CC), headed by a Secretary, will be formed with representatives from the key policy-making ministried divisions and head of the target agencies. In addition, to initiate and encourage the creation of formal arrangements for external monitoring of procurement, GOB will constitute a Public-Private Stakeholders Committee (PPSC) comprising reputable individuals from the civil society, think tank, professional and business apex bodies, and senior government officials., 42. Implementation of capacity development, MIS, and e-gp: A competitively selected TA team (consulting firm), under coordination with CPTUAMED, will implement an extensive capacity building program mainly with Engineering Staff College Bangladesh (ESCB- the nominated sub-consultant) and partly with Bangladesh Institute of Management (BIM) by instituting a well-articulated program covering an array of training, inqluded in the three-week main training course a short module of the Chartered Institute of Purchase and Supply (CIPS, U.K.). To ensure compatibility of the monitoring system (MIS) in CPTU, in accordance with the e-gp roadmap, the existing MIS PROMIS will be updated and expanded to form the first phase of e-gp using international consultant s services with substantial input from the local developer of the CPTU s MIS to promote skill transfer. In addition, to develop core competence skills in procurement including possible accreditation program, a separate twinning arrangement will be pursued between CIPS and a local institute such as ESCB, Bangladesh Rural Advancement Committee (BRAC) University, or another suitable private/ public university. 43. Implementation of/ communication strategy for CBC & SAC: Strategy for communication campaign and social awareness will be developed and initially implemented by a suitable organization, for instance, partner organization/ media find NGO/ communication firm

18 12 with specific expertise in the relevant field. The campaign will require the organization of workshops and the development of print materials specifically targeted to the audience, explaining the benefits of good public procurement. Public awareness will take place through the mix of channels most suitable to reach a large and varied population (probably radio, TV, print media, as well as through school teachers, community leaders, etc.). Subsequently, once the full strategy is developed and tested, small firms with relevant expertise may be selected who will carry out the grass root level workshops and campaigns. Independent monitoring of procurement by civil society would be funded separately from trust fund or similar arrangements outside the credit. 3. Monitoring and evaluation of outcomes/results 44. project Monitoring and Evaluation (M&E) will be done by both the target agencies and CPTU. Extensive use of the CPTU s centralized monitoring system is envisaged. A M&E team (consulting firm) will assist CPTU and prepare semi-annual reports on the overall project M&E including progress on the results framework for review by the WB. Results monitoring for PPRPII covers: (a) process monitoring of procurement activities by the target agencies to determine compliance with the PPR; (b) monitoring of procurement performance by the target agencies; and monitorin (c) the capacity development program and its impact; (d) the behavioral change communication and social accountability subcomponents; (e) the status of procurement and financial management; and (f) the overall project performance and its impact. For each component, a separate monitoring system has been developed (see Annex 3 for results framework and monitoring). The M&E process will cover all components and sub-components of the project, and the M&E data will be used to evaluate the project in three stages: (a) baseline situation; (b) mid-term evaluations; and (c) at the end of project implementation. 45. The target agencies and CPTU will provide required information to the M&E team. Several means may be used: direct data from the agencies, published data in the MIS of the target agencies and CPTU ( PROMIS ), field visits, consulting official sources/ bidding community/ civil society/ beneficiary groups, and interviewing key informants. Information thus collected will be further discussed and verified in open forums such as stakeholders consultation sessions. 4. Sustainability 46. Experience world-wide has demonstrated that the most important requirement for sustainable procurement reform is satisfactory policy reform with adequate institutional arrangements for its implementation, independent M&E, and stakeholder participation. For this project, most policy reform actions including the creation of a nodal procurement policy unit (CPTU) have been completed. As a follow-on intervention, the design for the proposed PPRPII has made the strategic choice to support strengthening the key sector agencies/ procuring entities for management of procurement and the CPTU, which would provide a strong foundation to sustain further reforms and institutionalize capacity development effort at local level in the longer term. 47. The reforms to be implemented during the project period-institutionalizing capacity development, strengthening procurement management and monitoring at sector level, introducing e-gp on a targeted basis, and involving civil society/ beneficiary groups in the

19 13 monitoring of procurement process and outcomes-constitute permanent improvements to the present regime. The CPTU is now a permanent entity that Government is committed to maintain. The enforcement and monitoring of procurement rules and procedures at the key procuring entity level together with measures to improve transparency (publication of procurement planning and monitoring data at websites including bidding results, using e-gp, and partnership with the civil society/ beneficiary groups/ bidding community) would help contain corruption, restore private sector confidence, and contribute to improving the investment climate. These results would help ensure achieving the PDO and sustaining project outcome. Risks To project development objective Absence o f civil service reform and reluctance and limited cooperation for management and monitoring of procurement by key sector target agencies (RHD, LGED, REB,and BWDB) Unwillingness or non availability of right civil society/ beneficiaj groups/ non-profit organizations (CSG) for monitoring procurement process/ outcomes because o f lack of I inadequate ownership by the Government Non issuance o f appropriate information technology and communication rules affecting piloting of e-gp, RISK MITIGATION MEASURES Ensuring reform implementation at the target agencies through a technical working group (TWG) compnsing a small number of motivated officials from these entities and the CPTU, adequate supports in terms of IT infrastructure and connectivity up to the district level and training for staff, and provision of a procurement monitoring coordinator at each entity. Creating a Stakeholders Committee for review of reforms comprising members from the Government, CSG, and business apex body, a separate. funding arrangement (trust fund from bilateral or similar) for the procurement monitoring CSG, effective working relationship through partnership/ MOUs among implementing agencies/ CPTU and CSGs, awareness among CSGs/ bidding community, a gradual process to broaden and deepen the concept of social accountability allowing sufficient time for consultation and consensus building. Supporting the preparation o f rules by the Ministry of Science Information Technology and Communication, the Computer Council for drafting the rules, and complemented with judicious use o f technical assistance. Risk Ratinf M To component results Inadequate institutionalization or non-well functioning of capacity development arrangement at local institute(s) Ensuring appropriate level interactions between the Chartered Institute o f Purchase and Supply (CIPS- UK) and relevant local institutes (ESCB or BIM), engagement of international TA team (consulting firm/ training institute) before the effectiveness of the credit, local institutes providing the local training resource persons, development o f procurement faculty at local institute(s). M

20 14 Risks Inability to change mindset and overcome internal resistance to implement reforms within target agencies (RHD, LGED, REB, and BWDB) and weak capacity of CPTU to implement the reforms. Delays in arranging separate financing for procurement monitoring CSG Broader public sector inefficiency and lack of continued political support for the implementation of procurement reforms Implementation- related problems such as shortage o f qualified staff at CPTU and target agencies, quick staff turnover, less experienced consultants and CSG, procurement delays, coordination problems and inadequate supervision. Loss o f time in the issuance o f Drocurement rules Overall risk rating N: Negligible Risk; M: Modest 1 RISK MITIGATION MEASURES Creating an enabling environment for the change process, incentive mechanism withm target agencies and CPTU (training and skill development, recognition of staff, recognition of TWG members contribution ), a strengthened CPTU with expanded organogram and skilled staff supported a TA team. Continuing dialogue with bilateral donors; improved coordination, harmonization of donors funding procedures. While funding constraints may affect procurement monitoring by CSG, other activities under that component relating to communication, advocacy, information, training, etc. still will continue from the project credit.. Regular coordination and pro-active communications by CPTU, IMED, target agencies including other relevant Miriistries and- higher levels of Government, meeting of the Consultative Committee, Stakeholders Council, and Project Steering Committee Close monitoring and continuous dialogue with CPTU and target agencies staffing, consultants and CSGs; assurance of Government allowing the current Director General (DG), CPTU to remain as DG and Project Director (PD) until his retirement in early 2008, followed by the selection of DGPD with appropriate qualifications and experience to IDA S satisfaction who is expected to continue for the remaining project period; initial project activities would, among others, include appropriate staffing arrangements at the CPTU combined with a suitable TA team; initiate processes to improve financial management and make procurement more efficient and transparent. The draft rule is at the final stage of approval. Regular monitoring; contact at the decision level of ministries; expedite approval process. yk; S: Substantial Risk; H:,High Risk Risk Ratinl S S S M M S 48. The major risk that may affect the achievement of the project s development objective is inadequate support and commitment from higher level management of the target agencies. The overall project risk is rated Substantial Primarily because of perceived issues in the management and monitoring of procurement at key sector target agencies, despite their expressed willingness to become part of the pilot. Since implementation is the key challenge, the project is more prone to that risk because of the sensitive nature of reform that is being pursued. The PMC and TWG members of each target agency would play critical mitigating roles in exposing detractors and building the constituency of support for reform from within the organization. This risk is also likely to be reduced to some extent by the involvement of (i) the Consultative Committee for policy direction with senior officials of the policy-making ministried divisions (Cabinet, Prime Minister/ Chief Advisor s Office, Finance, Law, Economic Relations Division, Planning, NED, Science Information and Communication Technology); (ii) the Public-Private Stakeholders Committee, with reputable individuals from the civil society, think-tank, private sector (bidding community/ business apex body), and senior government officials at the Secretary level; and (iii) the Project Steering Committee with representatives of implementing agencies. 49. Opposition to reforms may to a great extent be related to corruption, which is an endemic issue in the region. Project activities to increase transparency, introduce checks and balances in

21 15. the public sector, and educate the society at large could increase respect for ethics and law and increase the likelihood of detection. However, the broader issues of public sector inefficiency and corruption will require sustained effort over time to resolve. The proposed project s support can educate the community and foster openness but cannot assure that the lessons will be absorbed by all; therefor there remains a risk to achieving the desired objectives fully. 50. The project subcomponent involving CSG in the monitoring of procurement processes and outcomes is the most controversial activity, while its companion subcomponent involving social awareness/ education/ advocacy/ communication campaigns has insignificant risks in implementation. These activities deal directly with the demand side of the reform process, which is to a large extent beyond the control of the procuring entities. As there is no Freedom of Information Act in Bangladesh, it is quite legal to keep certain information confidential and introducing the concept of procurement monitoring by entities other than the procuring entity or CPTU is bound to be controversial. But it is the very independence of CSG monitoring that gives it great value added. If a CSG is formed with financing from bilateral donors, its sustainability will remain an issue and may pose a reputational risk to the WB, should it fail to function appropriately. The associated risks are proposed twbe managed with following measures: initiating a gradual approach to the concept of social accountability in procurement; initiating advocacy/ education campaigns at the beneficiary/ user/ community level; instituting a communication strategy to help build support for the reform; facilitating dialogue between procuring entities and the contracting community; and initiating CSG monitoring only after substantial progress on these activities. 51. The performance of M&E will be reviewed in depth at the MTR, which may be advanced if found necessary. The status of the CBC and SAC in particular will be reviewed in depth to see if the component would need realignment or restructuring to obtain the desired impact. 6. Credit conditions and covenants 52. Prior to negotiations: GOB: i. shared with IDA a copy of the approved TPP with revised structure of CPTU funded from the revenue budget; and a procurement plan for the initial 18 months of the project; obtained Bank s clearance to send request for proposal (RFP) to the shortlisted consultants for the key consultancy assignment for implementation and capacity development; formed a CC with representatives from the key policy-making ministried divisions and head of target agencies; iv. formed a PPSC, headed by the Finance Advisor, with members from the civil society, thi&-tank, NGO, business apex body, and senior government officials with agreed terms of reference; and v. confirmed that each target agency designated a PMC for overall monitoring and coordination of implementation of reform actions and represented at negotiations. 53. Prior to Board presentation: None

22 ~ Prior to effectiveness: None 55. Covenants for project implementation: There are following covenants for project implementation. The Borrower shall maintain CPTU with adequate staff funded from the revenue budget, headed by a Director General and three Directors. By no later than two months after the credit effectiveness, the Borrower shall (a) issue the procurement rules under the Public Procurement Act 2006; (b) appoint one more Director in CPTU and a Financial Management Consultant; and (c) confirm to the Association that CPTU is a permanent entity financed from revenue budget. By no later than three months after the credit effectiveness, the Borrower shall (a) ensure mobilization of the implementation and capacity development consultant; (b) appoint the additional Deputy Directors in CPTU. By no later than 15 months after the credit effectiveness, the Borrower shall (a) make the procurement performance monitoring system (MIS) of CPTU functional in all target agencies, and (b) develop and install the electronic government procurement (e- GP) system in CPTU and in at least three target agencies. By no later than 18 months after the credit effectiveness, the Borrower shall start piloting e-gp in at least two target agencies. The Borrower shall submit semi-annual progress report no later than one month after the end of each reporting period, included in it the detailed results monitoring indicators for each project component. The Borrower shall ensure that the current Director General of CPTU continues to function as Project Director (PD) until March 2008, following which the Borrower shall appoint a new Director General for successful implementation of the project for the remaining period to the satisfaction of the Association. The Borrower shall appoint, no later than nine months after the credit effectiveness, a Procurement Reform Implementation Advisor to assist the Director General of CPTU for efficient implementation of the project to the satisfaction of the Association. 1. Economic and financial analysis D. APPRAISAL SUMMARY ' 56. This project is designed to support sustainability of procurement reforms by improving procurement quality through better management and monitoring at target agency level. The direct benefits envisaged under the project would include faster and better use of public resources with increased transparency, contributing to the reduction of corruption, to an increase in aid utilization capacity, and to a better investment climate. The project would also enhance the capacity of the domestic construction and consulting industries to participate more effectively in national and international procurement. In the longer term, all the above would create a powerful force toward more transparent and accountable institutions, resulting in accelerated economic growth and faster poverty reduction. 57. To gauge the impact of the proposed interventions, a set of well-defined procurement performance indicators have been developed to monitor the performance of target agencies. In view of the nature of the project, since benefits cannot be quantified in monetary terms, no calculation of economic rate of return will be attempted. To ensure sustainability of the reform

23 17 initiatives, the Government has agreed to provide budgetary support to maintain the CPTU at the desired level. In addition, cost recovery mechanisms for providing training to private participants will be reviewed during implementation. 58. The Government will fund the CPTU staff salaries and part of operating expenses. The project s direct fiscal impact is minimal in consideration of its small contribution of about US$1.3 million as part of operating expenses, constituting five percent of the project cost. The project, however, would have significant fiscal impact on GOB S overall budget in terms of reduction of corruption, more effective competition, decrease of contracting costs, and timeliness of contract execution. 2. Technical 59 The key technical issues requiring special attention relate to (i) how to develop the incountry capability to deliver quality procurement training programs in an efficient and demanddriven manner, (ii) how to strengthen procurement management and monitoring at target agencies to help achieve quality procurement transactions, and (iii) how to sensitize the target groups of both the public and private sectors including the bidding community for acquiring and applying procurement knowledge in their work. 60. The major technical issues are: (i) enhancement, expansion, and integration of the CPTU s existing MIS PROMIS portal to form a robust system as the first phase of e-gp, with IT connectivity between the central server of CPTU and the target agencies up to the district level; (ii) integration of RHD s contract management system (CMS) and eventually of other target agencies with the CPTU s MIS in a way that all information starting with the invitation of bids (IFB) up to the final payments are available for monitoring; (iii) publication of relevant procurement data ir. the CPTU s website ( including procurement plan, IFBs, bidding results, and procurement performance indicators. To provide support in addressing these issues, an international training institute in collaboration with the local institute will provide incountry training to a large number of participants and extensive rigorous in-country/overseas training to a limited number of participants who will act as procurement focal persons at target agencies. The UK Chartered Institute of Purchase and Supply (CIPS) will introduce/ pilot a new procurement core competence skill certification course/ accreditation program in collaboration with a local institute and/or university, an activity absent from the first PPRP. 3. Fiduciary Financial Management 6 1. Although CPTU does not have a hll financial management organization of its own, it has successfully implemented the Public Procurement Reform Project. CPTU satisfactorily met the FM requirements, by employing a consultant as Project Finance Manager.. An appropriate FM system for the project has been agreed with adequate staffing, internal control measures, and internal and external audit arrangement meeting the requirements of Bank s OP/BP From the financial management perspective, the residual risk is Modest. This is because FM and disbursement aspects will be handled at one point by CPTU and the credit would have several consultancy contracts, where the financial flows are simply from Special Account to the

24 18 Consultants, with direct payment in some contracts, paid as per the terms and conditions of contractual agreements. Further details on Financial Management are provided in Annex Financing plan. The total project cost is US$ 24.9 million of which IDA Credit would finance US$23.6 million; the remaining US$1.3 million would be funded by GOB. All works, goods, consultants services including training and project staff incremental allowances would be financed 100 percent from the IDA credit. Recurrent/ operating expenses would be financed at the rate of 34 percent from the IDA credit throughout the project period. 63. Audit of project financial statements. CPTU/ IMED would be responsible for preparing project financial statements to be audited by the Foreign Aided Project Audit Directorate (FAPAD) of Comptroller and Auditor General (C&AG), using INTOSAI auditing standards. I 64. Funds flow and disbursement. IDA S part of project funds will flow mainly fhrough a designated account in a nationalized commercial bank to be opened either in US dollars or in Bangladesh Taka. Project funds will also flow through direct payments and.issuance of special commitments as and when required. Project cost will be disbursed under transaction-based traditional WB disbursement procedures. IDA will require full documentation where contracts for (i) goods exceed US$300,000 equivalent, (ii) works exceed US$500,000, (iii) consulting firms exceed US$lOO,OOO, and (iv) individual consultants exceed US$50,000. Expenditures below the above thresholds will be claimed through Statement of Expenditures (SOEs). Procuremen t 65. Risk and type of procurement: The residual procurement risk rating is average since, CPTU, being the key implementing agency, has been implementing a procurement reform project (PPRP) since 2002 without significant procurement problems/ issues. The target agencies may be responsible for very small procurement of computers for e-gp. The project procurement includes three major technical assistance consultancy contracts (implementation and capacity development, e-gp design and implementation, and M&E), and purchase of some goods and provision of obtaining services from non-profit organizations for the implementation of social accountability component. A draft Procurement Plan is included in Annex 8, along with other procurement details. 66. As part of the advance procurement action, the selection process for the key consultancy assignment for implementation and capacity development has been processed by NED/ CPTU in a way that the consultant will be on board by credit effectiveness. A competitively selected TA team (consulting firm) will implement an extensive capacity building program mainly with ESCB (the nominated sub-consultant) and partly with BIM by instituting a well-articulated program. To ensure compatibiiity of the existing MIS in CPTU, it will be expanded to form the first phase of e-gp using international consultant services with substantial input from the local developer of the MIS to promote skill transfer and robust maintenance capability of the system locally. Similarly, given the requirement for high degree of reliability of the e-gp system and its connectivity, this system is expected to be provided on a sole-source basis by hiring Grameen Phone, which has extensive networks across the country for such connectivity. For procurement core competence skills and accreditation program, UK CIPS will be contracted.

25 Procurement reform actions and management capacity. Most policy reform actions will be completed by the closing of the first PPRP. The Government established a Central Procurement Technical Unit (CPTU) with adequate staffing funded from its own resources, issued Public Procurement Regulation,s and recently passed a procurement law that includes most features of international good procurement practice. Concurrently, it developed a critical mass of 25 local procurement trainers and provided training to about 1,700 staff. All these actions are contributing positively to changinghmproving the procurement environment. 4. Social 68. Key social objectives and issues. The social development objectives include: capacity building, behavioral change, and public awareness. The major social issue is the behavioral change communication combined with social accountability. Given the experience of the first PPW, the key implementation challenges of the reform actions are closely linked to the change in mind-set of the stakeholders, in particular public procurement officials and the bidding community. Experience in other countries suggests that for such an attempt to succeed in its efforts, it will need the extensive support of external stakeholders-beneficiaries/users, civil society organizations, bidding community, and the media. 69. Planned Social Framework. The involvement of civil society/ beneficiary groups/ nonprofit organizations in the monitoring of procurement. has led to some controversy, as this approach is to a large extent beyond the control of the procuring entities. The key challenge is how to materialize demand-side monitoring on the ground. The framework for stakeholder participation has been established through: (i) initiating a gradual approach to the concept of social accountability in procurement; (ii) conducting public awareness campaigns in the beneficiary/ user communities; (iii) instituting a communications strategy to build support for the reform; (iv) facilitating dialogue between procuring entities and the contracting community; and (v) building CSGs capacity for procurement monitoring once substantial progress is made on (i)- (iv). 70. Implementation plan: There has been extensive dialogue with CSGs regarding their role in the process of reform. Initial findings indicate that while social accountability activities relating to social awareness, social mobilization, and media campaign can be achieved through partnership arrangements among CPTU, target agencies, and CSGs using project funds, independent monitoring of procurement processes and outcomes by civil society is likely to be funded separately outside the project. 5. Environment 71. The project is assigned Category C for Environment. No environmental impacts are expected to arise as a result of project implementation. The project will not involve any acquisition of land and displacement of population; there will not be any Project Affected Persons issue on this account (see Annex 10, Safeguard Policy Issues). 6. Safeguard policies Safeguard Policies Triggered by the Project Yes No

26 20 Environmental Assessment (OP/BP/GP 4.01) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) c1 [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] Involuntary Resettlement (OP/BP 4: 12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) Forests (OP/BP 4.36) [I [ X I Safety of Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60) [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI [I [XI [XI 7. Policy exceptions and readiness 72. There are no exceptions to WB policies. 73. The project meets the readiness filters of the Region. The financial management and procurement arrangements will be in place at the start of the project. The project is expected to be ready for implementation by the time it is presented to the Board, and the first year s activities could start immediately upon effectiveness. The project implementation and capacity development consultant will be in place by credit effectiveness. The first year of the work program would consist of developing the capacity development program, working out the plan for strengthening procurement management by target agencies, establishing the e-gp system, and framing a plan for gradual implementation of social accountability aspects.

27 21 Annex 1: Country and Sector Background BANGLADESH: Public Procurement Reform Project I1 Country economic setting and procurement reform 1. Bangladesh is one of the least developed nations in the world. With the dense population of about 135 million within an area of 147,570 sq. km and a per capita income below $500, poverty is endemic and wide spread. As in other country, public fimd is used for a large variety of services starting with the infrastructure and public utilities to service delivery for rural and social sectors with special emphasize on health, and education. With almost 85 out of 100 poor people living in rural areas, poverty in Bangladesh is largely a rural phenomenon. Improved performance of those public service delivery institutions concurrently with a developing private sector is therefore critical to reducing poverty. Despite considerable progress in overall poverty reduction, about half of the population still lives below the poverty line, and inefficient service delivery is preventing Bangladesh from achieving its full economic potential and accelerating the pace of poverty reduction. Governance and institutional constraints are the major impediments. It has been well documented that inefficient use of public fund is the root cause., 2. The WB s Country Assistance Strategy 2006 (CAS), aligned with the Government s ~ National Strategy for Accelerated Poverty Reduction 2005 (NSAPR), identified governance as the major constraint preventing Bangladesh from improving the investment climate and empowering the poor. As strategic goals relating to good governance, the NSAPR highlights the need for enhancing efficient use of resources; promoting transparency and accountability in resource use; and tackling corruption. Thus, investing for good governance is a high priority for the WB and the Government. 3. In core governance,. inefficiencies in public procurement practices, poor financial management, corruption, and quality of civil services have led to very low expectations of public services, and contributed to the high cost of doing business that, in turn, has deterred fast private sector development. There is growing recognition within the country that improved governance, with reduction in corruption, is a prerequisite for improving the investment climate and accelerating private sector-led economic growth. 4. Public procurement can be viewed not just as a mechanism for executing transactions but as an integral part of the process by which ministries and agencies use public money to provide services. Budgets get translated into services in large part through the operation of the procurement system. Procurement reform contributes to private sector development and enhanced trade. In developing countries, the state is often the largest single buyer of goods and services, the largest investor, and the largest single customer for a significant proportion of firms in the economy. Public procurement decisions have a major impact on the growth of the economy, the growth of sectors in the economy, and the growth of individual firms. In addition, the state is the largest single owner of assets in almost all countries, and its decisions on managing its stock and flow of assets strongly influence local resource markets. 5. Perhaps more significantly, procurement reforms, if successful, can help curb corruption. Public procurement is often at the epicenter of corruption and thus can serve as an arena in which

28 22 corrupt practices can be exposed and addressed. The association of corruption with procurement is understandable, given the number of discretionary choices that are part of the procurement process (what to buy, how much to buy, from whom to buy) and the amounts of money that are involved. Widespread corruption within procurement systems is particularly damaging since it perverts public spending (causing an overemphasis on capital spending and generating a lower rate of return), reduces the value of public assets (since bribe-givers benefit by skimping on quality), and distorts the economy (since firms invest in competing politically and not economically). 6. As part of the broad public sector reforms, procurement is one of the priority areas for governance improvement within the overall framework of public financial management (PFM) system. The Country Procurement Assessment Report 2002 (CPAR), broadly endorsed by the Government, identified series of deficiencies that include absence of a sound legal framework governing public sector procurement leading to proliferation of diverse rules and procedures among various agencies; protracted bureaucratic procedures allowing multi-point rent seeking; lack of critical mass of professionals to manage public procurement as reflected in poor quality bidding documents and bid evaluation, inordinate delays in completing the procurement process and ineffective contract administration; and absence of mechanisms for ensuring transparency and accountability in public procurement. 7. Since that time, following the CPAR recommendations, with WB s technical assistance through a public procurement reform project (PPRP), the Government made important strides in improving the legal framework for procurement and establishing a structure for managing the fimction. It made considerable progress in creating the foundations for an effective public procurement system and in bringing about a systemic change by mandating uniform procurement policy across all public sector entities. The Government established a procurement policy unit (CPTU), issued Public Procurement Regulations 2003 (PPR) and associated implementation procedures including streamlined procurement approval process, delegation of financial powers, and standard set of documents for procurement of goods, works, and services. Recently, the Parliament also passed a procurement law. The law and the regulations contain most of the international good public procurement practices.. 8. Though the landscape of procurement has been reshaped during the course of the last several years due to the procurement reform with harmonized procedures and the new regulations have increased substantial awareness among all stakeholders (procuring entities, bidding community, development partners, etc.), yet application of the national procurement rules has proven to be relatively inconsistent across government and within individual agencies, and actual implementation and appropriate monitoring of the regulations has been slow and little progress has been made in attaining tangible outcomes on the ground. Potential challenges that constrain the achievement of better procurement outcomes include substantial inefficiencies in procurement practices such as the lack of accountability of government officials, delays in the issuance of contracts, and inappropriate bidding practices including collusions. In effect, there has been significant non-compliance to the rules and regulations. Clearly, more needs to be done to ensure sustainability of the reform efforts, and the proposed intervention is undertaken to assist the Government.

29 Procurement policy and sectoral institutions 23 ' 9. Over 200 public sector agencies are involved in the management of procurement. Major part of the annual development program within the Government budget is spent by few key sectoral ministries involving infrastructure, transport, power, urban, and water resources. Other major ministries include health and education. In consideration of the use of large share of public resources from the annual development program of the Government, the project focuses on strengthening the key sectoral ministried implementing agencies dealing with infrastructure, transport, power, and water resources. The target agencies are Roads and Highways Department (RHD), Local Government Engineering Department (LGED), Rural Electrification Board (REB), and Bangladesh Water Development Board (BWDB). Other interested ministried agencies may also join the program if resources so permit (like, Power Development Board, food, chemicals, health, education). 10. While procurement is carried out at these agencies level, the CPTU oversees the policy/ regulations and its implementation part. CPTU, under IMED of the Ministry of Planning, was formed by the Government under its revenue budget as part of the PPRP intervention. CPTU is a permanent entity of the Government CPTU and has been implementing the current procurement reform project For PPRP 11, IMED/ CPTU is responsible for implementing the project while procurement management actions for strengthening the sectors will be implemented by the target agencies. Given the type of mandate to be performed, CPTU will be strengthened under the PPRP 11.

30 24 Annex 2: Major Related Projects Financed by the WB and Other Donors BANGLADESH: Public Procurement Reform Project I1 Sector Issue Projectls OED/ Latest Supervision (ISR) Ratings (WB financed projectsonly) Implementation I Development Objective WB-financed Lack of management capacity within the customs wing of NBR, complex export procedures, transaction-based processes leading to corruption and protracted clearance process. Export service institutions not delivering quality services (EPB) Excessive discretion exercised by judiciary, large case backlog causing protracted delays in reaching verdicts, and no separation of executive and judicial branches, leading to political interference in due process. Weak project accounting, reporting system and settlement methodojogy not consistent with modem audit technique and practice. MoF s asset management system is also obsolete and there is no computerized database storage and reporting system. GOB officials little focus on. policies and programs and too much focus on individual projects. Cumbersome procedures for project screening and evaluation are usually associated with major delays in implementation. Statutory framework for accounting, auditing and financial reporting is outdated. Bangladesh Export Diversification Project (BDXDP) Legal and Judicial Capacity Building Proj ec t Strengthening GOB S FM capacity and Building Institutional Capacity of the Office of the Comptroller and Auditor General Economic Management TA Program S (completed) S (ongoing) S (completed) U (ongoing) S U Accountable local government providing services that meet community priorities, supported by a predictable and transparent fiscal transfer system Absence of a sound legal framework in procurement; protracted bureaucratic procedures allowing multi-point rent seeking; lack of Local Government Support Project Public Procurement Reform Project I S MS S MS

31 Sector Issue Projecth OED/ Latest Supervision (ISR) Ratings (WB-financed projects only) Implementation Development Objective Progress (IP) (DO) xitical mass of procurement professionals; poor quality bidding documents and bid.evaluation, inordinate delays in contract award; and absence of mechanisms for ensuring transparency and accountability in public procurement. I 25 I Other development agencies Absence of appropriate budgeting and expenditure control. Inconsistent accounting system that compromises revenue and budget data used for Annual Development Plan. Weak capacity to conduct Government Audits. UK-DFID- Reform in Budget and Expenditure Control (RBEC 2000) UK-DFID- RIBEC Phase-I1 UK-DFID- Reforms in Government Audit (NGA) UK-DFID- Financial Management Academy Project (FMA) UNDP- Strengthening Transparency in the Auditor' General's ' Office (STAG) UK-DFID- Financial Management Reform Project (FMRP) completed completed completed completed completed ongoing. Improve stewardship of, and value for money obtained by, GOB State funds. Improve the management of the financial resources through adopting modem budgeting and expenditure control Improve stewardship of, and value for money obtained by, GOB State funds. Improve Government's fin. management capacity, adopting modem budgeting and expenditure management techniaues. Strengthening The Supreme Audit Institution of Bangladesh through equipping with IT. Improve the efficiency and effectiveness of the allocation of resources and to achieve equitable and improved public service delivery IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory), MS (Moderately Satisfactory). OED = WB Operations Evaluatiqn Depament

32 26 Annex 3: Results Framework and Monitoring BANGLADESH: Public Procurement Reform Project I1 (a) Results Framework PDO Improve performance o f public procurement system progressively in Bangladesh, focusing largely on the target agencies Project Outcome Indicators About 60% contracts in at least three target agencies reduce delays by making contract awards within the initial bid validity perigd Electronic government procurement (e- GP) introduced in at least two target agencies at their HQ level for international procurement. Increased stakeholder engagement in following procurement issues in at least two target agencies Use of Outcome Information YR1-YE: Assess achievements with respect to the implementation of reform actions and use o f proquement monitoring system including the use o f e-gp and stakeholders participation in procurement monitoring YR3: During the MTR, assess implementation of reform actions, and determine if strategy/ indicators for compliance or achieving PDO needs to be adjusted YR4-YR5: Consolidate the gains and feed into the strategy for mainstreaming program and evaluation. Intermediate Outcomes Outcome 2: target agencies manage and monitor their procurement at all levels to improve sectoral objectives Intermediate Outcome/Output Indicators i. Course curriculum and training materials developed for all courses ii. Local training institute develops a two-member procurement faculty iii. At least one local institute/ university introduces procurement core competence skill certification/ accreditation iv. About 60% procuring entities o f each target agency with one trained certified procurement staff i. Computer,hardware and software for all target agencies delivered and 3stalled ii. All contract awards above PPR specified thresholds published in CPTU's website for at least three target agencies iii. About 60% complaints in at least three target agencies handled satisfactorily iv. Annual implementation plan submitted by Target agencies Use Intermediate Outcome/ Output Monitoring YR1-YR2: Low levels may flag either poor training program for certification or lack of agency incentives to staff certified personnel YR3: Based annual M&E report and MTR, realign the capacity development approach, if necessary, to make it more effective YR4-YR5: Based on M&E reports, adjust/ modify the capacity development approach and consolidate the gains YR1-YR2: Flags possible procedural delays or other problems in compliance including lack of agency incentives YR3: Based on annual M&E report and MTR, realign the procurement management and monitoring approach, if necessary, to make it more effective YR4-YR5: Based on M&E reports, adjust/ modify the procurement management approach and consolidate the gains

33 27 Intermediate Outcomes Intermediate Outcome/Output Indicators Use Intermediate Outcome/ Output Monitoring Outcome 3: Target agencies at their HQ level pilot electronic government procurement (e-gp) for international procurement. i. e-gp developed and installed at CPTU and target agencies at HQ agencies ii. Network and connectivity for MIS established at the district level of at least tyo target agencies iii. e-gp piloted at HQ level for all international procurement in at least two target agencies YR1-YR2: HQ-field level (district) connectivity may flag problem or may raise incentive issues YR3: Based on M&E report and MTR, adjust the methodology and implementation plan for e-gp piloting and MIS, if necessary YR4-YR5: Based on M&E report, adjusvmodify the approach and consolidate the gains. ' Outcome 4: stakeholder engagement in following procurement issues increased communication strategy developed and launched ii. Workshops for communication campaign and advocacy campaign held in all districts for target professionals. and civil society organizations held iv. Government-contractors forum established for all target agencies and semi-annual meetings held I in understanding the concepts of social accountability and civil society/ beneficiary groups involvement in monitoring procurement YR3: Based on the M&E report and MTR, each targeted agency's approach may bc adjusted to suite the type of beneficiaries YR4-YR5: Based on M&E report, the involvement of civil society/ beneficiary will be consolidated for real life gains

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39 33 Annex 4: Detailed Project Description BANGLADESH: Public Procurement Reform Project I1 Lending instrument 1. Options examined and rejected included a sector adjustment credit and an adaptable program for lending. A Technical Assistance Loan (Credit) was considered the most appropriate lending instrument because it is the one best aligned with the current first-phase reform under the ongoing PPRP. The proposed second project will be implemented over a period of five years, with one mid-term review (MTR) during project Year Three (about October 2010). An enabling procurement environment, with country s own regulatory institutional framework (procurement policy unit) combined with its procurement laws/ regulations and a critical mass of procurement professionals, provides the basis for the proposed PPRP 11. Out of 300 public sector agencies where the Gyement s procurement law/ regulations are in force, the project will target four agencies of the key sectoral ministries, chosen for the size of their procurement spending and known hereafter as target agencies : Roads and Highways Department (RHD), Local Government Engineering Department (LGED), and Rural Electrification Board (REB), and Bangladesh Water Development Board (BWDB). Government would like to see the number of agencies involved increase over time, in particular, the Power Development Board (PDB), Directorate General of Food (DGF), Bangladesh Chemical Industries Corporation (BCIC), and other agencies relating to education, and health. It was agreed that such increase and its implications would be discussed at the appropriate time. Project development objective and key rationale 2. The Project Development Objective (PDO) of the proposed Technical Assistance Loan/ Credit (TAL/TAC), as a follow-on project, is to improve performance of the public procurement system progressively in Bangladesh, focusing largely on the key sectoral ministries and targeting their implementing agencies. The PDO would be achieved by strengthening the ongoing reform process and moving it further along with the following outputs: (i) enhanced capacity in creating a sustained program to develop skilled procurement professionals, (ii) strengthened management and monitoring of procurement in target agencies, (iii) introduction of e-government procurement in CPTU and the target agencies on a pilot basis, and (iv) creation of greater public awareness of a well functioning public procurement system by engaging civil society, think tanks, beneficiaries, and the private sector. All these actions are key elements in effective implementation of the procurement law/ regulations. 3. Though the basic foundation of reform has been laid, actual implementation and appropriate monitoring of the regulations has been slow and little progress has been made in attaining tangible outcomes on the ground. Experience shows that there are still substantial inefficiencies in procurement practices such as the lack of accountability of government officials, delays in the issuance of contracts, and inappropriate bidding practices including collusions. In effect, there has been significant non-compliance to the rules and regulations. 4. For sustainability of the current procurement reform program, the Government is now embarking on a round of reforms designed to address implementation challenges with

40 I 34 beneficiary/ stakeholders participation by improving its capability to implement the new rules and regulations more efficiently (in terms of process) and effectively (in terms of outcomes). This includes the development of a procurement focused management information system, the adoption of an IT based procurement system, and the expansion and institutionalization of training program aimed at establishing a professional career path within the Government and familiarizing non-specialists on the new rules/regulations and systems, including informed decision making by policy makers in approving contract wards. Thus, the proposed project will have the following four major components: a. Furthering Policy Reform and Institutionalizing Capacity Development; b. Strengthening Procurement Management in CPTU and Sectoral Ministries; c. Introducing e-government Procurement (e-gp); and d. Communication, Behavioral Change, and Social Accountability (CBC & SAC) Component 1 : Furthering Policy Reform and Institutionalizing Capacity Development 5. Furthering policy reform: The Public Procurement Regulations 2003 (PPR), framed under the PPRP, is in force. The recently passed procurement law will come into effect once the rules are made which is at its final stage of preparation through extensive consultation with a 60 member working group representing public sector, private sector, consulting industry, and others. Also, the key development partners provided their comments on it. The objective of the sub-component will. be to ensure that all secondary legislation of whatever nature which is affected by the adoption of the law is amended and brought up to date to reflect the latest state of play. Whatever those updating/ adjustments might be, they will imply consequential amendments to a number of other documents including the implementing procedures, the suite of standard, bidding documents (SBDs) and any guidelines or directions issued by the CPTU in respect of the procurement provisions. The remaining SBDs for specialized procurement (e.g., health sector goods, textbooks, commodity, community contracting, etc.) will need to be issued. An international agency will be selected through a competitive process who in collaboration of an identified local institute as explained below will undertake this task with overall guidance from the CPTU. 6. Institutionalizing capacity development: As of March 2007, under PPRP, GOB developed a critical mass of about 25 national trainers. and trained over 1700 officials of about 300 public sector organizations. The current training program appears to have been successful in meeting the immediate goal of training a core number of procurement officers in the new legal and regulatory procurement framework. However, the training does not go far enough on core procurement skills such as evaluation mechanisms and contract administration. Also, planning, budgeting, and supply chain management skills are lacking. For sustainable capacity development, its institutionalization is essential. To ensure continuity of the capacity development program not only on compliance but also on the core competence skills, the following components of a medium to long term capacity development strategy are envisaged: (i) Main procurement training course: The focus of this training for procurement of goods, works, and consultants services will be on compliance of rules and regulations including basic understanding of procurement core competence skills of purchasing, planning, and supply-chain management. This will be a three-week residential. course, each for goods and services, and works and sefiices, operating concurrently, with participants largely from the target agencies (RHD, LGED, REB, and BWDB), followed by other public

41 35 (ii) (iii) sector agencies, CPTU/IMED, and private sector. The course is mainly compliance focused, with some basics of competence skills. The junior-mid level officials/ procurement officers (who actually prepares bidding documents, request for proposals, evaluation reports, etc.) of the identified four target agencies are the key target audience; in addition, officers of other public procuring entities will also be included depending on the program need and availability of appropriate resources. The current training module will be reviewed and revised appropriately; key features of the course will include: basic modules on procurement competence skills, modules on compliance of national laws/ rules/ procedures, detailed modules on procurement of goods, works, and consultants services including hands-on training on the preparation of bidding documents/ request for proposals and evaluation of bids including contract management aspects, brief modules on the rules/ procedures/ documentation of the key Multilateral Development Banks (WB, ADB). To ensure sustainability, the training will be institutionalized and anchored locally in suitable institute in a way that the local institute over time develops a procurement faculty of its own in collaboration with the competitively selected international training provider, with a procurement basic core competence module by the Chartered Institute of Purchasing and Supply, U.K.- CIPS (2-3 days within the threeweek course). The international consultant, under CPTU s coordination, will carry out the extensive procurement capacity building program mainly with Engineering Staff College Bangladesh (ESCB- being the nominated sub-consultant), and partly with Bangladesh Institute of Management (BIM) by instituting a well-articulated program. The CPTU will coordinate and monitor all training activities under the program. The entire course module, developed jointly by the international training provider and the local institutes with necessary input from CIPS, will have endorsement of the WB and CPTU. Training ojprocurement focal person (PFP): This is an intensive advance short course designed specifically for the leading procurement professionals at the identified target agencies and MED/ CPTU; other agencies may join if resources so permit. The course will be a combination of compliance and competence skills training, held primarily at the local institute, with provision of exposures with international institutes or training abroad. Based on the qualification, skills and in-depth professional experience in procurement, a team of experts will select no more than eight persons from each of the target agencies and IMED/ CPTU to undergo this training; the persons will be selected either from TWG members or other mid-senior level procurement officials of these entities or a combination of them. After successful completion of the course, each of them will be a PFP of the respective agency. PFPs will also act as resource person for providing inhouse training and guidance on procurement matters. Development of procurement core Competence skills: This core competence training is distinct from the compliance-based training described under the main procurement training course. The component envisages a more holistic demand-based approach concentrating on the core skills of procurement functions. The method envisaged is to invite the Chartered Institute of Purchasing and Supply, U.K. (CIPS) to partner with local institute(s) to create skills at various levels allowing for the efficient division of labour within procurement departments and the creation of a distinct career path in procurement, if feasible, leading to the emergence of a well-trained and diverse procurement regime. The module will depend on the type of certificate/ accreditation a candidate would like to

42 36 pursue; currently CPS has six modules at various levels 2-7 recognized all over the world (starting at 16 years in secondary education or adult educations at level 2 up to university Masters Degree). The partnering institution could be either ESCB or BIM or a private/ public sector university like BRAC, or other university or a combination of them, (iv) (v) (vi) (vii) (viii) (ix) Short training course forjunior level oficers: Junior level staff of procuring entities who assist in estimates, accounting andor associated with procurement activities will be trained on a short course with customized module. This may vary 2-3 days depending on the kind of audience and the procurement activities. Short-training course for policy makers: All key policy makers qnd officials at various tiers of GOB will undergo this short course specifically designed on the basis of procurement rules and associated approval process. The objective is to help facilitate an efficient procurement approval process with reduced time lag. This course is meant for senior level officers with duration of 1-3 days, depending on the level of contract approval authority and financial delegation. Starting with the target agencies, over time this is expected to cover all public procurement entities and policy level ministries. Short-training for civil sewice oficers: This will cover freshly recruited civil servants as well as mid-level and senior civil servants. Assistance will be provided to various existing public training institutes to develop and include appropriate procurement modules within their current syllabus. For instance, for civil service entry officers in the administration cadre, a short module is likely to be introduced in their foundation course for the administrative cadre conducted at the Bangladesh Civil Service Administration Academy (BCSAA). Similar courses appropriately designed may be introduced in the training courses of senior level civil service officials conducted at the Bangladesh Public Administration Training Center (BPATC) or Academy for Planning and Development (APD). Short training for bidding community: This course with expected duration of about 2-3 days will be designed to take into account the need of the bidding community including contractors, suppliers, and consultants; course module will. include rules/ regulations as well as preparation of bids with due consideration of the bidding conditions. The course could be a combination of goods, works, and consultants services or separate for each audience, depending on the demand. All such courses for the private sector will be based on actual costs paid by the participants. Short training for auditors: Given the importance of the role of auditors in public procurement, the public auditors will be provided with targeted course on procurement that are appropriate for them. Since their role is different from the roles of public procurement officials, the course module will concentrate on the type of deficiencies in bids and actual contract implementation issues including delayed payments and imposition of liquidated damages for delayed implementation. Short orientation courses: This course will vary depending on the target audience which is expected to include a cross section of stakeholders including the Members of Parliament, business community, civil society groups/ CSGs, and media professionals. The objective will be to create an informed society of their roles in public procurement matters with special emphasize on peoples expectations of procurement outcomes.

43 37 (x) Training on BOT/BOOT/BOO/Concessions Contract: This one-week training course will emphasize on public-private partnership contractual arrangements for large infrastructure projects. It will be provided in ESCB with participants mainly from the four target agencies (RHD, LGED, REB and BWDB). ' 7. Capacity development/ training needs: Procurement officials of all procuring entities under the target agencies will undergo the mandatory main procurement training course of three weeks; over 2000 staff will be trained from these agencies. Procurement officials of other implementing agencies may also be nominated and participate in the main course provided suitable vacancy exists. All other training courses are on a demand basis. A summary of estimated training need is in Attachment Incentive mechanism for sustainability: To promote sustainability of the capacity development program, the following incentive mechanism is envisaged: (i) make provision to have at least one procurement trained staff in the evaluation committee; (ii) include procurement expertise as one of the criteria in the staff performance evaluation and promotion that deals with procurement; (iii) identify leading procurement professionals for each target agency who will be recognized as procurement focal person (PFP) at the agency level; (iv) make provision of training the PFPs abroad; (v) create opportunity to become local procurement trainers from the PFPs of each target agency andor top performers in the training classes; (vi) provide opportunity to the agency level PFPs and/or top performers in the training class to undertake procurement accreditation program with the Chartered Institute of Purchase and Supply (CIPS- U.K), allowing worldwide recognition as certified procurement professional. The details are provided in the Project Implementation Plan (PIP) of the Government. On recommendation from the,capacity development consultant, the government in consultation with the Bank would determine the training evaluation modality to ensure that the training programs are conducted effectively. Component 2: Strengthening Procurement Management at Sectoral Level & CPTU/ IMED 9. Implementation Challenges at Sectoral Level: The GOB has gained invaluable experience with implementing new procurement practices after the adoption of national procurement rules. Though most policy reform actions are in place, application of those rules/ regulations has proven to be relatively inconsistent across government and within individual agencies, and the piloting of the procurement monitoring and information system in key implementing agencies. While CPTU is the policy making body, the actual implementation of regulations and associated procurement outcomes are dependent entirely on the performance of the implementing agencies under various ministries. Experience shows that full implementation of regulations with appropriate monitoring still remains as the key challenge combined with cross-cutting governance and institutional constraints including delays in award for large contracts, allegations of fraud and corruption, and political interference. The experience to date has left little question that implementation of the PPR will require significant strengthening of the ability of both CPTU and the implementation agencies to manage procurement operations and transactions and monitor and report upon results. Lessons from international experience with improving procurement in other countries suggests that effective implementation of the new law will require a disciplined and effective central public procurement body, a clear implementation strategy that has been agreed upon by the policy agency and implementing bodies, and mechanisms to support and monitor prokess in the application of the strategy.

44 The reasons for the varying degree of implementation at entity level encompass issues ranging from the limited amount of time that has elapsed since the regulations came into force to the disinterest of parts of the bureaucracy to adopt new procurement procedures. Experience has demonstrated both the ability to significantly improve procurement practices and outcomes as well as the enormous challenges that lie ahead. All of the target agencies (LGED, RHD, REB, and BWDB) are playing leading role in the implementation of PPR. For instance, BWDB s Contract and Procurement Cell- CPC (functional since 2004) is the focal point for management of information, knowledge and technology; LGED also has recently set up a Procurement Unit. Though piloting the procurement monitoring system has indicated the power of the system to. increase transparency, at the same time it has severely strained the resources of the executing agencies (REB and LGED) and the CPTU to actually produce/ analyze data with appropriate measures to handle the deficiencies. 11. Review at the target agencies level indicates the following generic deficiencies that still exists and need to be addressed: planning & budgeting- inadequate procurement planning and its monitoring; splitting of contract packages; inadequate integration of procurement planning with budget formulation; delays and complex procedures in the fund release mechanism. Besides, there are also issues concerning quantity increase in the bill of quantities (BOQs) of some of the bidding documents. 0 0 bidding process- excessive delays in award of contract as the contract approval limit goes higher, specially at the levels of agency head and above; large incidences of nonadherence to the procurement approval process in particular reference to the processing of evaluation reports for the approval of the ministry or cabinet committee levels; ignoring PPR requirements, review of bid evaluation committee s report by another committee or set of persons attached to the contract approving authority; allowing frequent submission of bids at multiple locations; mostly providing 21 days bidding time in national competitive bidding without regard to the high value of contract size; incidence of collusive bidding practices with inadequate enforcement of the relevant sanction provisions of the PPR; frequent extension of bid validity; inadequate disclosure of information; inadequate adherence to the complaint handling mechanism; either no or poor means of collecting procurement processing data from the field; no centralized unit or system in place at the agency level to track and monitor bidding and contract award information for determining compliance with the PPR. Contract management- poor contract administration; frequent non-adherence to the work plan/ schedule; excessive delays in contract execution; frequent incidence of delayed payments to contractors/ suppliers/ consultants; non-imposition of liquidated damages for delayed implementation; inadequate supervision and quality control of works. monitoring- either no or poor means of collecting procurement processing data from the field; no centralized unit or system in place at the agency level to track and monitor bidding and contract award infomation; poor monitoring of contract performance; and infrequent submission of procurement information to CPTU.

45 Strengthening sector entities: This sub-component is designed to support each of the critical elements identified in the preceding paragraph for the target agencies, followed by other agencies as the project moves on. For appropriate management of procurement to address the key generic issues, the implementing agencies require adequate support in terms of improving its practices with required logistics and infrastructural support. In addition, disclosure of procurement process information including contract awards and appropriate handling mechanism for complaints are critical to make the system more efficient and functional in terms of accountability of the procuring entities. The interventions will include: (i) agreeing to specific sets of arrangements for each targeted agency to address the deficiencies identified in bidding practices, contract management, and procurement planning and budgeting; (ii) providing support to the target agencies in developing a strategy for the implementation of new rules and practices; (iii) providing infrastructural and logistic supports to those entities for the collection of data for procurement tracking and plonitoring including establishing and integrating CPTU s monitoring system PROMIS as a fully functional system; (iv) integration of PROMIS with the RHD s Contract Management System (CMS) in a way that RHD can have a fully kctional automated system to track bidding process as well as contract performance. Other target agencies may also initiate similar arrangements The sector strengthening reform actions have been anchored at CPTU and the target agencies through a technical working group (TWG) comprising small number of highly motivated officials in the CPTU and the target agencies. These officials are working together in promoting the improvements from within. To achieve sectoral outcomes in terms of efficient use of resources and strengthening procurement management and its monitoring, each target agency will implement the following standard protocol within the overall framework of the P PN PPR: i. procurement monitoring coordinator (PMC): designate a PMC for overall monitoring of agency s procurement. The PMC wil! be responsible for coordination and monitoring of procurement management at the entity level starting the invitation of bids up to the final payments, with assistance from TWG. Mainly the procurement monitoring database will be the source of information. Through submission of quarterly report, the PMC will bring any significant deficiencies/ departures from practicing the PPR to the notice of the management, and may take assistance of any other staff, as the agency provides iv. V. vi. procurement planning: prepare annual procurement plan with appropriate contract packages without splitting and publish the same in website of the agency and/or CPTU for contracts of Tk. 10 million and above; budgeting: prepare budget taking into account the annual procurement plan and the timeline for procurement packages fund release mechanism: obtain fund or assure timely release of fund in coordination with the relevant ministry. invitation for bids (IFB]: publish invitation of bids above specified thresholds in website of the CPTU, in addition to the publication in widely circulated newspapers. post qualzjkation; invite bids for works contracts on a post-qualification basis, except for the large value contracts of US$ 5 million and more where pre-qualification may be done provided the work is of complex nature;

46 40 vii. viii. ix. x. xi. xii.... xiii. xiv. xv. bidding time: allow a minimum of 21 days bidding time in national competitive bidding (NCB), however, for large value NCB contracts (Tk. 50 million and more), the bidding time should not be less than 28 days; multiple dropping: all bids shall be submitted and opened at one location; on exceptional circumstances as specified under the Procurement Act/ Rules, submission of bids at more than one location may be allowed provided they are opened at one location and the reasons thereof are recorded properly. However, for Bank-fimded projects such exception shall not be acceptable; opening of bids: open bids immediately after the bid submission deadline. bid opening committee: open bids by a formal bid opening committee included in at least one bid evaluation committee member. bid opening minutes: prepare bid opening minutes, with readout bid prices of participating bidders, signed by bid bpening officials and representatives of bidders; and share the minutes with bidders immediately after opening. bid evaluation committee: include at least two members of outside the procuring entity in the bid evaluation committee, with adequate experience in procurement; depending on the type of procurement such members shall be either from public offices or from professional bodies/ universities/ beneficiaries; timeliness of bid evaluation: ensure independent functioning of the the bid evaluation committee and submit bid evaluation report directly to the contract approving authority within the stipulated timeline, along with the certificate of impartiality. timeliness of contract: award contract within the initial bid validity period without seeking extension of time. PMC will make extra effort to alert concerned procuring entities for award of contract within the initial period of bid/proposal validity so that no extension of validity is required. sub-delegation ofjnancia1 power: appropriately sub-delegate financial powers at the field level as per the GOB S financial delegation notification. All field offices shall ensure exercise of their authority in the field of bid evaluation, contract award, and contract administration without referring them to the higher authority. xvi. re-bidding: allow re-bidding only in exceptional circumstance with valid justifications, taking into account that the development partner may not finance such contract, if found not justified, in particular the agency will enquire into the matter, record and highlight the grounds of re-bidding (i.e. inappropriate bidding practices or similar, high bid prices etc.). For corrupt practices, actions need to be recommended. xvii. contract awards: publish bidding results in website with brief reasons for rejection of bids. Within two weeks of contract award, the agency will publish in its (if applicable) and CPTU s website the following information: identity of contract package, date of advertisement, number of bids sold, number of submitted bids, number of responsive bids, brief reasons for rejection of bids, name of the winning bidder and the price it offered, date of notification of award, date of contract signing, proposed completion date of contract.

47 41 xviii. complaint handling: introduce complaint box at each procuring entity and handle complaints within the stipulated timeline, maintain a complaint database and a standard protocol with triggers for carrying out investigations. xix. late payment and liquidated damage: make payments to suppliers/ contractors/ consultants in a timely manner as per the provisions of the contract. Interest for delayed payments beyond a specified period will be stated in the bidding documents. Also, impose liquidated damages as per contract provisions for delayed completion/ delivery. xx. post review: carry out annual post review of procurement packages on a sample basis as per the provisions of the PPAI PPR. xxi. procurement performance monitoring: install and use the procurement monitoring system PROMIS of CPTU with connectivity up to the district level to track procurement performance, with necessary updating of required field, generate report at entity level, and transmit relevant data to CPTU. xxii. integration of contract management tool: for RHD, integrate the contract management system (CMS) with CPTU s PROMIS to generate all monitoring information starting with the IFB up to the final payment. xxiii. MIS data submission: provide procurement management and monitoring data to the CPTU and the designated M&E consultant. xxiv. pilot e-gp: pilot electronic government procurement (e-gp) at HQ for international procurement (ICB contracts and international consultancy). The agency will establish e-gp connectivity up to the division level. xxv. training: nominate and train all relevant staff in procurement in accordance with the agreed plan under the project; also suitable candidates will be trained on the use of e- GP/MIS applications. xxvi. engagement of beneficiary: take initiatives to partner civil society/ beneficiary groups/ non profit organizations to help build a conducive procurement environment through awareness building, media campaign, and monitoring as appropriate. xxvii. action against bidderdstafl take action against bidders and/or staff for corrupt and fraudulent practices. In cases of possible collusion found or established for reasons, Le. same hand-writing, identical unit prices in the bill of quantities (BOQs), consecutive serial numbers in bank guarantees for bid security etc, procuring entities will initiate actions, including debaning contractors/suppliers, as appropriate in accordance with national rules. If any firm is debarred, the list of debarred firms will appear in the web sites of CPTU, and of the entity, if applicable, and the debarment notice will be circulated to all field offices and other government/public sector offices, putting it as a lesson to discourage corrupt or similar behavior. Similarly, for staff, the agency will take appropriate/disciplinary action against those involved in corrupt or fraudulent practices, in accordance with the services rules and procurement regulations. 14. To promote the culture of good performance among the target agencies, the project envisages following incentive mechanism: GOB will recognize annually (i) one target agency as

48 42 the Icon of the Year for best procurement performance measured through the project results monitoring indicators and provide symbolic monetary award along with a certificate; (ii) top three procuring entities of each target agency at the field level (district, sub-districts or other fields) as best performers; and (iii) three officials (senior, mid, and junior level) in each target agency for their effective contribution in promoting the knowledge of procurement, practicing them, and help implementing the PPW PPA. The project has provisions for the logistics and infrastructure support including training to help achieve the desired goals by the target agencies. Evaluation mechanism for items (i)-(iii) will be shared with WB for review. 15. Strengthening CPTU: CPTU with its current staffing and logistics is overburdened with numerous tasks and is simply insufficient to cope with the given mandate of procurement monitoring and the incoming changes in the procurement activities in the country. While the procurement management and monitoring is primarily the responsibility of the procuring entities, CPTU has the responsibility to support GOB not only on procurement policy matters but also in the monitoring of implementation of procurement policies and practices by various ministried entities and provide necessary reports to evidence proper functioning of the public procurement system or the lack of it. In addition, developing and implementing a strategy for procurement capacity development and its institutionalization within the country. 16. As part of the disclosure of information, CPTU;among others, will publish in its website the following information: (i) procurement law and associated all policies/ procedures/ guidelines including standard bidding documents and request for proposals; (ii) procurement plans as submitted by the procuring entities; (iii) all invitations for bids (IFB) above the specified threshold in the PPR (iv) bidding process monitoring information as output of PROMIS including contract management data for RHD and other target agencies, when available; (v) complaints handling information including the results of review by the independent review panel; (vi) list of debarred ineligible firms along with brief reasons for debarment and the period of debarment; (vii) capacity development information including list of trained staff by agency or batch; and (viii) important clarifications in the form of frequently asked questions (FAQs). To address functions relating to rules/ procgdures, monitoring, e-government procurement (e-gp), and social accountability issues, CPTU needs substantial strengthening in terms of staffing and logistics. The proposed organization structure, funded with GOB S own resources, will have 36 staff headed by the Director General and assisted by three Directors. In addition, there will be project funded consultants/ staff. 17. Strengthening IMED s other units with linkage of CPTU: IMED has four other units that are performing functions relating to project monitoring and evaluation in reference to various sectors. IMED has the overall responsibility at the national level to provide GOB with required level of information as regards project implementation monitoring of various ministries. Procurement, being an integral part of the project implementation, thus requires strong linkage of CPTU with its other units of IMED in a way that there is appropriate exchange of information. Besides, for carrying out day to day functions more effectively concerning project monitoring and evaluation, strengthening of those units in terms of logistical and technical support is needed. To make the reform initiatives more effective, those units are required to be well equipped in terms of their infrastructural facilities. ADB is providing a technical assistance grant of about $800,000 for IMED s project management. Given the nature of the project objective, to complement ADB s initiative, the project, within its limited scope, will provide support to these

49 43 I- units through computerized linkage of the CPTU s MIS and relevant units with necessary infrastructure to ensure proper sharing of information. Also, the project will support providing technical assistance in terms of individual consultants need through a pool of consultants so that part of the technical expertise could be outsourced either to relevant agencies/ institutions like Bangladesh University of Engineering and Technology or to obtain services directly from identified consultants. 18. Strengthening bidding community: Successhl implementation of the PPW PPA will require an informed and well-trained bidding community, equipped with knowledge and skill for preparing bids. Also, it is critical that the bidding community contributes to the development of the procurement regime in the country through their experience and hands-on issues. Toward this, as part of the process, apart from training of the bidding community, various options will be explored including development of a nation-wide contractors database of qualifications and experience; formation of contractors registration board; and development of local construction industry. NED/ CPTU and the target agencies will coordinate the feasibility of introducing this concept. Component 3: Introducing e-government Procurement (e-gp) 19. Risks and governance requirements for public procurement: The public procurement system should be able to support the trust of the business sector and the broader community and be characterized by: value-for-money, transparency, open competition, and accountability. However, the vulnerabilities in procurement include lack of information and expertise, contacts and collusion, conflicts of interest with public officials, lack of accountability and political influence. Experiences have included: discrimination and delay in issue of bidding documents to suppliers, cartel formation to suppress competition, physical threats to bidders, bid boxes at multiple locations, tampering of bid files, delays in evaluation of bids, human interfaces at every stage, and an unwillingness to provide transparency. The significance of discretion in the anticorruption arena is frequently reiterated, and the discretionary power of officials is perceived as representing high risk. These problems are mostly not matters for procurement law but for procurement management. Thus while the procurement steps may simply be prescribed in procurement law, the management tasks around this operate at another level. Therefore to bring in transparency in procurement process, information access is essential, which in turn is a precondition for accountability. This transparency is not effectively served in a paper-based environment where information access is substantially academic. This objective can be obtained through implementation of e-gp E-procurement design: The strength of e-procurement arises from its capacity to greatly reduce the cost and increase the accessibility of information. However, the benefits do not arise simply because technologies are being applied. The effective application of these technologies requires that processes be formally defined, lines of authority clearly specified and procedures and terms and conditions be standardized - these steps are required by computerization. Thus, e- procurement is not simply the application of technology to existing processes, but a reform process in itself. The enhanced transparency arising from the application of technology to the procurement function delivers directly and efficiently what many rules and regulations seek to do indirectly. Both for high value bidding exercises and low value purchasing, procurement regulations usually aim at ensuring transparency through due process by stipulation of procedural

50 44 steps. The outcome of this is instead often a lack of transparency because of over-regulation. Technology can bypass much of this by delivering very low cost audit paths and highly accessible activity records: transparency is delivered more directly. The regulation and transparency versus performance issue, noted previously, becomes substantially circumvented. 21. System components and functionality: Recognizing the need for some quick results but also considering the risks associated with the level of technological capacity, organization and expertise within the public and private sectors, the results of the recently concluded study provides ground that e-government procurement can be implemented slowly in phases in the following areas: e-bidding, e-purchasing, and e-contract management. The development of the e- bidding service requires: posting all bidding information on a single internet site and developing and activating the information systems that support that site. If a third party service provider is engaged it is also important that the functional and operational requirements are clearly and contractually specified. These must be specified in a way that integrates the central site and online transactions with work processes. Detailed components will involve: development of single web-based system, formation of an e-gp technical support unit, capacity development and training on e-gp for key procuring entities, e-gp awareness campaign, and piloting e-gp followed by its fill introduction. 22. A range of systems and sub-systems are applicable: E-Bidding System (EBS), Bid Lodgement System (BLS), Contract Management Registers, Contract Management System, Government Procurement Portal (GPP), Consultant Registration System, and Works Management System. The functional capabilities of an e-bidding service need to be specified. 23. It is envisaged that the online e-gp services and functions to be implemented in a phased manner where each phase may be broken down into smaller steps to match the resources, development and the business model. This represents a risk-managed approach and is recommended over a Big Bang approach that would carry high risk of incompatibility with user needs, policies and resources. CPTU, in close coordination with the target agencies will establish the system. To start with, the system will be piloted on a limited scale in each of the target agencies, and the actual mode of implementation will vary depending on the type of procurement. Taking cognizance of the bidding community, it is envisaged that the possible areas will be: large consultancy assignments involving international consultants, goods/ works procured through international competitive bidding (ICB); small works will be tried only when the system has proven to be robust and the bidding community is well equipped with the required level of expertise and infrastmcture. 24. The system will be designed and integrated centrally through CPTU with portals for each key agency/ ministry so that they have independent access. Compatibility of the system with the CPTU s MIS is a critical consideration. The systems on the website can be accessed by both buyers and suppliers. The timetable for this approach will be determined by the capacity of the CPTU to implement the components in target agencies. The system functionality of these requires specification as a next step. This will provide the roadmap to system selection and a realistic timeframe to follow. To maximize skills transfer, as well as fill integration with mainstream management and long term evaluation of the systems the Roadmap will be designed around the preference for the local development of e-gp rather than the purchase of a commercial off the shelf system. While the e-gp system s technical support function will be out

51 45 sourced, the fee for service mechanism could be established to borne the necessary maintenance cost and make the system more sustainable on the long-term where the user charges goes to the application service provider. Component 4: Communication, Behavioral Change, and Social Accountability 25. This component involves two separate but related sets of activities. The first focuses on creating greater public awareness of the importance of a well functioning public procurement system and promoting a better understanding of the operations and mechanics of the procurement process. The second involves the initiation ofa long term process of engaging civil society, think tanks, and the private sector in monitoring the implementation of procurement regulations -.are the rules and procedures being followed -- and procurement outcomes. Bdth aim to support the implementation of reforms in public procurement through inducing behavioral change that, among others, brings recognition and acceptance of the legitimate role civjl society groups can play in holding Government accountable for the proper conduct of procurement and the willingness of.such groups to engage in active monitoring of both procurement processes and outcomes. 26. Building social awareness and understanding: This project aims to facilitate the implementation of the rules and regulations that will govern public procurement under the recently passed procurement law, e.g. are contracts being bid out in accordance with the law, and the monitoring of procurement outcomes, e.g. are roads being built to standard, are the right textbooks in the right quantities being delivered to the right school districts. Thus, it will necessarily draw the attention of vested interest groups who will likely create impediments to the project. For this reason, it is important for the project to be able to draw wide public support, not just from the general public and civil society but likewise from policymakers, public cfficials, members of parliament, and local politicians. Four subcomponents have been included to support the attainment of this objective: 1. Communication strategy: To generate public support for procurement reforms, it will be important to educate Bangladeshi society in general about what procurement is and the crucial importance that it has for the proper management of public funds. Procurement is very technical in nature and most citizens, including intellectuals, will know very little about it or even care about it. The term itself evokes a sense of boredom. The challenge for the project is how to get the public to appreciate the value of a good procurement system: why should they care about it; what does it mean for their daily lives, what can they do in their own little way to help improve it. The project will develop and implement a culturally grounded communication strategy to make the average citizen aware and appreciative of the need for a well functioning procurement system. The first step would be to carry out an opinion research (a quantitative survey and a series of.focus groups) to determine how much the public understands and appreciates procurement and the values that it embodies (proper management of public funds, outsourcing the provision of goods and services in a competitive manner, accountability of public officials, etc.). Based on the results of this research, a comprehensive communication strategy would be developed. While it is difficult to ascertain the content of the strategy, it is foreseeable that it would involve print, radio, television, and other forms of communication as needed. In the

52 46 Bangladeshi context, innovative approaches that build on cultural attributes will be explored as experience suggests these can be very effective for creating awareness among the populace and getting people quickly informed about a complex issue. These could include for instance the following: use of songs performed by well known Bangladeshi artists that are played on the radio/ TV and recorded on CDs which are then distributed to the population, perhaps through elementary and high schools andor religious organizations;. 0 a music video targeted to the younger generation could also be prepared and shown on regular TV stations as well as cable channels; 0 anti-bribery billboard at each procuring entity of target agencies; a feature for-tv documentary on the impact of a poorly working procurement system and. the pathologies that plague the Bangladeshi system; road shows, rallies, and short plays produced and presented by university drama clubs or other similar arrangements aimed at the college crowd; 0 an education program on morale and ethical behaviors/ norms for honest earning and livelihood (possibly by religious leaders, hams or similar approaches); and 0 a comics series in Bengali that presents the core of the issues in a lighthearted but clear way. ii. Education program: Education is important in creating awareness. The project will thus seek to inform citizens, the media, and other third parties of the basics of proper procurement, Le. the steps in the process and the essential requisites for carrying out each step properly, and, through the lens of public procurement, to expose them to the logic and usefulness of social accountability mechanisms. An education program will be developed which would include among others training of select NGOs on the basic principles, fundamentals, logic, and implications (for one s daily life) of procurement and a roaming workshop that would go to different towns and would be handled by the NGOs. iii. Behavior change: Promoting awareness and appreciation of the importance of good procurement among the Bangladeshi public is not sufficient to bring about change. It is key to engage the procurement community - officials, contractors, intermediaries, etc. -explain to them that the Government is committed to improving the current system and encourage them to operate according to suitable standards. A communication effort in itself will not be enough to convince those who are behaving unethically that they should act differently. However, such a behavior change initiative is likely to help those who are fundamentally honest and well-meaning but who might have acted differently due to ignorance or peer pressure. Under this initiative it is foreseen to have workshops, award schemes, mentoring programs, as well as interpersonal communication activities. iv. Advocacy campaign: Ultimately the activities above will have to be supported by a well thought out advscacy campaign. This one will be designed to gamer support of officials at the central and local levels for the reforms envisioned within the project as well as for mainstreaming and expanding these reforms, including in particular the engagement of civil society groups or non-profit organizations. This advocacy effort

53 47 will strive at keeping procurement reform high in the agenda of decision-makers, civil society and the media. This will help ensure that there is an ongoing debate about the importance of counting with a sound procurement system for the social and economic development of the country. 27. All four sub-elements are designed to de-mystzjl the procurement process -- often a black box to most individuals, to help promote a shift in behavior and mind-set among the members of the community (policymakers, public officials, bidding community, civil society, politicians) with regards to procurement activities, to encourage increased demand for reforms, and ultimately to provide the social foundations to support the institutionalization of a well functioning public procurement system over the long term. 28. Engagement of beneficiary groups: This sub-component involves the establishment of an entry point for engagement of beneficiary groups/ community support groups/ civil society groups/ non-profit organizations/ business chambers/ media apex bodies (CSG) in monitoring the implementation of the procurement act and associated procurement outcomes. In the Bangladesh context, the engagement of external parties in monitoring and advocacy will require a relatively long gestation period. This project will attempt to initiate a process that will undoubtedly take several years to mature. 29. Social accountability is still not a well understood concept in Bangladesh (except within the small, limited class of intellectual elites) and, as such, it draws a high degree of cautiousness and skepticism (sometimes even suspicion) from most individuals. Not surprisingly, pro-active and focused advocacy for third party monitoring of government activities is still very much at a nascent stage: though well known for its vibrancy and effectiveness in the delivery of services, the NGO community (and civil society more generally) in Bangladesh is still in the very early stages of engaging pro-actively in advocacy for governance reforms and in demanding greater accountability of the Government in the delivery of public goods and services However a small number of groups (comprising think tanks, NGOs, and media) have expressed an interest in initiating a gradual process that can potentially lead over the medium term to wider and deeper engagement of civil society and the private sector in the monitoring of procurement processes and outcomes. This component focuses on a set of activities needed to initiate the said process. i. Improving public access to procurement related information: With the CPTU s existing website and a linked management information system enhanced to form the first phase of e-procurement, more and more information is going to become available on procurement related matters. CPTU s website makes available procurement information and is scaling up a management information system that will contain detailed procurement information from the key ministried agencies, who will be entering data through an interactive data entry system. This information will be made available (through the website) to the public for use in research, analysis, and other related activities. ii. Technical training of media professionals and other interested third parties: Relevant information, once obtained must be interpreted and analyzed to become useful. Procurement data is highly technical and requires specialist training;

54 48 iii. iv. without sufficient training, interested citizen groups and other third parties will not be able to make effective use of such information. It will thus be important to establish a training program in procurement practices for the various stakeholders who have an interest in using this data. The idea is to promote procurement literacy among civil society groups and media professionals to enable them to analyze and understand the available data and to motivate them to get increasingly engaged in advocacy for continued reforms in procurement and in monitoring the implementation of the reforms as well as their outcomes. Establishing a Government - contractors Forum: In terms of initiating engagement between the Government and external stakeholders, a good place to start is with the contracting community. This project will endeavor to establish a regular forum through which the contracting community (contractors association, suppliers association, consultants association, etc.) can engage in a continuous dialogue with the Government on procurement related issues. To facilitate and institutionalize this dialogue, a third party will need to be engaged as convener and moderator of the forum. This could be a think tank, a well established NGO, or a consortium of civil society organizations. Whatever the form this takes, the groups involved will need to undergo sufficient training on procurement to be a credible moderator. Encouraging the creation of formal arrangements: To expand, deepen, and sustain efforts to engage beneficiaries in the conduct of procurement, it will be important to establish an appropriate authorizing environment. One way or another, it will be necessary for the Government of Bangladesh to establish formal arrangements through which more direct engagement of beneficiaries in the procurement process can be officially sanctioned. This could start for instance with the creation of a public-private Stakeholders Committee(PPSC) comprising reputable individuals from civil society and the private sector and senior government officials at the Secretary level CPTU can help facilitate the implementation of building social awareness subcomponent and the first three activities for the engagagement of beneficiary groups subcomponent, and it has indicated a willingness to do so. The latter one - the formal arrangements -- will require the support and explicit agreement of the GOB, which the project will endeavor to secure. It is anticipated that increased awareness among the populace and the communications strategy will help pave the way for productive discussions with the Government: with better understanding comes a willingness to talk. This could start, for instance, with the creation of a public-private, Stakeholders Committee (PPSC) comprising reputable individuals from civil society and the private sector and senior government officials at the Secretary level.

55 49 Name of Number of Breakdown of Procuring No. of Class- Agencies Procuring Entities I Officers Entities' RHD 65 1 HQ and 64 District offices 354 LGED HQ, 64 District and 480 1,168 Potential Trainees' BWDB I 330 I 1 HQ, 7 Zone, 19 Circle, 77 I REB Division and 226 Subdivision offices.1 1 HQ (completely centralized) 2,507 2,059 Notes: 1. Procuring Entity is defined as Ministries, Divisions, Departments andor Local Government agencies (e.g. City Corporations, Municipalities, etc.), Corporations, Autonomous, Semi-Autonomous bodies or other units or sub-. divisions thereof to the extent that they use public funds for procurement. 2. This is derived on the following basis: all class-i officers if total number is less than or equal to percent o f class-i officers in case total number is more than At mid-term review, the above program will be reviewed and adjusted according to include other agencies (like, PDB, food, chemical, etc. may be added)

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57 51 Annex 5: Project Costs BANGLADESH: Public Procurement Reform Project I1 1. Cost estimates at appraisal are summarized below.,the recurrent cost in the project includes annual operating costs. 2. The project involves two large consultancy assignments: (i) implementation and capacity development; and (ii) e-gp consultant. Besides, there will be monitoring and evaluation consultant, and a team of support service individual consultants to CPTU. Estimated costs of goods and equipment are related mainly to computers and e-gp connectivity. A detailed itemized cost estimate will be included in the TPP. Project cost by component Furthering Policy Reform and Institutionalizing Capacity Development Strengthening Procurement Management at Sector Level & CPTU/ IMED Introducing Electronic Government Procurement (e-gp) Communication, Behavioral Change - and Social Accountability.Total Project Cost Total Financing Required Financing. I Goods Consultancy Services Civil Works I Total Total Financing Required Financing Project cost by category Local Foreign Total US$ million US$ million US$ million 5.OO IDA GOB Total Local US$ million Foreign Total US$ million US$ million IDA GOB Total / All costs are inclusive of physical contingencies (3%), price Contingencies (2%), and local taxes. Consultancy services include project incremental allowances for staff of CPTU, TWG members, and PMCs.

58 52 Annex 6: Implementation Arrangements BANGLADESH: Public Procurement Reform Project I1 Partnership arrangements 1. The proposed reform interventions have been broadly agreed on by the Joint Strategic Partners (WB, ADB, DFID, and Japan) within the overall framework of the WB CAS. The development partners expected the WB to take a leading role in procurement in assisting the government in institutionalizing the various measures taken by it, including the issuance of PPR and enactment of a procurement law, to improve peformance of public procurement system. They expressed willingness to associate themselves with the Bank in its endeavors in that regard. On its part, the Bank kept them posted on the project preparation and discussions held with the government during processing of the TA components. In sizing the sectoral strengthening component, it kept in view the ADB's TA support to IMED project management, which is an important aspect of the project. The procurement process as well as outcome monitoring by the civil society/ beneficiary groups is expected to be financed out of the available trust funds, as available, while other part of the social accountability component will be implemented under the TA credit by the GOB in partnership with the stakeholders. Institutional and implementation arrangements 2. PPRP I1 will be implemented over a period of five years. To ensure continuity of the reform program, CPTU within IMED will be the key implementing agency for the project while the target agencies (RHD, LGED, REB, and BWDB) will be responsible for implementation of management and monitoring of procurement actions at the agency level as envisaged under Component 2 of the project. Government would like to see the number of agencies involved increase overtime as mentioned in paragraph 6 of the main text. In addition, in coordination with CPTU, the target agencies activities will include, among others, implementation of e-gp in phases on a selective scale as envisaged in Component 3 of the project, and engaging beneficiary/ user/ civil society participation in building social awareness in procurement matters as outlined in Component 4, The CPTU and the target agencies will prepare a Project Implementation Plan (PIP) where year-wise implementation activities would be detailed to help timely implementation and monitoring of the outputs and outcomes in order to meet the project objectives. Each target agency will update the annual implementation plan, as needed, no later than two months before the start of the next fiscal year. The PIP will be shared with IDA for review. 3. All target agencies expressed their deep interest and willingness for implementing the PPR, with varied degree of implementation stage, for instance, LGED is relatively at advanced stage of implementation including piloting MIS of CPTU. One agency (BWDB) expressed staffing constraints though it has a Procurement Cell. The main constraint is the shortage of staff with the desired skills. This would limit the TA intake capacity of BWDB. The DG will arrange restructuring internally and designation of staff for procurement training of its regular staff and coordination by drawing upon consultant assistance to carry out the normal functions of the board. All agencies agreed to the proposed actions, iricluding the appointment of a Procurement Monitoring Coordinator (PMC), connection of CPTU's MIS with them, and the preparation of its

59 53 * *. Implementation Plan. In LGED, it would also mainstream the active involvement of communities and other stakeholders in the monitoring of the procurement process in its various projects/schemes at the district- and upazilla-levels (covering union parishads and municipalities); this is because LGED already has some experience in the engagement of members of civil society, beneficiaries, and peoples representatives in various stages of procurement/procurement outcomes at the local level (union parishads). 4. PSC, PMC, TWG: To oversee and review project activities, the Project Steering Committee (PSC) for the ongoing procurement reform project will be reconstituted in line with the mandated functions of the proposed project. The PSC should meet as frequently as possible depending on the project need, however, not less than at least once in every three months. A Procurement Monitoring Coordinator (PMC) at the target agency level, not below the rank of Superintending Engineer or equivalent, will be responsible for coordination and monitoring of agency s implementation of procurement reform actions; the PMC will be assisted by the TWG. Currently, each target agency nominated two TWG members who are assisting and deeply associated with the preparation of the project. Given the nature of the task for coordination and monitoring of implementation of the Procurement Act/ Rules, it would be preferable that the target agency designates a full-time PMC. Also, one of the TWG members may be designated as PMC provided adequate level of seniority as stated above is maintained; in such case another member will be included in the TWG. Draft guidelines for TORS for the PMC and extended TOR for the TWG have been agreed. 5. CC, PPSC: For providing policy directions concerning procurement reform across the country and harmonization of country procedures, a Consultative Committee (CC) will be formed with representatives from the key policy-making ministries/ divisions (Prime Minister/ Chief Advisor s Office, Finance, ERD, Law, Planning, IT, etc.) and head of the target agencies. The CC should meet at least once in a quarter. In addition, GOB will constitute a Public-Private Stakeholders Committee (PPSC) with reputable individuals from the civil society, think-tank, business apex body, and senior government officials at the Secretary level with terms of reference acceptable to the Association to initiate and encourage the creation of formal arrangements for external monitoring of procurement process as well as outcomes; it is envisaged that this process will be gradual and likely to take shape once adequate level of social awareness among community is built: Draft TOR for CC and PPSC have been agreed. 6. Strengthening support to CPTU & target agencies: In light of the fast increasing task and mandated functions relating to reform, CPTU s current strength will be improved in terms of staffing in accordance with the proposed structure (attached), headed by one Director General (DG) and assisted by three Directors (Rules/ Procedures, Capacity Development & Coordination, and e-gp and M&E), instead of the current two Directors. CPTU staff will be entirely funded from the revenue budget. As part of the incentive structuresand in light of the sensitivity of reform functions, since this is a TA, project staff incremental allowances, as per the Government rules but not exceeding 30% of salary, will be funded from the credit. For consistency purpose, project staff will include staff of CPTU, TWG members, and the PMCs. Besides, CPTU and the target agencies will be assisted by a pool of consultants of various fields (e.g., e-gp, proc. reform implementation, post review, commercial service, social awareness, client relations, financial management, etc.). For support in e-gp, MIS, monitoring, and data processing of the target agencies, there will be designated consultant attached to each target agency for the initial period of the project.

60 54 7. Implementation of capacity development program: A competitively selected TA team (consulting firm), under coordination with CPTU/IMED, will implement an extensive capacity building program mainly with ESCB (the nominated sub-consultant) and partly with BIM by instituting a well-articulated program covering an array of training, included in the three-week main training course a short module of the Chartered Institute of Purchase and Supply (CIPS, U.K.). It is expected that the local institute will develop their faculty to continue with such courses in future, when there is no project. Introduction of courses in the university or other institutions will also be looked into (e.g., Bangladesh Civil Service Administration Academy - BCSAA, Bangladesh Public Administratibn Training Center-BPATC or Academy for Planning and Development-APD or Financial Management Academy- FIMA). In addition, for developing curriculum for core procurement skill (in the planning, budgeting, logistics, and supply chain management) and procurement accreditation program, a separate twinning arrangement will be established between CIPS and other local institute like ESCB or BIM or BRAC University or any other suitable private/ public university. 8. Implementation of MIS & e-gp: To ensure compatibility of the monitoring system (MIS) in CPTU, in accordance with the e-gp roadmap, the existing MIS will be extended and integrated with the existing portal PROMIS to form the first phase of e-gp using international consultant s services with substantial possible input from the local developer of the CPTU s MIS to promote skill transfer; this will also ensure more robust maintenance capability of the system locally (New DohaTech Ltd.). The team will develop the system with its central portal/ server at CPTU and integrate with the key ministries/ target agencies; the TWG will coordinate the activities of integration between CPTU and the ministries/ implementing agencies. Given the requirement for reliability of uninterrupted service for transmitting procurement data and in consideration of the wide network coverage across the country, for connectivity with PROMIS and subsequent e-gp, it is envisaged that CPTU and the target agencies s relevant portal will have district level connectivity through Grameen Phones network. 9. The CPTU s MIS will have connectivity up to the district level for each targeted agency while the e-gp connectivity will be piloted up to the division level. E-GP is expected to be piloted at the head quarter level of each agency for international procurement (ICB & international consultancy). This phase will adopt implementation of e-bidding System (EBS), followed by gradual inclusion of electronic bid evaluation, if feasible. Subsequently, contract management system; government procurement portal (GPP); supplier registry and bid registration; and bid lodgement system (BLS) may also be introduced depending on the feasibility. 10. The CPTU is to be responsible for e-gp specifically to ensure the consistency of policy authority across this area and to ensure that there is no separation between procurement and e- GP. This next phase will require the CPTU to: 0 mandate a national framework for e-gp including a single integrated procurement data and management system; arrange and engage service providers; establish e-gp whole-of-government policies including for e-signatures;

61 55 0 arrange industry briefings and a service centre; ensure that its own internal skills are adequate to manage the transition. 11. For implementation, in the case of Bangladesh, there is a pre-existing portal that will be built on, Of more significance, considerable work has been undertaken to develop and mandate an existing MIS of CPTU, namely, Procurement Management Information System (PROMIS). The PROMIS has been developed by the CPTU provides a valuable opportunity to consolidate the authority of the CPTU as well as to integrate management systems with online technology. Thus the first phase would constitute the standardization of the PROMIS that is already operating to one degree or another in target agencies. These agencies are attempting to comply with the reporting requirements set by the CPTU but are hindered by the lack of interoperability between systems which has meant that manual inputs are supplementing the data transfers. This issue will be resolved to consolidate the template for PROMIS for these and other agencies. ' 12. The CPTU will establish an inter-agency committee including one authoritative officer from each of the target agencies to map PROMIS development and integrate with agencyspecific developments such that the standardized core data requirements of the CPTU will be automatically provided as part of the individual agencies management activities. This committee will also coordinate a review of the contract development, management and advertising, together with the associated human resources that is managed by offices outside of Dhaka and for whjch basic hardware for connectivity is required. 13. In addition to the system developments outlined above several other supporting initiatives will be undertaken: Procurement policies will be redefined to include not only management practices in the electronic environment but also other circumstances. The CPTU will seek further advice on the application of procurement law and other laws and regulations that may impinge on e-commerce in the economy and give careful consideration of international trends and experience. The CPTU will provide a human resource up-skilling and orientation program for the pilot agencies in relation to e-gp. The CPTU, in consultation with key major business associations, will develop a business activation strategy to address existing government contracted suppliers, non-contracted suppliers and also work with the service industry that supports e- commerce applications. The CPTU, in consultation with the IT business association, will coordinate and develop government policy to assist the e-gp Service Provider and the IT industry address connectivity and infrastructure. The CPTU will establish a timetable for the deployment of e-gp phases. This timetable will be published to the Bangladesh technology industry, government suppliers and government agencies. 14. Implementation of CBC & SAC: Strategy for communication campaign and social awareness will be developed and initially implemented by a suitable organization, for instance, partner organization/ media firm/ NGO/ communication firm with specific expertise in the

62 56 relevant field. The campaign will require the organization of workshops and the development of print materials specifically targeted to the audience, explaining the benefits of good public procurement. Public awareness will take place through the mix of channels most suitable to reach a large and varied population (probably radio, TV, print media, as well as through school teachers, community leaders, etc.). Subsequently, once the full strategy is developed and tested, small firms with relevant expertise may be selected who will carry out the grass root level workshops and campaigns. To facilitate and institutionalize the dialogue between the Government and the contracting community (Government-contractor forum), CPTU or the target agencies may take assistance of moderator (e.g., media firm, communication firm or other suitable organization). Independent monitoring of procurement by civil society would be funded separately from trust fund or similar arrangements outside the credit.

63 I I 1- T I T 1 n I I T 'T

64 58 Annex 7: Financial Management and Disbursement Arrangements BANGLADESH: Public Procurement Reform Project I1 1. Country Issues: Over the last several years, GOB has been addressing key weaknesses in financial management identified in the Country Financial Accountability Assessment (CFAA), through a series of reform programs supported by DFID, WB and a few other development partners. However, due to the fragmented approhch to Public Financial Management (PFM) reforms there has been uneven improvement across the PFM system and government agencies and institutions. A joint WB, DFID, and GOB review of Institutional Arrangements for Public Expenditure, Financial Management and Procurement completed in June 2005 revealed that Bangladesh s public expenditure institutions need to be significantly strengthened. The review that was carried out under Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework also confirmed that links in the public financial accountability chain in Bangladesh continue to be weak. Internal and external controls remain weak, as reflected in the lack of accounting information in line ministries, delays in the publication of audited reports, unsatisfactory quality of the external audit function, and ineffective Parliamentary oversight of the whole budget process. 2. Though GOB has taken several steps to improve its public financial management and procurement systems and the overall trajectory of change has been positive, the pace of progress has been slower than anticipated. Various diagnostic studies report that piece-meal technical assistance driven by donors neither helped the Government to reap the full benefit of reforms nor sustained the capacity developed. Country institutions are still not sufficiently developed to manage public resources and undertake project implementation effectively. The recently approved GOB document on PFM Vision & Medium Term Rolling Action Plan develops time-bound reform actions and remedial measures to improve financial management and accountability. Among the reform actions proposed are measures aimed at strengthening line ministry s financial management function. Despite the weak overall country financial management environment, fiduciary risk in donor-funded projects has been greatly minimized due to the government policy stipulating additional implementation arrangements in those projects 3. Implementing Agency: Implementation Monitoring and Evaluation Division(IMED) of the Ministry of Planning will implement the project through its Central Procurement Technical Unit(CPTU). CPTU, being one of the four directorates of IMED, will be responsible for implementing all four components of the project and for overall financial management of the project including the part of the project actions that would be implemented by the target agencies (RHD, LGED, REB, and BWDB). The target agencies will be implementing the respective part of component I1 of the project that might include carrying out limited procurement function. However, all project disbursement including those for procurement of equipment, software and consultants support for other agencies will be handled by CPTU for the sake of simplified project financial management, facilitating one point budgeting, fund access, disbursement, accounting and financial reporting for all project financial transactions. All those other agencies have prior experience of implementing WB funded project and all are either currently implementing or are involved in preparation of WB-funded projects.

65 59 4. IMED is a division of the Ministry of Planning, headed by a Secretary. The Secretary, apart from being the administrative head of the division, is also the Principal Accounting Officer of the division and as such has the responsibility to exercise oversight over all financial activities of the division. IMED does not prepare any agency-level annual financial statements; however GOB S annual and quarterly financial statements prepared by Controller General of Accounts (CGA), includes annual and quarterly expenditure statements of IMED showing comparison against the approved budget for each line item. IMED has limited organizational capacity in financial management and does not have a specialized unit in financial management. Like all other ministries in GOB, a Chief Accounts Officer (CAO) reporting to the CGA, is assigned for IMED. The CAO, who sits in the CGA s premises far away from IMED office, performs limited finaqcial management functions that include pre-audits and payments of all expenditures incurred out of recurrent and development budgets of IMED and its offices located in Dhaka city and submission of quarterly and annual expenditure statement of the Ministry to the CGA. An inhouse Accounts Officer (AO) in IMED, supported by four other staff, processes staff pay bills and other recurrent expenditures of IMED and its directorates including CPTU, for payment by CAO. The A0 draws cash cheques from CAO for payment of salaries to low paid staff and meeting petty office expenses and arranges payments to other staff and vendors in cheques. The AO s payment hnctions are overseen by a Senior Assistant Secretary who is authorized to act as the Drawing and Disbursement Officer (DDO) of IMED. The A0 prepares for the DDO, monthly, quarterly and annual statements of expenditure under IMED s recurrent budget, for submission to CAO and other GOB agencies. 5. Risk Analysis and Mitigation: Before mitigation, the overall FM risk is rated as Substantial. This is mainly due to non existence of an ongoing FM organization and system in CPTU. Considering CPTU s experience of successfully implementing the PPRP and the agreed arrangement for carrying out of all FM activities at one point and agreements reached on mitigating measures, the residual risk is Modest. Risk assessment, mitigation measures and determination of residual risks are tabulated below: Risk Inherent Risk County Level PFM institutions and system lack capacity for detecting financial irregularities in a timely manner, including taking corrective actions. Entity Level Absence of an ongoing FM organization Initial FM Risk Rating H S Various reforms on country level PFM ongoing and planned but unlikely to have any impact in short term A core FM team has been designed and agreed to be in place under project hnding After M Condition FA includes covenants for FM staff to be in place on time.

66 60 Project Level Besides CPTU, four other target agencies will also implement some activities. M FM and disbursement functions designed to be carried out by Agreed upfiont Control Risk Budget M Adequate staffing and L Agreed upfiont Accounting Internal Control- Weak internal controls might not prevent improper use of project funds Funds flow Financial Reporting Auditing ~~ Residual FM Risk Rating M S M M M S Excel based accounting system will Segregation of duties in FM function and internal audit hction designed in the project Designated account in a commercial bank will ensure quick disbursement and retlort back. Annual FS harmonized with IFRs FM staff will be trained in reporting expenditure Timely receipt of audited FS not being, an issue, efforts will be made on proper ' follow up of audit, issues L L M IM Included in the TOR for FM consultant. TORS by negotiations Included in the Disbursement Letter Strengths All FM and disbursement functions wili be performed centrally at one point by CPTU that successfully implemented the Public Procurement Reform Project. FM consultant of the ongoing project will be hired right fiom the start up of the project to establish the FM systems and to ' train up the CPTU FM staff to be recruited. 6. Project Financial Management: The project financial management arrangement, as assessed and agreed, together with the implementation of the actions in the action plan would be adequate to meet the project financial management needs complying the requirements of Bank's OPBP Implementations of the actions will be enforced through appraisal and negotiations

67 61 conditions. The status as assessed and arrangements agreed on various aspects of financial managements are stated below. 7. Staffing: CPTU does not have a financial management organization of its own but it has successfully implemented the Public Procurement Reform Project, satisfactorily meeting the FM requirements, by employing a consultant as Project Finance Manager. The consultant s term of employment expires on June 30, 2007, when the current IDA credit closes. As the Accounts Officer, IMED and his staff do not have the mandate or the capacity to look after project financial management functions, there lies no FM arrangement in place to meet the project financial management needs. IMED did not place an Accountant with the CPTU during the life time of the ongoing project, for building up in-house FM capacity, though agreed at negotiations. In order to have an adequate financial management arrangement in place to cater to the project s requirement, the IMED/CPTU agreed to appoint a Financial Management Consultant (FMC), for a duration of at least one year starting with effectiveness of the project. For comparative advantage, the FMC for the ongoing project will be hired on a sole source basis. The FMC will set up the FM system for the project by replicating the excel based accounting system that is being used in the ongoing project. In addition, in view of CPTU s extended functions in PPRP I1 and to institutionalizing FM capacity within CPTU, IMED will hire three staff - Deputy Director (Finance), Accounts Officer and Accountant in CPTU, within three months of credit effectiveness using credit funds. TORS and the qualifications for these positions will be agreed before negotiations. The appointed staff will assist/ share with the FMC the responsibilities of various FM functions and will eventually take over the responsibility under a learning plan. 8. Budgeting: CPTU will be responsible for one point comprehensive budgeting for all project activities regardless of implementation and procurement by other target agencies. Project s annual budget estimate will be initiated by the FM staf-f with the help of the units entrusted staff with implementation of various components and activities of the project, having regard to implementation plan and updated procurement plan and following GOB guidelines on budgeting for development projects. MS Excel based accounting system and CPTU s MIS will serve as information systems for budgeting purpose. The budget estimates will be identified in two distinct columns by source of finance based on the agreed share of financing for budgeted activities. The budget estimates submitted by the DG, CPTU and recommended by the Secretary, IMED will be scrutinized by MOF, which will allocate the approved GOB and IDA resources in the annual budget under Annual Development Program(ADP). MOF will monitor the budget implementation through issuance of authorization for use of designated account and quarterly release of GOB funds. My genuine necessity for deviation from the budget will be met by obtaining the approval through Revised Annual Development Plan(RADP). 9. Fund Flow and Designated Account: IDA S part of project funds will flow mainly through a designated account in a nationalized commercial bank to be opened either in US dollars or in Bangladesh Taka. Having regard to the depreciation of BDT in the recent past; it would be advisable to open the account in US$. Project fund will also flow through direct payments and issuance of special commitments as and when required. The authorized limit for designated account and minimum application size for direct payment will be agreed with loan department and will be reflected in the Additional Instructions (Disbursement Letter).

68 All CPTU staff will continue to be funded from GOB S revenue/recurrent budget.. Project operating cost will be funded 34% by IDA. Consolidated salaries of incremental project staff and project staffs incremental allowances, as permissible by the Government, has been agreed to be entirely funded by IDA. Project staff will include staff of CPTU, TWG members, and PMCs. All other project activities will be funded 100 percent by IDA including taxes thereon. GOB Funds allocated under Annual Development Plan(ADP) through the national budget will be accessible following observance of quarterly fund release procedures initiated by the PD and approved by IMED and also by MOF and MOP in case of 4th quarter. No GOB fund will flow directly to the project; all bills for expenses incurred as approved by the Project Director will be presented to the CAO, IMED for payment after pre-audit in cross cheques to the providers of goods and services including vendors and incremental staff While all other activities under Component 4 will be financed from the project, the monitoring of procurement activities by civil society/ beneficiary group (engaging the creation of formal engagement) has not been considered under project financing at this stage. Other donors and trust funds are being explored as the funding source for this activity. 12. Disbursement: IDA s share of the project cost (100 percent of all project costs including taxes except operating expenses) will be disbursed under transaction based traditional WB disbursement procedures initially. IDA will require full documentation where contracts for (i) goods exceed US$300,000 equivalent, (ii) works exceed US$500,000, (iii) consulting firms exceed US$lOO,OOO, and (iv)individual consultants exceed US$50,000. Expenditures below the above threshold will be claimed through Statement of Expenditures (SOEs). After the mid-term review, disbursements may be switched over on the basis of Interim Unaudited Financial Reports (IFRs) if the borrower so prefers and IDA finds that project financial management system is working satisfactorily and is generating timely and reliable full set of IFRs that are acceptable to IDA. 13. Disbursement of IDA funds will be made through two disbursement categories. The following table shows the share of financing: I Expenditure Category I Amountinus$ I IDA s Share of Financing 1. Goods, Works, Consultants Services, Training, incremental Project staff salaries, and prqject allowance for the Project staff 2. Operating Cost Total million 100% 1.94 million 34% Million 4mount (US$) For the purpose of project allowance, the Project staff means CPTU staff, Procurement Monitoring Coordinators (PMCs) and Technical Working Group (TWG) members of the target agencies

69 63.. Operating Costs means costs incurred by CPTU on account of the operation and maintenance of equipment and vehicles, hiring of vehicles, office rent, costs of consumables, fuel, office utilities and supplies, bank charges and advertising expenses but excluding any salaries and allowances of civil servants. 14. Expenditure Management and Internal Control: CPTU will follow the GOB S General Financial Rules that stipulates the procedures for the incurring of expenditures including expenditure approvals and payment procedures. In addition, the specific directives from thk GOB including the Table of Organization and Equipment (T&OE), Government s Standard Code of Accounts, Delegation of Financial Authorities for development projects, procedures for use of funds for development projects and the Project Accounting Manual that provide for the internal control arrangements on financial transactions, hiring, acquisition and use of fixed assets, accounting controls and delegations and controls on project implementation will be followed in implementing the project. IMED will also implement the Internal Control Manual that the Ministry of Finance has recently introduced to be implemented in all line ministries and departments of GOB. Internal control in terms of the separation and segregation of various functions under financial management of the project will be achieved by clearly drawn TORS for three FM staff positions and appropriate supervision and monitoring of the various functions internally and through oversight of DG, CPTU. A Director in CPTU will be assigned to oversee the monthly bank reconciliation, countersign the cash book every month end and scrutinize before payment any bill for operating expenses above certain threshold.all payments shall be approved by the Project Director. Besides, pre audit by the office of the CAO, of any payment on operating expenses would serve as check and balance on numerous small transactions. 15. Accounting and Reporting: The project will follow GOB Project Account:rg Manual iii maintaining books of accounts and in complying with monthly, quarterly and annual financial reporting requirements of various government agencies as well as the WB. CPTU has been maintaining basic books of accounts manually using spread sheets for analysis and reporting. The same excel based accounting tools will be replicated in the up coming project, using GOB code of accounts and project components. Manual Registers will be used to adequately record acquisition and use of all project fixed assets. Physical inventory at the end of each financial year will ensure updated status on usable condition and safe custody of the assets. IDA, through an IDF Grant is supporting the GOB in computerization of its Project Accounting Manual with the objective to provide universal software to all the development projects. This project s accounting system will promptly adopt such universal system whenever it is ready. The CPTU will provide Interim Un-audited Financial Reports (IFRs) on a quarterly basis showing project progress on all components on a user friendly format. The format of the IFRs and exact contents will be discussed and agreed with the CPTU during project appraisal. 16. Internal Audit: Government s Internal Control Manual encourages large ministries to have in house internal audit unit, but presently IMED does not have any internal audit unit. As such, internal audit will be conducted annually by hiring a chartered accountants firm on the basis of a. TOR to be agreed during project negotiations. The firm will be selected through appropriate competitive process to be prior reviewed by IDA. The internal audit report would be submitted to the Secretary, IMED with a copy to the DG, CPTU.

70 External Audit: The Comptroller and Auditor General (C&AG), through the Directorate of Foreign Aided Projects Audits (FAPAD), will carry out the external audit of the project. The C&AG is acceptable to the WB as an independent auditor. Annual audited financial statements will be submitted by FAPAD to the IDA no later than six months after the end of each fiscal year. For the sake of avoiding duplicity and promoting effective harmonization, last quarter IFRs will be presented as the annual financial statement of the project. The WB is now in the process of such agreement with C&AG for accepting the IFRs as the AFS for all projects under Bangladesh Portfolio. In case such an agreement is not reached soon, this project specific agreement will be reached during negotiations. The IMED as per its mandated responsibilities as the line ministry of CPTU, will liaise with FAPAD and follow up on all audit issues and recommendations relating to the project. The country is yet to adopt a policy on the disclosure of audit finding. However, a recently prepared draft audit law includes provisions for mandatory disclosure of audit reports in the website. 18. The following audit reports would be monitored by the WB in the Audit Report Compliance System: Implementing Agency IMEDKPTU Audit Type Auditor Deadline Project Financial Statement C&AG December Financial Management Action Plan: An action plan, that summarizes required activities and timelines to help ensure that adequate financial management arrangements are in place during project implementation, is presented below. Action Responsibility Completion date Covenant '1. Finalize TOR for Financial Management Consultant (FMC) CPTU By Negotiation 2. Agreement to complete selection of FMC on sole source basis (FMC of PPRP).. 3. Appointing the FMC IMED IMED By Negotiations Before Effectiveness effectiveness 4. Finalize TOR for Deputy Director(Finance) and other two FM positions IMED By Negotiations 5. Filling the position of DD(F) and other two FM positions (Accounts Officer & Accountant) IMED of effectiveness 6. TOR for Internal Audit CPTU/IMED By Negotiations

71 65 7. Finalize Interim Un-audited Financial Reports formats and contents CPTU/IDA, By Negotiations ' 20. Supervision Plan: The initial superyision will focus on compliance with all agreed actions, terms, and conditions including FM staff being on board, identifying any FM or disbursement issues in project implementation and agreeing on redressing measures. CPTU's readiness to access of funds,,use of excel based accounting system, production of first IFRs on time, and use of internal controls on FM functions will be closely reviewed. In addition, supervision efforts will focus on sampling expenditures below prior-review thresholds, reviewing payment processes against the defified control framework, and monitoring the progress of institutional preparedness and strengthening.

72 66 Annex 8: Procurement Arrangements BANGLADESH: Public Procurement Reform Project I1 1.. Country Procurement Environment: The Country Procurement Assessment Report (CPAR), broadly accepted by the Government and issued in 2002, identified inadequate public procurement practices as major impediment affecting project implementation in Bangladesh. Procurement deficiencies include: absence of a sound legal framework, protracted bureaucratic procedures allowing multi-point rent seeking, lack of critical mass of professionals to manage public procurement, inordinate delays in completing the procurement process and ineffective contract administration and absence of mechanisms for ensuring transparency and accountability in public procurement. 2. Procurement Reform Actions: To carry out procurement reform, following the CPAR recommendations, the Government is implementing a WB-supported a Public Procurement Reform Project (PPRP), which is scheduled to close in June As part of the reform under I PPRP, the Government has established a Central Procurement Technical Unit (CPTU) within the Implementation Monitoring and Evaluation Division (IMED) of the Ministry of Planning, with staffing funded from own resources. The Government issued Public Procurement Regulations 2003 and associated implementation procedures, including streamlined procurement approval process, delegation of financial powers, and standard set of documents for procurement of goods, works, and services. The Parliament has now passed a procurement law in July The effectiveness of the law and the issuance of the rules are expected to take place in the near future. The law and the regulations contain most of the international public procurement best practices; notable features include: (i) non-discrimination of bidders; (ii) effective and wide advertising of procurement opportunities; (iii) public opening of bids in one place; (iv) disclosure of award of all contracts above specified threshold in the CPTU s website; (v) clear accountability for delegation and decision making; (vi) annual post procurement audit (review); (vii) sanctions for fraudulent and corrupt practice; and (viii) review mechanism for handling bidders protests. Concurrently, in order to build procurement management capacity, CPTU, in collaboration with ILO and local institutes, has developed a critical mass of 25 national trainers and pravided training to about 1700 staff of about 300 organizations. 3. The new regulations are being implemented by all public sector entities with var$ng degrees. The landscape of procurement has been reshaped in the last several years due to the procurement reform with harmonized procedures. The new regulations have also increased awareness among the stakeholders (such as the procuring entities, bidding community) by building confidence. Though the basic foundation of reform has been laid, actual implementation and appropriate monitoring of the regulations has been slow and less progress has been made in attaining tangible outcomes on the ground. Experience shows that there are still substantial inefficiencies in procurement practices such as the lack of accountability of government officials, delays in the issuance of contracts, and inappropriate bidding practices including collusions and public interference. In effect, there has been significant non-compliance to the rules and regulations.

73 ~ 67 General: 4. Total value of the project is US$ 24.9 million; IDA Credit will finance US$23.6 million. Procurement under the project will largely involve consultancy services and training of US$ 18.6 million, followed by goods of US$ 3.6 million and works of US$0.7 million. 5. Procurement under the project would be carried out in accordance with the WB s Guidelines: Procurement under IBRD Loans and IDA Credits of May 2004, Revised October 2006 (Procurement Guidelines) and Guidelines for Selection and Employment of Consultants by World Bank Borrowers of May 2004, Revised October 2006 (Consultant Guidelines). Within the overall context of WB guidelines, local procurement of goods, works, and services (for which the shortlist entirely comprised of national consultants) will follow the Government s Public Procurement Regulations PPR (goods: < US$300,000 per contract, works: < US$500,000 per contract, and consulting services- firms: < US$200,000 per contract and individual consultant- < US$50,000 per contract) and in case of any conflicts between the two procedures or ambiguous/confbsing interpretation WB Guidelines will prevail. 6. Expected major procurement of goods and consultants services has been announced in the General Procurement Notice (GPN), published in the dgmarket and United Nations Development Business (UNDB), ad it will be updated annually. 7. Procurement Components and Responsibility: All four components of the project will be implemented by the Implementation Monitoring and Evaluation Division (IMED). While CPTU of IMED will be responsible for main implementation, the target agencies (RHD, LGED, REB, and BWDB) will implement certain actions under the project relating to the management of procurement at agency level, piloting e-gp, and introducing the concept of social accountability. Each target agency will designate a Procurement Monitoring Coordinator. Except computers and accessories, all procurement will be carried out by CPTU. Computers and accessories will be procured by target agencies. 8. Procurement Capacity and Risk Assessment: Procurement capacity assessment of CPTU has been carried out with a view to: evaluate the capability of the implementing agency and of the adequacy of systems in place to administer WB-financed procurement and assess the risks that may negatively affect ability of the agency to carry out the procurement process. CPTU has been implementing a public procurement reform project since 2002, without significant procurement problem or systemic deficiencies except delays in implementation; it has adequate in-house expertise to deal with procurement. A very small part of procurement of goods will be carried out by the target agencies. All target agencies have experience in IDA hnded projects. To safeguard WB fbnd, a critical review of procurement has been done; though the residual risk at the agency level can be rated as average, because of the country procurement environment, the project risk is high from procurement operation and contract administration viewpoint. To minimize the risk, a procurement risk mitigation framework has been introduced.. Measures for Improving Governance in Procurement. 9. Several measures have been introduced and agreed with the Government for improving governance in procurement and for minimizing procurement risks under the Project. The two

74 68 main pillars of improving procurement related governance risk mitigation framework are: (i) system of handling complaints; and (ii) disclosure of information and procurement website. 10. System for Handling Complaints: A credible system of handling complaints will be put in place in CPTU. The salient features of the system will be an oversight of a complaint database, a standard protocol with appropriate triggers for carrying out investigations, and taking action against involved parties. The system will be developed and managed by CPTU. The system will be supported by a database containing information about all procurement steps and other relevant information such as official estimates, all bidders information (individuals, compani es, joint ventures, owners information, etc. ), and all bids. In this regard, the CPTU s MIS database can be used. For ICB/ prior review contracts for goods, works and selection of consultants, and all contracts above US$lOO,OOO, the WB prescribed complaint redress mechanism will apply. 11. Disclosure of Information and Procurement Website: All information relating to bidding and procurement above the specified thresholds, as per PPR, will be published in CPTU s website. The information, among others, will include invitation to bid, bid documents and RFPs, wherever applicable, latest information on procurement pladcontracts, status of evaluation once completed, contract award information with adequate details and poor performance of contractors, suppliers and consultants, including list of debarred firms. The website would be accessible to all bidders and interested persons equally and free of charge. 12. In addition, the following additional steps, which have been discussed and agreed with CPTU, will be followed as a part of procurement and implementation: (i) Alert CPTU and target agencies offlciald staffi The CPTU in reference to the provisions in the PPR and the legal agreement signed with IDA, will issue an alert letter notifying about the possible consequences of corrupt and similar behavior in procurement practices and actions to be taken against the officials/staff if get involved in such practices. Moreover, the ministry will highlight that in case of non-compliance of the WB s procurement guidelines, the WB may take remedial actions (Le., withdrawal of fhd, misprocurement) against the concerned packages and slices. (ii) Alert bidders: CPTU, through a notification, will alert all bidders on consequences of corrupt practices (fraud and corruption, collusion, coercion, etc.). The alert message, among others, will include that if bidders are found to have adopted such practices, they would be debarred from subsequent bidding processes in conformity with PPR and the WB s Guidelines, as appropriate. In addition, in the pre-bid meeting, the bidders will be clarified for preparation of bid correctly. (iii) (iv) Multiple dropping: Multiple dropping of bids (bids submitted in. more than one location and opened in one location) will not be permissible for all procurement under the WB-financed project. Bid opening commi#ee (BOG ) & Bid evaluation commi#ee (BEC): A formal structured BOC and BEC will be constituted for each contract package, as per the provisions of the PPR. The BOC will include at least one member of the BEC; the

75 69 (v) vi) (vii) (vi$ BEC will have at least five members with two members from outside the procuring entity, with proven track record of experience in procurement; depending on the type of procurement such members shall be either from public offices or from professional bodies/ universities/ beneficiaries; Bid opening minutes: During the same day of bid opening, photocopies of the bid opening minutes (BOM), signed by bid opening officials and the bidders representatives (present at the bid opening), with readout bid prices of participating bidders will be shared with the bidders either by , fax or special messenger. Also, for prior review packages, copy of such BOM will be sent to the WB the same day of bid opening. Timeliness of bid evaluation and contract award: In accordance with the procurement approval process of the Government, bid evaluation reports will include certificates of impartiality (individually and collectively) as per the PPR and will be submitted directly to the contract approving authority following the stipulated timelines. CPTU will put extra effort to ensure award of contract within the initial period of bidproposal validity so that no extension of validity is required. It will closely monitor the timing, taking into account that the WB may not finance contracts which are not awarded within the period of bid validity. Action for corrupt practices - by bidders: In cases of possible collusion found or established for reasons i.e. same hand-writing, identical unit prices in bills of quantities (BOQs), consecutive serial numbers in bank guarantees for bid security etc, CPTU will initiate actions, including debarring contractors/suppliers, as appropriate in accordance with PPR and WB s guidelines. If any firm is debarred, the list of debarred firms will appear in the web sites of CPTU, and of the entity, if applicable, and the debarment notice will be circulated to all field offices and other government/public sector offices, putting it as a lesson to discourage corrupt or similar behavior. CPTU will share such information with the WB regularly. Action for corrupt and similar practices - by GOB staf$ In cases of possible corrupt or similar practices, CPTUI IMED will thoroughly investigate it and if involvement of GOB staff is established, they will take appropriate/disciplinary action against those concerned, strictly in accordance with the services rules. In addition, sanction provisions as per the PPR will apply. x) Measures to reduce coercive practices: Upon receiving allegations of coercive practices resulting in low competition, CPTU/ IMED will look into the matter and take appropriate measures. For prior review contracts, observations of CPTU/ IMED will be shared with the WB, along with the evaluation reports. CPTU may seek assistance from law enforcing agencies to provide adequate security for bidders during bid submission, For ICB contracts, provision for bid submission through IntemationaVNational Courier Services will be allowed and confirmation of the receipt of the bid will be informed to the bidder through . (x) Rebidding: In case of re-bidding, CPTU/ IMED will enquire into the matter, record and highlight the grounds of rebidding (i.e. corruption or similar, high bid prices etc.) along with recommended actions to be taken. For prior review cases, all such detailed reports will be sent to the WB. The WB may not finance

76 70 (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) contracts recommended for rebidding and take further remedial measures, if in the opinion of the WB, it is determined that collusion, corruption or similar practices have been adopted in the bidding process. Filing and record-keeping: CPTU will preserve records and all documents regarding their public procurement, in accordance with provisions of the PPR. These records will be made readily available on request for audit, investigation or review by the WB. Procurement Plan in websites: The approved procurement plan of the project will be published in the website of CPTU for contract packages of Tk. 10 million and more, and the WB (if applicable), and updated semi-annually. Procurement monitoring in formation in websites: CPTU/ IMED will enter all information related to procurement monitoring into the database software MIS. Quarterly reports will be generated for monitoring procurement performance of CPTU and published in the website of CPTU and/or entities. These reports will be submitted to the WB. Publication of award of contract in websites: CPTU, within two weeks of contract award, will publish in its websites the following information: identity of contract package, date of advertisement, number of bids sold, number of submitted bids, number of responsive bids, brief reasons for rejection of bids, name of the winning bidder and the price it offered, date of notification of award, date of contract signing, proposed completion date of contract as well as brief description of the contract awarded. For contracts following international competitive bidding (ICB) procedures, direct contracting for goods and works, single source selection of consultants and all other pertinent consultant contract for firms (e.g., QCBS, QBS, FBS, LCS), CPTU/ IMED will publish notice of award of such contracts in UNDB Online and Development Gateway Market (dgmarket), in accordance with the provisions of the WB s Guidelines. Contracts awarded under the NCB procedures should include publication of results of evaluation and of the award of the contract nationally/locally. Complaints handling mechanism: CPTU, for procurement under national competitive bidding (NCB), will enforce a complaint handling mechanism in accordance with the provisions of the PPR including submission and disposal of complaints within the timeline stipulated therein. In the office of CPTU, they will introduce a complaint box and during pre-bid meetings, bidders will be informed of their rights to complain. For ICB, complaints will be handled as per the WB s Guidelines. Late payments and liquidated damages: CPTU will ensure timely payment of bills of the suppliers/contractors/consultants as per the provisions of the contract. Interest for delayed payments beyond a specified period will be stated in the bidding documents. For delays in implementation, liquidated damages will be imposed, as per the terms of the contract. Post procurement audit (review): As per the provision of the PPR, CPTU/ IMED will carry out annual post procurement audit (review) based on sample contracts

77 71 (xviii) (xix) of at least 15 percent of the number of contracts covering 30 percent of the aggregate value of the contracts by hiring chartered accounting firm (with international affiliation), share the findings of the report with the WB, and will initiate actions/steps for improving procurement practices, as appropriate. This is in addition to the IDA S Procurement Post Review that would cover a minimum of 20 percent post review contracts consistent with the level of risk. Oversight by Director General/ Project Director: The CPTU s DG/ PD will provide oversight hnction of procurement. Review and monitoring will also include the cases on corrupt and similar practices, review contract award and, management issues (i.e. delays in award, liquidated damages, delayed payments, etc.), prepare reports on monitoring of contracts and submit quarterly report to the WB. NCB conditions to be added: i) Post bidding negotiations shall not be allowed with the lowest evaluated or any other bidder; and ii) Bids should be submitted and opened in public in one location immediately after the deadline for submission; and iii) Rebidding shall not be carried-out without the IDA S prior concurrence. 13. Other Actions: Other action to improve the procurement governance includes emphasizing by the target agencies and CPTU to make award of contract within the initial bid validity period without any extension; 14. With the above arrangements, the procurement under the project is likely to be effective and transparent, resulting in smooth implementation of the project leading to achievement of the project development objectives. However, procurement process and implementation of the contracts would be reviewed every six months by the WB, and adjustments or corrections will be made, as appropriate. Procurement Arrangements: 15. Overall procurement arrangements with tentative amounts are given in Table A. 16. Procurement ofworks. Civil works are primarily in Component 2 related to a building and training complex, if applicable. Because of the small nature of work, it may not attract international contractors, though provisions have been kept. (9 International Competitive Bidding (ICB). Civil works contracts estimated to cost more than US$2.0 million equivalent per contract may be procured using ICB. (ii) National Competitive Bidding - NCB: Civil works contracts estimated to cost less than US$2.0 million equivalent per contract may be procured using NCB. 17. Procurement of Goods. Generally goods will be procured using ICB for large packages, followed by NCB and national shopping for small valued contracts. (i) ICB: Goods and equipment contracts estimated to cost US$300,000 equivalent or more per contract will be procured using ICB. This includes large value computer networking in e-gp.

78 72 (ii) NCB: Goods and equipment contracts estimated to cost less than U $300,000 equivalent per contract may be procured using NCB. This includes office equipment and vehicles etc. (iii) Shopping - S: Goods of very small contracts or individual purchases of off-the-shelf items may be procured, through prudent shopping procedures. (iv) Direct Contracting - DC: Computer software, books journals and training materials with individual contract costing less than US$2,000 equivalent may be procured following DC with the prior approval of the Association. Consultants Services and Training 18. Major consultancy assignments relate to capacity building and technical assistance including e-gp connectivity and MIS expansion. (a) Quality- and Cost- Based Selection (QCBS/ Quality-Based Selection) : Consulting services through firms estimated to cost US$200,000 equivalent or more per contract will be procured following either QCBS or QBS, depending on the type of assignment. (b) (c) (d) (e) Fixed Budget Selection (FBS): Services through firms estimated to cost less than US$200,000 equivalent per contract may be procured following FBS in accordance with the Borrower s Procurement Regulations. Consultants Qualification (CQJ: Services through firms estimated to cost less than US$lOO,OOO equivalent per contract may be procured following FBS or CQ, depending on the type of assignment, in accordance with the Borrower s Procurement Regulations. Single-Source Selection (SSS): Specific consultants services through firms, satisfying Consultants Guidelines (paragraph 3.9 to 3.13), with the Association s prior agreement, may be procured following SSS. Individual Consultants (IC): Services for assignments, estimated to cost US$50,000 or more, for which teams of personnel are not required and the experience and qualifications of the individual are the paramount requirement, will be procured through individuals in accordance with paragraph 5.4, Section V of the Consultants Guidelines. All other individual consultants may be selected following Borrower s Procurement Regulations. Individuals will be selected on the basis of their qualifications for the assignment. 19. Nominated sub-consultant for implementation and capacity develop.ment consultant: A.TA team comprising international and national consultants will support the implementation and capacity development program. To institutionalize capacity development in Bangladesh by developing a procurement faculty in at least one local institute and for conducting the main three-week residential procurement training course on goods, works, and services, it is critical that an appropriate twinning arrangement is put in place using the services of an international consultant, selected competitively, in collaboration with a suitable local institute. This three-week course is mainly compliance focused, with basics of competence skills. Besides, the consultant will be responsible for conducting other short-term courses. An initial review of the possible local institutes has been carried out; institutes considered are: Engineering Staff

79 73 College Bangladesh (ESCB), Bangladesh Institute of Management (BIM), Bangladesh, Institute of Administration and Management (BIAM), Bangladesh Public Administration Training Center (BPATC), Bangladesh Academy for Planning and Development (BAPD). Detailed review indicates that, among the above institutes, ESCB, though new, appears to be the most potential to grow into a major private sector training provider with long term sustainability, followed by BIM. 20. BPATC, a purely government entity located about 28 km away from Dhaka, though suitable for residential training, it has two main limitations: (a) the centre does not have adequate classrooms and (b) it mainly caters the need for training of purely civil servants. BIAM, a quasigovernment organization located in Dhaka and associated with Bangladesh Civil Service Association, provided the main training courses under PPRP during its initial stage, but it suffered from administrative difficulties for which CPTU had to transfer the course to BIM. BIM, a semi-autonomous training institute in Dhaka, has been imparting the main courses under PPRP for almost the last two years of the project. Though the courses are being conducted in a smooth fashion by CPTU in collaboration with ILO, BIM yet could not develop a procurement faculty of its own; besides due to its location at Dhaka, the trainees are not encouraged to stay inhouse. APD, a purely government entity at Dhaka, provides training mainly to economic cadre of the Government and has limited capacity in terms of available classrooms and dormitory The rationale for proposing ESCB as nominated sub-consultant are as follows: a. ESCB, headed by a Rector and affiliated with The Institution of Engineers Bangladesh (IEB), though new, is developing as a potential local training institute in the private sector aimed at becoming a center of excellence in engineering, management and social science; b. ESCB, with its own resource persons, has been conducting a five-day procurement course in its facilities at IEB, Dhaka since January 2005, mainly for the key implementing agencies staff (e.g., RHD, LGED, BWDB). Though this course is on a limited scale, in consideration of its nature of functions under the IEB, it appears that this is likely to be the only institute who has the right potential to mobilize adequate number of quality faculty members and conduct the courses in a sustained manner in the long term, including effective use of the services of local trainers developed under PPW; c. ESCB s new campus of about 23 acres, located 40 km from Dhaka, is an ideal set-up and environment for such residential training away from everyday work. It has adequate overall physical infrastructure and facilities to start such courses including classrooms, adequate academic and residential building, administrative arrangements, and own electricity generation support; and d. From the viewpoint of long-term sustainability and institutionalization of capacity development within the country, in consideration of the above potentials, ESCB has competitive edge over the other institutes For all training courses, the consultant will provide the resource persons (international and local) regardless of whether the course is conducted in ESCB (nominated sub-cohsultant) or elsewhere. The main procurement training course (three-week) will largely be conducted at ESCB, while part of it will be conducted at BIM. However, for the purpose of nominated sub- a

80 74 consultant, arrangements between the international firm (consultant) and ESCB be made in a way that will permit the international consultant to select the faculty among a pool of qualified candidates of ESCB providing the specific unit rate applicable to each individual of the pool. In addition, ESCB, since new, still may require some initial support in terms of logistics and equipment to expand its capability, which the project can support taking into account the longterm benefits for procurement capacity development Nominated sub-consultant for MIS expansion to form e-gp and its maintenance: The existing procurement management information system ( PROMIS ) of CPTU for tracking procurement performance was designed by Dohatech New Media, a local software developer; Dohatec also worked for the WB. PROMIS is a unique tool of this kind, being used %for procurement tracking, to capture procurement process data and measure a set of pre-defined performance indicators; currently the tool is being piloted with two target agencies (LGED kd REB). PROMIS by now have been presented in a number of international forum and the software received high appreciation. Recognizing the potential of this system, and since it captures many of the e-gp related initial functionalities (like invitation for bids, publication of contract awards), the proposed e-gp design and implementation will require the services of an international consultant in collaboration with the local developer; meaning Dohatech will be a nominated sub-consultant for this assignment. The rationales are as follows: a. b. C. d. It is most common for most countries to commence with the development of the portal and build functionality around this. In the case of Bangladesh there is a preexisting portal that will be built on. Of more significance, considerable work has been undertaken to develop and mandate the CPTU s MIS, designed and is being maintained by Dohatech. The existing portal PROMIS will be used as the foundation for the development of the first phase of e-gp; Dohatec was initially hired through a competitive selection process to develop the CPTU s website; the TOR that time mentioned about the possible follow-on actions for the development of an integrated MIS, with compatible functionalities. Subsequently, they developed the MIS for CPTU; The proposed e-gp design and development is a downstream work of what has already been established in CPTU s MIS. To ensure compatibility of the MIS in CPTU, in accordance with the e-gp roadmap and implementation strategy, the existing MIS will be enhanced, expanded, and integrated with the existing portal to form the first phase of e-gp using international consultant s services with substantial input in the form of sub-consultancy from the local developer (Dohatec New Media) to promote skill transfer; and The involvement of the local developer will also ensure sustainable more robust and cost effective maintenance capability of the system. 24. Single source selection for e-gp and MIS connectivity: target agencies will implement e-gp in 6 divisional districts and will provide online data for MIS from 64 districts. Given the highly specialized nature of the assignment and to implement the e-gp and MIS, these target agencies will need dedicated and reliable internet and data connectivity. GrameenPhone Ltd, has significant competitive edge over the few other internet and data connectivity providers, like Rangs IIT or Bangladesh Telephone and Telegraph Board (BTTB). BTTB, being a public sector

81 75 0 agency, provides service of low quality with very high degree of unpredictability. On the other hand, though Rangs IIT has internet and data connectivity network, they do not have their own connectivity line and actually uses GrameenPhone s line on lease basis. It is only Grameen who has connectivity across the country even up to the sub-district level. The MIS data collection network for target agency like LGED (who has offices in all sub-districts) will be expanded up to the sub-district level over time, though now is proposed to start up to the district level. The similar would be the case with e-gp in the future. In consideration of all of these and the rationale provided below, GrameenPhone Ltd. (Bangladesh) will be contracted for the connectivity: a. GrameenPhone Lid. (GP) is the leading mobile service provider in Bangladesh, which has more than 10 million subscribers. It has connectivity all over the country through optical fiber and microwave link. GP has separate division named Optical fiber division to provide data connectivity; b. Bangladesh Railway has an optical fiber network through out the country. GP has taken lease of this optical fiber network for 20 years in the year of After that GP has improved the network significantly. This provides GP a sustainable competitive advantage over other competitors. No other service provides has such facilities; c. GP has Enhanced Data Rates for Global Evolution (EDGE) services throughout the country. Through this facility, one can easily transfer electronic data, and can also access servers from remote area. GP maintain high quality internet and data services. It has also community information centre (CIC) up to sub-district level. Form CIC one can get very high speed internet service; and d. GP is the only service provider which can provide the required level of quality services with high degree of liability, as it has alternative backbone network for each and every route. Due to this, if main connectivity is out of order, the network automatically switches to the alternative route. This satisfies the requirements of paragraph 3.10(d) of the Consultant Guidelines, 25. Single source selection of competence training provider/ accreditation program: This sub-component of core competence training is distinct from the compliance-based training described under capacity development program above. The core competence training in procurement envisages a more holistic demand-based approach to develop skills in procurement planning, budgeting, supply-chain management, strategic procurement, with necessary levels of accreditation after fulfilling or undertaking a defined number of modules. The approach envisaged is to invite one of the internally reputed institutions who provides such accreditation program and to partner them with a local institute(s) to create skills at various levels allowing for the efficient division of labour within procurement departments and the creation of a distinct career path in procurement, if feasible, leading to the emergence of a well-trained and divers procurement regime. There are only couple of institutions who deal with such accreditation program; one in the USA and the other in the UK, the Chartered Institute of Purchase and Supply (CIPS). Under the project, CIPS would be contracted on a sole source basis to provide these services. The rationales are as follows:.

82 76 a. b. C. CIPS, being a highly specialized and recognized institution, acts as a center for excellence for the whole profession of purchase and supply chain management to improve the professional standards of practitioners and raise awareness of their contribution to corporate, national, and international prosperity; It is an international education and qualification body representing purchasing and supply chain professionals and a central reference point worldwide on matters relating to purchasing and supply; its professionals code of ethics is the model for the international code and the domestic codes for many countries; and CIPS has currently six modules at various levels 2-7 recognized all over the world (starting at 16 years in secondary education or adult educations at level 2 up to the university Master Degree). Thus, CIPS is exceptionally qualified to undertake this assignment. Operating Costs 26. The operating costs will include operations and maintenance of equipment and vehicles, hiring of vehicles, office rent, costs of consumables, fkel, office utilities and supplies, bank charges, and advertising expenses but excluding any salaries and allowances of civil servants. Procurement and Selection Planning 27. The Borrower will prepare a Procurement Plan for project implementation which provides the basis for the procurement methods. The Plan will cover the initial 18 months of the project and will be updated annually covering always the next 18 months of project implementation. It will also be available in the Project s database and in the WB s external website. Prior to issuance of any invitation for bids for procurement of goods and works and selection of services, the proposed Plan shall be furnished to the WB for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the respective Guidelines. Procurement of goods and works and selection of all consultants will be undertaken in accordance with Plans approved by the WB. 28. Use of Standard Bidding and Contract Documents. For ICB procurement of goods and works, the use of IDA S Standard Bidding Documents (SBD) is mandatory. For NCB procurement,, CPTU may use the Government s Standard Bidding Documents in form acceptable to the WB. For selection of international consulting firms, the WB s Standard Request for Proposals (RFP), including standard contract form will be used; for local consultants Government s procedure laid out in the national regulations will apply including its documentation. Depending on the type of procurement, the WB s or Government s Standard BidProposal Evaluation Form will be followed for submission of evaluation reports.

83 77 Table A: Procurement Arrangements (US$ Millions) I/ 2 Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. Includes (i) goods to be procured through shopping; direct contracting (ii) consulting services to be procured following quality based selection, quality and cost based selection, selection under fixed-budget, least cost selection, consultant qualification and single source selection, and individual consultants methods, and cost of training, seminar, workshops and other dissemination activities; (iii) project incremental allowances for CPTU s staff, TWG members, and PMCs; and (iv) recurrent costs. N.B.F. Not Bank-financed Prior Review Thresholds Goods and Works: During the initial 18 months of the project, the WB will carry out prior review of the following contracts: (i) first contract for goods by each implementing agency using NCB, and thereafter contracts estimated to cost US$ 300,000 equivalent or more, irrespective of the procedures; (ii) for works- first packagekontract using NCB, and thereafter all contracts estimated to cost US$500,000 equivalmt or more, irrespective of the procedures; and (iii) all contracts for goods and works using direct contracting. After 18 months, the above thresholds will be revieweddefinedredefined in the revised procurement plan, if necessary but subject to the prior review and no objection., # 30. Consultants Services: The WB s prior review will be required for consultants services contracts estimated to cost US$lOO,OOO equivalent or more for firms and US$50,000 equivalent or more for individuals. All single-source contracts will be subject to prior agreement by.the WB. All TORS of the consultants are subject to the WB s prior review. Table B: Thresholds for Procurement Methods and Prior Review a/ Category Works (Threshold) Method >= us$2,000,000 ICB All contracts. NCB First contract regardless o f value in NCB and thereafter, all contracts valued US$SOO,OOO or more - Goods DC All contracts >=US$300,000 ICB, All contracts

84 78 Expenditure Category Services Contract Value Procurement Contracts Subject to Prior Review (Threshold) Method <US$300,000 NCB First contract by each implementing agency regardless of value in NCB and thereafter, all contracts valued US$300,000 or more. DC All contracts >=us$200,000 QCBS/ QBS All contracts. <us$200,000 <us$loo,ooo >=US$50,000 <US$50,000 Selective contracts meeting the requirements of 3.9 to 3.12 of the Consultant Guidelines FB S FBSLCS IC- Qualifications (Section V of the Consultant Guidelines) IC- Qualifications, references. sss All contracts of US$lOO,OOO or more Post review All contracts Post review Prior agreement l - a/ Prior review threshold would be reviewed after 18 months and adjusted, if necessary. Post Review 31. For compliance with the WB s procurement procedures, the WB will carry out sample post review of contracts that are below the prior review threshold. The Procurement Core Team will also review and carry out audit of such contracts. Such review (ex-post and procurement audit) of contracts below the threshold will constitute a sample of about 20 percent of the. contracts in each agency. Review of Procurement Performance 32. The WB will monitor the compliance with the requirements of W s different procurement methods and performance standards on a continuous basis. As part of the project s planned annual review/mid-term review, a comprehensive assessment of procurement performance will also be carried out. Based on the review, in consultation with the Government, the WB may revise the prior review threshold, including the procurement and selection methods. 33. Reporting. The project will prepare semi-annual Procurement Monitoring Report (PROCMOR) included as part of the implementation status report, as per specific formats agreed with GOB. 34. Frequency of procurement supervision missions proposed. Once every six months. Besides, as part of the fiduciary control, WB s staff and independent consultant, as deemed appropriate, will carry out post review/procurement audit of contracts.

85 79 Details of the Procurement Arrangement: 35. G6ods and Works: List of contract packages to be procured following ICB and NCB: 1 Re No. G1 G2 G3 G4 G G6 - G7 - G8 - G Contract Description Hardware and software for LGED Hardware and software for RHD Hardware and software for REB Hardware and software for BWDB Computers & Printers for CPTU and IMED (Desktop, laptop, printer, modem, photocopier and Estimated cost (US$) 400, , , , ,000 other accessories) Furniture and Fixture for CPlT I 180,000 and IMED including furnishing Office equipment, electrical and 100,000 communication equipment for CPTU and IMED- Vehicles for CPTU (2 Microbus I 75,000 5 Procurement Method ICB NCB NCB WCB NCB NCBNS 6 Domestic Preference (yesho) Yes No No No No (Prior I Post) Prior Post Post Post Post May2008 April 2008 April 2008 April 2008 March 2008 January 2008 March 2008 December - w1 Civil works -Construction of new CPTU office facilities 700, Consulting Services S6 S7 S8 S9 target agencies (field offices) e-gp awareness and communication consultant Feasibility study on IT infrastructure 200,000 60,000 QCBS CQI FBS Yes Yes June 2008 December 2009 and e-contract management e-gp implementation and monitoring 345,000 IC Yes, October 2007 consultant (intl.) (15 SM) e-gp Training Specialist (intl.) (9 210,000 IC Yes April 2008