Page 1 The World Bank 1818 H Street N.W. (202) 477-1234 I NTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS October 11, 2002 Mr. Alvaro Cruz Vargas Gobernador de Cundinamarca Gobernaci�n de Cundinamarca Bogot�, Colombia Ms. Piedad Caballero Prieto Secretaria de Educaci�n de Cundinamarca Secretar�a de Educaci�n de Cundinamarca Bogota, Colombia Re: Japanese Grant for preparation of the Cundinamarca Education Quality Improvement Project - Grant No. TF051358 Dear Sir/Madam: I am writing on behalf of the International Bank for Reconstruction and Development (the Bank) to indicate the Bank�s agreement, as administrator of grant funds provided by Japan, to make a grant in an amount not exceeding three hundred thousand U.S. Dollars (US$300,000) (the Grant) to the Colombian Department of Cundinamarca (the Recipient). The Grant is being made to the Recipient at request of the Government of the Republic of Colombia (Colombia). The Grant is made in response to the Republic of Colombia�s request for financial assistance and for the purposes and on the terms and conditions set forth in the Annex to this Letter Agreement (the Project), which will be carried out by the Secretary of Education of the Department of Cundinamarca (Cundinamarca). The Recipient represents, by confirming its agreement below, that it is authorized to contract and withdraw the Grant for the said purposes and on the said terms and conditions, and Cundinamarca is authorized to carry out the Project, in accordance with said terms and conditions. Please confirm your agreement with the foregoing, on behalf of the Recipient, by signing, dating, and returning to us the enclosed copy of this Letter Agreement. Upon receipt by the Association of the copy of this Letter Agreement countersigned by you, this Letter Agreement will become effective as of the date of the countersignature. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Olivier Lafourcade Country Director Colombia - Mexico - Venezuela Country Management Unit Latin America and the Caribbean Region Page 2 - 2 - AGREED: DEPARTMENT OF CUNDINAMARCA By: /s/ Alvaro Cruz Vargas Governor of Cundinamarca Date: October 15, 2002 SECRETARIAT OF EDUCATION DEPARTMENT OF CUNDINAMARCA By: /s/ Piedad Caballero Prieto Secretary of Education of Cundinamarca Date: October 15, 2002 Page 3 - 3 - ANNEX Purposes, Terms, and Conditions of the Grant 1. Purposes and Activities 1.1. The purpose of the Grant is to assist the Recipient in the preparation of the Cundinamarca Education Quality Improvement Project which has as its main objective to improve the quality of learning in basic (grades 0 to 9) and secondary (grades 10 and 11) education through continuous and comprehensive interventions at the school and classroom levels based on four dimensions: teacher performance, quality in the classrooms, school management and monitoring of learning outcomes (the Project). The activities (the Activities) for which the Grant is given are as follows: (a) provision of technical assistance to prepare guidelines, terms of reference and feasibility studies for the design of the following Project sub-components: (i) improving pedagogical practices; (ii) providing instructional resources, learning materials and competency- based curriculum guides; (iii) developing the management capacity of school principals; (iv) establishing strategic partnerships between the schools, the productive sector and civil society actors to facilitate lifelong education and labor market insertion of the secondary and post secondary graduates; and (v) improving mechanisms for permanent quality assessment of the students attainment in all grades (these Activities are estimated to cost US$225,000 equivalent; (b) provision of technical assistance to: (i) analyze the institutional, governance and legal characteristics of the Cundinamarca education system, and (ii) design guidelines for the preparation of a ten-year education plan, through the involvement of all the major stakeholders (teacher, principals, union representatives, mayors) in the design of the education improvement plan supported by the Project (these Activities are estimated to cost US$27,000 equivalent); and (c) provision of technical assistance training and equipment for the carrying out of studies related to the improvement of the management capacity of Cundinamarca, including the design of the management information system, the formulation of the institutional and economic analysis, and the design of the evaluation and monitoring system (these Activities are estimated to cost US$48,000 equivalent). 2. Implementation Generally 2.1. The Recipient, through Cundinamarca, shall: (a) carry out the Activities with due diligence and efficiency; (b) promptly provide the funds, facilities, services and other resources required for that purpose; (c) furnish all information covering the Activities and the use of the proceeds of the Grant as the Bank shall reasonably request; (d) from time to time exchange views with the Bank's representatives on the progress and results of the Activities; and (e) take all necessary measures required to enable the Bank to visit the territory of Colombia for purposes related to the Grant. Without limitation on the foregoing, the Recipient shall, if the Bank shall so request, prepare and furnish to the Bank promptly upon completion of the Activities a report, in form and substance satisfactory to the Bank, on the results and impact of the Activities. Page 4 - 4 - 3. Procurement 3.1. Except as the Bank shall otherwise agree, procurement of the consultants� services and goods required for the carrying out of the Activities to be financed out of the proceeds of the Grant shall be governed by the provisions of Attachment I to this Annex. 3.2. The Recipient shall ensure that all imported goods to be financed out of the proceeds of the Grant shall be insured against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and that any indemnity for such insurance is payable in a freely usable currency to replace or repair such goods. The Recipient shall ensure that any facilities relevant to the Activities are at all times operated and maintained in accordance with appropriate practices and that any repairs or renewals of such facilities are promptly made as needed. 4. Withdrawal of Grant Proceeds 4.1. The amount of the Grant shall be credited to an account opened by the Bank on its books in the name of the Recipient (the Grant Account), and may be withdrawn therefrom by the Recipient in accordance with the provisions of this Section 4, for expenditures in respect of the reasonable cost of goods and services required for the Activities and to be financed out of the proceeds of the Grant. 4.2. The expenditures for the following items may be financed out of the proceeds of the Grant and shall be used exclusively in the carrying out of the Activities: % of Amount of the Grant Expenditures to Item Allocated (in U.S. Dollars) be Financed (1) Consultants� services 277,000 84% (2) Goods 13,000 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 84% of local expenditures for other items procured locally (3) Training 10,000 84% TOTAL 300,000 For purposes of this paragraph, the terms: (a) �foreign expenditures� means expenditures in the currency of any country other than that of Colombia for goods or services supplied from the territory of any country other than that of Colombia; (b) �local expenditures� means any expenditures that are not foreign expenditures; and Page 5 - 5 - (c) �training� means the non-consultant expenditures incurred by the Recipient in connection with the carrying out of the training activities, including workshops, travel costs and per diem of trainers and trainees, rental of training facilities and equipment, and training materials. 4.3. Notwithstanding the provisions of paragraph 4.2 above: (a) No withdrawals shall be made from the Grant Account: (i) for payments made for expenditures prior to the date of signature of this Letter Agreement by the Bank; (ii) on account of payments for any taxes levied by or in the territory of Colombia; (iii) on account of expenditures in the territories of any country which is not a member of the Bank or goods produced in or services supplied from such territories; or (iv) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the Bank�s knowledge, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations; (b) no withdrawals shall be made from the Grant Account after May 29, 2006 or such later date that the Bank shall establish by notice to the Recipient (the Closing Date). However, withdrawals may be made after the Closing Date for expenditures incurred prior to the Closing Date if the corresponding withdrawal application is received by the Bank within four months after the Closing Date, after which time any amount of the Grant remaining unwithdrawn from the Grant Account shall be canceled; and (c) if, in the Bank�s opinion, an amount of the Grant allocated to any of the items in the table in paragraph 4.2 above will be insufficient to finance the expenditures for such item, the Bank may, by written notice to the Recipient, reallocate to such item an amount of the Grant then allocated to another item which, in the Bank�s opinion, will not be necessary to meet other expenditures. 4.4. When the Recipient shall desire to withdraw any amount from the Grant Account, it shall deliver to the Bank a written application for withdrawal of such amount in the form specified by the Bank. Withdrawal applications shall be: (a) signed on behalf of the Recipient by the Gobernador de Cundinamarca or such other person as he or she shall have authorized in writing; and (b) accompanied by such evidence in support of the application as the Bank shall reasonably request. Authenticated specimen signatures of the person authorized to sign withdrawal applications shall be provided with the first application bearing his or her signature. Each withdrawal application for an amount of the Grant and its supporting evidence must be sufficient in form and substance to satisfy the Bank that the Recipient is entitled to withdraw such amount from the Grant Account and that such amount is to be used in the carrying out of the Activities. The Bank shall pay the amounts withdrawn by the Recipient from the Grant Account only to or on the order of the Recipient. 4.5. The Bank may require withdrawals from the Grant Account to be made on the basis of statements of expenditure for expenditures under contracts for: (a) services of consulting firms costing less than US$100,000 equivalent; (b) services of individual consultants costing less than US$50,000 equivalent; (c) goods; and (d) training, all under such terms and conditions as the Bank shall specify by notice to the Recipient. 4.6. Withdrawals of the proceeds of the Grant shall be made in the currency of the Grant. The Bank, at the Recipient�s request and acting as an agent of the Recipient, shall purchase with the currency of the Grant withdrawn from the Grant Account such currencies as shall be required to pay for expenditures to be financed out of the proceeds of the Grant. Whenever it shall be necessary, for the purposes of this Letter Agreement, to determine the value of one currency in terms of another, such value shall be as reasonably determined by the Bank. Page 6 - 6 - 4.7. To facilitate the carrying out of the Activities, the Recipient may open and maintain in U.S. Dollars a special deposit account (the Special Account) in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Attachment II to this Annex. 5. Accounts and Audits 5.1. (a) The Recipient shall maintain or cause to be maintained a financial management system, including records and accounts, and prepare financial statements in a format acceptable to the Bank, adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures related to the Activities. (b) The Recipient shall: (i) have the records, accounts and financial statements referred to in subparagraph (a) above and the records and accounts for the Special Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year as so audited; and (B) an opinion on such statements, records and accounts and report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof, and concerning said auditors, as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Grant Account were made on the basis of statements of expenditure, The Recipient shall: (i) maintain or cause to be maintained, in accordance with subparagraph (a) above, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank�s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in subparagraph (b) above and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. 6. Suspension and Cancellation 6.1 The Bank may at any time, by notice to the Recipient, suspend the right of the Recipient to make further withdrawals from the Grant Account if any of the following events has occurred and is continuing: (a) the Recipient has failed to comply with any of its obligations herein specified; or (b) the right of the Recipient, or any other entity to which the Bank has made a loan with the guarantee of Colombia, to make withdrawals under any loan agreement with the Bank or any development credit agreement with the International Development Association shall have been suspended. 6.2. The Bank may, by written notice to the Recipient, terminate the right of the Recipient to make further withdrawals from the Grant Account: (a) at any time after the right of the Recipient to make withdrawals from the Grant Account shall have been suspended pursuant to the provisions of paragraph 6.1 above; or (b) if the Recipient shall have failed to take action, satisfactory to the Bank, within six months after the effective date hereof, to carry out the Activities; or (c) if the Bank has Page 7 - 7 - decided, at any time after consultation with Colombia to withdraw its support to the Project; or (d) if Colombia has withdrawn its request for the Bank�s assistance in financing the Project. Page 8 - 8 - Attachment I Procurement Section I. Consultants� Services Part A : General Consultants� services shall be procured in accordance with the provisions of Sections I and IV of the �Guidelines: Selection and Employment of Consultants by World Bank Borrowers� published by the Bank in January 1997 and revised in September 1997, January 1999 and May 2002 (the Consultant Guidelines), paragraph 1 of Appendix 1 thereto, Appendix 2 thereto, and the following provisions of this Section and Sections III and IV of this Schedule. Part B : Quality- and Cost-based Selection Except as otherwise provided in Part C of this Section, consultants� services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. Part C : Other Procedures for the Selection of Consultants 1. Quality-based Selection Services rendered by consulting firms for the Activities described under Paragraph 1.1 of the Annex may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 through 3.4 of the Consultant Guidelines. 2. Selection Based on Consultants� Qualifications Services rendered by consulting firms for the Activities described under Paragraph 1.1 of the Annex estimated to cost less than US$50,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 3. Individual Consultants Services rendered by individual consultants for the Activities described under paragraph 1.1 of the Annex in tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines shall be procured under contracts awarded in accordance with the provisions of paragraphs 5.1 through 5.4 of the Consultant Guidelines. Part D : Review by the Bank of the Selection of Consultants 1. Selection Planning A plan for the selection of consultants, which shall include contract cost estimates, contract packaging, and applicable selection criteria and procedures, shall be furnished to the Bank, for its review and approval, prior to the issuance to consultants of any requests for proposals. Such plan shall be updated every six (6) months during the execution of the Project, Page 9 - 9 - and each such updating shall be furnished to the Bank for its review and approval. Selection of all consult ants� services shall be undertaken in accordance with such selection plan (as updated from time to time) as shall have been approved by the Bank. 2. Prior Review (a) With respect to each contract for the employment of consulting firms estimated to cost $100,000 equivalent or more, the procedures set forth in paragraphs 2, 3, and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $50,000 or more, the report on the comparison of the qualifications and experience of candidates, and the terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval. The contract shall be awarded only after said approval shall have been given. The provisions of paragraph 3 of Appendix 1 to the Guidelines shall also apply to such contracts. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. Section II . Procurement of Goods Goods shall be procured: (a) in accordance with the provisions of Section I of the �Guidelines for Procurement under IBRD Loans and IDA Credits� published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines); and (b) under contracts awarded on the basis of shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. The review procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply to such contracts, provided that the word �bids�, in such paragraph 4, shall be read as �quotations�. Page 10 - 10 - Attachment II Special Account 1. For the purposes of this Attachment: (a) the term "eligible items" means the items set forth in the table in paragraph 4.2 of the Annex to this Letter Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Activities and to be financed out of the proceeds of the Grant; and (c) the term "Authorized Allocation" means an amount equivalent to US$30,000 to be withdrawn from the Grant Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Attachment. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Attachment. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) The Recipient shall furnish to the Bank a request or requests for a deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account such amount or amounts as the Recipient shall have requested. (b) (i) For replenishment of the Special Account, the Recipient shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Recipient shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Attachment for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account such amount as the Recipient shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Grant Account under the eligible items, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Recipient out of the Special Account, the Recipient shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Attachment, the Bank shall not be required to make further deposits into the Special Account: Page 11 - 11 - (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Recipient directly from the Grant Account; (b) if the Recipient shall have failed to furnish to the Bank, within the period of time specified in paragraph 5.1 (b) (ii) of the Annex to this Letter Agreement, any of the audit reports required to be furnished to the Bank pursuant to said paragraph in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Recipient of its intention to suspend in whole or in part the right of the Recipient to make withdrawals from the Grant Account pursuant to the provisions of paragraph 6.1 of the Annex to this Letter Agreement; or (d) once the total unwithdrawn amount of the Grant shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawals from the Grant Account of the remaining unwithdrawn amount of the Grant shall follow such procedures as the Bank shall specify by notice to the Recipient. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Attachment; or (ii) was not justified by the evidence furnished to the Bank, the Recipient shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Recipient shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. Page 12 - 12 - WB203490 M:\COLOMBIA\JGAGrants\777- Colombia Cundinamarca Education Quality.doc October 2, 2002 3:48 PM