THE WORLD BANK

SYNOPSIS

of

INDEPENDENT PROCUREMENT REVIEW (IPR)

of

5 PROJECTS IN BOSNIA-HERZEGOVINA

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Global Procurement Consultants Limited

Maker Chambers IV, 8th Floor, Nariman Point, Mumbai 400 021, INDIA

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August 2003

Global Procurement Consultants Limited

SYNOPSIS

of

INDEPENDENT PROCUREMENT REVIEW (IPR)

of

5 PROJECTS IN BOSNIA - HERZEGOVINA

CONTENTS

Chapter 1 / Summary Report of Independent Procurement Review (IPR) of 5 Bank funded projects in Bosnia Herzegovina
Introduction
Common Observations
Project Specific Observations
Project Specific Recommendations

Global Procurement Consultants Limited

Chapter 1 Summary Report of Independent Procurement Review (IPR) of 5 Bank funded projects in Bosnia Herzegovina

1.0Introduction:

1.1Global Procurement Consultants Ltd (GPCL) have been appointed by the ECA Regional Procurement Advisor’s Office of the World Bank, Washington DC, USA to carry out an Independent Procurement Review (IPR) of the Procurement and Contracting carried out by Implementing Agencies under 5 Bank Financed projects in Bosnia-Herzegovina:

Bosnia – Herzegovina:

Sr. No. / Name of Project / IDA Credit No.
1. / Mostar Water Supply & Sanitation Project / 3400 BOS
2. / Education Development Project / 3351 BOS
3. / Basic Health Project / 3202 BOS
4. / Pilot Emergency Labour Redeployment Project / 3385 BOS
5. / Export Enterprise Facility Project / 3257 BOS

1.2The main thrust on the Assignment was to review, analyze and report on the findings with recommendations as to whether:

  1. Procedures and processes followed by the respective Implementing Agency were in line with the Loan / Credit agreement and Bank’s Guidelines.
  1. Expected Economy and Efficiency had been achieved.
  1. Capacity to handle Procurement efficiently exists in the Implementing Agencies.
  1. Quality of Goods, Works and Services were as per specified standards, and contract values as awarded, were reasonable.
  1. in the case of those contracts which are subject to prior review, the Bank's procurement supervision of the projects;
  1. compliance with the Bank's general guiding principles of economy and efficiency, equal opportunity, transparency and quality including but not limited to, and to the extent possible, technical, physical completion, and price competitiveness aspects of contracts; and

1.3In due consultation with the Bank though as per terms of reference max. 30% of contracts selected should be under prior review, in the absence of enough number of post review contracts, 56 contracts out of 97 selected falls under prior review.

Table 1

Sr. No. / Project / Works / Goods / Services / Total
1. / Mostar Water Supply & Sanitation Project / 6 (1 prior) / 9 (6 prior) / 2 (2 prior) / 17 (9 prior)
2. / Education Development Project / --- / 17 (4 prior) / 8 (all prior) / 25 (12 Prior)
3. / Basic Health Project / 10 (all prior) / 15 (10 prior) / 12 (all prior) / 37 (32 prior)
4. / Pilot Emergency Labour Redeployment Project Export / --- / 7 / 6 / 13
5. / Enterprise Facility Project / --- / 2 / 3 (all prior) / 5 (3 prior)
Total / 97 (56 prior)

1.4It was ensured that the contracts selected covered various modes of procurement, and categories, as listed below

Table 2

Sr. No. / Project / Mode of Procurement / Total
ICB / NCB / IS / NS / Direct / QCBS / QBS / Others
1. / Mostar Water Supply & Sanitation Project / 6 / 6 / 1 / 2 / --- / --- / --- / 2 / 17
2. / Education Development Project / --- / --- / --- / 15 / 8 / 2 / --- / --- / 25
3. / Basic Health Project / 8 / 10 / 3 / 3 / 1 / 4 / --- / 8 / 37
4. / Pilot Emergency Labour Redeployment Project Export / --- / 1 / --- / 6 / --- / --- / --- / 6 / 13
5. / Enterprise Facility Project / --- / --- / --- / 2 / --- / --- / --- / 3 / 5
Total / 97

1.5The field review activity in Bosnia Herzegovina was conducted from 24thMarch 2003 till 4th April 2003. The purpose of the field mission was to critically scrutinize in detail all the available data, documents, reports, correspondence associated with the selected contracts and note down all the relevant information enabling analysis of the procurement approach followed by the Implementing agency in the project execution. On return from the field visits, based on the input gathered, Draft IPR report for each of the project was prepared, highlighting the deviations if any observed in each contract and identifying areas of deficiencies and recommending steps for improvement and necessary action.

1.6The Draft IPR reports were forwarded to the Procurement Specialist, ECA region of the World Bank in May 2003. Response to the reports from respective Task Manager, PAS’s and other concerned officers were deliberated during the meeting held in Bank’s headquarters in end July. Based on additional input received from the above discussions the Final IPR Reports on each project were submitted to the Bank in August 2003.

2.0Common Observations:

2.1Out of the 97 Contracts reviewed, except for 9 contracts wherein Procurement process followed is not in order, process followed in the balance contracts is Acceptable.

2.2Invariably, cost estimated prepared by all Implementing agencies were found to be either too high or too low.

2.3Brand name and model number have been used for describing goods, which is not as per Bank guidelines

2.4In 3 out the 5 projects reviewed, substantial amount of Credit / Loan is yet to be committed.

2.5It was noted that documentation is generally well organised and retrieval during the course of the review was smooth in all the projects except, in Export Enterprise Facility Project. All the documents relating to respective contract’s procurement process have been properly bunched together and maintained.

3.0Project Specific Observation:

3.1Mostar Water Supply & Sanitation Project

  1. Out of the 17 contracts reviewed except for 3 contracts wherein the Procurement Process followed has not been sound, other contracts have been satisfactorily procured and completed.
  2. Nearly 52% of the Loan amount is yet to be committed
  3. Irrespective of estimated cost, costs of Tender Document and amount for Bid security have been kept the same in most of the contracts
  4. In all the civil works, defects liability period stipulated is only 30 days, which is inadequate. Especially in case of important civil structures such as Construction of Pump Stations and Reservoirs, where long term settlement of foundation or seepage of water through joints is likely, a short liability period is not rational
  5. Though there has been delay of 6 to 8 weeks in completion of civil works contracts, such delays (due to poor weather) had been condoned by the PIU and extension of time granted.

3.2Education Development Project

  1. Out of 25 Contracts, except in 1 contract, the procurement process followed was noted to be in order; possibly even the contracts falling under post review have been reviewed by the Bank. In one of the contracts where late bid has been accepted, and it had been evaluated; which is not a good practice.
  2. Nearly 55% of the Loan amount is yet to be committed
  3. The bid evaluation report does not contain any analysis to establish that all bids are technically responsive.

3.3Basic Health Project

  1. Out of the 37 contracts reviewed except for 2 contracts, wherein procurement process followed is “Not in Order”, the process in the balance 35 contracts is “Acceptable” possibly because of Bank’s Prior review of nearly 32 contracts out of 37 selected.
  2. Though the project is coming to close on 28 Feb. 2004, nearly 40% of the loan is yet to be committed.
  3. Irrespective of estimated costs for works, the minimum qualification – on turnover, liquid assets have been kept the same. This had resulted in poor bid response.
  4. In most of the works contracts 10% Performance Guarantee is not being collected before contract signing. It is being collected in some cases only at the time of making final payment and has therefore no relevance
  5. In the absence of realistic construction / delivery period, generally all contracts have been delayed.
  6. One of the evaluation criteria in a consultancy contract namely “references” is very broad and difficult to quantify. Besides short list as carried out is not fair, as 2 other firms with similar qualifications have not been short listed. Hence categorized as Not in Order

3.4Pilot Emergency Labour Redeployment Project:

  1. Out of the 13 contracts reviewed except for 1 contract, wherein procurement process followed is “Not in Order”, the process in the balance 12 contracts is acceptable.
  2. Classifying the mode of procurement of all Service Contracts in the Project as Consultants’ Qualification is not valid since both Technical and Financial Proposals have been called for together for bids under Self employment in Agriculture. Besides, a consultancy fee for the above also includes cost of Goods procured under National Shopping mode.

3.5Enterprise Facility Project:

  1. Out of the 5 contracts reviewed, in 2 contracts, procurement process followed is “Not in Order”, the process in the balance 3 contracts is acceptable.
  2. Only 7 Consultancy contracts and 6 Goods contracts have been procured and of small values after the year 2000. The documents for 5 contracts, were only available in the offices of PIU for scrutiny. Even on those available contracts, maintenance of data and documents was noted to be chaotic and disorganised and retrieval time consuming.
  3. It was observed that the main focus of the Project Implementation Team has been towards Sub-loans and Securities. Therefore, the officers concerned were not able to offer any clarifications on missing data and reasons for certain decisions taken during the procurement process
  4. In shopping contracts, the Letter of Enquiry is without any Technical parameters for comparison and no deadline indicated for last date for submission of quotes.
  5. Evaluation report in one contract is not complete as important data like reason for rejection of firms other than the selected one is not known.

4.0Project Specific Recommendations:

4.1Mostar Water Supply & Sanitation Project

  1. As contract award value is lower than estimate by a large margin, for a utility with likely expansion in the future, it is important that cost data bank is created during the course of the project itself with the induction of qualified experienced estimator
  2. PIT Procurement staff who are enthusiastic should be encouraged to undergo advanced procurement training programmes so that knowledge can be shared; and sustained capacity building ensured
  3. Creation of Procurement schedule in the form of a bar chart with linkages to project activities would ensure that the procurement is judiciously planned. (neither far ahead nor too late than when actually required).This would prevent unnecessary storages and pilferages of valuable items (meters, valves, fittings, etc)
  1. Exclusive asset register (computerised) should be maintained in the warehouse to ensure that goods procured under the World Bank credit are not mixed with others and issue properly controlled

4.2Education Development Project

  1. Induction of a Qualified Estimator in social sector projects could be a good option to overcome the weakness of estimated value higher than the contract award.
  2. Procurement training and orientation by PAS in the Bank’s country office which is currently ongoing would resolve deviations such as use of Brand names, opening of late bids and taking the same for evaluation etc.

4.3Basic Health Project

  1. Periodic training on procurement issues would remove deviations such as collecting performance security only after completion of works, keeping same qualifications though estimated value of works varies etc.
  2. Low estimate reflects poorly on the internal estimation capability, which is true in most of the social sector projects where the PIU’s may not have data base or exclusive civil engineering cell to do proper estimation. To overcome this against such projects, a post of Estimator can be created whose experience and expertise would lead to better estimation and set up data bank for future reference. Based on his assessment, estimated construction time period will also be realistic
  3. Procurement plan needs to be periodically updated and should be in line with the PAD. Monitoring and adherence to the approved plan is vital. Creation of MIS for close monitoring is recommended.
  4. In addition to stipulation of the estimated cost in the LA wherein a particular mode of procurement is to be followed, based on the nature of Goods/ Works to be procured the LA can also classify the procurement modes.

4.4Pilot Emergency Labour Redeployment Project:

  1. Project specific audit comprising of critical review of project objectives achieved combined with study of Procurement and Financial management process followed would have been better option than an exclusive IPR, since for the consultancy contracts identified for IPR, mode of procurement and evaluation criteria had to be specially evolved suiting the project goals and objectives
  2. Bidders for Goods contracts floated by Service Providers have back out after award of contract. Bid security (even small amount) could have been called for, to discourage such practices.

4.5Enterprise Facility Project:

  1. Orientation on sound procurement process and importance of maintenance of all connected records for post contract should be provided to the PIU before commencement of the project.
  2. Involvement of Bank’s PAS in the country office to provide periodic advice on procurement would yield results.
  3. In Loan Agreement, maximum ceiling value should be allocated to selection of Individual consultants (similar to foot note 21 – Selection based on Consultant’s Qualification), so as to prevent utilisation of large aggregate amount in a single contract itself.

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