-ee一－→．■，■■•■■■■■■•■■■■口口口開口■■■口口■■■•．■．•．口•口啊••■•■”―一―一 L一｀戶一，. !，〔〕一。＇一，一＇一｀一一： ·＇&＇伏k 二、’·p j &&，、，1 甲戶’一’·‘’·，·’、 一｀ 一必。‘.＿、、 The World Bank H AND BOOK ON CONSULTING SERVICK S A Guide for the World Bank Staff Projects Policy Depar%ment Operations Policy Staff September, 1985 Abbreviations AMS Administrative Manual Statement CV Curriculum Vitae DACON Data on Consulting Firms DTCD United Nations Department of Technical Cooperation for Development FAO Food and Agriculture Organization SLAC Latin American Federation of Consulting Engineers FIDIC Federation of International Consulting Engineers IAD Internal Auditing Department ICB International Competitive Bidding IGRA International General Rules of Agreement ILO International Labour Office IRD International Relations Department ITC International Trade Centre, UNCTAD/GATT ITU International 'elecommunications Union LIB Limited International Bidding LOI Letter ol Invitation NGO Ncn-Government Organization OMS Operational Manual Statement OPM Operational Policy Memorandum OPN Operational Policy Note OPS Operations Policy Staff PCR Projects Completion Report PD Project Document PPDPC Central Procurement Unit PPF Project Preparation Facility TOR Terms of Reference - 2- UNDP United Nations Development Programme UMDP/OPE United Nations Development Programme/Office of Projects Execution UNEP United Nations Environment Programme UNESCO United Nations Education, Scientific and Cultural Organization UNIDO United Nations Industrial Development Organization WHO World Health Organization Consulting Services Handbook Preface This Handbook is designed to guide Bank staff on the selection and use of consulting firms' services. Its contents cover both consulting services financed by the Bank (the majority of cases) and also those financed by UNDP and for which the Bank is executing agency. It amplifies the policies and procedures set out in the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency," August, 1981, hereinafter referred to as "the Guidelines." The Handbook is not an official Bank publication, and is prepared for the use of Bank Staff. It may not be published, quoted or cited out- side the World Bank Group, except with prior permission of the Bank. For assistance on consulting services matters, Bank staff are advised to contact advisors in the Central Procurement Unit, PPD, and/or the Legal Department. The Central Procurement Unit manages the DACON Information Center (located in D-1060), which contains a variety of information on consulting firms and consulting matters. The heart of the system is a computerized data base which holds up-to-date information on about 3,600 firms (January, 1985). This information is supported by files containing details on each individual firm. There are also copies of national registers of consulting firms and a Terms of Reference (TOR) Library. Computer printouts in connection with Bank-financed projects are available on request. The Center is open to both Bank staff and borrowers' representatives. All US dollar figures relate to January, 1985. The Handbook was assembled by Maurice W. Dickerson, Consultant Services Adviser, in the Central Procurement Unit of the Projects Policy Department, with the advice and assistance of many sharing similar professional interests, both inside the Bank and around the world. The text was edited by Rachel Weaving and typed by Patricia Lalich. September, 1985 Consulting Services Handbook Contents Section Page No. INTRODUCTION 1. Consulting 1 2. Consulting Firms 3 3. Types of Assignments 11 4. The Seven Steps To Select a Consulting Firm 13 5. The Role of Bank Staff: Borrower Contracts 15 6. Financing Consultants' Services 19 7. Terms of Reference 22 8. Estimating Consultant Services' Costs 36 9. Selection Procedures 42 10. The Short List 49 11. Letter of Invitation 55 12. Proposal Evaluation 63 13. Consultants' Contracts 81 14. Cont.act Negotiations 98 15. Planning and Mission Checklist 117 16. Development of Local Firms 118 17. Training in Consultants' Contracts 133 18. Supervising Consultants' Contracts 139 19. Evaluation 142 20. The Role of Bank Staff in UNDP-Financed and 145 Bank-Executed Assignments 21. Institutional and Operational Assistance 161 22. Individual Consultants 164 -- Annexes 1 through 27 166-254 Alphabetical List of Headings I-1-I-9 Section 1 Consulting 1.01 The practice of providing knowledge for reward to create projects probably goes back to the days of the first major structures--the pyramids, the Parthenon, the Roman aqueducts. These early architects and engineers practiced alongside physicians and lawyers, among others. T,_ a large extent, up to this century, both the employment and remuneration of archi- tects and engineers paralleled that of doctors and lawyers. They were approached to provide services on the basis of their reputation and were paid according to norms established by the profession. It was considered poor taste for the prospective client to dig too deeply into reputation, and akin to sacrilege to question fees. 1.02 The twentieth century brought some changes. Architectural compe- titions became commonplace, and clients began to ask for proposals from several consulting engineers as to how a job would be performec The advantages to a client of comparing firms' experience and their di- terent approaches to the same task became more evident for overseas work whf. tle client could have a choice of technologies worldwide. The World Bank has played a big part in this by influencing its borrowers to choose from an international spread of firms and by requiring a technical competition when the Bank itself is proposing to employ a consulting firm. 1.03 In the 1970s, many developing countries began to question the cost of consulting services. While it is quite natural to question any costs, other factors, such as the wide range in rates charged by firms of different nationalities and the huge differences between the salaries of 2 clients' own staff and the apparent salaries of the consultants' staff, made the need for some form of cost comparison inescapable. 1.04 Consultants argue that the apparent overemphasis on price in current selection and employment procedures takes all flexibility away from the consultant, encourages the firm to do cut-rate work and employ lower- paid staff and, in general, lowers project quality. Indeed, some Central Works Tender Boards often treat the procurement of consultants like that of paint and truck batteries; this approach rarely yields the desired results that were hoped for. The purpose of this Handbook is to describe what the Bank believes to be good practice in the selection and employment of con- sulting firms, which will encourage an equitable relationship between a client and a consulting firm (and the consulting profession) and thus promote a climate for enhancing project quality. In a consulting contract, the Bank is financing a mutually acceptable arrangement between people. The selection process and contractual relationships should, therefore, display the care and dignity expected of such a human relationship. -3- Section 2 Consulting Firms 2.01 For convenience, consulting organizations employed on Bank-finan- ced projects are termed "consulting firms." A list of the more common types of these firms is given below: -- private partnerships -- private limited companies -- public companies -- firms partly owned by government -- government corporations -- government departments and public sector organizations -- non-profit organizations -- training institutions -- UN agencies -- personnel recruitment agencies -- firms owned by manufacturing or contracting companies -- universities - non-government organizations (NGOe' All the above types of organizations are acceptable for Bank-financed assignments; the choice among them depends on the type of assignment. A brief description of each is given below. A. Types of Consulting Firms Private Partnerships 2.02 This is the traditional consulting firm formed by one or more individuals to practice their profession. Some consulting partnerships have been in business for over 150 years, while others may have just been formed. Some partnerships are large with, say, 20 partners, 20 associate partners and a staff of 1,000. However, the majority are small-to-medium range firms. Although some in the professions have expressed concern about consulting partnerships operating as companies or corporations, the advan- tages to be gained have resulted in an increasing mve towards partnerships incorporating as private companies. In addition to tax and other financial advantages, a major advantage is the ability to establish a legally contin- uous entity with improved means of transferring ownership to other profes- sionals within the company. Private Limited Companies 2.03 Private companies are those consulting firms incorporated and registered as companies, but whose ownership remains in private hands, usually with a majority of shares held by the senior officers and the remainder held by the firms' staff who have qualified in terms of tenure and level of responsibility. Most consulting firms in the United States are private companies. Public Copanies 2.04 While there is a tendency for partnerships to become private companies, only a few of the latter become public corporations. This reluctance to go public stems from the concern that, in a public corpora- tion, the majority stockholders may not te those concerned with the professional aspects of the business, but may be concerned more with maximizing short-term profits. Firms Partly Owned by Governments 2.05 Some consulting companies are directly or indirectly partly owned by governments. A company specializing in railways may have some stock held by a state rail corporation. Companies may also be partly owned by state-owned banks. Government Corporations 2.06 These consulting firms may be offshoots of public sector indus- tries, such as a national electricity authority, or the consulting arm of a government department or ministry. Such corporations can normally call on a wide range of &overnment staff. Due to limitation on the liability they - 5 - can assume (sovereign immunity), government corporations may be More suit- able for advisory and institution-building assignments rather than, say, design. Government Departments and Public Sector Organizations 2.07 Even where a government department or public sector organization has not set up a consulting arm, its services as a consulting organization on Bank-financed projects may still be eligible for Bank financing. These services will normally be provided in a country other than the home country of the organization. For example, the Census Bureau of one country may provide advice to a similar organization in another country. The provision of such services, often institutional in nature, is known as "twinning," and is eligible for Bank financing (see also Section 21). 2.08 The Bank will not finance a government department providing services in its own country, unless the services and staffing are clearly incremental to the department's regular work program. Non-Profit Organizations 2.09 These are mainly found in the United States and, from the client's point of view, the non-profit label can be a misnomer. The fee or profit element can be of a similar amount as that of a profit-making com- pauy, but is often earmarked for research and development. Non-profit institutes normally practice in the research, management, sociological and institutional fields. Training Institutions 2.10 Most developed countries have government or privately-run training institutions. The types of training extend from vocational through top-level management, and cover many sectors. Not only can these institutions run training courses for developing country personnel, both at home and overseas, but they can also advise on setting up similar institu- - 6 - tions in developing countries. Contact the Training Unit in the Bank's U Education Department for details. gtN AAeplie 2.11 Agencies in the UN system can provide a variety of services in preparing and implementing Bank-financed projects.l/ 2.12 Such assistance may take the form of providing professional services, recruitment of individual staff, service of contracts, adminis- tration of fellowships, and small-scale procurement. Among the Agencies most likely to be found qualified for this type of work are the Food and Agriculture Organization (FAO), International Labour Office (ILO), United Nations Education, Scientific and Cultural Organization (UNESCO), United Nations Development Programme/Office of Projects Execution (UNDP/OPE) and United Nations Department of Technical Cooperation for Development (DTCD). Several other agencies, such as the International Trade Center-UNCTAD/GATT (ITC), the United Nations Industrial Development Organization (UNIDO), United Nations Environment Programme (UNEP), International Telecommunica- tions Union (ITU), and World Health Organization (WHO) have also occasion- ally undertaken such a role. 2.13 A borrower from the Bank may use a UN agency's services if the services are: (a) appropriate for the work to be carried out; (b) of a cost and quality equal to those available from other sources; and (c) provided in a timely and efficient manner. Personnel Recruitment Agencies 2.14 Recruitment agencies can be a useful source of individual consul- tants. Some recruitment agencies will guarantee a reasonable level of 1/ The use of such agencies in Bank-financed projects is covered in OPN 9.02, "Provision of Advisory Services by UN Agencies to Borrowers Under Bank-Financed Projects." - 7 - performance and, if the client wishes, will also arrange for personnel re- placement. However, it ihould be understood that recruitment agencies do not have, or normally portray themselves as having, corporate expertise or experience in any particular field. There are other organizations which give the impression that they are full-fledged consulting firms with corporate expertise, but are in effect merely recruitment agencies (more commonly known as "body shops"). Such firms normally are not sufficiently experienced and capable for work on Bank-financed projects. Firms Owned by Manufacturing or Contracting Companies 2.15 Most large contracting or manufacturing companies have, as an integral part of their organization, well established and experienced design and supervisory groups. Some companies have formed these into separate divisions or companies and are marketing their services. The Bank has no objection to the use of these firms on Bank-financed projects, provided the parent company clearly understands that, on a particular project, it can either consult or contract (or supply equipment), but it cannot do both. Bank staff should ensure that potential consulting firms and borrowers are fully aware of the conflicL of interest provision in the Guidelines (para. 1.08), and it should be brought to the attention of the consulting firms in the Letter of Invitation (LOI) (Section 11). B. Other Sources of Expertise Groups of Firms 2.16 In some countries, consulting firms join together in groups to market their services for overseas work. Some of these groups are backed by their government. Others are private ventures by the firms themselves. Examples of groups of firms are Sweco (Sweden); Norconsult (Norway); ENEX (New Zealand); NEDECO (Netherlands); and Techniberia (Spain). Some groups (e.g., ENEX) will sign a contract with the client under its group name. Others (e.g., Techniberia) will arrange for an individual firm or joint -8- venture of firms to sign the contract with the client. Because they have a wide range of expertise from which to draw, these are useful organizations. However, at the proposal stage, the client should ask which individual firm or firms will be undertaking the work with their respective responsibil- ities and liability relationship clearly defined, and request that the experience of this firm or firms should be described in the proposal. a rule, if two or mDre consulting firms are unwilling to be jointly and severally liable to the client for 100 percent of the services, then one of them should alone sign the contract for 100 percent of the services and the other firm(s) should be subcontracted to the main firm. 2.17 Information on groups of firms is held in the Bank's DACON Infor- mation Center. Associations 2.18 Professional consulting firms usually form an association in their own country. The Bank encourages the formation of associations in developing countries, as it believes that associations can often further the aims of the profession and their member firms. From the client's view- point, an association can be a useful source of information on suitable firms to undertake an assignment, and most associations will provide clients with some form of lists of appropriate consulting firms. There are also international associations of firms, the largest of these being the International Federation of Consulting Engineers (FIDIC). This Federation is in effect an association of associations and comprised (June, 1984) of 42 member associations (listed in Annex 1). Another well-known regional federation is the Latin America Federation of Consulting Engineers, FELAC, which is comprised (July, 1984) of 11 member associations throughout Latin America (listed in Annex 2). Associations, and particularly FIDIC, also publish information on consulting matters and produce sample contract - 9 - documents for general use. FIDIC can also be approached by governments to provide lists of firms appropriate for a particular assignment. The list of FIDIC publications, together with some of their documents, are held in the DACON Information Center. Universities 2.19 Universities can provide a wide range of professional services, but some are better equipped for overseas work than others. Generally, university staff are best suited for short-term assignments where little follow-up is required, but some universities will recruit long-term staff for overseas assignments. As with a recruitment agency, Bank staff should satisfy themselves that this provision of individuals is the appropriate way for the assignment to be conducted. Non-Government Organizations (NGOs) 2.20 These are non-profit organizations with private membership which provide development assistance. Such organizations principally include foundations, lay and religious aid associations, non-governmental coopera- tives and credit unions. Normally labor unions, chambers of commerce, research institutions, universities or public interest groups would not be included. Some NGOs have affiliates/correspondents in other countries. There are also consortia of NGOs. A fuller discussion of NGOs is contained in a paper entitled "Bank Relations with Non-Governmental Aid Organiza- tions," available from IRD. The use of NGOs is covered in OPN 10.05.2/ Association of Retired Professionals 2.21 In several industrialized countries, associations have been formed of retired professionals who are available for usually short to medium term assignments as advisers. These associations are particularly useful in 2/ OPN 10.05, Involving Non-Governmental Organizations (NGOs) in the Preparation and Implementation of Bank-financed Projects. - 10 - providing advisors to the private sector, including to de7eloping country consulting firms. A list of such associations is given in Annex 20. Eligibility 2.22 Depending on capability, consulting firms from all World Bank member countries and from Switzerland and Taiwan, China, are eligible to be financed under World Bank-financed projects. Such consultants may employ personnel from non-Bank member countries, provided the input of these personnel does not exceed about one-third of the total personnel input. 2.23 Consulting firms employed by a borrower may undertake feasibility studies and continue on to design a project and super-ise its implementa- tion. While different consultants may be employed to undertake feasibility studies and design, the Bank considers it exceptional for the same consul- tant not to continue on from design to coustruction supervision. Unless on grounds of poor performance, staff should be very reluctant to approve a fresh selection process to choose a firm for construction supervision. 2.24 The manufacturing or contracting parents of consulting firms engaged on a Bank-financed project are not acceptable as bidders on the resulting project (see para. 2.15). 2.25 Individuals and their firms previously employed directly by the Bank to assist in such activities as project identification, preparation, appraisal and supervision are not eligible for employment by the borrower on the same project for three years after completion of their Bank employ- ment (see AMS 2.05). - 11 - Section 3 Types of Assignments 3.01 Bank-financed projects have required consulting services for a wide variety of assignments ranging from artificial insemination of fish to design and construction supervision of offshore oil platforms. With in- creased attention being paid to the human and managerial side of projects, the range of assignments is widening further. 3.02 For convenience, assignments can be grouped into four categories: 1. Preinvestment Services-e.g., surveys, feasibility studies; 2. Preparation Services--e.g., design, preparation of bidding documents; 3. Implementation Services--e.g., construction supervision, project management; 4. Instituttonal and Operational Assistance--e.g., extension advice, management advice, training. Training may be a specific task (e.g., training of water treatment plant staff) or may be identified as a transfer of skills component of any assignment (see Section 17). 3.03 Consulting assignments are people-intensive where consultants use their skills to advise, create and train. Where the use of an established technology predominates, and the assignment is equipment-intensive, then rather than being called consulting assignments, such contracts are called service contracts, and are procured by conventional international competi- tive bidding or limited international bidding under the Bank's Procurement Guidelines,3/ rather than under the Guidelines for the Use of Consul- tants. Such service contracts are used, for example, for aerial surveying, 3/ "Guidelines for Procurement Under IBRD Loans and IDA Credits," August, 1984. - 12 - satellite mapping, drilling and computer services. If in doubt, staff should consult the Central Procurement Unit. 3.04 Assignments range in duration from a few days to several years. Long-term assignments should be divided into contracts with maximum dura- tion of 2-3 years to allow for change of staff, new conditions, changed costs, etc. (see Section 7 below for details of contract phasing). 3.05 Annex 3 gives the list of Services used in the international DACON (Data on Consulting Firms) form. Sector-specific services are too numerous to give here, but 1,400 such services are listed in the DACON form. - 13 - Section 4 The Seven Steps To Select a Consulting Firm 4.01 While consultant services are not procured in the same manner as civil works or goods, there is a fairly well-structured process by which a firm is chosen for an assignment. This process is described below. 4.02 The client begins by preparing the assignment terms of refer- ence (TOR). The terms of reference are the client's specification of the assignment the consuitant is to perform; they usually follow from the need for consulting services identified-usually jointly by the borrower and Bank staff. While the estimated cost of the consulting services may start as an educated guess, it can be prepared better by simulating the assign- ment activities, using network analysis or other means to define activ- ities' durations and costs. As many problems are caused by unduly low estimates, the estimate should be well refined before proposals are in- vited. Next, a decision must be made on whether to approach a single firm or to invite several firms on a short list to compete for the assignment by submitting their proposals for evaluation by the client. If a short list of firms is to be appointed, the client then sets the ground rules for the competition (the selection procedures), and conveys these, the terms of reference, other information and the proposed contract conditions to the consultants by means of the letter of invitation (LOI). The consultants prepare their proposals on the basis of the LOI and its contents, and information which they gather while visiting the project country and/or area of study. By a specified date, the proposals are submitted to the client, who then evaluates the proposals according to the previously-agreed ground rules. The firm winning this competition by submitting the proposal evaluated as the best is then invited to negotiate a contract with the client. - 14 - 4.03 The above process falls neatly into seven steps. These are: i) Preparing the terms of reference (TOR); ii) Estimating the assignment cost; iii) Preparing the short list of firms; iv) Determining the selection procedure; v) Sending the letter of invitation (LOI) to the short list of consultants; vi) Evaluating the consulting firms' proposals and selecting a firm for contract negotiations; and vii) Negotiating a contract with the selected firm. 4.04 This Handbook, particularly Section 15, and the Procurement Unit's training aids are orga.Ized on the basis of these seven steps. Where a short list is not used and an individual firm is to be approached, then Steps (iii) and (iv) are omitted, and (v) and (vi) are revised to reflect the direct approach. 4.05 Bank staff are encouraged to view the selection and employing process in terms of these seven steps, not only because they are helpful for planning purposes, but also because, as will be seen in Section 5 below, the Bank staffs' own involvement in the process is linked to these steps. - 15 - Section 5 The Role of Bank Staff--Borrower Contracts 5.01 The selection and employment of consultants are the responsi- bility of the borrower, but Bank staff must contribute to this process. The Bank's wealth of accumulated wisdom can and should be made available to the borrower. To supplement the experience of individual project officers, each region has a technical assistance unit, where knowledge and experience is accumulating. Project officers should seek the advice of these units. The Central Procurement Unit of the Projects Policy Department can help staff with the more difficult issues. Tasks Required of Bank Staff in Selection of Consultants 5.02 In accordance with the Loan/Credit Agreement,4/ the Bank must be involved at certain stages of the selection procedure. The standard covenant, which must be included in all Loan Agreements, reads as follows: "In order to assist the borrower in carrying out the project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the 'Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency,' published by the Bank in August, 1981." A summary of the Bank's requirements, taken from these Guidelines, is given below, together with the Guidelines paragraph references: Terms of Reference (TOR) "2.04 .... Because of their importance to the success of the assignment, the Bank reviews and approves the TOR." 4/ References to World Bank Loans in this Handbook apply equally to IDA Credits. 16 Cost Estimate (Budget) "2.09 An estimate should be made of the cost of a proposed consulting assignment and reviewed and approved by the Bank." Short List of Firms "2.13 To ensure that only consulting firms considered capable of undertaking the assignment are invited to submit proposals, the Bank reviews and approves the short list prepared by the borrower." Individual Firm "2.20 ....Therefore, while the Bank generally recommends invit- ing proposals from a short list of firms, it does not object to the borrower's requesting a proposal from a single firm of its choice, provided that the Bank approves the firm invited and, subsequently, the contract." Selection Procedures "2.21 The Bank's interest in the selection process is to ensure the adoption of a suitable procedure for the assignment. While allowing the borrower ample opportunity to propose any appropriate selection procedure, the Bank requires that, prior to inviting proposals, the borrower submit the proposed procedure, including the proposed evaluation criteria, in advance for comment and that its comments be taken into account. Where a proposed procedure is considered inappropriate and detrimental to a particular consulting assignment, the Bank will so advise the borrower and require that the procedure be modified." Letter of Invitation (LOI) "2.39 As the letter of invitation includes the terms of reference and the selection procedure, the Bank should be given the opportunity to comment on the draft letter before it is finalized." - 17 - Proposal Evaluation "2.41 The Bank will normally wish to receive and comment on a copy of the winning proposal before the borrower invites the firm to negotiate a contract in order to satisfy itself of the adequacy of the proposed work plan and approach and the qualifications and experience of the personnel proposed for the assignment. The Bank may also wish, in particular zases, to rev-ew the evaluation report covering all proposals." The Contract "2.44 The Bank will review and comment on the contract negotiated between the borrower and the selected firm prior to its signature. The contract, as vell as any material amendments thereto, must be satisfactory to the Bank. More broadly, the Bank reserves the right not to finance a contract in cases where: (i) the consultants have not been selected under procedures substantially in accordance with taose agreed between the Bank and the borrower; (ii) the quali- fications of the consultants are not satisfactory to the Bank; or (iii) the terms and conditions of the contract are not satisfactory to the Bank." 5.03 This comprehensive involvement by Bank staff should not be taken lightly and, particularly for less experienced borrower agencies, can be crucial to the success of the assignment, the project, institutioa building and policy guidance. The involvement, which can be both difficult and sensitive, can be made considerably easier for both the borrower and Bank staff if staff have been helping the borrower through the selection proc- ess. The need for such advice will depend on the sophistication of the assignment and/or the borrower. Its effectiveness will depend on the - 18 - manner in which it is given and the borrower's receptivity. Experience has shown that nearly all borrowers' project agencies welcome advice and assis- tance in the consultant employment process, provided such advice is specific in nature and is given early. 5.04 Specifically, such advice would cover the initial preparation of the terms of reference (TOR), selection procedures, letter of invitation (LOI) and draft contract. Together, these make up the package to be sent to the invited firms. The advice can be based on suggestions made in the appropriate sections of this handbook. When the borrower has finalized the package, it can then be sent to the Bank, with our review and approval following quickly. - 19 - Section 6 Financing Consultants' Services 6.01 Many consulting assignments, such as feasibility studies and detailed engineering, begin before a loan/credit is made for the project upon which the consultants are working. Project agencies must thus seek interim ways to pay the consultants for their services. Advance planning should reduce the difficulty a borrower has in financing consultant's services, whether from Bank or non-Bank sources. Common financing sources are listed below: World Bank i) As a "piggy-back" component in an ongoing loan, covering the cost of future consulting services. This is a common and easy method of financing suca services. It requires that the future need for consulting services be identified at the time a loa-; is ap- praised. ii) By retroactively financing the services from the forthcoming loan. This method requires the borrower to pay for the services from its own funds, and to be reimbursed when the loan is made. Bank staff should specifically advise the prospective borrower that advance contracting with retroactive financing occurs at the prospective borrower's own risk and does not commit the Bank to make a loan (for details, see OS 2.41, paragraphs 5-7). iii) Through the Project Preparation Facility (PPF). The PPF provides for an advance against the forthcoming loan, with arrangements for repayment by the borrower if the loan is not made. This ar- rangement requires an application from the borrower and approval by the Bank (see OMS 2.15). It does not require the borrower to - 20 - use its own funds, but there is no assurance that the advance will lead to a loan. iv) From a "free-standing" technical assistance loan. This normally requires that the assignment should have been identified when a technical assistance project was appraised, but there is some flexibility in this regard. This method is as convenient as the piggy-back arrangement (see OMS 4.00, "Financing of Technical Assistance and Engineering," and OPN 5.02, "Use of Technical Assistance Loans to Generate Developmert Projects and to Strengthen Local Project Design Capabilities"). Other Sources v) Through a UNDP-financed and Bank-executed project.5/ In these cases, the Bank, rather than the borrower, is responsible for employing the consultants directly is advantageous. However, UNDP funds are scarce, and claims on countries' UNDP budgets need to be made well in advance. UNDP funds are used mainly for preinvestment work; they should not be used for engineering design or construction supervision consulting assignments. vi) From bilateral sources. Many countries offer grant financing to cover the costs of their consultants carrying out feasibility studies. This is a useful form of financing and can sometimes be extended to cover follow-on consulting assignments. The dis- advantages relate to the "tied" nature of funding, with the con- sultants often under contract to the bilateral agency and not the borrower. These disadvantages can be minimized by a close involvement of the Bank in the assignment preparation stages. / A UNDP assignment may sometimes be executed by another UN agency. - 21 - Some bilateral agencies have standing agreements with the Bank for this purpose. vii) From other multilateral sources. Funds, such as the European Investment Bank, will cofinance consulting services in certain countries. As with bilateral financing, close liaison should be established at an early stage with the funding agency's staff responsible for preparing the assignment. - 22 - Section 7 Terms of Reference 7.01 The terms of reference (TOR) are the borrawer's instructions to the consultant as to the serices the consultant should perform to complete an assignment. They are first prepared for issue to an invited number of consultants so that these consultants can submit proposals as to how eac"X of them would undertake the assignment and what staff they would use. After one of the consultants has been selected, the TOR, as modified during negotiations, then form an integral part of the contract. The consultant's prcposal does not form part of the contract, is not a legal document, and may be discarded after negotiations are complete and the appropriate ele- ments of the proposal have been incorporated into the contract. 7.02 Bank staff are required to approve the terms of reference, and it is quite normal for staff to assist the borrower in their preparation. This is a good opportunity for policy dialogue between the borrower and Bank staff and to reach a mutual understanding on: (i) the need for consultants; (ii) the scope of the assignment; (iii) how the assignment relates to the total project; and, (iv) mechanisas for training and transfer of know-how that can be incorporated into the consultant's TOR. 7.03 Sometimes a client will ask a consulting firm already employed on an earlier phase of a project to draft TOR for the later stages. In such a case, and except where the consulting firm is directly employed by the Bank, the consultant should not be precluded from participating in these later stages. 7.04 Within the Bank, a TOR library, categorized by sector, is situa- ted in the DACON Information Center (D-1060). The library contains copies - 23 - of TORs previously used on Bank- and UNDP-financed projects. Presently, the TOR library is for Bank staff use only. Staff may wish to visit the Center before going on mission. A. Considerations in Drafting Terms of Reference (TOR) 7.05 Persons drafting TOR, who will normally be on the staff of the borrower, should themselves be familiar with the type of work the consul- tants will be called upon to perform. If they are not, they should employ someone who is. This person may be an individual consultant and, if so, in the interests of impartiality, should be disqualified (along with any par- ent firm) from taking part in the subsequent consulting assignment. 7.06 It is often helpful for the TOR drafters to imagine themselves in the position of leading the team which is conducting the assignment. This simulation will also help in estimating the assignment's cost. 7.07 The drafters should be familiar with the sector into which the assignment fits, and with lessons learned from previous assignments. If the assignment relates, say, to run-of-the-river irrigation, they should know how it relates to the country's irrigation program and how that program, in turn, relates to the agricultural development program. 7.08 The drafters should be familiar with the country of the assign- ment--its people, topography, wage rates, customs, internal transportation system, to name but a few items. More particularly, the seasonal varia- tions should be known (field work should not start at the beginning of the rainy season), and national holidays may have an effect on the proposed assignment. 7.09 If the assignment is focused on a particular project area, this area must be visited by the drafters. The points to look for will be both project-related (types of crops or river currents) and logistics related - 24 - (transport facilities, availability of field accommodation, or accessibil- ity for drilling rigs). A helicopter or small plane trip, while no substitute for a land-based visit, helps to develop an overall impression of the area. 7.10 The drafters should be familiar with the project agency which will be the consultant's client, and should be able to respond to such questions as: "Which person will the consultant report to?" "What facilities will the client provide?" (See paras. 7.42 and 7.43.) "What will be the counterpart arrangements?" (Para. 7.44.) 7.11 The environmental aspects of the assignment should be considered at an early stage and, if necessary, outside assistance secured to help identify environmental considerations that should be included in the TOR. Guidelines on environmental aspects to be c.vered in terms of reference for work.in various sectors are available from the Environmental, Science and Technology Unit of PPD. 7.12 The assignment's potential for transfer of skills should be considered. This potential is greatest where foreign consultants are employed and skills can be transferred to local consulting firms working in joint venture with their foreign partners and/or to government personnel. Additional time and money should be allocated for the training, and the Bank will finance the additional costs. Transfer of skills is covered in more detail in Section 17. 7.13 Finally, the drafters should determine the extent of the informa- tion which will be available to the consultants and which will be listed in the TOR. This information may include past studies, rainfall records, aerial photographs (can they be released to the consultants?) or maps. The more data the consultant can be given, the less likelihood there will be of repeating previous data-gathering work. - 25 - 7.14 In summary, persons drafting TOR should be familiar with the: -- type of work to be performed; -- sector; - country (including seasonal variations, holidays, etc.); -- project area (should have visited); - project agency (the consultant's client); -- environmental aspects; -- training requirements and possibilities; and, -- background information (past studies, etc.). 7.15 The TOR are written statements of the tasks a consultant must address, and manner in which the results of the consultant's work must be presented, with information given to assist the consultant in the assignment. 7.16 In practice, TOR normally comprise the following sections: I. Background; II. Objectives; III. Scope of Work; IV. Training (where appropriate); V. Reports and Time Schedule; VI. Data, Local Services, Personnel and Facilities to be provided by the Borrower. B. Example: TOR for a Port Modernization Study 7.17 The development of TOR for a simple port modernization study is used as an example. The background information is usually presented as the first item in the TOR, but it is often best first to define the assign- ment's objectives. In other words, what does the client want from the study? The objectives should be defined simply and concisely, and, in this example, might be: - 26 - Objectives i) to determine the technical and economic feasibility of installing a container terminal; ii) to prepare an overall port development program for the next five yeara; iii) co prepare a program for improvement in operations; iv) to recommend an appropriate tariff structure. The above objectives are clear, easily understood and convey to government politicians, officials, funding agencies and the consultant what the assignment's end-product should be. Background 7.18 It helps the consultant in preparing his proposal and planning the assignment to have as much background information as possible. For our example, the background information should answer such questions as: -- For whom is the study wanted? - Why is it being undertaken? -- How does it fit into the transport sector? - Where is the port located? -- What is the port's history? - What type of traffic does it currently handle? -- Who operates the port? -- What are its current problems (if any)? -- Who might finance a modernization program? For a specimen description, see Annex 4. Scope of Work 7.19 After the Background and Objectives sections, the TOR should describe the consulting work which the client will require, indicating the particular areas to be covered, and in how much detail. In the Scope of - 27 - Work section, most lists of tasks begin with the phrase inter alia, i.e., "among other items." This denotes that, while the client is directing the consultant to a particular task, other tasks may also be required to achieve the objectives, and it is up to the professional judgment of the consultant to identify these other tasks and perform them. For a sample, see Annex 4. 7.20 The first question to be addressed is phasing. Should the consultants undertake some preliminary work, and produce a report with their preliminary findings? This is a very useful course of action when consideration of alternative approaches is called for and thus where the extent of the overall assignment cannot be determined when the TOR are drafted. Such phasing is normal for feasibility studies and for management and training assignments. A Phase I report is usually produced about three months after the starting date. 7.21 The scope of work will, therefore, depend on whether the assign- ment is to be phased. If it is to be phased, part of the consultant's scope of work in Phase I may be to produce draft TOR for Phase II for con- sideration by the client. Usually the scope of work will be well defined for Phase I, and less well defined for the longer Phase II period. Thus, the following statement might appear: "This study shall be conducted in two phases as follows: Phase I shall comprise traffic forecasts and preliminary operational and engineering studies, formulation of alternatives, and shall be completed in three months after the starting date. Phase II, after agreement with the Government, shall comprise detailed economic analyses, and preliminary engineering of selected container scheme alternatives and the preparation of recommendations covering: (a) the five-year development program; (b) the program for operational improvements; and, (c) the proposed tariff structure. Phase II will be completed within nine months after the starting date." (Or, in other words, Phase I will take three months, and Phase II, six months.) 7.22 Often during negotiations, the consultant will ask, "What do I do with my field team while the Phase I report is being considered?" The answer lies in planning the assignment so that the team can continue work- ing on non-critical aspects, e.g., data collection, survey work and, in this case, work on the development program, operational improvements and the tariff structure. Both the client and the Bank should be ready to receive and review the Phase I report as soon as it is submitted so that timely decisions can be reached. For the Bank, this means that a mission generally should be in the field when the Phase I report is submitted. 7.23 Having defined the phasing, the detailed scope of work is consid- ered, usually asking the following types of questions: -- Are there any geographical limits to the study? -- What forecasting details are required? -- What are the time limits for projections, economic analysis, etc? -- Are there any initial ideas as to the types of container traffic? -- Should the consultants compare the situation with those elsewhere, with any particular country? -- What units of measurement should be used? -- Should the inland traffic mdes be studied? -- Does the client envisage the consultant using mathematical modelling and computer-based analysis? Is this appropriate? -- What should the cost estimates cover, and how should they be presented (e.g., existing and proposed capital and recurrent, foreign and local costs, with and without taxes)? -- Should the present facilities be assessed? -- What alternatives should be considered? Is one alternative to do nothing? -- What level of preliminary engineering is required: (a) for Phase I; (b) for Phase II? -- To what depth should the consultants study the financial aspects of the port? -- How far back in time should the study of past finances be taken? -- Should the present port regulations be studied? Are recommenda- tions on changes required? -- Should the preliminary engineering include hydrographic surveys, or a determination of the dredging likely to be needed? -- Any specifications for boreholes (spacing, standard tests, etc.)? -- Any guidance to be given the consultants on shipping forecasts? -- What accuracy is required for the estimated quantities and cost estimates? -- What guidance can be given concerning the economic methodology (some suggestions on costs and benefits, indicators required, etc.)? -- What is required in the Phase I report and what in the Phase II report? -- Are financial and economic sensitivity analyses required? -- Is a time-phased plan required? Training 7.24 A training program should be considered for inclusion in most consulting assignments. The Bank's policy on the transfer of know-how is covered in Section 17; the present Section suggests how training might be covered in the TOR in our example (see also Annex 4). 7.25 There are three main categories of training: -- Specific structured training programs for, say, crane operators or extension workers; -- Transfer of consultants' skills to government counterpart staff; and, -- Transfer of consultants' skills to local consultants' staff when a foreign firm is in association with a local firm. 7.26 Assignments in the first category are relatively straightforward, with consultants chosen for their experience and capability in training assignments. The assignment will call for the development of curricula, provision of training personnel, and the supply of training equipment. 7.27 The implicit training assignments are more difficult to set up, as the consultants are chosen primarily for their skills in the main assignment (e.g., design of a bridge), and the training element is usually of secondary consideration-if considered at all. To be successful, such training needs to be specifically recognized as a requirement to have any chance of success (see Section 17). 7.28 The Bank considers that four elements essential for the success of any training program are: -- a commitment on the part of all concerned; -- a plan; -- availability of qualified people to train; and, - adequate funding. Without all of these, a training program will almost certainly fail. 7.29 Training of Government Staff. The TOR should indicate the role government staff will play in the assignment. The following questions should be considered: -- Will government staff work alongside the consultant's staff? -- Will government staff be responsible to the consultant for their performance? -- If not, how is the consultant's responsibility for the success of the assignment defined? - 31 - -- Can government staff be released full-time? -- May the consultant assist with the selection of government staff? 7.30 Sometimes a transfer of know-how can be defined in the TOR--e.g., "in the course of the assignment, the consultants shall train six govern- ment staff in computer-based container management." The consultants will be asked to propose how and by whom this training would be done, and how long it will take. Eventually the negotiated contract will include a realistic training program, with trainers' and trainees' names given, the time to be spent by each, and the cost allowed for the training program. 7.31 Training of Local Consultants. While the training of local con- sultants by foreign consultants is more difficult to structure, such transfer of know-how between commercial partners often has an excellent chance of success. The local consultant can see the commercial value of the know-how, and its use in future assignments. Eventually, the local firm intends to undertake a large proportion of assignments with minimal or no foreign assistance. 7.32 Under these circumstances, it is often best for the TOR to invite joint-venture firms to suggest in their proposals the arrangements which they might make for training and the extent that these may increase the cost and/or the duration of the assignment. In the interests of improving local capability, governments (clients) should be interested in bearing this additional cost, which the Bank is prepared in principle to finance. Time Schedule and Reports 7.33 Time Schedule. It is usual for the client to fix a duration for the assignment-e.g., detailed engineering to be completed within nine months, or advisory services to be provided for two years. The assignment time is normally measured from a starting date--usually the arrival date of staff in the country of assignment. It may be convenient to make the starting date one week after the arrival of the consultants to allow them to settle in before work begins. The week's costs might be split between the client and consultant. 7.34 Any provisions for phasing the assignment (see paras. 7.19-7.20) should be specified in this section of the TOR. Eventually, the negotiated contract will include a bar chart giving details of personnel, the timing of their individual activities, the dates reports are due, and other pertinent information. Within some modest flexibility, the consultants are contractually obliged to adhere to this schedule. However, where, say, the second phase of the assignment cannot be defined, the Phase II budget may be notional and subject to adjustment after decisions have been taken on the basis of the Phase I report. 7.35 Reports. The assignment's reporting requirements should be clearly laid out. In particular, for inception and progress reports, there should be a balance between, on the one hand, keeping the client fully informed and, on the other hand, forcing the consultant to spend most of his time preparing reports. All inception and progress reports should be brief. 7.36 An inception report is best received after the consultant has been on the job for about six weeks. Any major inconsistencies in the TOR, problems of staffing, of access and of the provision of client assistance will normally have become apparent during this period. The inception report should be designed to give the client confidence that the work is underway as planned, or, alternatively, to bring to his attention major problems which might affect the direction and progress of the assignment. If any significant initial findings have been made in the six week period, then, of course, they should be included in the report. 7.37 Progress reports serve t3 keep the client informed of the progress of the assignment and may also serve other purposes, such as an accounting mechanism for payment. For feasibility study and design assignments, progress reports at two-month intervals are probably quite satisfactory. Reports should be brief and produced in enough copies to inform all of the involved client's staff simultaneously of the progress of the projecc. Progress reports should include a bar chart giving details of progress and any changes in the assignment schedule. 7.38 Progress Reports on Advisory Services and Construction Super- vision are best made monthly. This is particularly important for advisory services where the report not only keeps advisors on their toes, but also serves as a means of displaying the next month's work program. Each advisor on the team should be asked to contribute to the monthly progress report, being thus encouraged to achieve what he or she has set out to do, and being recognized for his achievement. Construction supervision is such that a monthly cycle is normally set up for contractor payments, and a monthly progress report to the client naturally dovetails into this cycle. In this regard, the consultant should be required to present an accurate cost picture of the construction, and to alert the client to any likely cost overruns well in advance of these overruns occuring. 7.39 If, as with most feasibility studies, the assignment is to be phased, then a Phase I Report will be required which will normally address the alternatives which hava been studied during Phase I and recommend those which should be studied in detail during Phase II. A Phase I Report will decide the general direction of the assignment and its results which, in turn, will strongly influence the nature of the project. It therefore behooves the Bank to take a Phase I Report seriously, and for Bank staff and borrowers to arrange well in advance that this report should be discussed with the consulting firm in the field. Bank missions should be planned accordingly. 7.40 Phase II or the Final Report may take many forms according to the assignment. It should be discussed while still in draft. Even so, one must not forget that the consultant alone is responsible for his findings, and while changes may i made in the final report as a result of borrower- Bank-consultant discussions, such changes should not be forced onto the consultant. If the consultant does not accept certain important comments or recommendations of the borrower, then they may still be noted in the report, but the consultant should be asked to give reasons in the report why they are not acceptable. Final Reports may also consist of bidding documents and drawings or, at the end of construction supervision, may be a set of "as built" drawings. 7.41 With all reports, the TOR should indicate the number of copies requi:ed, the required language, and the names of the report recipients. For all major reports, it is wise t have a summary, and it is often convenient to have this summary in a separate volume. Consultants should be encouraged to be concise in their presentations and advised that bulky reports are often counterproductive. Data and Assistance to be Provided by the Project Authority 7.42 The TOR should list all the types of information and the services that the project authority can make available to the consultant. For feasibility studies, project authorities should determine what previous studies have been conducted, and what maps and aerial photographs are available, as these are normally the first items required by the consul- tants. For most civil engineering works, rainfall and runoff records are required. 7.43 It is normal for the project authority to provide some form of material assistance to the consultants, usually in the form of office space, vehicles, survey equipment, office equipment, local telephone and telex services, etc. The provision of suitable vehicles is frequently a - 35 - cause of friction between the client and consultant. Although the borrower may agree in advance to provide vehicles, drivers and maintenance, these may not be available when required, or may be found unsuitable. It is often wise not to commit the borrower to the provision of vehicles, but to allow for these to be provided under the consultant's contract and passed to the project authority on assignment completion. 7.44 Similarly, the provision of personnel to assist the consultant can be a cause of difficulty. Counterpart personnel, i.e., those persons who will actually work with the consultant on the project, may not be provided in time, or may not be given sufficient free time to work with the consultant, or may be unsuitable for the work. During the initial drafting of the TOR, Bank staff should realistically assess with the borrower which of its staff can act as counterparts. If the borrower provides support personnel, e.g., draftsmen or surveyors, the borrower should clearly indicate that these people will work the same hours as the consulting firm and will work under the consultant's direction. This is important, as, particularly for survey work, the consultant has to take the responsibility for the accuracy of such work, and also bears the cost if the work is performed incorrectly. 7.45 From the above, one can see that the drafting of the TOR should not be taken lightly, but should be undertaken by people who are familiar with the type of work involved and the sector in which the assignment falls. The best way to prepare TOR is to assume that you will be heading up the team which will be undertaking the assignment, and through this, determine what the work should comprise, how long it should take, and what help and facilities you would require. Example 7.46 A complete example of terms of reference is given in Annex 4. - 36 - Section 8 Estimating Consultant Services' Costs 8.01 An estimate of the cost of a consulting assignment is required for several reasons: -- to include in the Borrower's budget system, and in the Bank's Project Brief and Appraisal Report estimates; -- to indicate the level of effort required of the consultant (as an alternative to stating the number of man months, the cost estimate can be included in the Letter of Invitation); and -- because its preparation obliges the borrower and Bank staff to make explicit their views of how the assignment is likely to be carried out. This is an iterative process and may lead to a revision of the TOR. 8.02 As the cost estimate is based on the TOR, at least a rough draft of the TOR should be available before the estimate is prepared. If no TOR are initially available, staff should estimate costs generously so as not to be unduly constrained once accurate estimates are produced or the actual contract negotiated. Erring on the generous side is particularly advisable for UNDP-financed, Bank-executed assignments where estimates are often prepared ode to two years. before the assignment takes place. Sometimes, UNDP-financed assignment estimates have been based on unduly low man-month rates (e.g., salaries for individuals rather than rates for firms), with no provision made for price escalation. Two years later staff have been faced with the all too familiar scenario of insufficient funds for the assign- ment, with bewilderment that so little foresight was used in the estimate preparation. A. Preliminary Estimates 8.03 Some rules of thumb for making preliminary estimates for engi- neering-related assignments are given below: - 37 - Cost as Percent of Assignment Construction Cost Infrastructure Engineering Feasibility study 0.5-2 Detailed design 3-6 Construction supervision 5-8 i.e., a total of 9-15% of construction cost Architecture Architectural design and 3-5 contract administration Industrial Engineering Feasibility study 1-2 Basic design 1-3 Detailed design, proaurement 8-12 services and construction supervision Procurement Services Procurement services 1-5% of cost of goods 8.04 These indicators should be used with caution and normally only to confirm that, in relation to the total estimated project cost, the assignment estimate is of the right order of magnitude. B. Preparing a Detailed Estimate for a Man-Month Assignment6/ 8.05 The following paragraphs give suggestions on preparing a detailed estimate. The suggestions are illustrative only, and are not to be taken as limits or ceilings. 8.06 The principal components of an estimate are: Foreign Currency Local Currency Foreign professional personnel Local professional personnel (man-month rates) (man-month rates) Home office personnel Local air fares (man-day or man-hour rates) Telephone and Telex Services International air fares Taxis and rented vehicles Transit hotel costs. Subsistence or per diem or accommo- dation costs 6/ As no rule of thumb method is available for advisory and institutional building assignments, detailed estimates should always be prepared for these services. - 38 - Foreign Currency Local Currency Shipping of personal effects Office rent New vehicles Support personnel Office equipment Office expenses Engineering equipment Local sub-contracts Telex services Report reproduction Shipping of Project Equipment/Supplies Insurances Duration of Assignment 8.07 Longer assignments have proportionately lower air fares and living expenses (housing versus hotels) and hence a lower overall cost per month. Estimating a Man-Month Rate 8.08 Man-month rates vary considerably according to the experience of the individual and the nationality of the consulting firm and, if several firms are to be invited to submit proposals, choosing a man-month rate for estimating purposes is not easy. Man-month rates also vary according to the type of assignment (e.g., discipline of the personnel); a petroleum exploration promotion assignment (with petroleum geologists) will have much higher man-month rates than, say, one covering road maintenance training. However, for most infrastructure projects (including those in agriculture), an estimated average foreign man-month rate of between US$7,000 and US$10,000 would be in order. For advisory assignments involving only one or two senior personnel and for assignments involving management consul- tants, the estimated rate should be around US$12,000. For petroleum- related assignments the estimated rate should be between US$14,000 to US$16,000. (For advice on the composition of man-month rates, see Section - 39 - 14.) As man month rates vary considerably, for budget purposes, it is better to prepare estimates on the high side. 8.09 The rates for local personnel should be determined by local enquiry. Home Office Work 8.10 Unless an unusually large amount of design work will bL undertaken in the home office, it is safe to estimate home office time as 10 percent of field time. International Air Fares 8.11 To make these estimates, assume that all foreign personnel will be coming from the farthest industrialized country. For assignments over six months, assume two-thirds of the team have dependents, and allow three full-round trip economy class air fares for each of these team members and one full-round trip fare for each of the remainder. Transit Hotel Costs 8.12 Allow for two days out and two days back with taxis, etc., per staff person per trip, say, $500 per trip. Note that the travel cost of dependents, other than their air fares, is not normally borne by the client and is therefore not covered by the contract. Shipping of Personal Effects 8.13 Allow about US$5,000 per staff person assigned for over one year's *L"ation, and US$1,000 for those assigned for less. Vehicles 8.14 The number and type of vehicles needed for the assignment should be estimated. For 4-wheel drive vehicles, allow about US$15,000, including shipping; for cars allow US$12,000. Office and Engineering Equipment 8.15 If no better estimate is available, allow about US$15,000. - 40 - Telex Services 8.16 Allow about US$250 per month. Report Reproduction 8.17 The cost of report reproduction is usually underestimated. Err on the high side, say, US$25,000 for the reports covering a 9-month feasibility study. Local Costs 8.18 Staff should discuss such costs with the borrower and with local consultants. Subsistence or Per Diem Costs 8.19 Subsistence allowances are normally paid to foreign consultants' staff in addition to their salaries and overseas premiums.7/ This is usually a separate item paid to the consultant in local currency to cover this expenditure. 8.20 Subsistence allowances are paid on a calendar day basis and should be based on, but not necessarily identical to, the UNDP table of standard subsistence rates (available in all Bank departmental technical assistance units, Loan Department and in the Procurement Unit). Subsis- tence allowances should always be paid in local currency and the same rate should be paid irrespective of a staff member's family status or seniority. A consulting firm may make its own arrangements according to its firm's policy to distribute the subsistence allowance. However, the total amount should be distributed. Contingency Allowance 8.21 A contingency amount completes the estimate. It should cover: 7/ The overseas premium is not only the inducement to work overseas (and sometimes work longer hours), often under difficult conditions, but also covers the costs of such items as educating the consultant's children and maintaining a house in the home country. The premium typically adds 25-60 percent to the salary. - 41 - (i) inaccuracies in costs used to make up the estimates; (ii) changes, either before or during the assignment, in the work to be carried out; and (iii) price escalation. Price escalation should be considered, not only for the period of the assignment, but also for the period between the time the estimate is made and the start of the assignment. To allow for delays in selection and give room for negotiation, Bank staff should advise borrowers to over- rather than underestimate contingency allowances. Example 8.22 Annex 5 gives an example of an estimate for a 24-month technical assistance assignment. - 42 - Section 9 Selection Procedures 9.01 This section deals with the principles governing the adoption of a selection procedure where several firms are being invited to submit pro- posals. The application of detailed selection criteria is not covered in this section but is described in Section 12, Proposal Evaluation, 9.02 The selection of a consulting firm for contract negotiations is normally based on a comparison of all proposals submitted by entities on the short list. Depending on agreement reached with the Bank, the invited proposals may be submitted without or with a quotation of the cost of the services. In the former case, the winning consulting firm is chosen solely on the basis of technical quality. In the latter case, both the technical quality and price are taken into account. The Bank's revised Guidelines (August, 1981) recognize that, for a range of assignments, price can be a factor in the selection process. 9.03 Under the Guidelines, Bank staff are required to discuss with the borrower the selection procedure the latter proposes to use. This is to ensure that: -- the selection procedure is equitable; -- the procedure is appropriate to the assignment, including where price should be and should not be a selection factor; -- staff have the opportunity to offer advice and review the selection process. These three points are discussed below. procedures to Safeguard Equity 9.04 In recent years, three influences have caused borrower agencies to explore ways and-means to codify selection procedures. First, although remaining steady as a proportion of project costs, the cost of consulting services is being constantly questioned by borrowers, and ways to limit - 43 - these costs are constantly being explored. Second, borrowers wish to encourage the development and use of their domestic consulting firms. Third, in some form or other, the Bank's procedures for selecting its own UNDP-financed consulting firms have been adopted for selecting consultants at large by nearly all its member countries. 9.05 Arguments for codification center on the real need to improve selection procedures in some agencies. Arguments against codification state that codified procedures become too inflexible, price can become the dominant selection factor, and that the selection decision can move away from the technical agency directly responsible for a project's success and to a Central Works Tender Board or a non-technical reviewing ministry. Sometimes there are two sets of codified procedures--one for foreign firms (sometimes acceptable) and the other for local firms--(often based solely on price, and often unacceptable). On the whole, the Bank believes selection procedures should be systematic, but not applied mechanically to the exclusion of technical judgement. 9.06 Bank staff should satisfy themselves that not only will the procedure to be adopted be equitable, but that it will also be perceived to be so. They should ensure that the procedure is determined before propos- als are invited, and should obtain the details of the procedure in writing from the borrower. Once agreed with the Bank, the procedure should be detailed in the letter of invitation. Needless to say, the procedure should not be changed in the course of the selection. 9.07 The list of invited firms (the short list) should be closed after the letters of invitation have been issued and any proposals from firms not on the short list should not be considered. The selection procedures should avoid making onerous demands on competing firms such as bid-bond requirements, multiple visits to the country (one should be enough), - 44- individual oral presentations and unreasonable registration. 9.08 Proposals should be evaluated by a committee (see Section 12), with the borrower informed that Bank staff may wish to review the results prior to a firm being selected for negotiations. Appropriateness 9.09 Some selection criteria are appropriate for some types of assign- ment; others are not. There are three characteristics by which assignments may be judged as to whether or not price should be a selection factor. These are technical complexity, assignment impact (e.g., will the conse- quences of poor performance be major or minor) and the comparability of proposals. These characteristics are discussed in the Guidelines8/; rather than add to that discussion, some illustrative examples are given here, by sector and service, of where price should and should not be a selection factor. Though the choice always requires judgment, they show that the more mechanical routine assignments are more suitable subjects for price consideration than those which depend more on human qualities. 9.10 The quality of a consultant's services is the paramount concern in choosing a consultant. Unlike buying a truck, where the precise charac- teristics of an offered vehicle can be measured and compared against requirements in the technical specifications, consultant selection is necessarily based on more subjective judgments. It is difficult to make impartial judgments between firms about the likely quality of their services if their prices for these services are known in advance. Hence, if the borrower and the Bank agree it is appropriate to use price as a selection factor (advice on which is given below), then a two-stage evaluation procedure must be adopted, such that the technical evaluation is completed before the prices are known. This is normally accomplished by 8/ Paraso 2.28-2.38 of the "Guidelines for the Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency," August, 1981 - 45 - asking for the technical and price proposals to be submitted in separate sealed envelopes. All envelopes should be clearly marked as to their contents and double-sealed for security. To forestall any concerns about the sanctity of the price envelopes, some borrowers arrange for the price envelopes to be submitted to a separate agency or firm of chartered accoun- tants for safe]eeping. Th,- Bank supports this practice and any other which encourages confidence in an impartial evaluation procedure. 9.11 Agriculture. Pure agricultural assignments, such as extension services, seed development or range management depend on highly specialized individual expertise and a close working relationship and mutual trust, both at government and village level, and as such should not incorporate price in the selection process. 9.12 The above comments also apply to most rural development projects, although price may be used as a selection factor for simple tasks, such as the design of buildings or water supply facilities, to be carried out as separate assignments. 9.13 Simple irrigation assignments may be judged using price as one criterion. However, for larger communal areas affecting the lives of thousands of people, selection without price should be the rule. 9.14 Education. For curriculum development and other such services required to develop the "software" side of an education project, price should not be used. For the design of simple structures, price can be taken into consideration. For larger structures, an architectural competition without the use of price is usually more appropriate. 9.15 Industry. Industrial practice calls for the use of price as a selection factor for most assignments. The argument is made that most individual industrial processes are well known and assignments require adaptation to requirements and sites, rather than conceptual creativity. These comments apply to the engineering firm that will design and supervise construction of the installation. They do not necessarily apply to initial feasibility study assignments, or to the appointments of consultants to liaise with the owner and the engineering firm. 9.16 Environment, Health, Population. Due to the specialized and sometimes sensitive nature of assignments in these sectors, price should not be a selection factor. Exceptions might be made for aesignments in designing facilities and supervising construction. 9.17 Energy. Price should not be a selection factor in choosing consultants for feasibility studies, tariff, or energy pricing assignments, but may be considered for detailed engineering and construction supervi- sion. 9.18 Proposals for exploration promotion, investigative drilling and field enhancement should not be judged on the basis of price; wrong advice could cost billions in wasted resources. 9.19 Transportation, Urban Development and Water Supply. Price should not be a factor for feasibility studies and advisory services, but can be considered for most design and construction supervision. 9.20 Type of Service. In general, as the quality of recommendations affects the entire subsequent project cycle, price should not be a selection factor for preinvestment assignments (sector, sub-sector, feasibility studies, etc.). 9.21 Price may or may not be appropriate as a criterion for evaluating proposals for project design, depending on their complexity, the assign- ment's impact, and how precisely the design TOR can be written. Price should not be used for, say, major bridge or dam design, but can be con- sidered for most intermediate and simple design assignments. 9.22 Price may be used to evaluate construction supervision proposals, but for most of these assignments the design engineer already selected will continue with construction supervision. 9.23 Most advisory services should not be selected using price, be- cause the requirement is for the best, not average, advice. This comment applies also to most management and training assignments-where the quality of the personnel and the impact of the results usually far outweigh the cost of the services. Staff Advice and Review 9.24 The borrower and Bank staff should agree early in the selection process on the selection procedure to be used. This is best done while on mission, as it is difficult and time-consuming to exchange ideas by telex or letter. Bank staff may wish to provide the borrower with Section 12 of this Handbook and sample evaluation sheets. 9.25 The importance of using an equitable, easily understood selection procedure which can stand up to scrutiny (sometimes public) cannot be over- emphasized. Bank staff should be prepared to advise borrowers on why price is not an acceptable selection criterion for all consulting assignments, and on how to consider price when this criterion is acceptable. If goverr ment regulations require competition based on price but Bank staff consider that this is not suitable for the assignment in question, waivers to the government regulations must be sought and agreed before proposals are in- vited. The Bank may reject a selection procedure incorporating price, if, in its opinion, price should not be a selection factor (Guidelines, para. 2.21). If the procedure is not modified, the Bank has the right to reject the contract for Bank financing (Guidelines, para. 2.44); hence, the importance of agreeing in advance whether price will be considered, and of adhering to that agreement. 9.26 In summary, Bank staff should ensure that the selection procedures: -- are clear and unambiguous; -- do not favor e particular firm or nationality; -- where appropriate, are acceptable in regard to use of price, and include a two-stage evaluation procedure; -- are detailed in the letter of invitation; -- are acceptable to final government approving authority (e.g., Ministry of Finance); -- in conformity with the relevant provisions of the applicable Bank loan documents. I I I I - 49 - SECTION 10 The Short List 10.01 The list of firms invited to submit proposals in competition with one another is traditionally known as the short list. Bank staff are reminded that the borrower need not select a firm through a competitive process and may approach a single firm of its choosing. 10.02 When the process is competitive, a short list is prepared by the borrower and submitted to the Bank for approval. The short list should be of three to six firms, so as to: -- encourage firms to put a major effort (innovation, ideas) into their proposals; - increase the chances of a well-qualified firm being selected; -- allow for an intense and meaningful evaluatioa of proposals; -- reduce the opportunities for outside influence; and, -- in the long run, reduce the overall cost of consulting services. 10.03 If (perhaps to adhere to local regulations) a borrower wishes to approach more than six firms, a two-stage procedure should be used, with the larger n!mber reduced through a simple prequalification exer'ise to a maximum of six. Prequalification should be considered an exceptional exercise, as not only does it involve more client (and consultant) staff time, but, more importantly, it lengthens the time of the selection process by at least three months. 10.04 For a prequalification exercise, "letters of interest" may be invited directly from known firms or by advertising. The advertisement (see Annex 6 for example) should contain only a brief outline of the assignment, and should not ask for proposals at this stage. Firms should be asked to submit a statement of capability and experience appropriate to the upcoming assignment. From the responses, a borrower can then choose three to six qualified firms for the short list. From the date of publica- tion of the advertisement to the closing date, at least 35 days should be allowed for replies. 10.05 Once a short list has been made up, applications from other firms should not be considered. A. Compiling a Short List 10.06 Some borrowers have little difficulty in preparing short lists from their own registers of consultants, or from knowledge gained from experience with firms already working in their country or from consultants' promotional visits. 10.07 On occasion, borrowers approach national or international associ- ations of consultants for suggested lists. Doing so may be especially use- ful where the upcoming assignment is unusually specialized (see Annex 1 for some addresses). 10.08 Commercial attaches in dmbassies are increasingly business oriented and, if requested, will usually supply the names and addresses of some of their suitably qualified national firms. Governments may be approached where "twinning" with government departments or corporations (e.g., electricity companies) is desired (see Annex 27). 10.09 The Bank can help borrowers through the DACON (Data on Consulting Firms) Information Center. Under OP/14/78,9/ it can also supply lists of consultants to borrowers, on an exceptional basis. Bank-financed contracts are highly sought after, and it behooves the Bank not to influence the borrower in its choice of a consultant. Other than by these means, Bank staff are not permitted to suggest the names of likely consulting firms to borrowers. While staff may believe they are acting in the best interests 9/ "Interim Procecures for Providing Assistance to Borrowers in Prepara- tion of Lists of Consultants," October 17, 1978--filed with OP 2.50. - 51 - of the borrower and the project, the perception might be that Bank staff are favoring some consultants or some nationalities over others. 10.10 UN agencies may be included in a short list in competition with consulting firms. However, it will usually be more appropriate to approach these agencies directly, requesting a proposal, rather than considering them alongside consulting firms. Such agencies may have difficulty in naming the personnel to be employed on the assignment (see footnote 1 to para. 2.11). B. Geographic Origins of Invited Firms 10.11 The short list should normally have a wide geographical spread, preferably with not more than two firms from any one country.10/ Borrow- ers sometimes wish to restrict lists to local firms. For some advanced developing countries with experienced capable firms, this is not unusual. However, this arrangement may be denying the project agency some benefits. While, in principle, the Bank has no objection to this proposal (provided that the firms are capable), other arrangements involving skill transfer may be more advantageous. For example, it may be beneficial for project agency staff to be exposed to and working with an international firm which has successfully conducted similar assignments elsewhere in the world. 10.12 For countries where the consulting profession is in the early or middle stages of development, similar advantages in terms of skill transfer usually accrue to the local firms if both local and foreign firms are invited to joint venture with each other. In this regard, (Guidelines, para. 1.14), the borrower may suggest or require that foreign firms 10/ This is required where the Bank is Executing Agency for UNDP-financed projects. - 52 - undertake joint ventures with local firms or vice versa.11/ The Bank prefers the suggested, rather than the mandatory, approach, as experience shows that most foreign firms now consider it desirable to associate in some way with a local firm. 10.13 Where a mandatory association has been agreed in principle, no percentage participation of each firm in the joint venture shoulO be pre- scribed. Local and foreign firms seem to have little difficulty in agree- ing among themselves the contributions that each will make to the assign- ment. The Bank may object to a mandatory association in some circumstances (see Guidelines, para. 1.14). 10.14 Firms should be free to find their own partners, or more impor- tantly, continue with their partners from past and present associations. Sometimes borrowers wish to prequalify local firms and present this pre- qualified list to the short listed foreign firms. Since the prequalified local list may not contain more than six names (in any case, there may not be any more firms meeting the qualifications in the country), the system is similar to a forced marriage. There are two better courses of action. A foreign firm may be selected using a normal selection procedure, and then allowed to pick any local firm of its choosing. Alternatively, a local firm may be selected and then invited to choose a foreign firm that has appropriate complementary skills, either from a short list or at large. In either of these arrangements, the underlying principle should be freedom of choice of partners and freedom of type of association. 11/ Any legal issues should be resolved before inviting proposals. Inter- pretation of local laws for consulting services financed under the project should be dealt with at loan negotiations or when the law is introduced. - 53 - 10.15 The letter of invitation should state that a firm may enter a joint venture with only one other firm on the list of invited firms; this is because no meaningful relationship can be set up if the same firm is involved in the preparation of competing proposals. C. Approval by Bank Staff 10.16 Bank staff should consider a short list carefully before ap- proving it. Any firm on the list approved by the Bank must be capable of undertaking the assignment. Bank staff are familiar with the capabilities of many firms proposed by borrowers. Where a proposed firm is not known or where the capability of a firm is in doubt, the staff of the DACON Informa- tion Center should be consulted and the firm's records reviewed. If a firm is not known, or the Bank's information on the firm is out of date, then the borrower should be advised to ask the firm to forward information to the Bank supporting its capability and experience for the proposed assign- ment. Where a domestic firm is considered unsuitable for the assignment, the borrower might be advised to ask it to undertake a joint venture with a more appropriately capable and experienced firm. If staff propose to indi- cate their non-approval of a firm, then the Consultant Services Adviser should be asked to review the case before the borrower is informed. 10.17 After approval of the short list, except on the grounds of an unacceptable proposal or irregularities in the selection procedures, the Bank is not in a position to state that a firm eventually selected by the borrower from the short list is not suitable for the assignment. 10.18 To summarize, Bank staff should: -- limit the list to six firms; -- except for small local assignments, ensure that the six firms represent more than one nationality; -- repeat the shortlist back to the borrower in the acceptance telex; 、＿ ブ×サー / / / / / / … / / / ブ - 55 Section 11 Letter of Invitation 11.01 The letter of invitation (LOI) or request for proposals (RFP) can be regaried as a package of Information sent to the short-listed consul- tants to enable them to.submit responsive proposals. This package is akin to the bidding documents sent to prequalified civil works contractors to enable them to bid. As such, the LOI should be complete and should cover the items listed below. Bank staff should be satisfied with the contents of the LOI before it is mailed by the borrower. Their review at this stage (whether in the field or not) permits a convenient check of most aspects of the borrower's proposed selection procedures. 11.02 Sample LOIs are given in Annexes 7 and 8, and may be given to the borrower. Annex 7 gives a model LOI where the cost of the services will not be a selection factor. Annex 8 gives a model where cost will be taken into account. A list of items to be included in the LOI is given in Annex I of the Guidelines. The more important of these items are discussed in detail below. Assignment Description 11.03 This should be kept very brief, and should not duplicate the in- formation in the TOR. Attachments 11.04 Attachments are an integral part of the package--without them the LOI is meaningless--and must include: The Terms of Reference (TOR) The TOR describe the services the consultant is expected to perform (see Section 7). Supplementary Information for Consultants Although entitled supplementary information, these are instructions to consultants concerning the information to be - 56 - presented in the proposal, and the information required for financial negotiations. The attathments should state the conditions of contract under which the consultants would be employed, and inclusion of the proposed form of con- tract is strongly recommended. The Bank encourages the use of a standard format for curricula vitae (CVs) that, in turn, encourages firms to be factual in presenting the experience of their staff (see Annex 7-2). In submitting CVs, firms should give the dates of the positions held by their staff, and describe the precise responsibilities of staff on the projects on which they have worked. Wherever possible, CVs should be signed by the individual concerned. 11.05 Bank staff should check for consistency between the LOI and attachments and among the attachments themselves. Visit Requirements 11.06 For most consulting assignments, the invited consultants should meet the borrower agency's representatives before submitting proposals. Such meetings may be arranged with all consultants present or can be on an individual basis. The meetings are for clarification, and consultants should be encouraged to ask questions. Where individual meetings are held, substantive clarification given to one consultant should be given to the others through the meetings, by letter or, preferably, by telex. 11.07 In the LOI, consultants should be informed of the agency personnel whom they should meet. Consultants should be asked to contact these people in advance. 11.08 For certain assignments, it may be useful for consultants to make site visits. 11.09 Consultants (particularly foreign consultants) should be advised in the LOI that all meetings and visits are at their own cost and will not be reimbursed. - 57 - Details of Selection Procedure 11.10 The LOI must state the method and criteria of selection to be used. The points to be awarded per category in the technical evaluation must be given and, if price is to be a factor, the manner in which this is to be taken into account must also be given. LOIs without such details are not acceptable. Level of Effort 11.11 Either the estimated number of man months or the budget for the assignment must be specified. Knowing the TOR and the client's estimate of man months or the budget, the consultant is in a better position to judge what a client wants. From a client's point of view, proposals are more comparable and therefore a more meaningful evaluation can be carried out. To help in the preparation of proposals, the LOI should state the estimated budget, net of contingency allowance, and indicate whether the procurement of equipment is covered. Financial Information Required of the Firm 11.12 The financial information which will be required of the success- ful firm during negotiations is normally noted in the supplementary infor- mation for consultants (Annex 7-1). Firms should be advised well in advance that, if they are invited to negotiate a contract, supporting documentation covering salaries, social costs, overheads, salary premiums and other items must be presented during financial negotiations. Time Allowed for Proposal Submission 11.13 Adequate time should be allowed for consultants to prepare and submit their proposals. The time allowance (a minimum of about 45 days) should include mailing both ways (15-20 days), site visits and actual proposal writing (25-30 days). Longer assignments may require a longer - 58 - period. Given the lengthy period it often takes borrowers to select a consultant and the probable duration of the assignment, it makes little sense to try to shave a few days off the proposal preparation and submission phase. Local Laws and Regulations 11.14 Some countries have laws or regulations covering the selection and employment of consultants. These can be quite extensive in Latin America, while other countries have regulations covering, for example, joint ventures with local firms. Invited foreign consultants should be advised of the existence of these laws and regulations, identified, where possible, by name and/or number. This will minimize the chance of a proposal being rejected on the grounds of a minor legal technicality. Where a law or regulation is known to be subject to several interpreta- tions, the proposed interpretation should be made in advance and included in the LOI. A- a minimum, consultants should be advised of whom they might contact for information on such laws and regulations (see para. 13.42). Relationship with Manufacturers or Contractors 11.15 The LOI should state that, if a winning firm is "associated" with a manufacturer or contractor, its associated company will not be allowed to bid on work related to the consulting assignment. Consulting firms should acknowledge their understanding of this statement in their proposals, and an appropriate clause should be included in the contract. The Bank strong- ly disapproves of a consulting firm's manufacturing or contracting associ- ates, however distant, trying to get business on the same project on which the consulting firm has been or is employed. Bank staff should be rigorous in their consideration of conflict of interest, and where the position is unclear, request the borrower to obtain information from the firm and other sources such that a decision can be made whether or not to exclude the firm - 59 - from bidding on the subsequent project. The Legal Department should always be consulted in these cases. 11.16 For interpretation of this policy, Bank operational staff may consult with the Legal Department and/or the Central Procurement Unit in PPD. Some countries' laws ace stricter than the Bank's policy on this subject and exclude all consulting firms (and any firms with whom they may undertake joint ventures) who have a direct or indirect relationship with a manufacturer or contractor. If, for the assignment in question, this law is acceptable to the Bank, then it should be identified in the LOI. Other- wise, the Bank should obtain a waiver. Proposal Submission 11.17 The LOI should state when, where and how the proposal should be submitted. Points to watch are: -- that a submission address is given; -- that the proposals are not to be opened at a public bid opening; -- that, although the agency may reject late proposals, there is no statement indicating automatic rejection (the latter are discour- aged since the agency is obtaining consulting services, not buy- ing trucks); -- that, where price is to be taken into account, the LOI clearly states that the technical and price proposals must be submitted in separate envelopes which are clearly marked "Technical Pro- posal" and "Financial Proposal." To give assurance to all parties that price will not be considered during the evaluation of technical proposals, the financial envelope may be delivered to another agency for safekeeping until the technical evaluation is complete. The arrangements and the address should then be given (see para. 9.10 above). - 60 - Telexes from Consulting Firms 11.18 So that the agency may be aware whether or not the invitations have arrived and whether or not a firm will be submitting a proposal, the LOI should ask for telexes indicating: -- that the invitation has been received; -- whether or not the firm will be submitting a proposal and, eventually; -- intended visits to the agency; and -- notice of when and to whom the firm's proposal was mailed. 11.19 If, after a reasonable time, no telex of acknowledgement is received from a firm, the agency should telex the firm inquiring if the invitation was received. If it was not, the agency should extend the proposal closing date. Joint Ventures12/ 11.20 The Bank recommends that the names and addresses of the other invited firms be given in the LOI, so that the invited know who they are competing against. The LOI should include a statement that: (a) if firms do not have all the necessary expertise in-house, they should feel free to enter joint ventures with other firm(s) to make up a complete team; (b) a firm's name may only appear on one proposal (i.e., a firm may not be a joint venture partner in more than one consortium). Validity Period 11.21 As with civil works contracts, proposals must have a validity period during which time the client will select a consultant for negotia- tions. For this period, the consultant guarantees that the staff named in 12/ In the Handbook and in the Consultants Guidelines, the term "joint venture" covers the range of agreements entered into by two or more consultants joining together to perform an assignment. - 61 - the proposal will be available for the assignment and, where price will be a factor, that he will maintain his price. This validity period should be specified in the LOI. A firm position should be taken with a consulting firm which has been selected during the validity period and wishes to change staff. In this case, consideration should be given to rejecting the firm if the staff named in the proposal cannot be guaranteed for the assignment. 11.22 Some agencies take a notoriously long time to evaluate proposals and select a firm for negotiations. When the Bank is selecting a consul- tant for a UNDP-financed project, the time frame from receiving proposals to selecting a consultant for negotiations is about 21 days. As a borrow- er's selection process may have one or two additional administrative layers, 45 days is a reasonable time to adopt for proposal validity. At the outside, the period should not exceed 90 days. 11.23 If the proposal's validity period is likely to be exceeded, the borrower should so advise the consultant and ask if the proposal can be extended for a specified period. At this stage, the consultant may offer staff substitutions, if he so wishes, but cannot substantially change the price. If staff substitutions are made, the ongoing evaluation should be revised, but only with respect to weaker, not stronger, staff. This is to guard against a consultant strengthening his proposal if an information leak indicates that this would be in his favor. 11.24 Bank staff should discuss the selection process with the borrower to: (i) advise on how the process can be accomplished in the shortest possible time; and (ii) agree on the validity period of the proposal. Tiaing of Negotiation and Assinment Commencement 11.25 At a minimum, the months when these activities are to take place should be stated in the LOI. - 62 - Consultant's Tax Status 11.26 Borrowers' practices vary as to whether or not externally-finan- ced consultants are subject to income and/or profit tax (see para. 13.38 for more details). The Bank's position is that consultants should be informed in advance of their likely tax status and, if subject to tax, should at least be advised of where further information on their tax status might be obtained. As price proposals will vary considerably according to the consultant's tax status, the LOI or attachments should indicate how (if at all) the tax portion should be identified. - 63 - Section 12 Proposal Evaluation 12.01 Sometimes, during the evaluation process, borrowers may wish to seek some clarification from one or more of the proposing consultants. Although this is an accepted procedure in bidding for goods and works contracts, it should normally be avoided in consultant selection for the following reasons. First, any contact with one proposing consulting firm during the evaluation process raises doubts in the other firms' minds as to the fairness of the procedure. Second, in discussions with one firm, other aspects of the assignment may be raised which will not have been shared with other firms and may put this one firm at an advantage (or disadvan- tage). Third, clarification has a cost, and as the consulting firm's project director is unlikely to be in the borrower country at the time of evaluation, costs will be incurred which will eventually increase the cost of the services. A. Evaluating Technical Proposals 12.02 Proposals must be evaluated on technical grounds whether price is to be a selection factor or not. 12.03 The Bank advocates a committee approach to technical evaluation, whereby each member of the committee independently evaluates the propos- als. Members then either average or reach a consensus on the results. At least four to eight hours should be allowed for the evaluation of each proposal by each committee member. 12.04 Technical proposals should be evaluated by reviewing the experi- ence of the firm, the work plan and the proposed personnel. For different types of assignments, the weights might be as follows: Preinvestment Preparation Supervision Training Firm's Experience 10 40 10 10 Work Plan 35 30 20 10 Personnel 55 30 70 80 - 64 - The different values reflect the varying degrees of importance that the firm's experience and the proposed personnel have for assignments where, say, the firm's accummulated experience counts (as in civil engineering design), as opposed to, say, training, where success will depend principally on the actual trainers. 12.05 The chairperson of the borrower's evaluation committee should first read all proposals to be in a position to discuss with other commit- tee members any detailed subdivision of the weights published in the letter of invitation (LOI). This is particularly important where several of the staff that a consultant proposes to use belong to one discipline and have to be evaluated as a group. Experience 12.06 The experience of the firm is normally given less weight than the other two categories, because the borrower has already gone through an informal prequalification procedure. In the evaluation of proposals, the firm's experience, as described in the proposal, is usually considered in relation to certain specific aspects of the project, e.g., experience in, say, rock fill dams, rather than in dams in general. The firm's overseas experience is also taken into account. Work Plan 12.07 In reviewing the firm's work plan, the borrower looks for how well the consultant has understood the nature of the assignment, for innovative ideas, and for whether the approach is a professional one. In evaluating the work plan, the borrower often scrutinizes the consultant's proposed approach to each task indicated in the terms of reference. For example, the borrower might review such items as the proposed approach to data collection (e.g., the balance between interviews, use of past records and additionAl measurements), the land classification system to be adopted, - 65 - the economic methodology to be used, and, for some of the more complex assignments, the consultant's approach to the assignment logistics.13/ Personnel 12.08 While a firm's experience and work plan are given close atten- tion, its proposed personnel nearly always receive the closest scrutiny. That the success of an assignment largely depends on the field personnel is a hackneyed statement, but a true one. Among the personnel, it is the team leader who, by definition, plays the major part in the success or failure of an assignment and whose appropriateness is therefore looked at the most critically. 12.09 Using the CVs put forward in the proposal, the more commonly used criteria to evaluate the consultant's proposed personnel are: -- general qualifications; -- adequacy for the project; and, -- language capability and experience in the region. Additional criteria might be appropriate in particular circumstances. 12.10 General Qualifications. These refer to education, membership of professional organizations and professional attainment. One might ask, "Given the years of experience, how far advanced is this person in his or her field?" For evaluation purposes, the value of a person's previous university education diminishes with age. For persons with more than ten year's experience, more at6ention should be given to the individual's career attainments, both in terms of position in the firm and in the levels 13/ A good example of the latter was an assignment in Nepal where the consultant had to visit remote potential sites for porter trail sus- pension bridges--and the assignment budget was limited. Sites in any particular area could be visited either simultaneously, by using several teams, or in series, using one team. The invited consultants had also to consider to what extent the team or teams should walk to the sites (up to five days) or fly by helicopter or plane to nearby airfields. Here, the consultant's logistic approach was a key element in proposal evaluation. - 66 - of responsibility with which the person has been entrusted, rather than to the university degrees acquired. Undue emphasis on university degrees earned should be discouraged, because it is difficult to compare degrees from different countries and, for many assignments, length of experience in developing countries is more significant. 12.11 Adequacy for the Project. Here, one looks to see whether the person will fit the job. Has he recently held a similar position? What is his cumulative experience in this type of work? Is this a major change in his professional career? Is he a generalist or a specialist? For a team leader--has he been a team leader before? Is he proposed as a leader because of his professional skills or his leadership skills? 12.12 The Bank recommends that evaluators keep an open mind on age: often innovation is needed more than conventional wisdom, and hence younger staff members can be an asset; on the other hand, experience accumulates with age and, provided they have suitable medical clearance, there is no reason to exclude people over sixty.14/ Appropriate capabilities, skills and experience rather than age should be the evaluation criteria. 12.13 Language Capability and Experience in the Region. Experience in the region (or better still, in the assignment country) carries consider- able weight, as it indicates that the individual should be able to start work without a long adjustment period. Naturally, an on-site position benefits more from regional or country experience than that of an office- bound design engineer. Overseas experience for senior team members is mandatory. Experience gained in several developing countries is more useful than long experience gained in one. For French- Portuguese- or Spanish-speaking developing countries, a working knowledge of the language 14/ In a recent UNDP-financed project for which the Bank was executing agency, the Bank approved the appointment of a 71-year old chief engineer who subsequently performed very satisfactorily. - 67 - is necessary. For other countries, skill in the language of tha borrowing country is desirable, but not essential. 12.14 The Bank recommends that borrowers evaluate only key members of the team and focus a large part of their attention on the project manager. Key members might be the leading staff proposed for each discipline. If all team members of a large team are to be evaluated, firms tend to include senior staff where less expensive junior staff would do. Evaluating all staff also encourages the practice of "bait and switch," whereby consul- tants put non-available talented staff forward in proposals, only to replace them with less qualified staff before the assignment starts. Finally, the practice diminishes the opportunities for firms, both foreign and local, to give experience to their junior staff. 12.15 For very specialized assignments, it may be appropriate to interview the key person in the team. This is particularly important for institution building assignments where the relationship between the adviser and the advised will be both sensitive and close. The cost of these inter- views is eligible for Bank financing. The Marking System 12.16 All categories are marked on a scale of 1 to 100 and then multiplied by their weights. A passing grade of 60 is usually set for each category, so that acceptable marks will range from 60 to 100. To avoid misunderstanding, the chairperson of the evaluation committee should ensure that all committee members understand and agree on the marking system before detailed proposal evaluation begins. 12.17 The chairperson should encourage consistency in applying the marking system. This is particularly important where price will be a selection factor and where absolute marks, not ranking, are thus taken into - 68 - account in the evaluation's second stage. As long as all scores are above 60, there are no problems. Degrees of failure, however, do create a difficulty. Obviously, a firm's overall ranking is affected if an unsuit- able candidate is marked 0 as opposed to 20 or 40. For personnel, the practical significance of a mark below 60 is questionable, since a candi- date with any mark below 60 would be rejected anyway. Under the circum- stances, it is reasonable that no mark below 40 should be given, this being a sufficient penalty. Therefore, a typical range might be: Marks Quality 40-59 Unacceptable 60-70 Marginally acceptable 70-80 Good 60-90 Very good 90-99 Outstanding Evaluation Example 12.18 Technical proposals have been invited from six firms for a port feasibility study. The following evaluation categories and weights were given in the letter of invitation: General % Evaluation of Personnel % Firm's Experience 10 General Qualifications 30 Work Plan 35 Adequacy for Project 50 Personnel 55 Language and Experience in 20 Region 12.19 The evaluation committee first meets to receive copies of the proposals (every member should have a complete set) and work sheets (see Annexes 9-1 and 9-2), and agrees on the committee's work schedule and any further evaluation details. - 69 - 12.20 In the example, the following weightings were agreed at the meeting. Actual evaluations might use more or (often) less categories. ( i) Firm's Experience (10%) % would be subdivided into: Large breakwater experience 2 Dredging design experience 2 Civil works experience 1 Port feasibility study experience 3 Overseas experience 2 10 ( ii) Work Plan (35%) % would be subdivided into: Hydrological data collection 5 Shipping forecasts 4 Analysis of alternatives 9 Preliminary engineering 5 Economic methodology 6 Intermodal facilities 3 Team scheduling and logistics 1 Activity schedule and logistics 2 35 (iii) Personnel (55%) % Team leader 20 Economics group 13 Civil engineering group 13 Mechanical engineering group 9 55 - 70 - 12.21 After evaluation, one member of the evaluation committee's work- sheets might look like this: ( i) Firm's Experience Firm ACD Firm JCL Score Wt. Score Wt. Wt. (%) Score (%) Score Large breakwater 2 80 1.60 75 1.50 experience Dredging design 2 60 1.20 75 1.50 experience Civil works experience 1 70 0.70 90 0.90 Port feasibility study 3 55 1.65 60 1.80 experience Overseas experience 2 60 1.2 80 1.60 6.35 7.30 ( ii) Work Plan Firm ACD Firm JCL Score Wt. Score Wt. Wt. (M) Score (%) Score Hydrological 5 60 3.00 85 4.25 Data Collection Shipping Forecasts 4 78 3.12 87 3.48 Analysis of 9 87 7.83 75 6.75 Alternatives Preliminary Engineering 5 80 4.00 75 3.75 Economic Methodology 6 75 4.50 85 5.10 Intermodal Facilities 3 50 1.50 82 2.46 Team Scheduling and Loglstics 1 70 0.70 75 0.75 Activity Schedule 2 70 1.40 80 1.60 and Logistics-- Man Months 35 26.05 28.14 Firm ACD appears to have been weak in its hydrological and intermodal approach. Firm JCL has put forward an attractive - 71 - economic methodology and approach to hydrological studies and shipping forecasts. (iii) Personnel 12.22 Personnel are evaluated using the special personnel sheet, of which a completed example is given in Annex 9-3. 12.23 Some points to note: Language ability and experience in region: If language other than English is essential, then equal weight may be given to both language and experience (say, a 10 percent weighting each). If language capability is useful but not essential, then the greater weight should be given to experience (say, 15 percent for experience, and 5 percent for language). Group ratings: Most assignments require more than one specialist in each major discipline. For example, the key mem- bers of a civil engineering team could be made up of a chief engineer, a soils engineer and a structural engineer. Each of the three engineers' contribution to the civil engineering team will depend on the nature of their work and, to some extent, the time each will spend on the project. As we wish to develop only one rating for the civil engineering team as a whole, each member's contribution should be weighted, along the lines of the following example taken from Annex 9-3: Weight Weighted Team Member Score (%) Score Chief Engineer 77.2 65 50.18 Soils Engineer 63.5 15 9.53 Structural Engineer 83.2 20 16.64 100 76.35 (Group Rating) -72 - Final mark: As noted above, the minimum level of accepta- bility is normally set at 60 percent. If, as sometimes happens, the consulting firm's proposal which is rated first also contains a proposed team member who scored below 60 percent, then the firm should be advised that a satisfactory replacement must be proposed prior to contract negotiations. 12.24 After the evaluation is complete, a committee member's summary evaluation sheet might appear as follows: ACD JCL Weight Weighted Weighted Item (%) Score Score Score Score Firm's general experience in field of project 10 6.35 7.30 Adequacy of proposal's plan and approach 35 26.05 28.1A Personnel (55) a) Read of Team 20 81.00 16.20 76.40 15.28 b) Economics Team 13 67.00 8.71 81.35 10.58 c) Civil Engineering Team 13 76.35 9.93 67.49 8.77 d) Mechanical Engineering Team 9 81.46 7.33 71.60 6.44 100 74.57 76.51 - 73 - 12.25 When the individual scores of the evaluation committee members were averaged, the record of this averaging appeared as below. The aver- ages are underscored. Firm ACD JCL Weighted Weighted Wt. Rating Rating Rating 1. Firm's general 10 6.35 7.30 7.30 8.25 experience in 7.36 7.83 field of project 8.72 7.10 .6.14 9.63 2. Adequacy of pro- 35 26.07 28.14 28.14 33.11 posed work plan 28.45 31.32 and approach 32.80 27.49 30.63 33.40 3. Personnel a) Head of Team 20 16.20 15.28 15.28 10.51 15.55 15.01 17.50 13.20 17.83 16.42 b) Economics 13 8.71 10.58 10.58 12.46 Team 9.62 10.22 11.70 .7.49 7.34 10.60 c) Civil Engi- 13 9.93 8.77 8.77 12.50 neering Team 8.88 11.20 .7.40 9.49 11.72 11.81 d) Mechanical 9 7.31 6.44 6.44 6.21 Engineering 6.58 6.97 Team 6.45 . 6.12 7.21 8.02 Final Score 100 - . 76.44 . . 82.55 12.26 In this simple example, Firm JCL was the clear winner. Report for Selection Committee 12.27 A brief report on the evaluation process and results should be prepared for the selection committee, which ultimately chooses the firm to be invited to negotiate a contract. The individual committee members' scores should not be identified in the report. If the firms are to be evaluated using technical criteria only, then the firm scoring the highest points should be the one invited. The report should indicate the principal items to be discussed with the firm during negotiations. - 74 - B. Comparing Prices 12.28 If the Letter of Invitatioa stated that price would be a factor in the selection process, the offered cost of the services should be con- sidered after the technical evaluation is completed. It cannot be empha- sized too strongly that: - the use of price as a selection factor must have been agreed with the Bank prior to issuing the Letter of Invitation; - the letter of invitation (LOI) must indicate how price ill be taken into account in the selection process; and - the technical evaluation must be completed before the offered prices are known. 12.29 The Bank's Guidelines do not prescribe or recommend any specific procedures for taking price into account. This omission is deliberate to allow both the Bank and its borrowers to gain experience in using different procedures. The following procedures have been found to be in current use: - Open price envelopes and compare the prices of firms scoring above a certain technical score, predetermined as satisfactory (acceptable). -- Open price envelopes and compare the prices of firms scoring within a certain predetermined percentage of the technically top-ranked firm (acceptable). -- Open price envelopes of firms scoring above a certain technical score, predetermined as satisfactory and, through weightings, combine price and technical score to produce a modified score and final ranking (marginally acceptable).15/ -- Open all price envelopes and, without weighting, rank firms on a price/technical point basis (not recommended). 1V Tha-iudn1 result in selection of a technical proposal significantly inferior to that of higher firms. Careful tradeoffs of value for money would have to be made. -- Open price envelopes and, without weighting, compare prices of all firms submitting technically acceptable proposals (not recou- mended). 12.30 On the assumption that a technical evaluation has been completed, let us review examples of each of these methods using the following data. Firm Technical Score Price (US$) A 92 1,000,000 B 90 800,000 C 85 730,000 0) 78 700,000 E 67 1,100,000 CoMaring prices above a set technical score. 12.31 If the prices of all firms scoring over 80 were to be compared, we should look at A ($1,000,000), B ($800,000) and C ($730,000). 12.32 The project agency would normally take the lowest price firm scoring above 80 percent-in this case Firm C. It can be argued that the agency should still have freedom to choose A, B or C; however, all factors influencing the ranking should have been taken into account in the short-listing and evaluation process and any exercising of last minute judgment should be considered exceptional. Comparing prices of firms within a certain percentage of the top technically-ranked firm. 12.33 This is similar to (i), except that the Letter of Invitation might say that only the price envelopes of all firms scoring within, say, 10 percent of the top technically-ranked firm would be opened and compared. Combining technical score and price. 12.34 This is normally done by weighting the technical score and the price. The weights given depend on the technical complexity of the assign- ment. Thus for a technically complex assignment a weight of 90 percent may be given to the technical scores with only 10 percent given to the price. For a simpler assignment the weights might be 70 percent technical and 30 percent price. The technical weighting should not be set below 70 percent. 12.35 To derive a percentage range for price, one can divide the lowest price (LP) by the other prices times 100, or take a previously estimated cost as the numerator. If a 90/10 technical/price ratio is taken then, from our example, the calculation would be as follows: Technical Price LPx1OO Weighted Firm Score x90% TU-s) X x10% Score A 92 82.80 1.00 70.00 7.00 89.80 B 90 81.00 0.80 87.50 8.75 89.75 C 85 76.50 0.73 95.89 9.59 86.09 D 78 70.20 0.70 100.00 10.00 80.20 E 67 60.30 1.10 63.64 6.36 66 66 The effect is to make A & B virtually of equal rank. 12.36 If a 70/30 ratio is taken, then the result is somewhat different. Technical Price LPx100 Weighted Firm Store x70% (US$M) X x30% Score A 92 64.40 1.00 70.00 21.00 85.40 B 90 63.00 0.80 87.50 26.25 89.25 C 85 59.50 0.73 95.89 28.77 88.27 D 78 54.60 0.70 100.00 30.00 84.60 E 67 46.90 1.10 63.64 19.09 65.99 Firm ? emerges as the leading firm--but closely followed by C. II Price/point comparison. 12.37 Here the total price is divided by the points scored. Technical Price Firm Score US$M Price/Point Ranking A 92 1,000,000 10,869 4 B 90 800,000 8,889 2 C 85 730,000 8,588 1 D 78 700,000 8,974 3 E 67 1,100,000 16,418 5 This method is not recommended, as very little weight is given to the technical quality of the proposal. While, admittedly, the method is not straight price competition, it is close to it. Open price envelopes of all firms considered technically capable and take lowest price. 12.38 If a lower limit of technical acceptability was set at, say, 65 percent, then in our example all firms would be considered, with D, the fourth technically-ranked firm, being selected. Hence, this method is not acceptable, as it is essentially straight price competition. The Role of Bank Staff in Evaluation 12.39 As the choice of consulting firms should be the borrowers' and should be clearly perceived as such, Bank staff should not participate directly in the borrower's actual evaluation of proposals. Advice and help should be given, but only before the actual evaluation takes place. This advice may conveniently take the form of a seminar for borrowers' staff, which can be mounted by the region with assistance from PPDPC. Lecture materials and audio visuals are available. 12.40 Under exceptional circumstances (e.g., where a borrower clearly has no experience in evaluation, and the assignment is of critical impor- IO tance), Bank staff may "sit in the wings" during evaluation. Alternative- ly, a borrower may wish to hire an experienced individual consultant to assist in proposal evaluation. 12.41 The Bank need not receive the detailed results of the evaluation, nor does the Bank normally receive copies of all consultants' proposals. Where the borrower is accustomed to arranging for all invited coasultants to send copies of their proposals to the Bank in order to save time, this should be continued. However, the Bank may request that it receive a copy of the evaluatior.: :.ort (see Guidelines, para. 2.42), and for major assignments or where problems are pLedicted, such a request should be made. 12.42 The Ban'- should receive a copy of the winning proposal after the evaluation is complete and the borrower has made its choice. Project officers should review the winning proposal to see that it meets the following criteria: -- the proposed work plan is satisfactory and meets the objectives of the terms of reference; -- the man months proposed are sufficient to undertake the assignment; -- the staffing plan is satisfactory; and -- (most important) the personnel are satisfactorily experienced and qualified. 12.43 The intention of this review is not to second-guess the borrow- er's evaluation team, but rather to be able to advise the boriower of the proposal's shortcomings, so these can be corrected in negotiations between the borrower and consulting firm. Any necessary corrections may be checked by the project oficer during his review of the negotiated contract prior to its signature. 12.44 The two main problems that can arise at this stage are: 4 J9 - i) the winning proposal is unacceptable to the Bank; ii) the objectivity of the evaluation process appears questionable. Unacceptable Proposal 12.45 If the proposal ranked highest by the borrower does not meet the minimum standards of the Bank, the borrower should be requested to reject all the offers and to issue invitations to a new list of firms. At the same time, the TORs and conditions of contract should be re-examined to make sure that it was not a lack of clarity on the part of the borrower which led to the unacceptable proposal. Only where the perceived deficiency is minor and easily corrected (upgrading of one or twdo personnel, simple changes in the methodology), should the borrower be encouraged to try to negotiate the proposal up to standard. Generally speaking, a poor proposal indicates a basic lack of understanding of the assignment, and the negotiation would then only be the first of many interventions, with the borrower increasingly taking responsibility for the successful outcome of the work. 12.46 If the borrower still wishes to employ a firm which has submitted a proposal which does not meet the Bank's standardz, the borrower should be advised: (i) that the Bank will not finance the consulting contract; and, (ii) the proposal must still be upgraded to comply with the standard provision of the Loan Agreement which indicates that consultants employed on a Bank-financed project must be employed under "terms and conditions" satisfactory to the Bank, even if themselves not financed by the Bank. 12.47 Where the objectivity of the evaluation process has been called into question as a result of either the Bank's review of the winning proposal or a complaint from one of the invited firms, then the Bank must review the evaluation report and all proposals. If this causes staff to - 80 - believe that the evaluation has been carried out improperly, then the course of action is similar to the above- i) ask for a re-evaluation (preferably with a new evaluation committee); or ii) refuse to finance the contract (and possibly other items covered by tne loan agreement). 12.48 The above assumes the perception of misconduct in carrying out the evaluation. A project officer's view that one proposal is better than the other is no grounds for initiating anything but reconsideration by the borrower of the application of the evaluation criteria. 12.49 In all cases, even where the borrower's choice is reasonable and soundly based, project officers should, where appropriate, make suggestions to improve the execution of the assignment which the borrower can discuss during negotiations. 81 Section 13 Consultants' Contracts 13.01 Bank staff are required to clear, on a "no objection" basis, con- sultants' contracts financed under Bank loans. They should discuss pro- posed forms of contract with the borrower early in the project cycle and allow time for a thorough review. This Section directs staff attention to those areas which should receive the most attention when reviewing con- tracts. For further details on contracts and advice on checking, please refer to the Bank staff "Checklist for Consultants' Contracts, A Guide for the World Bank Staff,"16/ issued by the Projects Policy Department in May, 1984. 13.02 A contract is an agreement between two parties for their mutual benefit. Consultants' contracts may vary from a simple letter of agreement to detailed documents with provisions attempting to cater for all eventual- ities. A. Origins of Contracts 13.03 Borrowers may have standard contracts, or they may request the consultant to prepare a draft contract to be submitted with the proposal or presented at the start of negotiations. Standard contracts should be reviewed by Bank staff before proposals are invited, so that they may be issued with the letter of invitation (LOI). 13.04 Other standard or sample contracts are available. The Interna- tional Federation of Consulting Engineers (FIDIC) has sample contracts covering: -- Preinvestment Studies; -- Design and Construction Supervision; and 16/ The Summary Checklist is given in Annex 10. The "Checklist" itself should be referred to for examples of acceptable clauses covering the various points mentioned below. - 82 - -- Project Management. With slight modification, these are acceptable for Bank-financed assign- ments. 13.05 The Bank uses a standard contract for UNDP-financed services. National associations in the developed countries all have sample documents; however, some of these are based largely on local law and tradition, and require considerable adaptation for international use. B. Types of Contracts 13.06 The different types of consultant contract are distinguished by the manner in which the consultant will be paid. Most contracts, and, hence, payment arrangements, fall into the following four categories: -- Time-based -- Lump Sum -- Percentage -- Cost plus fixed fee. Time Based Contracts 13.07 In this type of contract, payments are based on ag-eed rates per man-hour, man-week or man-month, multiplied by the time the consultant's team will spend on the job. The rate is usually made up of basesalary, staff benefits (or social costs), a percentage to cover the firm's over- head, a profit element and, for overseas contracts, a premium to be paid to the individual on top of his or her salary.17/ The manner in which the rate is calculated varies from firm to firm and also by nationality (see Section 14 for more details). 13.08 To be acceptable to the Bank, all time-based contracts must have a limit on the payments which may be made to the consultant, who must agree to complete the assignment within the stated limit unless a change in the 17/ Some consultants include the overseas premium in the base salary and determine their social costs, overhead and profit as percentage of the total salary. However, for comparison purposes of the Bank, the breakdown should be requested and given as in Section 14. - 83 - scope of work is authorized. The limit should include a contingency element to enable the contract provisions to be met if the prices faced by the consultant change, or if there are minor amendments to the contract. Typically, this limit may be between 110 percent and 130 percent of the estimate. 13.09 The costs of items other than man-month rates are also included as estimates in the contract, and are usually reimbursed at actual costs. 13.10 A local living allowance (subsistence allowance) is paid to the consultant's individual team members in local currency. This allowance is often based on the official UNDP subsistence rate for the particular city. 13.11 The best-known time-based contract is the "man-month" contract. This is used by the Bank when executing agency for UNDP-financed contracts, and is also widely used by its borrowers-particularly for preinvestment studies, advisory services and construction supervision. 13.12 Because it provides for payment for a consultant's inputs, rather than his output, the time-based contract with a ceiling affords more opportunity than other types of contracts for the client to be closely involved with the day-to-day work. The client is aware of who should be on the job, when, and what that individual's tasks will be. If negotiated correctly, it should afford considerable opportunities for the transfer of skills between named individuals. All too often, during contract tegotiations, the time available to the consultant is pared down so that these opportunities are drastically diminished. Nevertheless, the time-based contract with ceiling is flexible, popular and fair. Lump-Sum Contracts 13.13 The lump-sum contract is an output rather than an input con- tract. The client agrees to pay a certain sum for a product (e.g., - 84 - detailed design drawings) to be produced within an agreed time period. It is a simple contract to administer, as no matching of resources used in the contract (people, air fares, transport, subsistence, etc.) to payments is required. When the consultant produces, he gets paid. 13.14 While administering a lump-sum contract may not be difficult, negotiations can be complicated. The client should have a thorough knowl- edge of the work the consultant is about to perform to determine whether the lump sum proposed is reasonable relative to the services being pro- vided. During negotiations, the consultant must be asked to justify the proposed contract sum by producing the basis for his calculations (e.g., man-hours, computer time, etc.). Unless there is prior agreement other- wise, there is no recourse during the contract period if the client believes that fewer man-hours are being expended than discussed during negotiations, or if the consultant provides more man-hours than he budgeted. 13.15 The lump sum proposed may be based on the "traditional" formula of a percentage of estimated construction cost (see Section 8), but during contract negotiations, the percentage proposed should be supported by a detailed cost breakdown. 13.16 The lump sum is fixed for the life of the contract, and payments I should be made in accordance with a negotiated progress schedule. If payments are made against a schedule of percentage of work completed, then, at a minimum, a progress report must be submitted supporting that that percentage has been completed. 13.17 An allowance for price escalation is normally an integral part of the price of a lump-sum contract (during negotiations, check that this is reasonable), but no allowance is included in the lump sum for the cost of additional work. Rates for work requested in addition to that contracted - 85 - for should be specified; such rates are normally individual time-based rates, and payment for this is made separately. 13.18 Lump-sum contract assignments are convenient for straightforward design work and, by their nature, are often used where price has been a factor in the selection of the consultant. Percentage Contracts 13.19 A true percentage contract is one where the consultant is paid an agreed percentage of the actual final construction cost. Until recently, this type of contract was used frequently by consulting engineers and architects in the industrialized countries. The percentage to be used was based on a scale drawn up by the national association of engineers or architects. The percentage ranged from 4-1/2 percent to 10 percent, depending on the estimated value of the work, with 4-1/2 percent being charged for the larger and simpler works. For work in their home countries and in times of little cat no inflation, this method of payment was reason- able. However, for overseas work--where, among other items, construction cost bids are based on perceived political risk--relating the consultant's remuneration to contruction cost is not appropriate. It is not normally acceptable for Bank-financed projects. If local law requires that a contract be based on a percentage of project cost, then the percentage should be based on an estimate of construction cost rather than the actual construction cost, and the contract administered like a lump-sum contract. Cost-Plus-Fixed-Fee Contract18, 13.20 This is a special type of contract whereby the consultant (usually an engineering firm or engineerin contractor) is paid a fee (a 18/ The Asian Development Bank uses this term to define a Time-Based Contract. - 86 - "know-how" fee) to undertake the basic design and subsequently manage the design and construction of, say, an industrial plant. The contract often provides for a license fee covering the particular patented industrial process to be used. The consulting firm itself may own the patent and be paid the fee, or it may obtain the patent from elsewhere. 13.21 Although these are extremely detailed contracts covering large sums, they are basically time-based contracts with a ceiling. While the rates specified are usually man-hours, the reimbursables may include some specialized items of the plant itself, obtained from the engineering firm, and also the cost of contracts let on behalf of and following the regula- tions of the owner (client). Such contracts often include a guarantee that the completed plant will work as specified. These are not turnkey con- tracts. Distinction between Turnkey and Professional Services Contracts 13.22 For purposes of drafting contracts, the distinction between an engineering firm or managing contractor (professional services firm) and a turnkey contractor rests on what the firm is paid for. For example, on the one hand, an engineering firm may be engaged to design and manage construc- tion of a plant which he estimates will cost about US$400 million. The firm's maximum remuneration for its professional services could be US$20 million divided into a fixed fee of, say, $4 million, and a cost-plus element with a ceiling of $16 millio, . On the other hand, if this were to be a turnkey contract, bids would be called through ICB based on a concept- ual design, and the winning bidder would be paid on completion for the total cost of license fee, design and construction--i.e., the US$420 million would be paid to the selected contractor. This is quite distinct from the case where the supply, erection and construction contracts are awarded directly by a professional services firm on behalf of the owner, - 87 - and where the firm does not profit from these contracts beyond the fees mentioned above. C. Staff Review 13.23 A contract will often be reviewed twice: first, a preliminary review when the draft is being prepared for issue to the consultants, and then a formal review after the contract has been negotiated. As the con- tent of the contract is subject to negotiation and changes may have been made to the draft, the first assistance and review should not preempt the right to the second formal review. 13.24 The purpose of the formal review is to check the acceptability of the following principal items: -- The contract provisions. -- The terms of reference (TOR). (Have they changed since first approval by the Bank? Are the changes acceptable?) -- The staffing schedule. (Are the people named in the contract the same as in the winning proposal?) -- The remuneration or consultant's rates. -- Payment conditions. The Bank Staff "Guide to Consultant's Contracts," cited above, is designed to assist this review. A summary Contract Checklist is given in Annex 10. The principal items (and problem areas) in the contract provisions to be reviewed are dealt with below. Contract Components 13.25 A contract enecifies the scope of work, the consultant's duties, the conditions under which the consultants will work, the personnel to be assigned, details of payment and other items of agreement between the parties. Bank staff should review a contract to ensure that it is complete - 88 - in itself and can be referred to in, say, 18 months' time, as a self-con- tained document. As noted earlier, the consultant's proposal should not be part of the contract, but as discussed in Section 14, Contract Negotia- tions, pertinent parts of the proposal should be incorporated in the contract. Joint Venture Arrangements 13.26 Increasingly, borrowers are requiring foreign consulting firms to undertake joint ventures with local firms. Joint ventures are encouraged by the Bank as a means of transferriag skills (they are discussed at greater length in Section 16). They should be organized so that work can be performed satisfactorily. Where a foreign firm is to supply the leading expertise for the assignment, it should normally be designated the leading firm in the joint venture. A statement that the partners are jointly and severally bound is satisfactory provided that, if one partner fails to per- form, or withdraws, the other partner is able and permitted by the contract to make arrangements to complete the assignment. It may be desirable for the contract to require that, in the event of a break-up, the client has the right to approve a revised method of working proposed by the partner continuing the assignment, and also to approve any additional firm to be brought in. 13.27 On no account should token leaders, either foreign or local, be accepted. Doing so may seem politically desirable in the short run, but the project is unlikely to be performed satisfactorily, and the token leader is unlikely to benefit from this "sink-or-swim" approach. While some modest risk-taking is in order in the development of local consul- t&nts, naming an unqualified firm as token leader is too great a eisk to be acceptable. - 89 - Amendment Procedures 13.28 As both the client's and the consultant's perception of the work to be performed can change over the duration of the contract, procedures should always be included in a contract to allow for amendments to the scope of work. Typical amendment clauses are included in the Contract Checklist. Performance Schedule 13.29 Every contract should indicate the time allowed for the work the consultant is to perform. Such a performance schedule may be very detailed (e.g., for design of an industrial plant) or very simple (e.g., for advisory services). The performance schedule relates inputs (the consul- tant's personnel) to outputs (e.g., reports, recommendations, drawings), thus giving the client a measure of the progress of the assignment. The performance schedule may also be linked to payments, particularly for a lump-sum contract. 13.30 Performance schedules normally take the form of bar charts which should be identified as one of the contract components. The Bank should not accept contracts which are open-ended in time. Staff Substitutions 13.31 Staff substitutions will inevitably be required during the life of the contract; people get sick, have marital problems, and may run afoul of the law of the land. Further, a client may find some consultant's staff unfit to continue an assignment (usually for reasons unrelated to work). Thus, the contract must provide for staff substitution, indicating under what conditions staff may be replaced, whether or not the replacement staff must first be vetted by the client, and who pays for the replacement. Unless there has been an agreed change in scope of work, the cost of staff substitutions is normally met by the consultant. - 90 - Consultant's Authority 13.32 The client usually authorizes a consultant to carry out certain actions on his behalf. This authority normally covers two specific areas. First, a consulting engineer is normally given authority to supervise the contractor who is constructing civil works. While FIDIC believes it is in the interest of the client that this authority should be quite extensive and that the consultant should, in effect, work as an impartial agent, many clients limit this authority and reserve decisions on change. orders and variations in cost to themselves. It is important that the three parties concerned--the client, the consulting engineer, and the contractor--all clearly understand the scope of the consultant's authority, and that this should be reflected not only in the consultant's contract with the client, but also in the contractor's contract with the client. 13.33 The second area of responsibility concerns the consultant's authority over counterpart staff supplied by the client. The extent of such authority depends on the work the counterpart staff are to perform. In the case of engineering assignments, these staff are appointed essen- tially for liaison purposes, and the consultants can be expected to have little authority over them. Hiwever, if counterpart staff are to be functional members of the consultant's team, then the consultant should have the same authority over them as over his own staff. As this is frequently a cause of friction, Bank staff should discuss with the borrower, at an early stage, the role of counterpart staff and the consultant's authority over them. For more detail on counterpart staff, see Section 17, Training. Client Contributions 13.34 The contract should specify the extent of assistance-in terms of personnel and such items as office space and vehicles-that the client will provide to the consultant. This is another potential area of friction; personnel may not be provided on time, office space may be found to be unsuitable, and promised vehicles may not be available. Bank staff shou'ld advise the government that its contributions to the consulting assignment should be limited to resources that can truly be made available. The contract should include a clause allowing the consultant to make its own arrangements if contributions are found not to be available, and stating that the cost of these arrangements will be billed to the client. Price Adjustment 13.35 All time-based contracts of more than one year's duration should make some allowance for price adjustment. For a two-year assignment, it is recommended that the second year's man-month rates should be adjusted for expected inflation, and the mean rate for the two years should then be fixed for the life of the contract. This procedure should be agreed on during contract negotiations. Where ;;his is not feasible (particularly for consultants from countries with historic high inflation), or where the contract is for over two years, then the contract should provide for adjustment to be considered on an annual basis. A formula may be used for this purpose based on both local and foreign indices, but the Bank has found that the best approach is to grant increases based on salary changes in the consultant's home office. For example, if the average increase given to the home office staff is 6.5 percent, this figure would be accepted as a basis for increasing the man-month rctes on the assignment under review. This approach avoids the difficulty of combining cost of living increases and merit incre--ses, and should allow the firm some flexibility in the increases it grants to individuals. See the Contract Checklist for additional suggestions on price adjustment clauses and examples. Contingency Allowance 13.35 All time-based contracts should include a contingency allowance, to cover not only price increases, but also changes in the scope of work. It is self-defeating for the "ient not to allow flexibility in his own contract; if additional work becomes necessary, it may be difficult for the client to obtain authority to increase the contract amount. When a con- tract's total cost includes a contingency all wance, this problem is avoid- ed. For amounts over about 5 percent of the monthly cost of the consul- tant's personnel, drawings on the contingency fund should be approved by the client. Rates for Additional Work 13.37 Where the consultant is to be paid a lump sum or a percentage of the total cost of construction, rates for additional work should be specified in the contract. Th se are normally in the form of man hours, man weeks, or man mont--s. Their specification averts disagreements on the terms of additional work to be performed near the end of the contract. U Taxation 13.38 UNDP-financed consulting assignments are required to be tax free, but Bank-financed contracts may or may not be subject to tax, depending on the laws and/or regulations of the client country. Foreign consultants' rates are usually quoted on a tax-free basis, and the imposition of taxes will usually increase these rates. Usually two types of taxes are involved: (i) income tax on individual salaries; and, (ii) tax on the company's profit. The Bank does not finance taxes imposed by the borrowing country 'see OMS 3.30, paragraph 8 (f)), and clients may find it convenient to enter into contracts on a tax-free basis with consultants. Where they do not, the Bank requires that the taxes be financed by the borrower and - 93 - not by the Bank.19/ Bank staff should ensure that consultunts and clients are aware of the proposed consultant's tax status; the consultant should be advised, in the letter of invitation (LOI) of whether his remuneration will be subject to tax, and of where he may obtain information on likely taxes. Termination 13.39 Every consultant's contract should provide for its termination by either party because of a default of the other party or because of force majeure. In case of default, the defaulting party should first be given timt- (e.g., 15-30 days) to remedy the default. Termination because of force majeure should only be permitted if force majeure has prevented performance under the contract for a substantial period of time (e.g., 2-3 months). Furthermore, the client should be allowed to terminate the contract for his convenience. In all cases of termination, suitable notice (e.g., about 30-60 days) should be given to the other party. The client should pay fees and reimbursables up to the effective date of termination and--except in cases of ter%ination due to the default of the consultant-- the client should also pay a reasonable amount to compensate the consultant for any additional cost incurred as a result of the early termination of the contract (e.g., cost of breaking leases for houses of expatriates taken out for the expected duration of the contract). The consultant should hand over all work in progress and all equipment procured under the contract. 13.40 It is difficult to specify appropriate compensation to a client if a consultant does not perform the assignment satisfactorily, largely 19/ While the Bank will not reimburse payments for taxes, the extent to which disbursement is affected depends on the disbursement arrangements given in the Loan/Credit Agreement. If only the foreign exchange cost is being financed by the Bank, then, no special arrangements are necessary, as the taxes will be financed by the client. If the Bank agrees to finance part of the total costs, then the part that is not financed should be large enough to cover the tax element and some other local costs. If the Bank is financing 100 percent of consultants cost an estimate of the tax element must be clearly separated out and is not eligible for reimbursement. - 94 - because the fault for poor performance can lie both on the consultant's and client's side. The consultant may believe he has performed satisfactorily, for example, if he has recommended a course of action unpalatable to the client. It is therefore best to limit any such compensation to the client only for clearly defined failures to act, such as a failure to pduce reports within a given time frame. Because of the diffitulty in specifying the satisfactory nature of the work to be provided, the Bank is opposed to consultants being asked to provide performance bonds or guarantees. Also, such performance bonds will increase the cost of the assignment by at least 1 percent and sometimes more, while on the consultant's side, the cost of obtaining the guarantee usually makes inroads into personal lit-a of credit or overdraft. Neither does the Bank recommend the opening of a retention account where a percentage of money is deducted each month from payments made to the consultants and released on completion of the assignment: a consultant's profit margin is modest, and to be deprived of this margin for the duration of the contract drives up the cost to the client. 13.41 To maintain the client's recourse if the material specified in the contract is not produced, the final payment should only be released when the consultant has performed all contractual requirements. Local Law 13.42 Bank staff should be aware that, by signing the loan agreement, the borrower agrees that this international agreement supersedes the borrower's national law. Hence, waivers can and should be obtained for local laws and/or regulations which run contrary to the Guidelines. Naturally, this matter is highly sensitive, and issues of this nature should not be left to mission discussions with project agency staff, but should be raised during loan negotiations. All such issues should be discussed with the Bank's Legal Department before a position is taken with the borrower. Liability 13.43 Contract is Silent: Consultants, like other professionals, should be held liable for damages arising from their professional negli- gence. As the client and the consoltants are both bound by the applicable law (as stated in the contract), any liability arising from the consultants services will be determined under that law. Hence, no specific provision covering liability is required in the contract, unless the client wishes to bind the consultant to a contractual liability in excess of the liability existing under the applicable law, or unless the consultant wishes to restrict his liability to a limit below the liability existing under the applicable law. 13.44 Contract Mentions Liability: Clients, for reasons just mention- ed, may sometimes insist that liability be mentioned in the contract, while consultants will wish to mention liability only to limit it. As a result, most contracts now include some provih0-ns concerned with liability. Limitation of Liability 13.45 Under no circumstances should Bank staff accept a clause stating that a consultant (whether a firm or individual) is not liable at all for damages he may have caused in carrying out the services under the contract. Similarly, a limitation of liability merely to repeating the services free of charge is not acceptable. What is acceptable is a stated monetary limi- tation which is reasonably related to likely damages the client may experi- ence. This requires some judgment, and such a limit should also be related to the extent that, if the occasion arises, the consultant will be able to meet this amount either from his own resources or through professional liability insurance or both. 13.46 Many consulting firms take out professional liability insurance to cover themselves against occasions where damages result from the consul- - 96 - tant's services. Coverage of up to $10 million Zor a single claim is obtainable by reputable conaultants; higher coverage may sometimes be available. For large projects, it may, therefore, be appropriate to set the limitation (if a limitation is accepted by the client) within the consultant's insurance coverage. The consultant should be asked to produce evidence of such insurance (as is now required for public works in the UK). If the consulting firm is not covered by professional liability insurance, it should be asked to produce documentation indicating the manner in which it would meet its liabilities. 13.47 Time Limit: It is reasonable to include in the contract a time limit for the consultant's liability. This should not be linked to the duration of the services, but rather to a period during which consequences of the consultant's negligence might become apparent. This requires pragmatic judgment, and a period of 2-5 years after completior of the assignment would seem reasonable. 13.48 Indemnification Clause: FIDIC's various Model Forms of Agreement between Client and Consulting Engineer (generally known as IGRA Rules) regularly include a Clause 2.4.1 which (under the misleading title "Liability of the Consulting Engineer") provides for the Client to indemnify and hold harmless the Consulting Engineer against damages and claims (including those asserted by third parties) resulting from the Engineer's own actions, if and to the extent that these damages and claims exceed the Engineer's liability as limited by the agreement with the Client. The Bank no longer accepts this provision, and Bank staff should insist on its deletio. wherever it appears in draft contracts to be financed by the Bank. Insurance 13.49 The consultant should be required to take out insurance to appropriately cover his potential liabilities towards the client and - 97 - towards third parties. Tlis should include insurance for professional liability, for third-party liability and for loss of documents prepared under the contract or of the client's equipment used by the consultant to carry out the services. - 98 - Section 14 Contract Negotiations 14.01 The successful firm should receive written notification (letter or telex) that it is being invited for contract negotiations. This notifi- cation should mention any additional information the firm should bring to negotiations, as well as any major reservations the client has concerning the consultant's proposed staffing or work program, so that the latter has time to consider possible adaptations. If time permits, financial break- down sheets should also be forwarded to the consultant to allow him to pre- pare his financial proposals in a form acceptable to the client. If the client's draft contract was not issued with the letter of invitation, it should be sent to him at this time (see Annex 11 for sample telex). 14.02 Firms should be advised not to enter into fixed financial arrangements with their proposed assignment staff, as the firm's proposed man month rates and such items as overseas allowances may be adjusted during contract negotiations. 14.03 It should be remembered that the objective of negotiations is to arrive at a mutually-advantageous, clearly-defined relationship. There is a clear difference between bargaining, which is concerned with the distri- bution of benefits, and an adversary approach which destroys any coinci- dence of interest in the management and outcome of the assignment. 14.04 Contract negotiators should be well prepared. All members of the client's negotiating team should be fully familiar with the terms of refer- ence and with thd successful consultant's proposal. The team should be clear on the type of financial information it will be requesting from the consultant, and should have obtained information on the rates and salaries current in the consultant's country of origin. Some information on rates is held in the Central Procurement Unit (PPDPC). - 99 - 14.05 For those unaccustomed to negotiating contracts, the occasion can be a tense one: there are often real or imagined pressures behind the see es; surprises exacerbate these tensions, leading to irrational reac- tions and responses. It behooves both negotiating parties to keep such tensions to a minimum, and to reduce the possibility of unpleasant sur- prises by (a) being wel- prepared, and, (b) by informing each other in advance of any changes since the TOR were prepared and/or the proposal submitted. 14.06 Both parties should authorize a negotiating team leader to make decisions in negotiations. The client's team should keep notes and, if the assignment is large and complica-ed, significant points can be intialled by both teams as negotiations progress. Often, the client will require the right to audit the consultant's financial records. If any of the negotia- tion notea are to form the basis of an audit, these should be initialle4- by both parties. This applies particularly to the man-month breakdown sheet. (para. 14.30). 14.07 If possible, the consulLant's manager for the assignment should be present at negotiations. His/her working relationship with the client can begin, and he can bring project management concerns to the negotiating table (particularly those covering facilities, logistics and counterpart personnel). As there is as yet no contract between the client and consul- ta_z, the cost of the project manager's presence must be borne by the con- sultants.20/ 14.08 Contract negotiations should normally begin with agreement on an outline agenda. This will serve to inform various specialists of the client's staff when they are required and will also set a target for the completion of negotiations. A typical agenda is shown in Annex 12. While 20/ The cost will be included in the consultant's overhead charges. - 100 - contract negotiations for small assignments ($100,000-$250,000) can often be completed in 2-3 days, it is best to allow at least one working week for most contract negotiations. 14.09 If a draft contract was not sent out with the letter of invita- tion or to the successful consultant (para. 14.01), this should be dis- tributed when negotiations commence. Whoever tables the contract (usually the client), should give the other party time to study the document's details. A* Work Plan and Staffiug 14.10 The first item to be discussed is the consultant's approach to the assignment. The consultant's approach, or work plan, was evaluated as part of the selection process, and, as the letter of invitation encouraged suggestions to improve the TOR, any suggestions made by the consultants should now be discussed. It should be made clear at this stage that the consultant's proposal will not be part of the contract; any suggestions that the client wishes to adopt must be included in the TOR. (After the negotiations, the consultants' proposal will have no legal status.) 14.11 Negotiators should avoid acting as an editorial committee in revising TOR. When major revisions to the text are proposed, the client's staff should prepare inserts or revised pages away from the negotiating table, or ask the consultants to do so. 14.12 If the client has any difficulty with the methodology or work plan proposed by the consultants, this should be resolved before the TOR are finalized. As a result, there should be an agreed text of Part II,Objectives, and Part III, Scope of Work of the TOR. 14.13 In the discussion of staffing, zlarification should be obtained on the role of each key member of the consultant's team. If substitutions were requested by the client, the qualifications of substitute candidates - 101 - should be discussed and the names agreed upon. Then, the consultant's bar chart should be reviewed and agreement reached on the periods of time each key member of the team is expected to work in the field and home office. An outline bar chart is shown in Annex 13. 14.14 The consultants should be told that, once the contract has been agreed, the staff named in it may not be replaced except for very good reasons (e.g., sickness). Only "minor adjustments" (as defined in the contract) are permitted without prior approval by the client, but even these require prior notification of the client. 14.15 The agreements reached at this stage on TORs, work program and staffing must remain subject to change during negotiations if this should become necessary in view of financial constraints. B. Financial Negotiations21/ 14.16 Before discussing consultant's proposed costs in detail, the client should expand on the information given in the letter of invitation in regard to the consultant's tax status. 14.17 Except in the case of fixed price, lump sum contracts, provision should be made for audit. Audits will generally cover two distinct re- quirements: control of the items for which charges are made (actual item inputs, journeys, subcontracts, etc.), and control of the rates at which such items are charged (man-month tariffs, subccntract provisions). The consultant must contract to keep such records as will make an audit possible and meaningful, and to make the resulting documentation available for audit under reasonable conditions. 14.18 The detail to be discussed during financial negotiations will vary according to the type of payment provisions to be included in the 21/ Please also see paras. 16.19-16.25. - 102 - contract. Here, we shall discuss the example of a time-based contract with a ceiling, but negotiations for a lump sum or cost-plus-fixed-fee contract would be similar. 14.19 A time-based contract with a ceiling is one where staff inputs are denoted in terms of an individual's cost per nonth, -Yeek, day or hour, and the contract states a total amount within which the services must be completed. (Where the total amount of work to be undertaken is not known, the assignment should be phased as described in Section 7.) Under this type of contract, field work is billed at man-month rates, and home office work at man-hour or man-day rates. 14.20 A typical man-month contract contains clauses which state the maximum amounts in foreign and local currency to be paid to the consultant for the assignment. These amounts are based on schedules which form part of the contract and which give details of the inputs (people, vehicles, etc.) and the cost of these inputs. Withia some limited flexibility, which should be described in the text, the consultants are required to adhere to these schedules (see Annex 14 for examples). 14.21 Typical contract schedules would be: Schedule Foreign Currency 1 Services in country of assignment 2 Services in home office 3 International travel 4 Other reimbursables 5 A foreign currency summary 6 Foreign currency payment schedule Local Currency 1 Local items 2 Local currency payment schedule - 103 - 14.22 Financial negotiations are normally conducted following the order of the Schedules, and begin with a discussion of the man-month rates for services in the country of assignment. 14.23 A man-month rate is made up of the following items: -- basic salary; -- social costs (or staff benefits); -- overhead; -- fee or profit; -- overseas or inducement allowance. 14.24 Basic Salary. This is the monthly salary paid to the individual by the firm. Any overseas inducement to be paid should be identified separately, and should not be included in the basic salary. The salary should not contain a bonus item, except where law or government regulation decrees otherwise, or it can be demonstrated that the bonus amount has over time become part of regular salary. As the proposed personnel have been named in the proposal, the salaries of permanent staff are usually non- negotiable. 14.25 Social Cost. This is the cost of staff benefits resulting from legislation in the consulting firm's home country and the firm's own employment policies. It includes such items as vacation, holidays, sick leave, pension, social security and medical and life insurance. It varies from country to country, and in 1984, it ranged from 20-60 percent of basic salary. Firms from Continental European countries and Latin America are usually at the higher end of this range, while firms from North America, United Kingdom and most developing countries are at the lower end. Since most of these payments are required by law or by the firm's standard personnel policies, there is usually little scope for negotiating this item. Sometimes, by law, the consulting firms' staff members' overseas - 104- allowance draw some social costs. In these cases, this amount should be shown under social costs, but the net overseas allowance should still be identified separately and not included with salary. 14.26 Overhead. This covers the firm's administrative and business costs. It is normally based on the firm's recorded annual expenditures, as reflected in its financial statements. Included in the overhead cost are administrative costs, office rent, non-project home office backup and utilities, depreciation and amortization, materials and supplies, liability insurance, home office transport, data processing and miscellaneous expenditures. Another significant item of the overhead is the cost of professional staff not currently working on specific revenue-earning assignments. The proportion of staff time spent on revenue-earning contracts is a good indicator of a consulting firm's efficiency. However, consulting firms are often faced with administrative and other delays caused by their potential clients, which increases the period they have to keep staff on standby for a new assignment. Overhead also covers the costs of developing new business, including the preparation of comprehensive proposals for new work. The overhead allowance varies ftom firm to firm, and depends on the firm's size and the range and type nf service it offers. In 1984, the range was about 65-150 percent of salary costs. 14.27 Fee. This is the firm's gross profit before taxes. It is expresseJ as a percentage of the sum of salary, social costs and overhead, and usually ranges from 10-17 percent. Net profit varies according to the tax levied in the firm's home country and/or in the country of assignment. 14.28 Overseas or Inducement Allowance. This is an amount over and above salary which is paid to staff on overseas assignments by the firm employing them, particularly in countries with difficult living conditions. It is normally in the range of 20-60 percent of the basic salary (see para. 14.25). - 105 - 14.29 Calculation of Man-Month Rates. This is best shown by giving an example and assumes remuneration is tax free.22/ Suppose the basic salary of the specialist to be engaged is $3,000 per month, and the firm's social costs amount to 30 percent of basic salary, overhead is 100 psrcent of salary, the fee or profit is 12 percent of the sum of salary, social costs and overhead, and the overseas allowance is 30 percent of salary. The man-month rate would be calculated as follows: Percentage M Salary 100 3,000 Social Costs 30 900 Overhead 100 3,000 Sub-total 230 6,900 Fee (Profit) 12 percent of 230 27.6 828 Overseas Allowance 30 900 Total Man-Month Rate 287.6 8,628 Multiplier: 8,628-3,000 - 2.88 (I.e., the man-month rate is 2.88 times basic salary.) A breakdown sheet for this example is shown on the following page. 14.30 A sample list of social cost- and overhead items is given below. (A man-month breakdown sheet is shown on page 100.) Social Costs Percent of Salary Vacations (15 days) 7.0 Public Holidays (10 days) 4.6 Sick Leave (12 days) 5*5 Pension Plan 8.0 Medical Insurance 3.2 Life Insurance 1.7 Total 30.0 Overhead Home Office Rent 16 Rome Office Utilities 7 Administrative Salaries 14 Non-Revenue Earning Professional Salaries 15 1 < 13 13 - Break1 of Fimd N Rates in Cosultant Cxtract (Services in r~a (In ijs$) (1) (2) (3) (4) (5) (6) (7) Basic Oeeas 1d Saary Social cots Oyerhead Subtotal Fee Alance RateMnth ~itien Ber nt~h 3E of (1) 100%of (1) (1+2+3) 12 of (4) 3( of (1) Z of (1) S. Jns Qdef Eonmist 3,000 900 3,000 6,900 82B 900 8,628 - lu - Overhead Percent of Salarl Printing and Reproduction 3 Computer Costs 8 Tratisport 6 Business Promotion 16 Depreciation 6 Postage 1 Insurances 6 Miscellaneous 2 Total 100 14.31 The calculation of the home office man-hour or man-day rate is similar, although no overseas or inducement allowance is payable. Some firms charge the same overhead rate for home office time as for field time. Some argue that the home office costs for iverseas staff are greater, due to the increased administrative support the latter require; the majority argue the reverse. Rome office time is usually measured in days or hours. A day is usually equal to 1/22nd of a month-an hour equal to 1/176th of a month. While some specialized assignments (e.g., industrial design) require considerable home office time, many assignments should be carried out largely in the client's country. International Travel 14.32 These are the estimated costs of travel between the consulting firm's home country and the country of assignment. They can include the cost of the following: -- Vaccination and visas -- Airport transportation -- Air fares -- Excess baggage -- Unaccompanied baggage -- Rest stops (including ground transportation) -- Airport taxes -- Sea shipment of effects 14.33 Depending on the client's policy and the duration of the consul- tant's team member's assignment in the country, this schedule will also cover the travel costs of the team member's dependents. The Bank's policy is to allow for the cost of up to two full additional air fares--i.e., normally a spouse and two children, if the team member will be in the country continuously for more than six months. If for less than six months, no dependents' air fares are paid. Air fares should normally be economy class, although business class fare may be allowed for visiting partners or company officers. The Bank does not disburse for first-class travel by consultants. 14.34 A limit on the allowance for excess accompanied ane unaccompanied baggage and sea shipment costs should be given in the schedule, and should take into account whether or not the team member will be accompanied by dependents. Sometimes a sum is allowed which the team member can use for whichever method of transport he chooses. 14.35 For a two-year assignment, typical shipment allowances each way (including insurance) might be: Excess personal baggage: 20 kilos per adult Unaccompanied baggage: 100 kilos per adult 50 kilos per child Or in lieu of unaccompanied baggage, a sea shipping allowance of: $5,000 per family 14.36 All international travel costs should be paid on a reimbursable basis--i.e., the consultant must submit receipts and/or other appropriate documentation for all items to support reimbursement. Lump sum allowances for air fares can be subject to abuse. Other Reimbursable Items 14.37 This schedule covers the estimated cost of such items as: - Report printing -- Surveying equipment -- Office equipment -- Vehicles -- Insurance of above items23/ -- home office long distance telephone, telex and postage costs All are to be reimbursed at actual cost. 14.38 Handling fees and administrative costs for the procurement of, say, air tickets and vehicles are not reimbursable; such costs (if any) should be covered under the firm's overhead. Local Items 14.39 Costs that are incurred in the assignment country are paid or reimbursed in local currency. The largest of the items is the living or subsistence allowance paid to team members, in reflection of the difference in living costs between the consultant's home country and the assignment country. Two major costs which the team member may face are: (i) high rents for expatriate-styl1c accommodation in the assignment country; and, (ii) the high cost of secondary education for children, either in the assignment country or in boarding school at home. The Bank recommends clients not get involved in a consultant's team member's personal affairs, but to meet the cost of a fixed daily allowance for each team member. This allowance is usually based on the UNDP Daily Subsistence Rates, published every three months for most countries of the world. Two rates are given for the various parts of each country--one rate for the first 60 days of a team member's stay and another rate for after 60 days. The rates should only be used as a guide, as in some countries the rents for housing are exorbitant, and the UNDP rates may be insufficient. Where several months' rent has to be paid in advance, ,uitable advance arrangements can be included in the contract (see also paras. 8.18 and 8.19). 23/ The cost of insurance taken out for other purposes by the consulting firm or individual consultants is not reimbursable as such; it should be covered under the firm's overhead. - 110 - 14.40 Local office costs, staff and supplies and local transportution may also need to be included in the local items schedule. Payment Schedules 14.41 A consulting firm may be paid monthly or against progress tar- gets, either on presentation of invoices, or according to a payment schedule. Payment against progress targets can be made when the consul- tant's output is easily identifiable and produced at reasonable intervals. Where payment is on a lump sum basis, the payment schedule for a design assignment might be: Percentage Payment Contract Signature 15 Assignment 25% complete 15 Assignment 50% complete 15 Assignment 75% complete 15 Presentation of Drawings 30 Final Payment 10 100 14.42 Where a monthly payment schedule is adopted, this is set up to be roughly equivalent to the consultant's estimated cash flow. The first few payments will be quite high, reflecting expected expenditures on air fares, shipping costs, equipment purchase, rent allowances, etc. The final scheduled payment should be about 5-10 percent of the total contract cost, and is paid after: (i) satisfactory completion of the services; and, (ii) reconciliation and acceptance of all invoices. 14.43 Examples of Contract Schedules are given in Annex 12: see also "Checklist for Consultants Contracts: A Guide for World Bank Staff." C. Payment Provisions 14.44 Delayed payments are, unfortunately, an all-too common feature of consulting assignments. Sometimes the delay may be due to a client's dis- - 111 - satisfaction with the consultant's performance, but usually the problem is one of administration. A civil works contractor usually has the certifica- tion of a consulting engineer that payment is due, but the consulting engi- neer has no similar justification to support his own invoice. Such cert- ification should not be needed, but the fact remains that payments to consultants are usually behind schedule (with delays of up to six monrhs being not unusual). As delayed payments increase contract costs, Bank staff should pay close attention to contract payment provisions and, in particular, review the following items. D. Price Escalation 14.45 The Bank recommends that, for assignments to last over one year, the contract provide for price variation--normally due to inflation and merit increases in foreign and local costs. Some methods of providing for price escalation are given below. The provision is usually included as part of the contract's contingency amount. 14.46 A fixed annual percentage, based on best estimates of likely price variation, may be adopted for the contract period and stated in the contract--e.g., "man-month rates will be increased from the first anniver- sary of the starting date by 7 percent per annum." 14.47 This approach is convenient, but its outcome will depend on trends in inflation. The approach is not recommended for contracts of more than two year's duration. 14.48 A fixed percentage with consideration of an additional amount is a variation of the above. For example, "rates will be increased by 4 percent per annum. Any request by the consultant for increases of over 4 percent must be supported by documentation and will be subject to negotiation." - 112 - 14.49 Price variations tied to indices, although used frequently in civil works contracts, are less popular with consultants' clients. It is sometimes difficult for clients to accept that they must meet the cost of large inflation rates in countries thousands of miles distant, while the consultant's staff are actually working in the client's country. Sometimes agreement is reached that, say, 80 percent of the change in an index will be used. This is a satisfactory approach, but does not take into account staff merit increases-particularly for long-term contracts. Such merit increases can be proposed to the client for approval, although this could involve the client with the personnel policies of the firm. If an index is to be used, probably the best approach is to grant an increase in accord- ance with the total index increase on the assumption that 80 percent is the increase due to inflation and 20 percent meets the merit increase. 14.50 If a provision for price variation is not included in a contract of more than one year's duration, then the rates themselves must be in- creased to allow for some estimated variation. Sometimes an increase is agreed for the second year and, for ease of payment, the first and second year rates are averaged to give one rate. 1983 Estimated Variation 1984 Rate $8,000 Equ.&a 7 Percent $8,560 but becomes one rate of $8,280 fo:; each year. 14.51 Variation in local costs is in principle treated in a similar manner to that in foreign costs. Usually the only fixed price item in the local schedule is the subsistence and housing allowance for foreign staff, which is often determined on the basis of UNDP subsistence rates. In- - 113 - creases in this allowance can be tied to any change in the official UNDP rate; UNDP rates are reviewed every three months. E. Contingencies 14.52 An additional amount to cover contingencies should be included in all time-based contracts. The element due to price variation should be estimated in accordance with one of the methods indicated above, and now to be included as a contract provision. The physical component will depend on the precision of the TOR; at least 5 percent of the total cost of the assignment should be allowed for unforeseen physical contingencies. The following simple example shows how the calculation is made up. 14.53 A contract has been negotiated worth $900,000 equivalent, of which $600,000 comprises foreign man-month costs, and $120,000 equivalent represents local subsistence costs (assume the remainder of US$180,000 equivalent is not subject to price escalation). The contract will run for three years, and the variation in the price per foreign man-month has been based on an index representing the cost of living in the consultant's home country. The past three year's increases in this index have been 11 percent, 10.5 percent, and 9 percent. The UNDP subsistence rate has been increasing at about 15 percent per annum. The calculation might, therefore, look as follows: i) Man-Month Costs Based on the index's history, assume an increase of 8 per- cent for payments in the second year, and 7 percent for the third, i.e.: Year 1 Year 2 Year 3 Total 200,000 216,000 231,000 647,000 Hence, the price adjustment item ascribed to foreign man-month costs equals $47,000. - 114 - ii) Air Fares and Other Reimbursables As most of this expenditure takes place at the start of the assignment, and as there is an equal chance that air faces may increase or decrease, in our example little or no allowance for price variation is required. iii) Local Subsistence Costs The increase is calculated, as for man months, over a three- year period, with the amounts increasing at 10 percent per annum. This gives a contingency item of $12,400 for local subsistence costs. iv) Total Price Variation Contingency Hence, allowance for total price variation (foreign and local) = $59,400. v) Physical Contingency Allow a total of 10 percent of contract value: 10% of ($900,000 + $59,400) or $ 95,900 vi) Total Contingency Allowance Hence, total contingency allowance (price and physical) - $59,400 + $95,900 - $155,300 Say - $156,000 To include this contingency, the total contract value is raised from $900,000 to $1,056,000--a substantial increase of about 17 percent. 14.54 As indicated in Section 13, except for some agreed flexibility (stated in the contract) within which the consultant may vary the staff input or where increases are based on agreed indices, the contract should stipulate that the contingency amount may only be drawn upon with the client's written agreement. - 115 - F. Payment Provisions 14.55 As per para. 9, Annex II of the Guidelines, the contract should contain provisions to allow the consultant a reasonable cash flow. 14.56 Mobilization and Advance Payments. Advance payments may be made up to the amount of the anticipated expenditure in the first two months of the assignment, provided this does not exceed 15 percent of the contract value. A mobilization payment is part of the payment schedule and repre- sents the heavy costs to be incurred immediately before or shortly after the start of the contract; it is not "repaid" by the consultant. An advance, by contrast, is calculated as a percentage of the total contract cost, is additional to the monthly payments, and is repaid during the life of the contract (normally starting when the contract expenditure reaches 25 percent and being totally repaid when contract expenditure reaches 75 percent). I 14.57 If the amounts are large and the consultant is not well known, advances should be covered by a bank guarantee. However, bank guarantees should be the exception, and should not be requested on a routine basis. 14.58 Late Payment Penalties. As an additional incentive to the client for prompt payment, the contract may stipulate the payment of interest on delayed payments, with the interest rates perhaps pegged to the prevailing cost of money.24/ If an interest penalty is adopted, an amount to cover possible interest payments should be included in the contract's contingency fund. 14.59 Limiting Payment Withholding. To further enhance the prospects for a prompt, continuous payment stream, the Bank recommends that, where the consultant submits an invoice and the client wishes to delay payment 24/ A reciprocal discount may be awarded the client for early payments. - 116 - pending substantiation by the consultant of a disputed item on that invoice, only that part of the payment corresponding to the disputed item should be withheld, and the remainder paid on time (Guidelines, Annex II, para. 11 (ii)). G* Completing Negotiations 14.60 Successful contract negotiations should end with the initialling of a draft contract. Unless a prior waiver has been received, a copy of this initialled draft contract must be forwarded for the Bank's review and comment. Bank staff review of the contract is covered under Section 13. The Bank's comments will be transmitted by telex; usually these are suffi- ciently straightforward for the borrower and the consultant also to agree on any contract revisions by telex. 14.61 Examples of contract payment schedules are given in Annex 14. - 117 - Section 15 Planning and Mission Checklist 15.01 It takes longer to engage consultants than most people realize. A period of six months to one year between the invitation to submit pro- posals and the consultant's arrival in the field, while not desirable, is not unusual. Most of this time is not taken up by the technical aspects, but rather by borrower and Bank administrative procedures. Bank and borrower staff should, therefore, review the time required for the steps in the selection process, including, in particular, the various levels of internal government approval expected during the process, and plan accordingly. With the borrower, Bank staff should try to speed up the process--particularly those activities involving borrowers' and Bank's approvals. A schedule should be set up with a realistic time estimate for each step. Typical activities, times and schedules for a Bank-financed assignment are shown in Annexes 15 and 16. Experience shows the total typical times for selecting a consultant on a Bank-financed assignment are 40 weeks if there is no prequalification (see paras. 10.3-10.4), and 53 weeks with prequalification. Annexec 17 and 18 give similar information for a UNDP-financed, Bank-executed assignment, with a processing time of about 25 weeks. 15.02 In addition to the planning process, Bank missions should use a checklist both to prepare them to assist the borrower in the selection process and to keep track of progress. A sample checklist is given in Annex 19. - 118 - Section 16 Development of Local Firms 16.01 This section is designed to help staff implement the Bank's policy of promoting the development of local consulting firms, i.e., firms that are majority-owned by nationals of the country in which they operate. Foreign participation in a local firm's activities is usually on a tempo- rary and ad hoc basis, except in some francophone countries. 16.02 Like the priming of a pump, the consulting profession needs help and assistance during the early stages of its development, but soon this direct assistance not only becomes unnecessary but, by protecting the pi0fession from the need to strive for excellence through competition and from the natural process of weeding out the mediocre, incompetent and unethical firms, may impede the natural professional growth towards technical competence and professional impartiality. The Bank's aim is therefore to concentrate on stimulating the development of the profession in its early stages and where there are identifiable constraints to its natural development. 16.03 Although the local consulting business is privately owned, its development and health lie squarely in the hands of the government. In their promotional efforts, Bank staff must thus carry on a vigorous policy dialogue with and mostly through the borrowing government. At a working level, and in the context of project preparation, this staff dialogue should take place with the government's project agency and should address the pertinent constraints on a project-related basis. Some of the larger cross-sectoral issues must be raised with the government agency most concerned with the profession's development. This may not be easy as, while many government agencies clearly favor the development of local consulting fir&s, there is rarely a single agency charged with or geared - 119 - to this responsibility. Ministries of Finance, Economic Affairs, or Planning Commissions are the obvious places to start and, if this has not already been done, staff might suggest that government consider delegating this development function to a particular agency and person. 16.04 If local consultants are likely to be employed on a particular project, Bank staff should become familiar with the profession itself. Staff may find it useful to attend local association meetings. By offering to speak or to hold seminars, they can make their visit an occasion for the association to bring its members together. Visits to local consultants' offices are also useful. It is rare that a local consultant will not welcome a visit by a Bank staff member, though, naturally, this welcome is fueled by the hope of a Bank-financed assignment. When arranging a visit, staff should explain that the purpose is not only to gain an insight into the workings of this particular consultant, but also the profession as a whole. 16.05 A client employs a consulting firm to perform satisfactorily and complete a job--whether designing a dam or assessing the feasibility of a proposed irrigation scheme-hence, capability must ultimately be the sole criterion for employment. While recognizing national aims for self-suffi- ciency, neither the selection process nor the needed capability of a con- sulting firm should be compromised by over-enthusiastic promotion of local firms who may not have acquired the necessary skills and experience. A. Local Firm's Capability 16.06 In measuring a local firm's capability, the following should be taken into account: -- the qualifications and experience of individual staff in the required field; -- the number of such staff available for the assignment; -- the experience of the firm's senior staff in managing teams on similar assignments--i.e., the corporate experience; and -- the number of similar assignments carried out by the firm. 16.07 Probably the great(.st problem facing local firms in achieving "capability status" is the shortage of qualified and experienced staff. Small firms (i.e., a staff of 5 to 10), with staff neither qualified nor experienced, are not suitable for employment. A firm with some qualified staff but limited corporate experience may be a suitable sub-consultant or joint operation partner. 16.08 Capability is a matter of judgment, but this judgment can be shared by government and Bank staff together visiting a local consulting firm's offices to acsess the firm. The visit should include working sections of the firm (e.g., drawing offices, material labs). Good indicators of competence are drawings under preparation and other activity for ongoing assignments; professional books and manuals, and arrangements for checking drawings and other output. Such visits yield insights not only into particular firms, but also into the status of the local profes- sion as a whole, and the assistance that might be given to improve its status. 16.09 Local registration of consultants may help raise professional standards, but care must be taken that this does not lead to a closed shop for agency favorites. B. Local Firms' Advantages 16.10 To promote domestic firms, some governments prescribe such measures as joint ventures between foreign and local firms, minimum percentage participation by the local firm and preference for local firms 121 when in direct competition with foreign firms. Joint ventures (see paras. 16.42-16.50) can stimulate the local profession; decreed percentage partic- ipation and preference are protectionist in nature and, while enhancing short-term profits, do not promote the growth of capability. 16.11 The Bank considers that mandated preferences are unnecessary, as the natural advantages of a local firm's involvement are fully taken into account in the usual evaluation categories. First, in considering the category, "firm's experience," the local firm's experience will normally increase the score given to that element. Second, in scoring the work plan, the degree of local knowledge will be taken into account in deter- mining how this will benefit the assignment. Third, in reviewing the capability and appropriateness of the personnel, local personnel will again gain under the cetegory of "language and experience in the region." 16.12 By the same token, the Bank does not accept government-prescribed percentages of participation by local firms. While the Bank recognizes the government's aim to increase local participation in joint ventures, Bank staff should point out that arbitrary decrees on levels of local partici- pation can adversely affect the development of the profession. For skills to be transferred, local staff participating in a joint venture must be able to assimilate the training. Joint venture partners should be free to arrange their own degree of participation, and support this arrangement with their own proposals for transferring skills. Misplaced enthusiasm to employ an inexperienced local consulting firm alone may rob the firm of the opportunity to grow through skill transfer. C. Contract Financing 16.13 Bank staff are reminded that, to encourage the use of local consultants, the Bank will normally finance a percentage of total contract costs based on the foreign exchange component of employing consultants irrespective of the nationality of the firm actually employed. This percentage is usually 70-85 percent, and disbursement should be stated as this percentage of total costs. D. Constraints on Development 16.14 In most countries, the consulting business is a private sector operation and, as such, its development should be subject to normal market forces. However, in all countries there can be constraints which can greatly influence the profession's natural development. The Bank has undertaken a series of studies in developing countries to identify these constraints and how their effects might be minimized.25/ These can be grouped under three headings. -- Government's Attitudes and Practices; -- Constraints within the Profession; -- The Bank's Perceived Preference for Foreign Firms. Governments' Attitudes and Practices 16.15 Irregular Practices in Selecting Consultants. Local consulting firms often complain of irregularities that include favoritism, the award of contracts to firms owned by government officials, and expectations of unofficial payments. As stated earlier in this handbook, Bank staff should thoroughly review the selection procedure to be used for a Bank-financed consulting assignment. This review may also be the occasion to discuss alternative selection procedures and to conduct short training seminars. 16.16 As the Bank's "Guidelines for the Use of Consultants" apply equally to local as well as foreign consultants, the Guidelines and this handbook should be used as a basis for discussions. 25/ For a more detailed treatment of the subject, see "A Discussion Paper on the Development of the Local Consulting Profession in Developing Countries," available from the Central Procurement Unit in the Projects Policy Department. - 123 - 16.17 To evoid the piecemeal approach of different Bank staff working with separate agencies, and where the government framework is appropriate, improvements in selection procedures may best be discussed at a national level. Even when this is not possible, staff should determine to what extent the agencies' selection procedures are covered by national legisla- tion. If an undesirable aspect of the selection procedures requires a waiver of some legislation, this should be sought as vigorously for local firms as for foreign. 16.18 In reviewing these selection procedures, staff should look for the following: -- the selection procedure is fair and not weighted in favor of one particular firm or nationality; -- quality is the sole or paramount criterion in the selection process. Straight price bidding is unacceptable; - the selection process is detailed in the Letter of Invitation; - the terms of reference should be clear and should be considered flexible to allow invited firms to put forward their own ideas; - the budget for the consulting assignment should be realistic and allow for contingencies and negotiating room; - proposals should be evaluated by committee. Committee members should sign a statement that they have no involvement with the invited consulting firm; -- an evaluation report should be prepared and be available to Bank staff; and -- contract documents should be equitable. 16.19 Low Rates. The remuneration which consultants receive should be reasonable. By reasonable, we mean that the consultant should be able to 1. cover his costs, including an amount to cover down-time and business promotion expenses and make a fair profit. In their general review of costs, staff should discover the equitable rates for local consultants, and should encourage government staff to use these for estimating costs and to expect such rates to be presented during contract negotiations. 16.20 Budgets for consulting assignments should be calculated to allow this reasonable remuneration. Such estimates should include adequate contingencies. Consultants should not be put in the position of working at a loss because of poor estimates. 16.21 Consultants should have a signed contract before they commence work. While "letters of intent" may be a necessary expedient in some cases, if these are not backed up by cash advances, the smaller consultant may find himself deep in debt while struggling to make a good impression on the client. 16.22 Some countries produce guidelines on the man-ionth rates to be paid to consulting firms of different nationalities. While guidelines on all subjects are welcome, we have found that rate guidelines tend not to take all factors into account and, more unfortunately, tend to be applied rigidly even though the rates are obviously low. This is particularly true for simple matrix systems (i.e., allowable rate against years of experience and nationality). If guidelines are to be used, individual agencies should be allowed considerable flexibility in application and care should be taken to see that this flexibility is actually used. 16.23 Where price has been used properly as a selection factor, the resulting rates should be subject only to minimal negotiation. Quoted rates that are proved reasonable by supporting documentation should be accepted. 16.24 Payment Delays. Staff should bring to government's attention how payment delays can cripple a consulting firm's development and either drive up costs or lower quality. Staff should encourage the use of automatic payment schedules (paras. 14.42-14.43). 16.25 Where payments are delayed, staff should encourage the government to review its payment procedures. The local consulting association might be invited to take part in this review. 16.26 Preference for In-House Technical Departments. Design depart- ments within project agencies often engage consultants to take peak loads and special projects. Despite the potential advantages of this arrangement (smaller permanert staff, lower costs, independent checking of results), there is sometimes a propensity to give all such work to an in-house department. Staff should encourage the government agency to assess the true costs of this policy; they may wish to make available to government staff the discussion paper on the development of local consultants cited above (para. 16.14). 16.27 Preference for Public Sector Firms. Some governments set up and give preference to public sector consulting firms. Since competition breeds innovation and flexibility is created by also encouraging the private profession, staff should encourage governments to adopt normal competitive selection procedures, with no unfair advantages for public firms. If the public sector firm is in a dominant position, then smaller assignments may be reserved for competition by private sector firms. In addition, the public sector firm should be encouraged to joint venture with private sector firms to give them experience and promote their development. Constraints within the Profession 16.28 Lack of Experience and Difficulty in Getting It. Inexperienced firms are often rejected by a government contracting agency for lack of 1 experience. Where the government is the consulting profession's principal or only client, a firm may never gain enough experience to be accepted unless the government is keen to develop the local profession. Assignments can be tailored to the size and present experience of local firms. The risks of so doing can be minimized by close supervision. Supervision can be provided by an experienced group within the client's organization or preferably by an experienced firm which is capable of advising the smaller consultants and checking their work. The appointment of an experienced general or managing consultant to oversee the work of the smaller firms can be very effective both in providing this supervision and providing for transfer of skills. A further proven means for local firms to gain experi- ence under almost ideal conditions is through a joint venture with a for- eign firm. This subject is addressed in paras. 16.42-16.49 specifically. 16.29 Bank staff should be aware of the above possibilities, and should also come up with their own innovative ideas. 16.30 Lack of Work Continuity and Cash Flow. Aside from a firm's own standard of management, lack of continuous work and a shortage of cash can be directly related to the level of national development activity, the technical and marketing ability of the consulting firm, and the govern- ment's attitude towards the consulting profession. If there is a major economic downturn, then the consulting profession, which depends on development activity, fares badly. Under these circumstances, little can be done to alleviate the profession's difficulties. However, government and the Bank should be aware of the investment made to build up the profession and perhaps consider putting more in-house work out to consul- tants. 16.31 Governments may help develop the local profession by publicly stating this objective, by supporting local consulting associations, and by - 12/ - earmarking work for the profession. Government agencies should determine early on which assignment will go to consultants, and should increase the flow of information on forthcoming projects to the profession. The measure of the success of these efforts is the continuity of work in the profes- sion. 16.32 At an early stage, Bank staff should discuss with government the possible role of local consultants in project preparation and execution, and should encourage government to make this information available to the local profession. Local consulting associations may subscribe to the Bank's "Monthly Operational Summary" for information on projects under preparation. 16.33 Inability to Attract or Retain Qualified Personnel. If a local consulting profession is recognized by its government, is provided with a steady stream of work, and is adequately remunerated, then, as in developed countries, consulting firms will attract high caliber staff. I the local profession is not so recognized and is seen as unstable, underpaid and risky, then the better-qualified personnel will seek work elsewhere- possibly abroad. In the short term, Bank staff can do little in this regard except to point out to government officials that, if government is serious about developing the profession, then it should support it in a business-like manner. In the longer term, tailoring projects to give local firms assignments with the prospect of work continuity will make the profession more attractive to well-qualified personnel. 16.34 Lack of Commercial Knowledge and Professionalism. Outside help is often required to improve a firm's management, marketing and profession- al techniques. Joint ventures witt. foreign firms are an ideal way of transferring these skills; in addition, there are training possibilities. - 128 - 16.35 First, a training scheme can be organized, preferably through the local association, which, after assessing the needs, can provide courses and "in-office" training. Such schemes can probably best be carried out by foreign management consultants, and this lends itself to UNDP and Bank financing. The Bank-executed consultants' development project in Indonesia is a good example; its TOR and reports are available from the Bank's regional technical assistance unit or the Central Procurement Unit. 16.36 Another approach is for individual firms to obtain their own assistance. Well established firms can finance this themselves. Others might obtain assistance through the various organizations of retired executive professionals in developed countries set up precisely for this purpose (some of these are listed in Annex 20). This approach is highly recommended, as not only can assistance be obtained from people who have been successful top-level consulting firm executives and are keen to pass on their business acumen, but links may be forged with the executive's previous firm. Such assistance normally carries a charge for travel and other costs, but this may be financed under a Bank loan if the consulting firm is working on a Bank-financed assignment. 16.37 Lack of Access to Training. Apart from the schemes mentioned above, it is unlikely that technical training schemes can be introduced specifically for consulting firms. Nevertheless, as in all organizations, a local consultant's staff must continue to receive training. Probably the best means of foreign training is in the home office of a foreign consul- ting firm. For further ideas on training, see Section 17. 16.38 Local consulting firms may find it useful to charge an addition- al 3-6 percent of their basic salary bill as overhead to cover the cost of training. - 129 - 16.39 Joint Ventures. Bank studies in 16 countries indicate that most developing consulting firms can best be advanced through joint ventures. Joint ventures are not without problems but, in countries where they have been allowed to flourish, the local profession has quickly become highly competent. 16.40 Before firms are invited to submit proposals for joint ventures, Bank staff should review the arrangements envisaged with government (and possibly informally with consultants-both local and foreign) to ensure, first, that they would permit the satisfactory execution of the assign- ment, and second, that they would maximize the transfer of skills and development to the local partner.26/ 16.41 Guidance on mandatory versus voluntary joint ventures is given in the Guidelines (para. 1.14). For guidance on the training aspects of joint ventures, see Section 17.19 below. 16.42 The following aspects of a potential joint venture should be considered: -- The local firm should be a bona fide consulting firm, and not an agent or recruiting agency. -- The LOI should request details of the proposed joint venture arrangement, possibly asking for a copy of the proposed joint venture agreement between the two firms. 26/ Publications available on this subject include: -- "Guidelines for Ad Hoc Collaboration Agreements between Consult- ing Engineers" (FIDIC, May, 1977); -- "Study of Joint Ventures between Foreign and Domestic Consulting Firms: Phase I--Colombia" (HPG Associates for World Bank, July, 1982); and -- "Joint Ventures in Consulting--A Study of Indonesia and the Philippines" (Peter Barnard and Associates for World Bank, March, 1983). - 130 - I -- No specific local content should be specified in the LOI. I -- No direct preference should be given to local content in the evaluation. 16.43 Both government staff in evaluating the proposals and Bank staff in reviewing the winning proposal should bear in mind the following problems which have arisen within joint ventures: -- Cross-cultural and language difficulties. What degree of knowledge of the country and of the language is necessary to make the joint venture work? -- Styles of working. Is the proposed method of working, e.g., daily hours, weekend work, field work, appropriate to the local firm and its culture? -- Division of work between the partners. Is the local firm getting a share and level of work commensurate with its skills and capacity? - Foreign firms prefer long-term associations. Local firms prefer associations on an assignment-by-assignment basis. 1s the skill transfer program appropriate to the type of association? Have the firms worked together before? - Foreign firms' reluctance to transfer their knowledge. Check the proposed skill transfer program. Will skill transfer activities be included in progress reports? -- Lack of training expertise on the foreign team. This is difficult to check, but the LOI should indicate that training skills will be looked for in proposal evaluation, and that CVs will be checked accordingly. -- Joint ventures work best where the people working together are at similar professional levels. This is another "Catch 22" - 131 - situation, but should be looked for in the skills transfer program. -- Allocation of responsibility. Depending on the degree of local participation in the joint venture, will the local project director have appropriate responsibility? 16.44 Consideration of the contract should take into account the following additional points. First, how is responsibility shared? While not a party to it, a client government (and the Bank) may wish to review the final joint venture agreement between two firms, to be satisfied as to the division of responsibility and the arrangements made between them if one partner fails to perform. The assignment should not be put in jeopardy if one firm fails to perform. Joint and several responsibility should mean just that, with both firms capable of individually completing the work. 16.45 It is a big step from being the junior partner in a joint opera- tion to being the lead firm. A lead firm should be capable of taking the lead, in terms of knowledge, professional ability, managerial ability, and, for an infrastructure project, in terms of its financial ability to be held liable for defective design or inadequate supervision. In regard to such leadership and degree of participation, the Bank should not approve joint ventures where the local firm is clearly only a token leader. 16.46 Bank staff should consider it prudent to have the Bank's Legal Department review the draft contract documents for questionable or major joint ventures. 16.47 Lack of Access to Specialized Foreign Expertise. Local consul- tants have complained of their lack of access to a "roster" of foreign expertise. Staff should point out that such expertise can often be obtain- ed on a temporary-basis from a foreign firm or obtained from one of the organizations listed in Annex 20. If employed on a Bank-financed project, this can be financed through the local firm's contract. - 132 - 16.48 Failure to Organize an Effective Professional Association. Many borrowing countries do not have effective consulting firm associations. Some are too small to expect to develop enough firms to make such an assoc- iation worth forming but, in others, local consulting firms are active but have no professional associations. Sometimes the dominance of public sec- tor firms has inhibited the formation of an independent association. In other countries, associations of individual professionals seem to have inhibited associations of firms. The Bank encourages the formation of con- sulting firm associations, and if the government so requests, may finance technical assistance for this purpose. The International Federation of Consulting Engineers (FIDIC) and the Latin American Federation of Consul- ting Engineers (FELAC) work with consulting engineering firms to form national associations.27/ The World Bank's Perceived Preference for Foreign Firms 16.49 Bank staff need to refute this perception by actions as well as words. If they pursue a policy dialogue with borrowers on the lines of this section, borrowers should perceive that the Bank supports the development of the local consulting profession. Nevertheless, both Bank staff and borrowers should be aware that foreign firms, including those from other developing countries, will be required for a long time to come, both to transfer skills and to execute the more complex projects. 27/ See FIDIC's publication, "Guidelines for the Constitution of Associations of Consulting Engineers in Developing Coutries." - 133 - Section 17 Training in Consultants' Contracts 17.01 This section covers the practical application of Procurement Technical Note No. 3, "Training within Consultancy Ctra-Cts". 17.02 The employment of an experienced foreign consulting firm offers opportunities for skill transfer over and above the main purpose of the firm's assignment. For example, in the design of an irrigation project, the client's staff may learn the latest techniques of hydrological investi- gation, to be used in preparing future similar projects. A local consul- ting firm in joint venture with a foreign firm can improve its management of assignments. Thus, the foreign consulting firm can pass on its skills to both client staff and to local consulting firms. These different modes of training are discussed separately below. A. Transferring Skills to Government Staff 17.03 Skills are transferred from foreign consultants to government staff either through a counterpart relationship, or through an arrangement whereby government staff are actually line members of the consultant's team. The choice should depend on the types of skills to be transferred. The counterpart relationship is often favored because it is easier to arrange, but it is rarely successful. This section discusses some of the advantages and disadvantages of each arrangement. Counterpart Relationship 17.04 The counterpart relationship is most suitable where the consul- tant's team members' activities involve day-to-day decision making: plan- ning, scheduling, managing, etc. In these activities, the government counterpart must be seen to be part-owner of the decisions. The counter- part relationship is 'aast suited for engineering design, i.e., "hard" rather than soft aitlvities, and activities which are routine in nature. - 134 - Experience over the years indicates that a strong sense of commitment based in part on self-interest is needed for government staff to retain interest and motivation in a counterpart relationship. Interest fades quickly when the sole activity is looking over the shoulders of others. 17.05 Motivation is the key to success of a counterpart relationship. Bank staff should consider proposed counterpart relationships in this light, and, in particular, consider the following: 17.06 Qualifications and Experience. Are the consultant's team members and counterpart of similar professional level (i.e., type of profession, not necessarily experience)? This is essential for free and friendly com- munication. 17.07 Commitment. Commitment by both parties is essential for the transfer of skills to take place. Commitment can be fostered by penalties and rewards based on an evaluation system. This system may be based on monthly reports, papers to be prepared by the government counterpart and/or some sort of non-threatening test program. The consultant's commitment can be promoted by ensuring that sufficient additional time and money is included in the contract to allow transfer of skills to take place. 17.08 The government counterpart should see some prospect of rewards for his efforts. Such rewards could be in the form of a salary increment, promotion, overseas study tours or other tangible benefit. 17.09 Time Available. Agreement should be reached at the outset as to whether the government counterpart will be available part time, normal full time (government working hours), or asaignment full time (consultant's regular working hours plus additional time as the job requires). Working hours can be a source of friction, and part-time availability (which is anyway of limited use) should be clearly defined. 17.10 Work Program. The role of the counterpart and the skills transfer program should be covered in the terms of reference (TOR) as - 135 - finally agreed. These TOR should be available to the counterpart staff. 17.11 Assignment Pressure. Government counterpart staff selected should be those who clearly do not mind working under pressure, meeting deadlines and responding to crises. While all consulting assignments do not display all of these characteristics, the lack of tenure, need to make a profit, and independence characteristic of the consulting industry add up to an atmosphere different from that typical of the civil service. 17.12 Assignment Suitability for Counterpart Arrangements. Some assignments are sprinkled with counterpart arrangements like salt on a meal. Though the goal is institutional development, too little thought is given to the specific tasks to be achieved. As a result, most counterpart arrangements are failures. This pattern can be changed by considering the points listed above and by not being afraid to conclude that certain cases are unsuitable for counterpart arrangements. Government Staff as Line Members 17.13 Government staff can be incorporated into consulting teams as line members of the team, with definite functions and duties. This is a preferred arrangement for acquiring skills and gaining experience, but, as the consultant is, in effect, taking responsibility for their output, this must be carefully planned. Planners should consider, for example, a case where, during construction, the government's survey party's levels were found to be inconsistent, and a bridge had to be redesigned. It is essential that the direction of the government staff come under the responsibility of the consultant. The latter should have the right to ask for replacements for government staff if he deems them unsuitable. 17.14 The contract should clearly defiae the involvement of the govern- ment staff, their duties and output. The contract should also state whether, as is desirable, the consultant is responsible for the quality of their output. To allow for transfer of skills, the contract should allow for the consultant to field appropriate supervisory staff. For example, a chief surveyor should be assigned to train and manage survey parties. 17.15 Skills Transfer. Skills transfer may take place through formal classroom training, on-the-job-training, and/or training in the consul- tant's home office. A mix of all three is ideal, with emphasis given to training on the job. This should not be a "watching" assignment, but rather an assignment with specific responsibility. The contract may also provide for the procurement of a library and training materials. Skills Transfer to Local Consulting Firms 17.16 The transfer of skills from firm to firm requires a willingness to teach, a willingness to le&rn, and time. Bank bcaff should work closely with the government to facilitate the transfer of skills through joint ventures between local and foreign firms. While all joint ventures con- tracts should contain some elements of skill transfer specifically to encourage local firms, Bank staff might wish to identify appropriate consulting assignments which can be divided into tasks suitable for the less experienced firms. The latter could choose their own foreign partners and work out their degree of participation; the assignment's terms of reference would include a detailed skill3 transfer program. In addition to the normal criteria, proposals would also be judged on the innovativeness of the skills transfer programs proposed by the prospective joint venture partner, and the means to evaluate the program's effectiveness. An advi- sory consultant should be employed by the government to monitor either the effectiveness of the consulting assignment as a whole (e.g., monitor the design of an irrigation scheme), or solely the skills transfer program. 17.17 The following,items should be discussed by the borrower and Bank staff at an early stage: -- The local firm should be a bona fide firm and not an agent or recruiting agency. - 137 - -- The TOR and/or LOI should give guidance on the skills to be transferred within the joint venture, request that training programs be described in the joint proposal, and give details of the evaluation marks to be given to the skills transfer section of the proposal. -- The LOI should also state that additional funding will be allowed in the contract for an acceptable skills transfer program. This additional funding should be adequate and shown separately in the contract. Five-to-ten percent of the assignment costs would be reasonable. -- The skills transfer program should be appropriate to the assignment, well thought-out, and capable of subsequent evaluation. -- The foreign firm should include staff who, in addition to their main professional skills, have previous experience in transfer- ring skills. -- The teachers and learners should be at similar professional levels (e.g., during a typical two-year consulting assignment, a bridge design engineer may be able to transfer his skills to a civil engineer, but not to a surveyor, who has less of the education needed for designing bridges. -- A transfer of skills program will be enhanced if the foreign personnel have a demonstrated understanding of the local culture and some knowledge of the language. -- Local staff should have positions of responsibility and, if sufficiently experienced, in managing the assignment. -- The expectations should be realistic and tailored to the length of the assignment. - 138 - -- Skills transfer is more likely to be successful in long-term, rather than short-term, joint operations. -- It is easier to carry out, achieve and measure an engineering- type (or "hard") skills transfer program than, say, one of an institution-building (or "soft") nature. - The local firm should have a long-term plan regarding its profes- sional growth, and the skills transfer program should mesh with this plan. The firm should offer incentives to its staff who are participating in the transfer program. -- Consideration should be given to lengthening the proposed assign- ment so that the skills transfer can take place. -- Given sufficient time, a skills transfer program may include a mix of on-the-job training (with responsibility), formal training (lectures, exercises, etc.) and experience in the foreign firm's home office (preferably working on the same principal assign- ment). -- The program's progress should be evaluated by the client by means of reports, papers, tests, and/or interviews throughout the program (not merely at the assignment's end). - The success of a skills transfer program will depend on the foreign firm's willingness to train, the local firm's determina- tion to benefit professionally from the assignment, and the client's willingness both to allow time and money for this to take place and to assist in "oiling the wheels" so that both the assignment and the skills transfer program run smoothly. - 139 - Section 18 Supervising Consultants' Contracts 18.01 The client should always maintain some degree of supervision over the consulting assignment. Section 20 covers supervision of UNDP-financed assignments for which the Bank is executing agency. In the case of finan- cing from loans, supervision is the responsibility of the borrower's agency for whom the consultant is performing the assignment. 18.02 To supervise an assignment, the client must monitor the progress of the work and the man months and money expended, and determine where, within the contract, changes in the scope of work might be appropriate (with possible subsequent changes in the number of man months and in eventual payments to the consultant). The client should be careful not to take over from the consultant the responsibility for his work or for his output, but should always be aware of the status and staffing of the assignment and the general direction it is taking. 18.03 The consultant should submit regular progress reports: monthly, for operational assistance assignments that are advisory in nature, and for construction supervision; two-monthly, for feasibiity studies; and, for detailed engineering, at intervals appropriate for the type of work. Progress reports should be brief and readable. They should include as annexes the necessary administrative and contract information. Photographs are a quick and easy way of conveying the physical status of a project, and their use should be encouraged in progress reports. 18.04 The client should designate one of its staff as a counterpart project manager to be the focal point in regard to the assignment, and to comment to the consulting firm on the progress reports. The counterpart project manager should always be up to date concerning the assignment's - 140 - progress, and should act if the assignment appears to be running into difficulty. 18.05 Steering committees can supervise consulting assignments, but they should always act through a counterpart project manager. They can be particularly useful where the consulting firm has to deal with several departments or ministries, since the need to report on a regular basis to such a committee can instill organization and discioline in both the client's supervision and the consultant's approach to the assignment. The committee should not engage in the day-to-day running of the consulting assignment, but should convene for specific purposes-for example, to discuss the Phase I Report on a feasibility study, or some major recommend- ation concerning equipment maintenance. 18.06 All major reports prepared by the consultant should be submitted to the client in draft form. As part of supervising the consultant's work, I the client should arrange for his comments on reports to be given to the consultant in a timely manner. (Sometimes, contracts contain a provision that, if the consultant does not receive comments from the client within, within, say, two months, then he will finalize the report without them, and will be relieved of any obligation to make further changes.) 18.07 The object of all the measures mentioned above is to enable the client to keep his finger on the pulse of the consulting assignment, to be aware that it is proceeding to his satisfaction. Channels of communication must be kept open between the consultant and the client. It normally takes at least a month for a consulting firm to get into gear and for the team members themselves to feel confident about their assignment. The client's counterpart projeat manager can be a key figure in the success or failure of the assignment. If, within bounds, he is helpful and sympathetic, the - 141 - rewards in team morale and output can be great. If he reads only the fine print of the contract and ignores the more human aspects of the team, he may make it more difficult for them to perform as expected. 18.08 The Bank staff's role in the supervision phase is, as with other project elements, with and through the borrower. Staff do not have nor should they be seen to have any direct supervisory role vis-a-vis the con- sultant, and and any contact with the consultant should be with the borrower's permission, and preferably with a borrower's representative present. However, on mission, staff will be asked to assist the borrower in reviewing the consultant's work, and often they will be called upon to bridge possible communications gaps between the client and the consultant. Such matters may range from ascertaining the cause of late payments to major technical differences. Bank staff should assist where possible and, in general, encourage a sound client-consultant relationship. - 142 - Section 19 Evaluation 19.01 Evaluation of a consulting firm's performance requires a consid- erable degree of impartiality. This is not easy to achieve. The people involved are diverse in their professional disciplines, backgrounds and experience, their nationalities and cultures, their attitudes towards the (private) consulting business, and their personalities. The risk of arbitrary and partial judgments may be minimized by the use of mutually agreed criteria for measuring performance, by procedures that encourage balanced judgments, and by third party review of the evaluation by the project officers and/or the Bank Division Chief concerned. Nevertheless, it still exists. Evaluations need to be made and handled with great care and confidentiality, since an unfavorable evaluation, deserved or not, may have serious consequences for the firm concerned. 19.02 These considerations strongly suggest that consultants' perform- ance should be evaluated in detail only on completion of their assignment. Comments in the supervision report should aim only to provide a current record of staff observations on the consultants' work, comments by borrow- ers, problems that may have arisen and, most importantly, the actions taken with regard to them. 19.03 The performance of the firm on any assignment very much depends on the staff it has assigned to the work. Except in extreme cases, a firm's performance on a single job is not a sufficient basis for a final judgment on its likely performance in the future. 19.04 The procedures for evaluating a consulting firm's performance are detailed in Op./1/83, and are repeated below. -- before the completion of a consulting firm's assignment, the project officer should, first, report on its performance in - 143 - supervision reports and, in particular, should rate its perform- ance on Form 590 (see OMS 3.50). Second, if #he firm's perform- ance is unsatisfactory, the project officer may inform the Consultant Services Adviser in the Central Procurement Unit of OPS/PPD, in writing, of this fact; -- on completion of a consulting firm's assignment, if the project officer considers its performance unsatisfactory, he/she should so inform the Consultant Services Adviser, in writing, indicating the consulting firm, the project, the nature of the assignment, and the unsatisfactory features of performance; -- satisfactory consultant performance is not normally to be reported to the Consultant Services Adviser, but project officers may, at their discretion, inform him of superior performance. 19.05 Consulting firms must be made aware of any evaluation of unsatis- factory performance and given the opportunity to comment on views express- ed. Where such an evaluation takes place before completion of an assign- ment, it should be discussed and agreed with the borrower, who should convey the criticism to the firm and request an improvement. Bank staff should discuss unsatisfactory performance directly with the consulting firm only with the agreement of the borrower. Where such an evaluation is made on the completion of an assignment, either before or during the preparation of a project completion report (PCR), the Region should advise the consul- ting firm directly in writing. Commenting on Consultants in PCRs 19.06 The project completion report (PCR) is the main vehicle for reporting and commenting on a consultant's performance. OMS 3.58 contains a provision in this regard, but Bank staff should also be aware of the - 144 - legal implications of such reporting. The concerns over these legal implications are covered in OP/6/79,28/ and are repeated below. -- criticism of consultants, contractors and suppliers should be limited to what is necessary to explain shortcomings in project execution; -- criticism should be restricted to facts (e.g., the contract was completed three years later than agreed upon) and should not include judgments (e.g., the contract was completed three years later than agreed upon because of the incompetence of the contractor); -- unless it is unavoidable, names of firms or individuals should not be mentioned; -- no criticism should be made which is not backed up by hard evidence available in our files; and -- in all cases, where the report is critical, the party criticized should be afforded a reasonable opportunity to comment on the criticism in writing, and the comment, if any, should be included in the report. 19.07 In accordance with OP/6/79, the firm's comments on the Bank's views should b3 taken into account by the Region in the PCR. With respect to PCRs, staff should consult the Legal Department when in doubt about how to report a significant aspect of a project experience relating to the per- formance of consultants. 28/ Manual Circular, "Commenting on Contractors and Consultants in Project Completion Reports (PCRs)," July 27, 1979. - 145 - Section 20 The Role of Bank Staff in UNDP-Financed and Bank-Executed Projects 20.01 This section describes the role that Bank staff are required to play when a consulting firm is to be engaged under a UNDP-financed proj- ect for which the Bank is executing agency. The section amplifies the policy laid down in OPN 2.50, "Services of Consulting Firms for Bank Group Projects and UNDP Studies." The section amplifies but does not replace the Handbook sections dealing with detailed aspects of consultants' selection-- - ticularly Section 12, Proposal Evaluation, and Section 14, Contract Negotiations. 20.02 When the Bank agrees to execute a UNDP-financed project, a divi- sion and, within the division, a project officer, should be designated to manage the project. The division will be responsible for many activities concerning the execution of the project, but will be assisted by the regional technical assistance unit*29/ The time required of the project officer varies immensely, but the key reality is recognizing the amount of time likely to be involved and, hence, the importance of the division of responsibility between projects, the technical assistance units, programs, etc., as reflected in the matrix of staff responsibilities as given in Annex 21. Programs (projects) divisions should keep their corresponding projects (programs) divisions informed and involved in the preparation and implementation activities. OPS units executing projects should liaise with the region concerned. 29/ The role of regional technical assistance units is evolving and, in some regions, institutional options are being studied. The part played by TA Units, as described in this section, may vary from region to region. - 146 - Project Document (PD) and Budget 20.03 The PD is prepared in accordance with UNDP guidelines as summar- ized in OMS 4.30 and following the UNDP "Policies and Procedures Manual." While instructions for preparing the PD are specific, care should be taken not to confuse the PD with the assignment TOR. The PD is the agreement between the government, UNDP and the Bank as executing agency as to their relative roles in the execution of Lhe project and with the objectives and time frame specified. The terms of reference (TOR) are a part of the con- tract between the Bank and the consultants, and represent a legally-binding description of the services to be performed by the consultants. The PD should be drafted to allow the Bank to be flexible in discharging its responsibility. 20.04 The budget for the assignment is included as a line item in the project document, along with other line items covering such inputs as indi- vidual experts, fellowships, equipment, etc. As discussed in Section 8, an estimate of this budget may have to be prepared well in advance of the as- signment, and often befo)re the TOR have been prepared. A realistic esti- mate should be made with a substantial contingency added to allow both for price escalation and possible increases in the scope of work. The division concerned, in consultantion with the TA Unit, should make this estimate. Either may then be responsible for consultation with: -- the Training Unit in the Education Department, if there is a fellowship or training component; -- the advisor on UN/UNDP operations in PPD on fellowship costs; -- the Central Procurement Unit in PPD on major equipment procure- ment and on consultants costs. Terms of Reference 20.05 The terms of reference will be prepared by the division concern- ed, and cleared with the government. Consultation with the UNDP Resident - 147 - Representative is usually desirable. Sample TORs are held in the Central Procurement Unit. Selection Committee 20.06 The consulting firms to be invited to submit proposals are se- lected by a selection committee, made up as required in the region con- cerned, and chaired by the regional projects director The selection committee should normally comprise: -- the regional projects director (or designate), Chairman; -- projects division staff; -- representative(s) from the technical assistance unit; -- representative(s) from the Central Procurement Unit; and, where appropriate, representative(s) from the programs depart- ment and UN/UNDP Adviser on Operations. The responsible division acts as secretariat to the meeting, preparing the initial memorandum calling the meeting (example--Annex 22), and the memorandum recording the results (example--Annex 23). 20.07 A selection committee must make decisions on appropriate proce- dures and suitability of firms, irrespective of the value of the assign- ment, or the number of consulting firms to be invited. For example, approaching a single firm rather than inviting proposals from a short list of firms requires the committee's approval. Short Lists of Consulting Firms30/ 20.08 Section 10 covers the general principles of preparing short lists. For UNDP-financed assignments, the responsible division, assisted 30/ A consulting firm may, within this context, include a UN specialized agency. Note: In this context, the agency would be acting as a consulting firm under contract to the Bank to perform an assignment, and not acting as an associated agency. In the latter case, the agency is associated with the Bank (or vice versa) because of a special interest in the outcome of the project. - 148 - by the Central Procurement Unit and its DACON Information Center, first prepares a list of about 12-14 suitable firms. The list must represent capable consultants from a wide variety of countries, including firms from developing countries and the country of the assignment. Firms from the latter should not be included as token candidates; they should be as capable of undertaking the assignment as other firms on the list. The chairman should establish that all firms expressing written interest in the assignment have been considered for (but not necessarily included in) the long list.31/ (If not eventually included in the short list, each of these firms should receive notification indicating that it was considered, but has not been included in the shortlist.) 20.09 From the long list and any other firms which committee members may suggest, the committee selects a maximum of six firms. The list should be reduced to three or four for assignments of less than about 25 man I months. 20.10 The committee should agree on the criteria to be used to select the winning consultant. Nearly all the assignments for which the Bank agrees to be executing agency will call for a technical evaluation only without consideration of priee.32/ Further, estimates for UNDP assign- ments should be prepared such that consultants from all UN countries can be considered and thus the nationality composition of the long or short lists should not be influenced by budget constraints (e.g., excluding firms from a particular country because they are alleged to be too expensive). 20.11 While no hard and fast rule can be laid down, it may not be practical to seek proposals for assignments of less than 10-12 man months, 31/ Firms can learn about upcoming assignments by perusing UNDP IPFs, and by visits to the countries concerned. 32/ See Section 9, paras. 9.10-9.23 for guidance. - 1- and a direct approach to one consulting firm is accceptable. However, this approach will require the selection committee's approval (para. 20.07). Domestic Firms and Joint Ventures 20.12 Where a short list of firms is to be appointed, except for small assignments of clearly local character (e.g., village economic surveys), neither the UNDP nor the Bank can consider lists restricted to one nationality. Thus, for example, lists exclusively of local firms should not be considered by the selection committee. 20.13 In the interests of transferring skills and developing local firms, voluntary joint ventures between foreign and domestic firms are encouraged. An indication encouraging such joint ventures may be included in the letter of invitation. However, any proposed arrangements that make joint ventures mandatory should be considered unacceptable by the selection committee. Concerning the extent of local participation, as described in Section 16 above, during the evaluation of proposals no specific preference should be given to local participation, as a joint venture with a local firm will normally gain more points under the "local experience" criterion (both for the firm and its individuals) than a proposal for work by a foreign firm alone. Government's and UNDP's "No Objections" 20.14 As the Bank has been given the responsibility for undertaking the implementation of the project, the choice of consultants is its own. Nevertheless, it would be counterproductive to employ a firm which, say, for political reasons, was unacceptable to the government. Therefore, once the short list has been agreed by the selection committee, it should be conveyed by telex from the responsible division to the government's coun- terpart agency (identified in the PD) and the UNDP resident representative for their "no objections." Rarely are objections raisee. If they are, they should be considered by a further meeting of the selection committee. Letter of Invitation 20.15 After the Government and UNDP have indicated their "no objec- tions" to the short list, the letters of invitation, with all attachments, are sent by the responsible division to the short listed firms. Proposal Evaluation and Selection of Winning Firm 20.16 Proposals are evaluated by an evaluation committee, which reports to the selection committee. Most members of the evaluation committee are also members of the selection committee. 20.17 The evaluation committee should normally be chaired by the projects officer principally concerned with the project. At a minimum, it should comprise three persons who together professionally cover all aspects of the project; however, a committee of four to five persons is to be preferred. 20.18 A government may wish one of its representatives to take part in the evaluation process. This is acceptable, and it is preferable that the evaluation is conducted in Bank headquarters. Before the evaluation, the evaluation committee chairman should ensure that the government representa- tive is fully acquainted with the evaluation procedures. While possibly taking part in the evaluation, the government representative does not sit on the selection committee. 20.19 The evaluation is conducted in accordance witi Section 12 of this Handbook and, on its completion, a memorandum is prepared by the evaluation committee for the selection committee (example--Annex 24). The Selection Committee 20.20 The Selection Committee meets for the last time to act on the, recommendation of the evaluation committee. The selection committee should agree on conditions which will be required for negotiations (team changes, - 151 - modifications in methodology, etc.) and which should be conveyed in the invitation to negotiate. The meeting's proceedings are recorded in a memo to files (example--Annex 25). Invitation to Negotiate 20.21 Based on the selection committee's decision, the responsible division invites the selected firm by letter or telex (even if preceded by a telephone call) to negotiate a contract. The invitation should reaffirm the financial information which will be required c.' the consultant, and remind the consultant of the manner in which negotiations will be conducted as detailed in the "Supplementary Information for Consultants" (Annex 7-1). While negotiations may actually take less time, experience has shown that five working days normally should be allowed for the negotiating period which usually should commence on a Monday. 20.22 The responsible division, which should have alerted the govern- ment to the likely timing of negotiations (see Section 15, Planning and Mission Checklist), should also invite a government representative to be present during contract negotiations. The cost of the representative's visit can be a charge against the project. The role of the government representative is to: - become fully involved and familiar with the TOR and consultant's proposed work plan; - become familiar with the manner in which the Bank will be handling the assignment, including supervision and payment arrangements; -- agree on government procedures for the initial review and approval of the consultant's invoices; and -- offer and agree in detail on government's contribution in kind to the project (e.g., vehicles, office space). 1-. -- agree on the role the government agency will play in relation to the consultant's assignment; The Government's Role During Execution 20.23 The consulting assignment and the project of which it forms a part, is being conducted for the benefit of the government. The government is also a signatory to the project document. Hence, the government's role in the conduct of the assignment should be clear, and should be agreed between the government and the Bank, and conveyed to the consultant during contract negotiations. 20.24 The government's role may be considered as overseeing the assign- ment. No hard and fast rules can be laid down for this oversight function, but it can have both a technical and accounting involvement. On the tech- nical side, the government will wish to review all reports prepared by the consultants, and may also wish to be more closely involved through regular meetings and with some decision-making role. For convenience and for institution building, the Bank may delegate some of its supervisory authority to the government for some assignments. 20.25 On the accounting side, it is impractical to expect the govern- ment to review all the consultant's invoices prior to submission to the Bank; nevertheless, the government may wish to review the consultant's timesheets to satisfy itself that, in general terms, the consultant's personnel have been employed on the assignment and that the time spent is in accordance with the contract and consistent with the assignment's progress. Major differences of opinion between the consultant and the government should not hold up the submission of the timesheets, but should be brought to the attention of the Bank. 20.26 The government's role should be agreed in writing with the Bank, and a copy of the agreement should be given to the consultant. 20.27 Every effort should be made to encourage a government representa- tive to be present at negotiations. The chairman should ensure that any privileges and immunities to be extended to the consultants (Article IV of the consultant's contract) are clearly understood and agreed between the government and the consultants. Unsuccessful Firms 20.28 Firms which submitted proposals that were not selected should be notified by letter that another firm has been invited for negotiations. They should be given some indication of the weaknesses and strengths of their proposals (example--Annex 26). It is best not to inform the second- ranked firm that it has been unsuccessful until negotiations with the first-ranked firm are satisfactorily completed. 20.29 The conduct of negotiations is covered in Section 14. For UNDP- financed projects, the following also applies. Bank Negotiating Team 20.30 The responsible division should appoint a chief negotiator. Often this is the project officer concerned, but the regional technical assistance unit may assume the responsibility. For financial negotiations, this is desirable, enabling the TA Unit to build up its negotiating experi- ence and data on consultants' rates. A convenient arrangement is for the project officer to negotiate professional aspects of the assignment, and leave the financial negotiations to a technical assistance staff member. Thus, a Bank negotiating team might comprise: - technical assistance unit negotiator; -- projects officer(s); -- lawyer; -- Loan Department representative; - programs officer. - 154 - 20.31 The responsible divisier, chief should formally open the negotia- tions, and all members of the Bank team should be present. The lawyer should make sure that the consultants have a copy of the draft contract (based on the Bank's standard form) for discussion later in the week. The chief negotiator should agree on an outline agenda for the negotiations, and such an agenda with participants is similar to that given for Bank- financed assignments and shown in Annex 12. Two Bank staff should always be present during negotiations. 20.32 Work plans and staffing should first be discussed along the general lines described in Section 14. 20.33 Financial negotiations should follow (see Section 14), and all financial figures put forward by the consultants should be supported by documentation as below. It should be explained to the consultants that, in accordance with an agreed schedule, they will be paid shortly after the end of each month as long as the work proceeds on schedule, regardless of delays that might occur in processing invoices. This advantageous arrange- ment should be a consideration in the consultant's charges for overhead and/or profit. 20.34 Before proceeding with the financial negotiations, the consultants should be advised that, as stipulated in the Bank's standard contract, the Bank reserves the right to audit their accounts, and that spot audits take place each year, as discussed below. All statements made by the consultants on financial matters during negotiations and all documentation may be used as material for an audit. Salaries 20.35 Salaries of the consultant's permanent staff should be confirmed and substantiated by documentation (e.g., payroll sheets) and/or by a signed statement that the salaries put forward are those being paid at the - 155 - time of negotiations, and have not been set specifically for the assign- ment. The salaries should not include bonuses unless these are a fixed item of compensation (e.g., the thirteenth month in France). Salaries should not be adjusted for non-productive hours per year. The cost of non- productive hours should be included in staff benefits or overhead. Staff Benefits 20.36 These should be detailed and signed with the basis for their calculation shown. In particular, the bases for calculating annual leave sick leave and any other non-productive personal time should be establish- ed. Benefits for temporary and permanent staff should be differentiated. The build-up of the social charges incurred in relation to the firm's total billable salaries for the immediately preceding two or three years should be given. Overhead Costs 20.37 Figures on these should be detailed and preferably supported by audited figures from two to three preceding years such that, during a Bank audit, all listed items could be identified. The basis for the cost of non-revenue-earning time should be given. Overseas Premium 20.38 The firm should confirm in writing that the overseas premium included in the man-month rate properly reflects the premium that will be paid to its personnel in accordance with its standard practice. Any material deviations from such standard practice should be explained in writing. Subcontracted Personnel 20.39 The Bank allows consulting firms to supplement their regular staff to make up their field teams, but the allowable administrative costs - 156 - incurred for this by the firm, and the conditions governing the subcon- tracted personnel's rates and reimbursable costs, should be clearly estab- lished during negotiations. Also, any changes of subcontracted personnel and their respective rates should be approved by the Bank before their services are used on the project. Breakdown Sheets 20.40 The resulting man-month rate for each named individual of the team, with the above information and agreed percentages, should be detailed on the standard breakdown sheet (see Annex 7-4) which must be signed by a firm's representative. Consultants should be informed that this informa- tion is not part of the contract, but would be used if there were a spot audit. Subsistence Allowance 20.41 Written confirmation of the subsistence allowance to be paid to the individual and of che manner in which it will be paid must be provided by the firm's representative. Documentation 20.42 The chief negotiator is responsible for preparing a written record of negotiations to include the main points agreed and full details of the financial negotiations. These notes, together with the above docu- mentation, must be retained by the responsible division and must be avail- able for audit purposes for up to five years following the completion of an assignment. Copies of the documentation may be deposited with Internal Audit and the Central Procurement Unit. Rome Office Time 20.43 As time spent- on work at the home office cannot be immediately verified by the government or Bank staff, Bank staff should emphasize to the consulting firm the need to comply with the contract provisions in respect of home office work. These require prior Bank approval for substi- - 157 - tution of project personnel named in the contract and adjustments of time allocated for such personnel. Agreement on Rates 20.44 When tentative agreement has been reached on the contract payment terms and, in particular, or the man-month rates, the division should clear the terms and adequacy of supporting documentation with the Consultant Services Adviser of the Central Procurement Unit. The Contract 20.45 The contract to be used for UNDP-financed, Bank-executed assignments is a standard document available from the Legal Department. Other forms of contracts are not acceptable. The lawyer assigned to the project is responsible for acquainting the firm with the document and negotiating any modifications. These should only be minor. Completing Negotiations 20.46 Completion of negotiations normally involves a great deal of detail work. All appendices to the contract must be completed by the Bank, including: - the terms of reference; -- the staffing bar chart; -- financial tables for foreign currency payments; and -- financial tables for local currency payments. 20.47 In addition, the negotiators should go through the entire text of the main contract paragraph-by-paragraph. All blanks in the contract form should be filled in and the practical implications of all provisions in the standardized text should be explained to the consultants. The meaning of the "starting date," from which the due dates of reports and of payments to the consultants are calculated, should be emphasized. The Legal Department should be asked to review all modifications of the draft contract and terms of reference before completion of negotiations. - 158 - 20.48 The Loan Department usually explains detailed procedures for payment, submission of invoices and financial administration generally. The Technical Assistance Unit advises consultants on the role of UNDP resident representatives in the country and on activities of other UN agenties in which the consultants may be interested. 20.49 It is good practice to prepare two copies of the complete con- tract in final draft before the consultants leave Washington. These can be copies of a marked-up standardized contract form, with a set of the appendices in draft form, subject only to minor changes that may result from final review by the Controller's and Legal Departments. (Negotiators should preferably initial the two draft copies of the contract, even though it should be explained that this has no legal significance.) 20.50 Before the consultants depart, there should be a clear under- standing on responsibilities for the next steps. Normally, the Bank produces the contract in final form, signed by the regional projects dir- ector (allow a week or two), and sends it to the consultants for signature (unless the consultants find it convenient to sign in Washington). The consultants should be made aware of the conditions of effectiveness of their contract, and the time it may take to meet them, which normally determines the date on which the assignment can start. To become effec- tive, the consultant's contract must be signed by both parties; the project document must also be effective. It should be pointed out that the Bank cannot reimburse the consultants for any cost of delays in the effectiveness of their contract. 20.51 The lawyer should produce conformed copies of the contract (i.e., copies showing the date of the contract and the names of the representa- tives signing for both parties), and the responsible division should send copies to: - 159 - -- the consulting firm; -- the government counterpart agency; -- the UNDP resident representative; -- the Central Procurement Unit; and -- Loan Department, UNDP/Trust Funds Section. The original signed copy should remain with the region. Contract Administration and Supervision of Consultants 20.52 The division concerned has overall responsibility for adminis- tering the contracts of consulting firms retained by the Bank, and for supervising and evaluating their work. This responsibility includes: -- handling all correspondence between the consultants and the Bank; - arranging with the government agency concerned for day-to-day liaison with the consultants in the field and, to the extent agreed, for government review, approval and forwarding to the Bank of the consultants' invoices; - periodic visits to the field and/or the consultants' home office, to supervise progress of their work; - when appropriate, and with the UNDP representative, arranging for and participating in a "mid-term review" (or tripartite review) with the consultants, government agency concerned and UNDP; -- when appropriate, arranging to suspend payments or amend the consultants' contract; -- reviewing and commenting on the consultants' reports;33/ - ensuring the preparation of semi-annual reports required by UNDP; and 33/ These reports, inter alia, list the people on the assignment and the equipment provided by the consultants (and which is the property of UNDP). - 160 - -- final evaluation of the consultants' performance and preparing a confidential evaluation report to the UNDP. 20.53 The Loan Department's UNDP/Trust Funds Section is responsible for processing all payments to the consultants and for related financial arrangements with UNDP. Spot Audits 20.54 The Internal Auditing Department (IAD) of the Bank is responsi- ble for conducting audits on a sample basis of ongoing or completed con- tracts. The contracts to be audited are agreed by the region, LAD, the UN/ UNDP Coordinator (Operations), and the Central Procurement Unit. 20.55 The objectives of an audit are to: - review and assess the consultant's compliance with the terms of the contract and, in particular, with the provisions regarding the charges and reimbursable expenses for the services; -- det-rmine the basis and reasonableness of the representations on salaries, staff benefits, overheads, allowan.es and other costs made by the consultant to the Bank during contract negotiations; - assess the adequacy of the accounting records and documentation maintained by the consultant under the provisions of the contract, to substantiate the charges and reimbursable expenses for the services; and - identify any areas where improvements in the systems, procedures and related internal controls or other actions are required, and to present recommendations to Bank management. The above objectives should be conveyed to the firm with which the Bank is negotiating a contract.. 20.56 The Legal Department is responsible for assisting, as necessary, in matters of contract administration and for preparing any amendments to the consultant's contract. - 161 - Section 21 Institutional and Operational Assistance 21.01 There are certain types of consulting assignments which relate to developing the institutions in the Bank's borrower countries. These assignments include organization studies, accounting studies, design of management systems, management advisory services and, generally, services which look at the functions of people and their organizations, and advise and make recommendations on improvements. While many of the principles laid down in this Handbook apply to the selection and employment of consultants for specific institution building assignments, due to the sensitive nature of such services and the necessary close interaction between consultants' and clients' personnel, a great degree of care should be exercised in selecting the consultant and, in terms of procedures, a flexible approach adopted for both selection and the carrying out of the assignment. 21.02 As an example of flexibility, the TOR for institution building assignments can rarely be defined in detail and must usually allow a con- siderable amount of flexibility to both the client and the consultant in developing their working relationship and in developing and implementing recommendations. For these assignments, it is even more important that phasing of the scope of work be adopted, with perhaps only the initial three months work program clearly identified. 21.03 As these assignments depend almost entirely on the quality of the people the consulting firm is to assign and the "chemistry" between the consultant and client, a selection approach should be adopted that will endeavor to assist in assessing the cultural sensitivity of the consulting firm's proposed personnel. CVs should be scrutinized for past experience in similar assignments, and letters of invitation (LOI) might ask for references from previous developing country clients. Consultants should - 162 - understand that these references will be followed up. Interviews should be part of the selection process, although, for assignments Involving several personnel, it may not be convenient to interview all personnel of all the consultants invited to submit proposals. Nevertheless, at a minimum, in- terviews with team leaders should take place, and arrangements to finance these interviews should be included in the loan or credit. 21.04 The role of local staff is quite different from that of an engineering assignment. For the institution building assignments, local staff will be closely involved with the consultant's staff in improving their own institutions. During the consultants' proposal preparation, consultants should be able to meet and spend some time with the client's staff with whom they will be working. This should be mentioned in the LOI. 21.05 The "twinning" of institutions in developing countries with similar but more mature organizations in other parts of the world has proved to be a very effective way to transfer know-how, train staff, and build up management capabilities (see Annex 27).34/ Professional rela- tionships between operating entities offer advantages of complementarity and flexibility over time. The entity supplying technical assistance uses its own resources to offer services to its twin, as needed, in the func- tional areas in which they both work. Where the use of such an operating entity is being considered, it may be more appropriate to approach the organization directly rather than using a competitive procedure. 21.06 Bank staff are more closely invovled in institution building than other consulting assignments. In particular, the Bank team will be expect- ed to take part in on-going institution building discussions while on mis- sion in the country. This is particularly true for policy-related consul- 34/ For more information on this subject, see World Bank Technical Paper Noe 3eliThe Tvii"of Institutions--Its Use as a Technical Assis- fgaice Delivery-SwysTem,"b,y78. Lauren Cooper. - 163 - ting assignments where Bank staff will be expected to take part in policy dialogues with both the consultants and the client. 21.07 This brief section is not intended to be a coverage of complex issues involved in institution building assignments, but rather to alert staff to the fact that such assignments are more sensitive for the assign- ments to be successful, and require a high degree of good client-consultant relationships for them to be in anyway affe-ted. Advice on institution and operational assistance should be sought from Regional Technical Assistance Units, and from the Technical Assistance Unit and the Public Sector Management Unit in the Projects Policy Department of Operations Policy Staff. Section 22 Individual Consultants 22.01 This Handbook is devoted to the selection and employment of consulting firms; nevertheless, a word on the employment of individual consultants might be useful. 22.02 Individual consultants are employed extensively by the Bank itself to assist mission work, and the policy covering their selection and employment is covered in ADM 2.05, "Employment of Consultants and Research- ers," and in a handbook issued by Personnel Management Department. Indi- vidual consultants are also employed by borrowers on Bank-financed proj- ects. Such individuals are more usually employed on the "softer" aspects of technical assistance, i.e., institution building rather than engineering design. The question is often asked for a particular assignment, "should individuals or a consulting firm be employed". Often the question is not relevant, as, for example, one would not employ individuals for dam design, and it might not be appropriate to employ a consulting firm to provide one adviser on agriculture extension. Generally, the Bank believes that where three or more individuals are to be employed on an assignment, it is often better that a consulting firm be employed so that the firm can be responsi- ble for the cohesiveness and also for personnel administration. 22.03 Wher2, for some reason, a team of individuals is employed, it is essential that one of these individuals be designated as a team leader. Managing such a team of different nationalities, sometimes performing different functions, can be a formidable task. The project leader should be given clear authority over individual team members, and the terms of reference (TOR) of each team member should define the relationship with the team leader. 22.04 There need be no formal selection process for the selection and employment of individuals, and individcals are often obtained through advertising, through UN agencies, and through advice from the Bank. For key assignments, interviews should be scheduled, and the Bank, under its loan or credit, should be prepared to finance the cost of these interviews. Contracts should normally take the form of a simple letter of agreement with terms of reference and employment conditions. As well as remunera- tion, the employment conditions also should cover such items as medical expenses, insurance, leave, education, housing, etc. 22.05 An efficacious approach to employing and administering individ- uals is to utilize the services of UNDP (OPE), which will recruit the indi- viduals, and undertake appropriate personnel administration. In the field, the administration of the individuals will be undertaken by the office of UNDP Resident Representative which can relieve the borrower of time-con- suming administrative details. Under such arrangements, it should be made U quite clear to the individuals that they are working for the client and not for the UNDP. 22.06 Lastly, it is sometimes said that employing a group of individ- uals is cheaper than employing a consulting firm. This is only partly true, as with individuals there are several hidden costs including client administration and the cost of replacing sick or unsuitable staff, to name just a few items. However, as noted above, the types of tasks performed by individuals are usually somewhat different than performed by a consulting team, and the appropriateness of the type of team to be employed should outweigh considerations of cost. September, 1985 Consulting Services Handbook AN NEX ES Contents Annex No. Title Page No. 1 The International Federation of Consulting 166 Engineers (FIDIC) and Its Member Associations 2 Latin American Federation of Consulting 169 Engineers FELAC) and Its Member Associations 3 Types of Services by Sector 170 4 Terms of Reference: Colata: Port Moderniza- 173 tion Study 5 Consulting Services Cost Estimate: An Example 189 6 Sample Advertisement for Letters of Interest 193 7 Sample Draft Letter of Invitation 194 (for Unpriced Proposals) 7-1 An Example of "Supplementary Information for 199 Consultants" 7-2 Suggested Format of Curriculum Vitae for Members 206 of Consultant's Team 7-3 Work Program and Time Schedule for Key 207 Personnel 7-4 Breakdown of Agreed Fixed Rates in Consultants' 208 Contracts: ( i) Services in Field (ii) Services in Rome Office 8 Sample Draft Letter of Invitation 210 (Where Price will be a Selection Factor) 9-1 Consultants' Proposals-Summary Evaluation 216 Sheet 9-2 Consultants' Proposals--Personnel Evaluation 217 Sheet 9-3 Consultants' Proposals-Personnel Evaluation 218 Sheet (Completed Form) A e: tents (Cont'd.) Annex No. Title Page No. 10 Contract Checklist 219 11 Sample Telex: Notification to Selected 222 Consulting Firm(s) 12 Sample Contract Negotiations Agenda 223 13 Work Program and Time Schedule for Key 225 Personnel 14 Contract Payment Schedules 1 thru 7 226 15 Selection Activities for Bank-Financed 233 Contracts - Typical Time Ranges 16 Selection Schedule -- Bank-Financed Contracts 236 17 Selection Activities for UNDP-Financed, Bank- 237 Executed Contracts 18 Selection Schedule -- UNDP-Financed, Bank- 239 Executed Contracts 19 Consulting Services: Mission Checklist 240 20 Development of Local Firms: Volunteer 242 Executive Agencies 21 Bank-Executed, UNDP-Financed Projects: 243 Responsibilities 22 Sample Memo Calling Selection Committee 244 Meeting 23 Sample Memo Recording Selection Committee 246 Meeting - Short List Selection 24 After Proposal Evaluation - Sample Memo 248 Calling Selection Committee to Choose a Firm for Negotiations 25 Sample Memo Recording Selection Committee 250 Decision on Firm to be Invited to Negotiate Contract 26 Sample of Letter to Unsuccessful Firms 251 27 The Twinning of Agencies 252 Annex 1 Page 1 of 3 The International Federation of Consulting Engineers and Its Member Associations FIDIC Names and Addresses FIDIC Secretariat P.O. Box 86 CR-1000 Lausanne 12 Chailly, SWITZERLAND The Association of Consulting Suomen Neuvottelevien Insinoorien Engineers Australia Liitto 75 Miller Street Finlands Konsulterande Ingenjorers P.O. Box 1002 Forbund North Sydney, NSW 2060 Pohjantie 12 A AUSTRALIA 02100 Espoo 10, FINLAND Verband Beratender Ingenieure Chambre des Ingenieurs-Conseils de Isterreichs France Karlsgasse 9 Maison de 1'Ingenierie 1040 Vienna, AUSTRIA 3 Rue Leon Bonnat 75016 Paris, FRANCE Bangladesh Association of Consulting Engineers Verband Beratender Ingenieure - VBI C/O 2 Dhannondi RA Zweigertstrasse 37-41 Road 15 Postfach 10 22 42 Dhaka 9, BANGLADESH 4300 Essen 1, GERMANY Chambre des Ingenieurs-Conseils de The Association of Consulting Belgique Engineers Hong Kong Kamer van Raadgevende Ingenieurs 14/F, Bank of America Building van Belgie 1 Kowloon Park Drive Hotel Ravenstein Kowloon, HONG KONG 3 Rue Ravenstein 1000 Brussels, BELGIUM Felag Radgjafarverkfraedinga Brautarholt 20 Associacao Brasileira de 105 Reykjavik, ICELAND Consultores de Engenharia Travessa do Ouvidor No. 5 The Association of Consulting 10. Andar - Edificio Ubur Engineers (India) 20040 Centro B-6/23, Shopping Centre Rio de Janeiro, RJ, BRAZIL Safdarjung Enclave New Delhi 110 029, INDIA Association of Consulting Engineers of Canada Inkindo-Teknik 130 Albert Street (Suite 616) The National Association of Ottawa, Ontario KIP 5G41 Indonesian Consulting Engineers CANADA Jalan Bendungan Hilir Raya 29 Jakarta-Pusat, INDONESIA Foreningen af Radgivende Ingeniorer Esplanaden 34 Iranian Association of Consulting 1263 Copenhagen K. Engineers DENMARK 25, Jahanshad Street Mobarezan Avenue Estacade, Tehran, IRAN Annex 1 Page 2 of 3 Cumman Innealtoiri Comhairle na Sociedat di Architekt i Ingenieur h-Eireann Antiyano Association of Consulting Engineers P.O. Box 735 Ireland Curacao, NETHERLANDS ANTILLES 63 Haddington Road Dublin 4, IRELAND The Association of Consulting Engineers New Zealand The Israel Association of 10i Molesworth street Consulting Engineers P.O. Box 12-055 P.O. Box 11090 Wellington, NEW ZEALAND Tel Aviv 61 110, ISRAEL Association of Consulting Engineers Associazione Ingegneri Consulenti Nigeria Italiani G.P.O. Box 6450 Via Salaria 292 Lagos, NIGERIA 00199 Rome, ITALY Radgivende Ingeniorers Forening The Association of Japanese Akersgt. 35 Consulting Engineers Oslo 1, NORWAY C/O Shuwa-Daini-Toranomon Building 1-21-19 Toranomon Council of Engineering Consultants Minato-ku, Tokyo 105, JAPAN of the Philippines P.O. Box 52 The Association of Consulting Makati Engineers of Kenya Metro Manila, PHILIPPINES Mansion Houe Wabera Street Association of Consulting Engineers P.O. Box 72643 Singapore Nairobi, KENYA Singapore Proferisional Centre Block 23, 2nd Floor Korean Council of Consulting Outram Park, #03-129 Engineers Singapore 0316, SINGAPORE 302, 3rd Floor, Korea Construction Building The South African Association of 61-5, Nonhyon-dong, Kangnam-gu Consulting Engineers Seoul 135, KOREA Die Suid-Afrikaanse Vereniging van Raadgewende Ingenieurs Chambre des Ingenieurs-Conseils du P.O. Box 1644 Grand-Duche de Luxembourg Randburg 2125, SOUTH AFRICA 36, rue Wilson L-2732, Luxembourg, LUXEMBOURG Asociacion Espanola de Consultores en Ingenieria Association of Consulting Engineers Caltecnica of Malawi Plaza del Cordon P.O. Box 449 Madrid (12), SPAIN Blantyre, MALAWI The Association of Consulting Orde van Nederlandee Raadgevende Engineers Colombo, Sri Lanka Ingenieurs 60, Dharmapala Mawatha Javastraat 44 Colombo 3, SRI LANKA 2585 Ap The Hague, NETHERLANDS - 168 - Annex 1 Page 3 of 3 Orde van Raadgevende Ingenieurs in Zimbabwe Association of Consulting Suriname Engineers P.O. Box 1864 P.O. Box 3337 Paramaribo, SURINAM Harare, ZIMBABWE Svenska Konsultforeningen SKIF Kungsholmstorg 1 Box 22076 S-104 22 Stockholm, SWEDEN Association Suisse des Ingenieurs- Conseils Schweizerische Vereinigung Beratender Ingenieure Jupiterstrasse 45-207 3015 Bern, SWITZERLAND The Consulting Engineers Association of Thailand 37/1 Soi Somprasong, 3 Petchburi Road Bangkok 4, THAILAND The Association of Consulting Engineers Alliance House 12 Caxton Street London SW1R OQL, UNITED KINGDOM American Consulting Engineers Council Suite 802 1015 Fifteenth Street, N.W. Washington, D.C. 20005 UNITED STATES OF AMERICA Zajednica Konzalting Organizacija Jugoslavije Gunduliceva 23 P.O. Box 422 41000 Zagreb, YUGOSLAVIA The Association of Consulting Engineers of Zambia P.O. Box 30866 Lusaka, ZAMBIA 169 - Annex 2 Page 1 of 1 The Latín American Federation of Consulting Engineers and Ita Member Associations FELAC Names and Addresses FELAC General Secretariat Av. Rivera Navarrete, 451 Lima 27, PERU Camara Argentina de Consultores Asociacion Peruana de Consultoria, APC Sarmiento 848 - 30 Piso Av. R. Rivera Navarrete, 451 Buenos Aires, ARGENTINA Piso 3, Of. 3B Lima 27, PERU Asociacion Nacional de Empresas Consultoras Asociacion Uruguaya de Consultores Edif. Herman, Piso 17 - Of. 1701 Canelones 2257, Piso 1 La Baz, BOLIVIA Montevideo, Uruguay Associacao Brasileira de Sociedad Venezonala de Ingenieros Consultores de Engenharia Consultores Travessa do Ouvidor, 5- 100 Av. Lasalle - Los Caobos - Edificio 20040 Rio de Janeiro, BRAZIL Mengal, Pta. Baja Caracas, VENEZUELA Asociacion de Ingenieros Consultores de Chile Los Conquistadores 1700 110 Piso Centro Santa Maria Santiago, CHILE Asociacion de Ingenieros Consultores Colombianos Carrera 13 #48-47, Of. 803 Bogota D.E., Colombia Asociacion de Companias Consultoras del Ecuador J.L. Tamayo 157 y Av. Patria Quito, ECUADOR Asociacion Mexicana de Empresas de Consultoria Porfirio Diaz No. 100, ler. Piso Casilla Postal 03720 Mexico D.F., MEXICO Camara Paraguaya de Consultores Benjamín Constant No. 973 c/Colon Editicio Arasa 2 - 70 Piso Casilla de correo No. 807 Asuncion, Paraguay Åex 3 TYPES OF SERVICES sY SECTOR -170- Page 1 o 3 AS ce U@ Es Ev Ua s Po TE To Tn UO WE MS la Aenai Swee.ys. SalMe imagery ca G r~logscal SOvFs to Geop~yaca Swvey 14 Melgchl Surv.ys te I4yeogrape~ Sweveys id Sm S $-uy 1g Topograpic Swees ift Rusauces Survey 1 ij 2* Sector Stuses 3b Polcy Sudes 2* Reguinal Developmentf Plans 3e 3* Plarrung Sudies 3b Feasi~ty Sudes 30 Market Su~s 3d Econamuc Sues 3e Fnan~al Sbes 3 Tar* Stues~ 39 Tochncal Stumes 3hOper~banStuomu 31 Enwmna St~d ~- 31 So~~--- -S 3k Remch Deug.vEvaluan n 3 ms amu mdv~ce 3n Pr~at Reted m i ce __._____- -.---g-me1 - - i ____b - 172 - Annв� 3 ТУРЕ8 OF �ERVICES ®У SЕСТОд , ра8" ё 3 og g s.e+e.. а умwеrlм . � .. � � � � � � ����� � �� i � ,� �' �,� � � � � � 3���' coaES мса oRь-av�as � � г� � 3" � � ,� � � � .� пл ео го м ev иs м ro п то т� ио wa �е 7s СРвр�+в агд Мвгавпаnов � 7е 1ьАамtвnапа P1aмr+g 76 EaWOrг�MM�P1/f1t Rвhi0iAi0aП Тд PiaпqFaerory Авhадааооп 7в Crvd Waxs RМидмаиоп оа+.► гm.�nn п �9 Тл и �асамт+qг�иаг++Е w iг+tоггпsооп s,nг.ms лпа сагприr. � b Саприсвг Tвdvqbpy OtM► tе0в�У) W и � Ев иаегиоопаs sv.ngп+мmq 9b мапар«мм Ааvаыу s.Nкa ве И�г+вувпwа Sгибвs !д Orgaro:мa+r 0«.bобим 5tu�a �в мУ1рбW.г R.0{П►«1Мгпs sгУ�в !1 Tnuunp аnд TrиsfN 6f TвCUioioqy дhи (�рвау) !0 Ргqвеt Ровс-EvaNиtan � - М Annex 4 Page i of ii COLATA: PORT MODERNIZATION STUDY Terms of Reference jMe I. BACKGROUND I II. OBJECTIVES I III. SCOPE OF CONSULTING SERVICES 2 A. General 2 B. Traffic Forecasts and Cost Analyses 2 I* Commodity Flow Forecasts 2 2. Estimates of Containerizeable Cargo 2 3. Inland Traffic Flow Analysis 3 4* Container Movement Forecasts and Costs 3 C. Analysis of Present Port Operations 4 1. Review of Current Practices 4 2. Study of Alternatives for Improvement 4 3* Review of Financial Aspects 5 D. Container Terminal Engineering Studies 5 I* Physical Surveys 5 2. Operational Requirements 6 3. Alternative Layouts 6 4* Engineering and Preliminary Economic 7 Analyses Ee Terminal Development Program 8 lo Review of System Development Options 8 2* Final Economic Analysis and Investment 8 Program 1 4 Annex 4 Page ii of ii Page 3. Financial Analysis and Tariff 9 Recommendations 4. Program of Government Actions 10 5. Scope and Budget for Final Engineering 10 F. Time Schedule and Reporting Requirements 11 IV. TRAINING 12 A. Geneial 12 B. Seminars 12 C. Home Office 12 D. Containers 12 V. DATA, SERVICES AND FACILITIES TO BE PROVIDED BY 13 THE GOVERNMENT A. Data 13 B. Services 14 C. Facilities 14 - 175 - Annex 4 Page 1 of 14 1. BACKGROUND Maritime trade of Colata is served through a public terminal at the port of Ablata on the Atlantic Coast. Ablata is connected by road and rail to the capital of Blinde 200km inland. The public terminal is under the jurisdiction of a national port administration (NAP), which is the owner and operator of the docks and shore facilities. Though some investment has taken place in the last 20 years physical and operational constraints have caused congestion, and the costs to the country of resulting delays and inefficiencies have been severe. While, until now, container traffic has played a relatively minor role in Colata's foreign trade, this situation is expected to change drastically. However, Ablata terminals are not designed for the efficient handling of containers. This study follows recommendations made in the Colata Transport SLudy undertaken in 1982, and improvement of Ablata port forms part of the Government's development strategy in the transport sector. The Bay of Ablata was first mentioned in sailing records in 1533, and became a provision stop for early shipping to Asia. Permanent facilities were first constructed in 1840, and, in small increments, have been improved and expanded since then. The current export traffic is mainly agricultural (including timber); however, exports of finished goods is increasing. Imports comprise common goods, food products, equipment and oil. The latter is handled at a private satellite port in Ablata Bay which is not part of this study. The Government has approached the World Bank with a request to consider financing the implementation of feasible improvements resulting from this study. II. OBJECTIVES The purpose of this study is to: i) determine the technical and economic feasibility of installing a container terminal; ii) prepare an overall port development program for the next five years; iii) prepare a program for improvement in operations; iv) recommend an appropriate tariff structure. Annex 4 Page 2 of 14 III. SCOPE OF CONSULTING SERVICES A. General The consultants shall conduct all engineering work, physical surveys, the collection and analysis of operational, economic and financial data and other work harPin described, as required to attain the objectives stated above. In the conduct of their work, the consultants shall collab- orate closely with the Government, acting thrpugh NAP, which has agreed to assign counterpart staff to work with the consultants and provide the data, services and facilities outlined in Part IV herein. The consultants shall be solely responsible, however, for the interpretation of all data and services received ;nd for the findings and recommendations contained in their reports. The geographic scope of this study for traffic forecasts shall be the entire country and the shipping routes serving Colata in maritime foreign trade. The geographic scope of this study for operation analyses and advisory services shall cover the terminal under the jurisdiction of NAP. B. Traffic Forecasts and Cost Analyses 1. Commodity Flow Forecasts The consultants shall review: (a) the traffic flow projections made by the Government and to be provided to the consultants (see Part IV herein), and (b' the prospective developments through 1985 of inland trans- port modes within Colata, as foreseen by the NAP and by the agencies re- sponsible for each transport mode- Based on this review and their own assessment of prospective liner tervices to Colata, the consultants shall prepare forecasts of Colata's total maritime foreign trade through the public port terminal for the years 1985, 1990 and 1995. The forecasts shall indicate the regions of origin and destina- tion within Colata by major commodity groups, including general cargo, and the tonnages to be moved on principal corridors to and from the coast. 2. Estimates of Containerizeable Cargo Using the above forecasts of commodity flows in foreign trade, the consultant. shall estimate the amounts of traffic that could be con- tainerized on the principal maritime trade routes of Colata in 1985, 1990 and 1995. For this purpose, two estimates shall be prepared: (a) a low estimate, based on assumptions that port terminals would be improved for container transfer, but that inland movement of containers would not be encouraged; and, (b) a high estimate, based on assumptions that both ports and inland transport modes would provide efficient services for cargo move- ments in containers. Three areas require particular attention in the preparation of estimates of container traffic: (i) containerization of coffee exports, Annex 4 Page 3 of 14 (ii) containerization of banana exports, and, (iii) containerization of miscellaneous general cargo imports and exports in the categories that appear to have no particular advantage under containerization, compared to present modes of transport. Regarding categories (i) and (ii), the consul- tants shall made inquiries with principal producers, shippers and ocean carriers, to determine current shipping trends in these trades and the services likely to be offered to exporters. Estimates of containerizeable cargo shall be expressed in tons of exports and imports, and in numbers of outbound and inbound container units (TEUs)1/ (this shall include movements of empty containers). 3. Inland Traffic Flow Analysis The analysis of inland traffic flows under this study shall be limited to a review of work done by others and a general assessment of the impact of prospective developments in Colata's domestic transport modes on the country's maritime imports and exports. It is not expected that a mathematical model for simulation of inland traffic flows will be available to the consultants for purposes of this analysis. To the extent necessary for forecasting movements of containers under alternative systems, the consultants shall make assump- tions on the future characteristics and costs of inl.and transport modes, based on their own assessment of material to be made available by others; the main assumptions, however, shall be discussed and agreed with the Planning Office prior to their incorporation in the analysis. 4. Container Movement Forecasts and Costs The consultants shall prepare forecasts of container movements in 1985, 1990 and 1995 for the following alternative developments: 1) Container terminal facilities at Ablata. 2) No specialized container terminal facilities at Ablata. For the above, the consultants shall prepare estimates of the economic cost of transport, indicating terainal costs, inland transporta- tion costs and ocean shipping costs. Terminal costs shall include the capital and operating costs of the existing and proposed port facilities to be used by the traffic, and the vessel service time and waiting time costs expected to be incurred. C. Analysis of Present Port Operations 1. Review of Current Practices For the analysis of present operations at Ablata under the juris- diction of NAP, the consultants shall review all available data on terminal activities at the ports, observe and analyze current operating procedures 1/ Twenty-foot equivalent units. - 17Z5 - Annex 4 Page 4 of 14 and practices, and discuss present and prospective operational problems with personnel responsible for terminal management and with port users. The consultants shall also review inventories of existing port facilities and equipment and assess the present conditions and future utility of major components. The consultants shall study the movement of cargo and of bulk grain handled over NAP's terminal facilities. This shall include an analysis of the facilities, equipment and procedures used in receiving, transit storage, long-term storage and loading of cargo. Particular consideration shall be given to: a) the present and prospective use of containers in international trade and their implications for customs and port services; b) the interaction of inland transport modes with shipside and transit operations; and c) the storage and transfer of coffee and other agricultural exports. 2. Study of Alternatives for Improvement Based on the foregoing, the consultants shall study and discuss with NAP and other agencies concerned the alternatives for improvement that could be introduced at the existing terminal facilities. This shall result in preparation of a detailed program of recommended actions designed tc increase port efficiency and throughput capacity. The program shall com- prise (but not necessarily be limited to) the following: a) operational improvements that could be introduced without alter- ations to existing facilities and equipment; b) operational improvements requiring minor alterations and/or the acquisition of new equipment that could be introduced within one year; c) changes in NAP's administration and management systems that should be implemented without delay; and d) changes in NAP's administration and management systems that should be tested in a small-scale (pilot) operation prior to general adoption. The above program shall be prescnted in preliminary form at the end of Phase I of this study and in final form at the end of Phase II. The program shall comprise a proposed time schedule of the steps necessary for effective implementation. For all facility alterations and equipment ac- quisitions that are recommended, the program shall include schematic plans and layouts, performance specifications and cost estimates. For organiza- tional changes recommended in the program, the consultants shall assess the - 179 - Annex 4 Page 5 of 14 operational impact to be achieved, define the roles of affected institu- tions, identify staff training and recruitment needs, and estimate the initial and recurrent costs. 3. Review of Financial Aspects The consultants shall review the financial reports of NAP for 1970 through 1979 and discuss with the management and staff of NAP the principles and procedures used in the financial administration of individ- ual ports and of the port system as a whole (including such topics as management reporting and control, auditing, establishment of port tariffs, and forecasting of port revenues and costs). Based on the foregoing, the consultants shall analyze the finan- cial implications of the program of actions recommended in accordance with III-C-2 above. D. Container Terminal Engineering Studies 1. Physical Surveys The consultants shall review: all available data on topographic, hydrographic, weather, drainage and subsurface conditions in the port area of Ablata, plans of existing facilities; records of dredging operations; and construction records of pile-supported structures. Based on this re- view, the consultants shall define the scope of additional field surveys (including subsurface investigations and laboratory soil tests) required for the study of alternatives, the preparation of development plans, and engineering designs for the proposed container terminals. After review and approval of the proposed scope by NAP and the Bank, the consultants shall complete the required additional subsurface investigation, and assist NAP in completing other field surveys, in accordance with the following paragraphs. (a) Hydrographic and Sea Conditions Hydrographic surveys shall be conducted at each port over areas sufficient to cover construction areas and access channels to berthing facilities at all potential terminal sites. The hydrographic surveys shall indicate sea bottom depths below Mean Low Water at a maximum spacing of 50 feet in channel and anchorage arer , and at a maximum spacing of 20 feet in the vicinity of existing and proposed berthing facilities. Sea bottom contours shall be plotted at a minimum scale of 1:500. The accuracy of these surveys shall be sufficient to esti- mate quantities of dreding (if required) with an accuracy of + 10 percent. (b) Topography Topographic surveys shall be conducted of existing and potential future port terminal areas at the port, with sufficient detail to pro- - 180 - Annex 4 Page 6 of 14 vide a sound basis for the planning and engineering work to be com- pleted under this study. (c) Subsurface Investigations At Ablata, the consultants shall conduct subsurface Investiga- tions at the locations of existing and potential future sites of ter- minal facilities and in areas where dredging may be required. These investigations shall include, but shall not be limited to, dry sample borings in accordance with ASTM Spec. D1586 (or approved equal) using "standard penetration tests" in granular materials and undisturbed samples in cohesive soils; in each boring, samples shall be taken at 5 foot maximum intervals, where the nature of subsurface strata changes, and at the end of the boring. The spacing and depth of borings, sampling and testing shall be sufficient to determine with accuracy the conditions for dredging, pile driving, foundation construction and paving in the study of al- ternatives for port facility layout, preliminary engineering, and other work described herein below. 2. Operational Requirements The consultants shall make an assessment of prospective liner services to Colata by modern container vessels on Atlantic and Pacific trade routes. Based on their forecasts of vessel characteristics, the con- sultants shall determine the operational and space requirements for instal- lation of a modern container terminal facility of the following hypotheti- cal capacity ranges:2/ 300,000 to 400,000 tons per year. 3. Alternative Layouts On the basis of the finds resulting from B-1 and B-2 above, and taking into account the initial results of concurrent analyses of present cargo operations (C above), the consultants shall prepare and analyze al- ternative layouts for the installation of a container terminal at the port. These analyses shall comprise all container operations within the port area, preliminary estimates of capital ar.d operating costs, determina- tion of operational features and of the impact on cargo and vessel opera- tions in adjacent terminal areas, and an assessment of economic benefits. This shall result in the selection of the most effective and economical terminal configuration for container operations mentioned in B-2 above. 4. Engineering and Preliminary Economic Analyses For the selected layout mentioned tn the preceding paragraphs, the consultants shall prepare comprehensive operational descriptions and layouts, preliminary engineering designs and economic analyses. The operational deccription and layout for each port shall define the recommended container terminal configuration, yard handling and vessel 2/ 120 (field) + 6 (home office) x 1.15 (unforeseen work) - 145 man months. - 181 - Annex 4 Page 7 of 14 loading/unloading equipment, stacking methods, traffic patterns, storage and transfer capacities, control and weighing methods, relatec repairs and administrative facilities, operating procedures and staff requirements. Preliminary engineering designs shall be based on an analysis of alternative construction methods, taking into account the specific site conditions. Preliminary designs for the recommended project components shall be carried out to the degree of detail required to: (i) estimate principle quantities of construction materials (e.g., excavation, fill, concrete, piling, structural steel, fendering, etc.) with an accuracy of 10 percent +; (ii) determine the performance requirements and basic design characteristic of all major equipmoAt required; and, (iii) provide a sound basis for proceeding immediately with detailed engineering and preparation of contract documents for con!3truction and procurement. It shall be pre- sented in plans and drawings to appropriate scale, showing the main con- struction features, clearances, types of materials and key dimensions of each facility. Detailed definitions and quantities shall be given to all proposed container handling equipment and utilities to support the design concept. Cost estimates shall be presented with the scope and detail specified for the Investment Program (see E-2 below), but shall be accom- panied by breakdowns showing quantities and unit prices for principal categories of materials and work. The consultants shall provide a detail- ed statement explaining the provisions they have made for quantity and price contingencies. The preliminary analysis of economic benefits and costs for the proposed port development shall be based on the hypothetical projections of traffic, with and without the terminal projects. Benefits to be considered shall include savings in overall transportation costs and net gains to the economy that are expected to be directly attributable to the proposed container facilities (as compared to present facilities). Particular consideration shall be given to benefits arising from improvements in the transportation and marketing of coffee and other exports. Benefits may also include savings from: (a) decreased maintenance, operation and servicing costs for the existing and proposed facilities; (b) lower cargo losses in transit; and, (c) reduced turnaround time for vessels, railcars and trucks using the ports. Quantifiable benefits from increased economic activities attributable to the project may also be considered. Costs shall include final engineering, construction, equipment acquisition, physical contingencies and administration. The analysis of economic benefits and costs shall be presented in detailed tabulation for each year of the period through 1995. The consul- tants' economic evaluation for the selected alternativ% shall include de- termination of the economic internal rate of return, defined as the inter- estrate at which future benefits and costs are equal. An assessment shall be made of the proportion of benefits that will accrue to the economy of Colata, and the consultants shall make a sensitivity analysis, showing the variations of the economic internal rate of return under various assump- tions on traffic and project costs. - 182 - Annex 4 Page 8 of 14 E. Terminal Development Program 1. Review of System Development Options The results of the consultants' work under B, C and D above shall be summarized in an Interim Report and presented by the consultants at a series of meetings with NAP staff and other agencies concerned at the be- ginning of Phase II of the study. The purpose of these meetings shall be to afford an opportunity to Government officials at various levels for a free exchange of views with the consultants on the advantages and disadvan- tages of the alternatives for terminal development and operational improve- ments in the light of the traffic forecasts which will now supersede the hypothetical basis on which the three container terminals were studied under B above. While it is not expected that a clear consensus would be reached during these discussions on all aspects of future container terminal devel- opment, the consultants shall take into account, during subsequent steps of this study, all comments received on Phase I. This shall result in a clear definition of the major options and relatee operational targets that must be evaluated to define the investment program for container terminal devel- opment. 2. Final Economic Analysis and Investment Program Based on the foregoing, the consultants shall make a final eco- nomic analysis of the main options for container terminal development and operational improvements for cargo movements through the existing port facilities. Using the economic criteria outlined in III-D-4 above, the consultants shall formulate a recommended development program for container facilities in Colata ports through 1985 and calculate the resultirg eco- nomic rates of return; major risk elements shall be indicated, and the final economic analysis shall include appropriate sensitivity tests. The recommended program shall be presented with operational sum- maries, facility development plans, engineering designs and equipment per- formance specifications for each port in which investments are proposed. The program shall give the estimated capital cj3t of the proposed develop- ment, with breakdowns showing major facility and equipment components, foreign exchange and local currency requirements, and provisions for physi- cal and price contingencies. The estimates shall also include costs of engineering, construction supervision and other consulting services required for project implementation. 3. Financial Analysis and Tariff Recommendations Based on their forecasts of port traffic and the recommended in- vestment program, the consultants shall prepare financial forecasts for the years 1981 through 1990 of all revenues and operating costs of NAP. The forecasts shall be made for each port and for NAP's overall operation. - 183 - Annex 4 Page 9 of 14 Revenues shall be based, in the first instance, on the latest applicable port tariffs; costs shall include all port operations, terminal facilities, repairs and maintenance, administration, depreciation and financing charges. The consultants shall recommend revisions in tariff policy appro- priate for conditions prevailing in Colata to: (i) create incentives for the efficient use of port facilities; (ii) distribute the perceived benefits from the installation of container facilities between users and NAP; (iii) maintain NAP in a healthy financial position; and, (iv) avoid heavy financial burdens on the Government budget. The tariff policy shall be applied in a recommended structure and level of port charges, taking into account the need to cover all port costs, including a reasonable financial rate of return on fixed assets, and to simplify collection procedures, minimizing administrative costs to NAP. The consultants shall also prepare annual cash flow statements, proforma balance sheets for 1981-1990 and a financing plan for the con- struction of container and other associated facilities, based on the investment plan, clearly indicating the sources and applications of funds. In the financing plan, the consultants shall indicate the need for outside financing, if required. The consultants shall carry out a financial sensitivity analysis, indicating the effects of cost overruns, variations in tariffs and operating costs, and traffic uncertainties; this analysis shall identify important financial issues and necessary actions to be taken by the Government and NAP. The consultants shall make recommendations for installing a port costing system to facilitate comparison of revenues with short-run marginal costs for each service rendered and by each cost center, as a basis for devising appropriate cost-based tariffs and their revisions in the future, and to help management make sound decisions. The consultants shall help create a section in NAP which will have responsibility for preparing cost data for port services and shall identify financial or operational data necessa7y to measure current costs for port services. 4* Program of Government Actions The consultants shall prepare an outline of all Government actions required to implement thj proposed container terminal development, including the recommended timing of each step. This shall comprise actions considered necessary for: a) acquisition or rental of land not now under jurisdiction of NAP (if required); b) selection, contract negotiation and contract award for required consulting services; - 184 - Annex 4 Page 10 of 14 c) arrangements for project financing and approval of budgetary allocations; d) preparation, review and approval of contract documents for construction and equipment acquisition; e) contractor prequalification, bid advertising, evaluation of bids, contract award and contract execution; f) staff recruitment, training and organizational changes required for project implementation and operation; g) necessary changes in Customs procedures; and, h) any other steps recommended by the consultants to support the Program of Operational Improvements described in Section III-C-2 above or to ensure effective implementation of the proposed project. The consultants shall also prepare a time-based program for the implementation of tariff revisions, to be coordinated with the expected initiation of operations at the proposed container terminals. The mechanics of annual tariff revisions should be clearly recom- mended (e.g., indexing for inflation) and the financial situation should show an improving trends. 5. Scope and Budget for Final Engineering The consultants shall define the scope of additional consulting services required for: (a) detailed engineering, preparation of contract documents, and contractor prequalification; (b) services for bid solicita- tion, bid evaluation and contract award; and, (c) construction supervision. This scope shall be described in detailed draft terms of reference for all engineering services required, accompanied by detailed staffing schedules, manpower estimates, and a budget, all in a form that would be suitable as the basis of contract negotiations for the required additional services. 6. Time Schedule and Reporting Requirements The consultants shall mobilize their team in Colata within one week of the Starting Date. The consultants shall prepare and submit the following reports to the Government and the Bank within the time periods and in quantities in- dicated: - 185 - Annex 4 Page 11 of 14 Number of Copies to Timing (in months Government Bank from Starting Date) Inception Report 10 10 1-1/2 Progress Reports 10 10 (*) Interim Report 50 20 6 Draft Final Report 25 10 9 Draft Report 100 20 (**) ( *) At intervals of two months, after submission of the Inception Report. (**) Within thirty calender days of receipt of comments on the Draft Final Report from the Government and the Bank. All reports to the Government shall be in Spanish. All reports to the Bank shall be in English. The Inception Report shall summarize the consultant's initial findings; reflect a first assessment of available data and of site con- ditions at the ports; in addition, it shall contain: a) an outline of the methodology the consultants propose to use in traffic forecasting and economic analysis (see III-B-1 to III-B- 4); b) the proposed program and budget for physical data collection and field surveys (see III-D-1); and c) an outline of work expected to be completed up to presentation of the first Progress Report. Progress Reports shall contain a brief summary of the work accom- plished in the preceding two months, an outline of work expected to be com- pleted duriag the next progress reporting period, and the consultants' com- ments or recommendations on any unforeseen conditions that v-ay affect the progress or quality of their work. The Interim Report shall contain a summary of the findings and recommendations of the consultants on engineering and operational studies in the ports and traffic forecasts (Section III-B, C and D). The Final Report shall reflect all revisions the consultants deem appropriate after receipt of comments from the Government and the Bank of the Draft Final Report. - 186 - Annex 4 Page 12 of 14 IV. TRAINING General The consultant will be expected to make every effort to transfer their skills to the local personnel with whom they are working. In par- ticular, the consultants undertake the following training activities detailed below. Seminars once a month, the consultant will give a one-day seminar for NAP staff covering the results of work undertaken in the previous month; the design of the work plan for the coming month; and the relationship between cost, progress and total work remaining. The seminar will also cover the methodology, and in the feasibility studies, relevant techniques. Whenever possible, the consultants will arrange for at least one topic to be introduced by a member of the counterpart team. Training in Consultant's Home Office The consultant will make arrangements to accommodate the two members of the client's engineering staff listed below in its home office for a period of four weeks to gain experience in running the siltation model developed for this assignment. A further two weeks will be devoted to visits to physical hydraulic models and a wave tank to introduce them to how these are used in the analysis of problems and, in the case of the models, how they are constructed. On their return, the participants will be required to write a short paper indicating the way in which the techniques studied could be applied to one of five different problems connected with the client's port navigation. These papers will be presented to the NAP Chief Engineer, who will discuss them with the consultant. The participants will then give oral presentations at a staff seminar of NAP. 4r. J. Asahi, Senior Port Design Engineer Mr. S. Coros, Materials Engineer Containers The consultants will arrange for training in the use and handling of containers to be given to Mr. A. Lima--Assistant Chief, Port Opera- tions. This training will comprise three months' attendance at a recognized university, and three months' practical experience with a port operating authority. On the completion of these training aspects, Mr. Lima will be required to write a paper on container use and handling. After review by a panel, which will include the consultant's project manager, if the paper is - 187 - Annex 4 Page 13 of 14 considered acceptable, Mr. Lima will undertake a four-week mission to major ports worldwide. The consultants will be required to make the appropriate arrangements. V. DATA, SERVICES AND FACILITIES TO BE PROVIDED BY THE GOVERNMENT A. Data The Government has agreed to provide the consultants with access to all available data relevant to the Services and provide an inventory of such data. The data shall include (but not be limited to) the following: a) past reports prepared by or for Government agencies on develop- ment of the ports to be studied, waterborne transport, coffee movements, land transport serving ports, port operations and related supporting data; b) detailed information on the operations, data inputs and results of past and current traffic analyses (including transport systems and other models employed in forecasting); c) operating maintenance and traffic data and operating accounts of NAP and other agencies responsible for port activities, in all ports to be studied; J) general plans of all port facilities to be studied; e) an inventory of all existing shore facilities and equipment in the port of Ablata; f) all engineering data available on short facilities and channels in the port mentioned in (e) above, including construction plans and records, equipment specifications, test boring logs and soil laboratory tests, recent soundings; g) results of recent condition surveys and proposed repair work on existing facilities in the prrts mentioned in (e) above; and h) traffic projections for 1985, 1990 and 1995 of imports and ex- ports through the public ports of Colata, with breakdowns by major commodity groups and indications of the areas of origin and destination within Colata. To the extent possible, NAP will provide the above data from its own resources or from other agencies to the offices of the consultants within the first month of this study. - 188 - Annex 4 Page 14 of 14 In addition, the Government will make arrangements for access by tha consultants to all port facilities to be studied and to key officials in publIc and private ag&- Aes concerned with sector or regional planning, inland transport, shipping, ports and operations and services related to ports. B. Services The Government has agreed to p >vide the consultants during their stay in Colata with the following services: a) soundings and topographic surveys in the port of Ablata in accordance with III-D-1 (a) and (b) herein; b) survey control for test borings to be performed by the consul- tants in accordance with III-D-1 (c) hereof; c) secretarial staff to assist the consultants' staff in Colata, consisting of one (1) bilingual secretary and two (2) typists full time for the duration of the Services in Ablata; d) unlimited local telephone service, long distance telephone service within Lalata, and telex and international mail services as required for the Services; and e) transportation within Colata, as required for the Services, in- cluding local air transportation, car service in Ablata between living quarters and the office; car services to various Govern- ment agencies; transportation within the port areas; messenger service, as required. C. Facilities The Government has agreed to provide the consultants during their stay in Colata with the following facilities: a) suitable office space in Ablata for the consultants, the counter- part staff to be assigned by NAP and related secretarial staff; b) suitable office space for field investigations at Ablata; c) suitable office furniture and equipment, including typewriters, calculators, reproduction machinery, utilities, and office security and cleaning services; and d) office supplies, as required for the Services. - 1 - Annex 5 Page 1 of 4 Consulting Services Cost Estimate An Example Assume the assignment is to provide technical assistance by four to six people to an irrigation department in Thailand for two years. A. Foreign Currency US$ Foreign Personnel Services In-Country 4 for 24 months @ $9,000 864,000 2 for 12 months @ $9,000 216,000 1,080,000 Services in Rome Office 5% of $1,080,000 54,000 International Travel (Highest cost from USA) Visiting Partner 2 @ $3,000 6,000 Field Personnel (assume 2 out of the 6 are singl) 4 x 3 - 12 @ $3,000 36,000 2 @ $3,000 6,000 Shipping 6 @ $5,000 30,000 78,000 US$ Other Reimbursable Costs Reports (Final only-others produced in Thailand) 15,000 - 190 - Annex 5 Page 2 of 4 US$ Other Reimbursable Costs (Cont'd.) 4 vehicles 2 4-wheel drive @$15,000 30,000 2 Cars @$12,000 24,000 Office equipment 5,000 Library 5,000 Telex and postage (home office) 24 months @$250 6,000 Miscellaaeous 5,00 90,000 Summary Foreign Currency Costs Services in Country 1,080,000 Services in Rome Office 54,000 International Travel 78,000 Other Reidgoarsable Costs 90,000 1,302,000 Contingencies Price escalation on 1,502,000 Allow 15 percent contingency for unforeseen work 200,000 Assume assignment will not com- mence for one year from the date of this estimate, and assume price escalation of 6 percent applied to this ypar and to half of value after one year of assignment. 137,880 say: 138,000 Total foreign currency contingencies 338,000 Total Foreign Currency Estimate 1,640,000 Annex 5 Page 3 of 4 B. Local Currency (in Baht) B Subsistence i) in Thailand 4 x 24 x 30 - 2,880 + 2 x 12 x 30 - 720 3,600 man- days @ B1,000 3,600,000 ii) additional in field say, 8 man months 8 x 30 - 240 @ B400 = 96,000 Local Office Rent and 24 months @ B12,000 288,000 Utilities 6 Personnel 24 months @ B 8,000 1,152,000 Vehicle Running ',sts 24 months x 4 x B5,000 480,000 Miscellaneous 72,000 Subtotal 5,688,000 Contingencies Unforeseen @ 15% 853,000 subtotal 6,541,000 Price escal. @, say, 161 for 2 years 1,292,768 7,833,768 say: 7,900,000 - 1- - Annex 5 Page 4 of 4 B Hence, total estimated cost: Foreign Currency US$ 1,640,000 Local Currency B 7,900,000 Local currency in US$ equiv. - US$ 345,000 Hence, total in US$ US$ 2,035,000 Some interesting indicators US$ i) Gross average man-months rate (2.035m/1454/) 14,034 ii) Man-month rate for appraisal Report a) Foreign personnel costs 1,080,000 54,000 1,134,000 b) International travel 78,000 c) Subsistence costs B3,696,000 - 184,800 1,396,000/144 ( 9,694) say 9,700 iii) Expert field man-month cost as a percent of total cost (without contingencies) 1,080,000 x 100 - approximately 70% 1,586,000 2/ 120 (field) + 6 (home office) x 1.15 (unforeseen work) - 145 man months. - 1- Annex 6 Page 1 of I Sample Advertisement for Letters of Interest Republic of Colata Port Feasibility Study 1. Letters of interest are invited from qualified and experienced consulting firms who wish to be considered to undertake a port modernization feasibility study of the Port of Ablata, Colata. 2. The objectives of the study are: i) to determine the technical and economic feasibility of installing a container terminal; ii) to prepare an overall port development program for the next five years; iii) to prepare a program for improvement in operations; and iv) to recommend an appropriate tariff structure. 3. The study duration will be about nine months, and should begin in mid-1985. 4. Consultants who are interested in being considered for the assignment should submit information supporting their experience and capability in port modernization studies and, in particular, experience in containerization and in conducting assignments in developing countries. 5. Letters of Interest, with accompanying material, should be submitted to the Chief Engineer, National Port Administration Building (NAP), Front Street, Ablata, Colata. Letters should be submitted by April 30, 1984. 6. Please note this is not a request for proposals. After a review of the Letters of Interest, the National Port Administration will Invite 4-6 consulting firms to submit proposals for evaluation. - 194 - Annex 7 Page 1 of 5 SAMPLE DRAFT LETTER OF INVITATION (for unpriced proposals) Dear : Re: Consulting Services for 1. You are hereby invited to submit a proposal for consulting services required for the (title of services) which could form the basis for future negotiations and, ultimately, a contract between your firm and the (Project Agency). 2. (Paragraph giving a brief description of the assignment.) 3. To enable you to submit a proposal, please find enclosed: i) Terms of reference (TOR); ii) Supplementary information for consultants, including a suggested format for a curriculum vitae;3/ and, iii) A draft of the contract under which the services wili be performed.4/ 4. ... (name of borrower) ... has received [has applied for] a loan [credit] from the International Bank for Reconstruction and Development [International Development Association] in various currencies equivalent to US$ toward the cost of (name of project), and intends to apply the proceeds of this loan [credit] to eligible payments under the contract for which this invitation for proposals is issued. 3/ Information on the desired layout of the proposal, a typical c.v. and any othei: information which might encourage comparable proposals being received. 4/ It is highly desirable that a draft contract be forwarded to the consultants. However, for some assignments, it may be appropriate for the consultant to be requested to forward a proposed draft contract to the Project Agency. - 195 - Annex 7 Page 2 of 5 5. In order to obtain first-hand information on the assignment and the local conditions, it is considered desirable that a representative of your firm visit (country) before the proposal is submitted. Your representative should meet the following officials: Please ensure that these officials are advised of your visit in adequate time to allow them to make appropriate arrangements. 6. You are requested to submit a technical proposal only, without financial details, and your proposal should follow the form given in the "Supplementary Information for Consultants." Particular attent-'- should be given to following the format of the sample c.v. 7. Proposals will be evaluated using the following criteria: I) the firm's general experience in the field of the assignment ( points); ii) the adequacy of the proposed work plan and approach in responding to the TOR (_ points); and iii) the qualifications and competence of the personnel proposed for the assignment (_ points). [The following criteria are optional and their Inclusion will depend on the extent training is part of the consultants terns of reference (TOR).] - 196 - Annex 7 Page 3 of 5 Either; iv) the design and suitability of the skill transfer program (to client's or local consultant's staff, or both) (_ points); Or iv) the initial evaluation of proposals will not include the evaluation of the skill transfer program (to clients or local consultants staff, or both). The latter will be analyzed only for the greater number of either the top three firms or those coming within ___ percentage points of the top-rated firm. When analyzed, the skill transfer program will score a maximum of 10 percent.] Curriculum vitae of senior personnel in each discipline should be included with the proposal. These personnel will be rated generally in accordance with: i) their general qualifications ( points); ii) adequacy for the assignment ( points); and, iii) their language and experience in the Region (__ points). (Experience in (country) would be particularly advantageous.) [Optional in conjunction with (iv) above: iv) involvement in skills transfer program and training ability (_ points).] Either 8. It is estimated that about man months of services will be required for the study. However, you should feel free to submit your - 197 - Annex 7 Page 4 of 5 proposal on the basis of the man months which you consider to be necessary to undertake the assignment. OR 8. The funds available for this assignment are limited to US$ equivalent. This includes US$ as a contingency. The buiget estimate covers all foreign and local costs of consulting services for this study, including costs of experts in the field and home office. The estimate is based on a minimum of home office effort during the study and one man month for reviewing comments on the draft final report. The budget also covers international travel, preparation of final reports, equipment, insurance, office supplies, subsistence allowances, transportation in (beyond that provided by the government), and related expenses. 9. You are requested to hold your prGposal valid for 5/ days from the date of submission, during which time you will maintain, without change, the personnel proposed for the assignment. The (Project Agency) will make its best effort to select a consulting firm within this period. 10. Please note that the cost of preparing a proposal and of negotiating a contract, including trips to is not reimbursable as a direct cost of the assignment. 11. Assuming that the contract can be satisfactorily concluded in (month/ year), you will be expected to commence the assignment in (month/year). 12. We wish to remind you that any manufacturing or construction firm with which you might be associated will not be eligible to participate in 5/ It is recommended that this figure should be 45 days. The maximum figure to be shown should not exceed 90 days. - 198 - Annex 7 Page 5 of 5 bidding for any goods or works resulting from or associated 1with the project of which this consulting assignment forms a part. 13. Please note that if you consider that your firm does not have all the expertise required for the assignment, there is no objection to your firm associating with another firm to enable a full range of expertise to be presented. 14. If you intend to associate with a doLuestic firm, please note that a domestic firm may only associate with one foreign firm on the invited list. 15. An invitation to submit proposals has also been sent to (number) other firms. These firms are: 6/ 16. Your completed proposal shvuld be delivered to on or before (normally about 45 days), 19-. 17. The (Project Agency) is not bound to accept any of the proposals submitted. 18. Please note that the remuneration which you receive from this contract will [rot] be subject to the normal tax liability in (borrower's country). Information on tax regulations can be obtained from * 19. We would appreciate you informing us by telex: a) Your receipt of this letter of invitation. b) Whether or not you will be submitting a proposal. c) When submitting the proposal, the date and mode of shipment. Sincerely, Enclosures 6/ Optional. - .99 - Annex 7-1 Page 1 of 7 AN EXAMPLE OF "SUPPLEMENTARY INFORMATION FOR CONSULTANTS"7/ Proposals 1. Proposals will be evaluated according to criteria given in the Letter of Invitation and should include the following information: (a) A brief description of the firm azd an outline of recent experience on projects of similar nature. (b) Any comments or suggestions of the consultants on the Terms of Reference, and a description of the manner in which the consultants would plan to execute the work. (c) The composition of the team of personnel which the consultants would propose to provide in and the tasks which would be assigned to each team member. (d) Curricula vitae of the individual staff members to be assigned to the work and of the senior officer in the home office who would be responsible for supervision of the team. The curricula vitae should follow the format given in Annex 5-2. (e) Estimates of the total time-effort that could be provided for the services, supported by bar-chart diagrams showing the man mnthe for each expert. A sample of a suitable bar chart is given in Annex 5-3. (f) The consultant's comments, if any, on the data, services and facilities to be provided by the government indicated in the Teris of Reference (TOR). / This example should be scrutinized carefully and revised, as appro- priate, to ensure that it conforms with the Project Agency and the proposed assignment. - 200 - Annex 7-1 Page 2 of 7 2. Seven copies of the proposals should be submitted to . (Optional: One copy should also be sent to the World Bank for the attention of "I 3. In preparing the proposal, the consultants should give particular attention to the following: (a) Members of the team should have the requisite experience outside their own country, preferably under conditions similar to those prevailing in * A good working knowledge of is essential for personnel working in on this assignment. Reports shall be in English and . (b) The majority of the personnel comprising the consultant's team should be drawn from the permanent staff of the firm. (c) While a litited number of inspection visits to may be made by senior officials of the firm during the course of the assignment, short-term visits to should generally be kept to a minimum. Contract Negotiations 4. The following information is given to acquaint you with the manner in which negotiates a contract with a consulting firm. Negotiations normally commence on a Monday, and depending on the nature and size of the assignment, may take from two to five days. The aim is to reach agreement on all points, with the consultants and _ initialling a draft contract by the conclusion of negotiations. 5. Negotiations commence with a discussion of your proposal, the proposed work plan, staffing and any suggestions you may have made to - 201 - Annex 7-1 Page 3 of 7 improve the terms of refe:ence. Agreement will then be reached on the final terms of reference, the staffing and the bar chart, which will indicate personnel, periods in the field and home office, man months, and reporting schedule. Once these matters have been agreed, financial negotiations will take place and will begin with a discussion of your proposed personnel rates which should be expressed in man months. 6. The man-month rates are made up of salary, social costs, overhead, fee or profit, and any premium or allowance paid for overseas assignments. Forms giving a standard breakdown of field and office rates are attached to this Supplementary Information and should be completed for staff to be employed on the assignment. [Neither the forms nor any other financial information should be submitted with the technical proposal. These breakdown sheets will not form part of the contract.]8/ 7. Review of Man-Month Rates. The is charged with the custody of government funds and is expected to exercise prudence in the expenditure of these funds. The .m is, therefore, concerned with the reasonableness of a firm's financial proposal and, during negotiations, expects to be able to review data backing up a consultant's man-month rates* Consultants submitting proposals for contracts should be prepared to disclose such data and should accept that their proposed rates and other financial matters are subject to scrutiny and possible negotiation. Man-month rate details are discussed below. 8. Salary is the gross regular cash salary paid to the individual in the firm's home office. It should not contain any premium for overseas 8/ Where unpriced proposals are being called. - 202 -. Annex 7-1 Page 4 of 7 work or bonus (except where these are included by law or government regula- tions. The salary should not have been raised other than within the normal annual salary increase policy as applied to all the firm's staff. 9. Bonus. As bonuses are normally paid out of profits and as does not wish to make double payments for the same item, staff bonuses should not normally be included in the man-month rate. However, where the firm's accounting system is such that the percentage of social costs and overhead is based on total revenue-earning staff's remuneration (including bonus), then the bonuses may be included in the salary, provided the profit element is adjusted downward accordingly. In cases where, to follow national policy, 13 months are paid for 12 months' work, the profit element need not be adjusted downward. Any discussions on bonuses must be supported by documentation. 10. Social Costs are the costs to the firm of staff's non-monetary benefits. These items normally include pension, medical and life insurance costs, and the cost of a staff member being sick or on vacation. In this regard, the leave cost for public holidays is not an acceptable social cost, nor is leave taken during an assignment if no additional staff replacement has to be provided. Leave in accordance with a firm's leave policy at the end of an assignment is acceptable as a social cost. 11. The principles of calculating the cost of leave as a percentage of basic salary should normally be as follows: Leave cost as % of salary- days leave x 100 [365-weekends-public holidays-days leave (vacation and sick)/year] It is Important to note that leave can only be considered a social cost if the is not charged for the leave taken. - 203 - Annex 7-1 Page 5 of 7 12. Overheads are the firm's business costs whicl are not directly related to the execution of the assignment, and which will not be reim- bursed as separate items under the contract. Typical items are home office costs (partners' time, time of senior staff monitoring the project, rent, support staff, etc.), the cost of staff not currently employed on revenue earning projects, and business promotion costs. During negotiations, data supporting the last three years' overhead costs should be available for discussion, together with a detailed list of items making up the overhead and the percentage by which each relates to basic salary. The employee base used for obtaining averages includes temporary employees (i.e., outside consultants). 13. Fee or Profit. This should be based on the sum of salary, social costs and overhead. If any bonuses paid on a regular basis are listed, a corresponding reduction in the profit element will be expected. Fee or profit will not be allowed on travel or out-of-pocket expenses unless, in the latter case, an unusually large amount of procurement of equipment is required. Consultants should note that under the terms of the contract, payment will be made monthly against an agreed estimated payment schedule as described in para. 20. Invoices are required for adjustment of previous scheduled payments and are not required to trigger payment. 14. Overseas Allowance or Premium is paid by some firms to staff working overseas. Such allowances are calculated as a percentage of salary and will not draw overhead or profit. Sometimes by law, overseas allow- ances draw some social costs. In this case, the amount of this social cost should still be shown under social cost, with the net overseas allowance shown separately. The assumes that for concerned staff, this allowance where paid will cover home education, etc.; these and - 204 - Annex 7-1 Page 6 of 7 similar items will not be considered as reimbursable costs. Overseas allowances will not be paid for individual periods of one month or less. 15. Subsistence Allowance. This is not included in the man-month rate, but is paid separately and normally in local currency. No additional subsistence is payable for dependents--the subsistence rate will be the same for married and single team members. The subsistence allowance is usually based on prevailing UNDP standard rates for the particular country. 16. Team Members' Remuneration. It is not expected that the overseas allowance plus subsistence should cover all of a team member's living expenses in the country of assignment, and it is the responsibility of the firm to inform team members that these allowances are supplemental to their base salary and they may have to draw from the4.r salary from time-to-time. 17. Contracts with Team Members. Bearing in mind that man-month rates are negotiable and that particular attention is paid to proposed overseas allowances and subsistence, firms are advised against making firm financial arrangements with prospective team members prior to negotiations. 18. The reserves the right to audit cost details as part of an overall contract audit. In this context, i: selected for the study, the consultants will be expected to maintain time and other accounting records considered necessary to support allocations of salaries and other costs to the project. 19. Having selected a firm partly on the basis of an evaluation of pel3onnel presented in the firm's proposal, the expects to negotiate a contract on the basis of the experts named in the proposal and, prior to contract negotiations, will require assurances that these experts can, in fact, be made available. As the expected date of - 205 - Annex 7-1 Page 7 of 7 mobilization is given in the letter inviting proposals, the will not consider substitutions after contract negotiations except in cases of unexpected delays in the starting date or incapacity of an expert for reasons of health. The desire of a firm to use an expert on another project will not be accepted for substitution of personnel. 20. The consultants should note that the contract for this study will be with. Payments to the consultants will be made monthly, in accordance with an agreed estimated schedule, assuring the consultants of regular deposits in local and foreign currency as long as the work proceeds as planned. The consultants and their personnel will be exempt from or reimbursed for the cost of taxes, duties, fees, levies and other impositions in (assignment country) related to: (a) payments to the consultants or their personnel except (assignment country) residents in connection with carrying out this study; (b) equipment, materials and supplies brought into (assignment country) for the purposes of carrying out the study (provided they are subsequently withdrawn); and, (c) property brought in for the personal use of the consultants' personnel, or their dependents (provided the property is subsequently withdrawn). - 206 - Annex 7-2 Page I ct 1 SUGGESTED FORMAT OF CURRICULUM VITAE FOR MEMBERS OF CONSULTANT'S TEAM Name Profession Years with Firm Nationality Proposed Position on Team Key Qualifications: (Under this heading, give outline of staff member's experience and training mnst pertinent to assigned work on proposed team. Describe degree of responsibility held by staff member on relevant previous assignments and give dates and locations. Use up to balf-a-page.) Education: (Under this heading, summarize college/university and other specialized education of staff meber, givin3 names of schools, dates attended and degrees obtained. Use up to a quarter page.) Experience Record: (Under this heading, list all positions held by staff member since graduation, giving dates, names of employing organization, title of positions held and location of assignments. For experience in last ten years, also give types of activities performed and client references, where appropriate. Use up to three-quarters of a page.) Languages:0 (Indicate proficiency in speaking, reading and writing of each language by "excellent," "good," "fair," or "poor".) Signature of Staff Hember Annex 7-3 Page 1 of 1 WORK PROGRAM AND TIME SCHEDULE FOR KEY PERSONNEL MONTHS Man-Months No. of Name Position 1 2 3 4 5 6 7 8 9 10 11 12 Field Home Round Trips Total Reports Due/Activities and Duration 1. 2. _ _ _ _ _ _ _ _ _ _ _ _ 3. 4.__ _ _ _ _ _ _ _ _ _ _ 5. 6. 7. 8. 9. 10. Field Full Time / Part Time Home Office Full Time / Part time - - Reports Due * Activities Duration - гов - .� N � � '� ^� �� .� � � � �� �� �� i „ .. � � .. �� � � �, � .., � ' и g� � wк � �. 1 1 � I /� ,� t�i м �q� ц ' .� б � � � � � � � � � � N � м� � i � i .л .. I ���� i �1 �! м � �� � V � ' и � и � ,, � ,� - � � � �� Amwx 7-4 Page 2 of 2 PFD= TME: Omsulting Firm (Now): Date: Qnsulting Services: Cmntry: BredWom of Mmd Rates In Gmmlt3nts' QaTacts Services in Hme Office 1 2 3 4 5 6 7 Agreed Basic Fixed Salary Per Social Rate Per Agreed workim Charses Overhead Fee Workirg Fixed Rate New Position Day Z of 1) % pf 1) Subtotal % of 4) Day as% of I (Eqnessed in ftchange Rate: US$l - 210 - Annex 8 Page 1 of 6 SAMPLE DRAFT LETTER OF INVITATION (where price will be a selection factor) Dear : Re: Consulting Services for 1. You are hereby invited to submit technical and financial proposals for consulting services required for the (title of services) which could form the basis for future negotiations and, ultimately, a contract between your firm and the (Project Agency). 2. (Paragraph giving a brief description of the assignment.) 3. To enable you to submit a proposal, please find enclosed: i) Terms of reference (TOR); ii) Supplementary information for consultants, including a suggested format for a curriculum vitae;3/ and, iii) A draft of the contract under which the services will be performed. / 4. o.. (name of borrower) ... has received [has applied for] a loan [credit] from the International Bank for Reconstruction and Development [International Development Association] in various currencies toward the cost of (name of project), and intends to apply the proceeds of this loan [credit] to eligible payments under the contract for which this invitation for proposals is issued. 3/ Information on the desired layout of the proposal, a typical c.v. and any other information which might encourage comparable proposals being received. 4/ It is highly desirable that a draft contract be forwarded to the consultants. However, for some assignments, it may be appropriate for the consultant to be requested to forward a proposed draft contract to the Project Agency. Annex 8 Page 2 of 6 5. In order to obtain first-hand information on the assignment and the local conditions, it is considered desirable that a representative of your firm visit (country) before the proposal is submitted. Your representative should meet the following officials: Please ensure that these officials are advised of your visit in adequate time to allow them to make appropriate arrangements. 6. The proposal should follow the form given in the "Supplementary Information for Consultants." A two-stage procedure will be adopted in evaluating the proposals, with the technical evaluation being completed prior to any financial proposals being opened and compared. Technical proposals will be evaluated using the following criteria: i) the firm's general experience in the field of the assignment ( points); ii) the adequacy of the proposed work plan and approach in responding to the TOR (_ points); and iii) the qualifications and competence of the personnel proposed for the assignment ( points). [The following criteria are optional and the inclusion of one or the other will depend on the extent training is part of the consultants term of reference (TOR). Either: iv) the design and suitability of the skill transfer program (to client's or local consultant's staff, or both) ( points); - 212 - Annex 8 Page 3 of 6 Or iv) the initial evaluation of proposals will not include the evaluation of the skill transfer program (to clients or local consultants staff, or both). The latter will be analyzed only for the greater number of either the top three firms or those coming within __ percentage points of the top-rated firm. When analyzed, the skill transfer program will score a maximum of 10 percent.] Curriculum vitae of senior personnel in each discipline should be included with the proposal in the format of the sample c.v. These personnel will be rated generally in accordance with: i) their general qualifications (_ points); ii) adequacy for the assignment ( points); and, iii) their language and experience in the Region (_ points). (Experience in (country) would be particularly advantageous.) [Optional in conjunction with (iv) above: iv) involvement in skills transfer program and training ability (_ points).] 7. Price will be taken into account in the following manner. 8. Please note that the (Project Agency) is not bound to select any of the firms submitting proposals. Further, as quality is the principal - 213 - Annex 8 Page 4 of 6 selection criterion, the (Project Agency) does not bind itself in anyway to select the firm offering the lowest price. 9. It is estimated that about man months of services will be required for the study, and generally you should base your financial proposal on this figure. However, you should feel free to submit an alternative proposal on the basis of the man months which you consider to be necessary to undertake the assignment. 10. You are requested to bold your proposal valid for 5/ days from the date of submission, during which time you will maintain, without change, the personnel proposed for the assignment and your proposed price. The (Project AgencZ) will make its best efforts to select a consulting firm within this period. 11. Please note that the cost of preparing a proposal and of negotiating a contract, including trips to is not reimbursable as a direct cost of the assignment. 12. Assuming that the contract can be satisfactorily concluded in (month/ ZLar), you will be expected to commence the assignment in (month/year). 13. We wish to remind you that Any manufacturing or construction firm with which you might be associated will not be eligible to participate in bidding for any goods or works resulting from or associated with the project of which this consulting assignment forms a part. 14. Please note that if you consider that your firm does not have all the expertise for the assignment, there is no objection to your firm 5/ It is recommended that this figure should be 45 days. The maximum figure to be shown should not exceed 90 days. - 214 - Annex 8 Page 5 of 6 associating with another firm to enable a full range of expertise to be presented. 15. If you intend to associate with a domestic firm, please note that a domestic firm may only associate with one foreign firm on the invited list. 16. An invitation to submit proposals has also been sent to (number) other firms. These firms are: 6/ 17. Your completed proposal should be delivered tn on or before (normally about 45 days), 19__. The proposal should be submitted with the technical and financial proposals sealed in separate envelopes and the contents of each clearly marked. 18. Please note that the remuneration which you receive from this contract will [not] be subject to the normal tax liability in (borrower's country). Information on tax regulations can be obtained from 19. We would appreciate you informing us by telex: a) Your receipt of this letter of invitation. b) Whether or not you will be submitting a proposal. c) When submitting the proposal, the date and mode of shipment. Sincerely, Enclosures 6/ Optional. 215 - Annex 8 Page 6 of 6 The Supplementary Information for Consultants to be included with the Letter of Invitation (where price will be a Selection Factor) is identical to the examples give in Annexes 7-1 to 7-4. II Apnex 9-1 Page 1 of 1 Consultants' Proposals-Summary Evaluation Sheet Proposals Received: Project: Date of Evaluation: Evaluation by: FIRM: Item Wt. % Wt. % Wt. % wt. % Wt. Z Rating Rating Rating Rating Rating Rating Rating Rating 1. Firm's general experience in field of project 2. Adequacy of proposed work plan and approach 3. Personnel: (a) Head of Team (b) Economics (c) Engineering (d) (e) Totals: 100 Man-Months: In Field In Home Office Total COMMENTS P,ex 9-2 Page I of 1 Sheet No. Date: C~sultants' Pryps alm Shoet Project: _ _ _ _ _ _ Mequ~cy Iaruage ard Personmel Gen. ications for Pmect Fertence in Ratirg Grmp (F) + (H) Ratirg Gosition Nae Aoc Ratitg (Ex_% Ratirg (G)x_Ratixg (I)x + (J) (0) (A) (B) (C) (D) (E) (F) (G) (H) (1) (J) (K) NM:A ratings basis of 100 Ame 9-3 Page of I Sheet 1. I Dhte: CansultantsI Proposals-ftersonnel Evaluatin Sheet Project: Pirt Fasibility Study Cmsulting Fira- (Nane) ADC (country) cata Adequacy largtsW and tersonnel Ge.Qml ficatim for roject Experine in Ratirg Group Reg M (F) + (H) Ratiqg Grou Psition Nme Age Ratirg (E)x % Ratizg (G)x % Ratizg (I)x Z + (J) (K) (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) Team leader Russo 48 85 25.2 75 37.5 85 17 81.0 aiefFcFnoist hm 42 70 21.0 68 34.0 70 14.0 69.0 T Transport EcmoumLst Slth 33 65 19.5 65 32.5 60 12.0 64.0 ]67.00 OdefFRyineer ampnt 52 66 19.7 85 42.5 70 14.0 77.2 1 Soils Engineer Jones 32 62 18.5 70 35.0 50 10.0 63.5 176.35* Structural Eagineer Patel 34 74 22.2 90 45.0 80 16.0 83.2 ] Mechanical FRgineer WLlson 60 81 27.0 90 45.0 95 19.0 91.0 Electrical Engineer Jensen 37 60 18.0 45 22.5 50 10.0 50.5** 181.46 IILE All ratingp mn basis of 100 * See emanple, para. 12.22. ** Below 60 percent-fails-if firm invitel, this person mist b replaced. - 219 - Annex 10 Page 1 of 3 CONTRACT CHECKLIST* (Items of particular note are underlined) PART I. AGREEMENT 1. Identification of Contracting Parties 2. Parties Contracting Objectives 3. Contract's Components and All-Inclusiveness 4. Associations between Firms 5. Ruling Dates 6. Parties' Signatures PART II. CONDITIONS OF ENGAGEMENT A. General Information 7. Definitions 8. Amendment Procedures 9. Succession 10. Assignments 11. Authorized Representatives 12. Notices 13. Governing Language 14. Changes in Law B. Responsibilities of the Consultant 15. Performance of Services 16. Performance Schedule 17. Supply of Personnel 18. Procedures for Substitution of Personnel 19. Record-keeping and Audit Requirements Taken from the "Checklist for Consultants Contracts, A Guide for The World Bank Staff," May, 1984. - 220 - Annex 10 Page 2 of 3 20. Reporting Obligations 21. Use of Contract Documents 22. Subcontracts 23. Standard of Conduct 24. Consultant's Authority and Responsibility 25. Professional Liability 26. Insurance 27. Transfer of Skills C. Responsibilities of Client 28. Payment of Compensation a. Maximum Amount Stated b. Method of Payment - Time-Based With Ceiling c. Method of Payment -- Lump Sum d. Method of Payment - Cost Plus Fixed Fee e* Method of Payment -- Percentage of Construction Cost f. Interest on Overdue Payments g. Withholding of Disputed Amounts h. Recovery of Advance Payments 29. Provision by Client of Non-Monetary Contribution 30. Permits and Approvals 31. Price Adjustment 32. Contingency Allowance 33. Rates for Additional Work 34. Consultant's Right to Convert and Repatriate Portion of Local Payments 35. Local Taxation - 221 - Annex 10 Page 3 of 3 36. Rights of Suspension and Termination: ( i) By Client (ii) By Consultant 37. Force Majeure 38. Termination Mechanism (and Payment on Termination) D. Remedies for Parties' Failure to Perform Contractual Obligations (see also Termination) 39. Performance Guarantees 40. Retention of a Percentage of Payments to the Consultant 41. Withholding of Final Payment 42. Penalties for Late Completion E. Resolution of Disputes 43. Informal Mechanisms 44. Formal Mechanisms - 222 - Annex 11 Page 1 of 1 Sample Telex Notification to Selected Consulting Firm(s) TELEX ABC AND PARTNERS RE COLATA PORT MODERNIZATION STUDY. PLEASED TO INFORM YOU THAT YOUR PROPOSAL IS SUITABLE BASIS FOR CONTRACT NEGOTIATIONS WITH NATIONAL PORTS ADMINISTRATION (NPA), SUBJECT TO YOUR CONFIRMING STAFF NAMED IN PROPOSAL ARE AVAILABLE FOR ASSIGNMENT. NPA INTENDS BEGINNING CONTRACT NEGOTIATIONS AT 9:30 A.M. ON MARCH 7, 1983, AT PORT OFFICES, ABLATA. WE ANTICIPATE NEGOTIATIONS WILL TAKE FIVE DAYS. PLEASE NOTE FOLLOWING COLON AAA NPA WOULD APPRECIATE YOUR FIELD PROJECT MANAGER BEING AVAILABLE FOR FIRST TWO DAYS DISCUSSIONS ON WORK PLAN. BBB WE HAVE SOME CONCERN OVER YOUR PROPOSED TRAFFIC FORECAST ASSESSMENT AND WOULD WISH DISCUSS ALTERNATIVE APPROACH TO IMPROVE PROJECTIONS. CCC PLEASE REFER SUPPLEMENTARY INFORMATION FOR CONSULTANT ENCLOSED WITH LETTER OF INVITATION FOR FINANCIAL DETAILS REQUIRED FOR NEGOTIATIONS. DETAILS SHOULD BE SUPPORTED WHERE POSSIBLE BY DOCUMENTATION. DDD WE WOULD ADVISE YOU NOT TO ENTER INTO FIRM FINANCIAL ARRANGEMENTS WITH PROPOSED STAFF UNTIL NEGOTIATIONS ARE COMPLETE. WOULD APPRECIATE ACKNOWLEDGEMENT THIS CABLE WITH NAMES YOUR REPRESENTATIVES ATTENDING NEGOTIATIONS. REGARDS, , INTBAFRAD Annex 12 Page 1 of 2 National Ports Administration Port Improvement Study Sample Contract Negotiations Agenda Date: March 7-11, 1983 Venue: Room C-42 National Port Office Front Street Ablata Time: 9:30 a.m.-4:30 p.m. each day (Lunch one hour) Participants: NPA Mr. J.C. Abu, General Manager Mr. A.L. Khan, Operations Engineer Mr. L.C. Malinde, Chief Accountant Etc. ABC & Partners Mr. D.L. Stephens, Project Director Mr. N.K. Mendes, Project Manager Etc. Tentative Agenda Monday: Draft contract (receipt of document) Discussion on: i) General work plan ii) Hydrological data collection iii) Traffic forecasts - 224 - Annex 12 Page 2 of 2 Tuesday: Discussion on: i) Economic methodology ii) Operations review iii) Other items iv) Staffing v) Government's contribution vi) Work and staffing schedule vii) Tax liability Wednesday: Discussion on: i) Man-month rates ii) Other financial items Thursday: Discussion on: i) Financial matters ii) The contract Friday: Complete negotiations and initial contract Annex 13 Page 1 of I WORK PROGRAM AND TIME SCHEDULE FOR KEY PERSONNEL MONTHS Name Position 1 2 3 4 5 6 7 8 9 10 11 12 Field 'ome Round Trips Total Reports Due/Activities and Duration 1. 2. 3. 5. 6. 7 . - -_-_-_-_- 9. 10. Field Full Time / Part Time - Rone Office Full Time / Part Time Reports Due * Activities Duration Annex 14 Page 1 of 7 Schedule 1 Port Feasibility Study Project Estimated Field Foreign Currency Expenditures (Expressed and Payable in Canadian Dollars) Agreed Est. Number Billing Est. Name Position of Months Rate Amount J. Smith Team Leader 24 9,600 230,400 S. Jones Chief Economist 12 8,628 103,536 A. Khan Trans. Economist 8 7,900 63,200 44 397,136 Annex 14 Page 2 of 7 Schedule 2 Port Feasibility Study Project Estimated Field Foreign Currency Expenditures (Expressed and Payable in Canadian Dollars) Agreed Est. Number Billing Est. Name Position Man Hours Rate Amount B. Lee Project Director 192 84 16,128 J. Hodges Systems Analyst 168 54 9A072 138 25,200 Annex 14 Page 3 of 7 Schedule 3I Port Feasibility Study Estimated Foreign Currency Expenditures (Expressed and Payable in Canadian Dollars) I I Est. Est. Est. Number Unit Cost Amount 1. Economy Class, Round Trips a) Staff Toronto-Bangkok 1 3,300 3,300 London-Bangkok 2 2,200 4,400 b) Dipendents London-Bangkok 4 2,200 8,800 2. Subsistence Allowance During Travel Staff, 2 nights 50 100 3. Shipments a) Air Freight 3 families 1,000 3,000 b) Sea Freight 3 families 3,000 9000 28,600 Note: With exception subsistence, above items reimbursable at actual cost. Annex 14 Page 4 of 7 Schedule 4 Port Feasibility Study Estimated Foreign Currency Expenditures - Other Reimbursable Costs (Expressed and Payable in Canadian Dollars) Est. Est. Est. Number Unit Cost Amount 1. Report Printing - - 10,000 2. Four-Wheel Drive Vehicles 2 12,000 24,000 3. Current Measuring Equipment - 4,000 4,000 4. Inflatable Boats 2 1,300 2,600 5. Outboard Motors 2 700 1,400 6. Miscellaneous 4,000 46,000 Note: Reimbursement for all items at actual cost. - 230 - Annex 14 Page 5 of 7 Schedule 5 Port Feasibility Study Estimated Foreign Currency Expenditure (Expressed and Payable in Canadian Dollars) Summary C$ Field 397,136 Home Office 25,200 International Travel 28,600 Other Reimbursables 46,000 Total 496,936 Contingency/i (7%) 35,064 Contract Foreign Currency Maximum 532,000 Note: Contingency does not provide for price escalation, as such escalation is already allowed for in rates. - 231 - Annex 14 Page 6 of 7 Schedule 6 Foreign Currency Payment Schedule (Expressed and Payable in Canadian Dollars) Cumulative Amount Total 1. 53,000 53,000 2. 25,000 78,000 3. 20,000 98,000 4. 20,000 118,000 5. 22,000 140,000 6. Etc. 24. 12,000 470,000 25. - 470,000 26. 26,936 496,936 Total 496,936 i I - 232 - Annex 14 Page 7 of 7 Schedule 7 Port Feasibility Study Estimated Local Currency Expenditures (Expressed and Payable in Baht) Est. No. of Days Unit Rate Est. Amount 1. Subsistence Allowance Bangkok 1,320 1,300 1,716,000 in-country Travel Allowance 60 200 12,000 Sub-Total 1,728,000 2. Local Travel 60,000 3. Local Office Expenditures i) Office Rent @B70,000/ Month 1,680,000 ii) Secretary @B10,000/ Month 240,000 4. Miscellaneous 40,000 Total 3,748,000 Contingency (10%) 375,000 Contract Local Currency Maximum 4,123,000 - 233 - Annex 15 Page 1 of 3 Selection Activities for Bank-Financed Contracts Typical Time Ranges Time (in Weeks) A. Selection Schedule S- Prepare Selection Schedules 0.2 I B. Prequalification/ (if prequalification is to be used) I -- Prepare advertisement 1.0 - Advertisement to Bank (Telex) 0.2 -- Bank Agreement (Telex) 0.4 -- Publish Advertisement 7.0 -- Consultants Respond 4.0 - Evaluate Responses and Prepare Short List 2.0 14.6 C. Preparation - Draft Terms of Reference 1.0c0/ -- Estimate Cost 1.00 10/ -- Define Selection Procedure 1.00 10/ -- Prepare Draft Contract 2.Oc-- -- Draft Letter of Invitation 1.00--/ -- FAC&age to Bank (allow for postage) 1.5 -- Bank Comments or Agreement 2.0 5.5 9/ Prequalification is not a requirement for Bank-financed assignments. 10/ Concurrent activities. - 234 - Annex 15 Page 2 of Time (in Weeks) D. Firms - Prepare Short List 2.011/ -- Send Short List of Firms to Bank (Telex) 1.0 - Bank Agreement (Telex) 1.0 4.0 E. Invitation and Evaluation - Invite Proposals (allow for postage) 1.5 - Consultants Prepare Proposals 3.5 - Consultants Send Proposals to Project Agency 1.5 (Copies to Bank-Optional) - Project Agency Evaluates Proposals 4.0 - Project Agency Confirms Best-Ranked Firm 2.0 -- If Copies Not Sent Previously, Winning Proposal 1.5 Sent to Bank (allow for postage) - Bank Review and Comments (by Telex) 1.0 15.0 F. Contract Negotiations - Firm Invited to Negotiations (by Telex) 2.0 -- Contract Negotiations 2.0 - Project Agency Agreement to Draft Contract 2.0 - Other Government Agency Agreement 2.0 - Draft Contract to Bank (allow for postage) 1.5 -- Bank "No Objections" to Contract 1.0 - Contract Signature 1.0 -- Consultants' Mobilization 4.0 - Assignment Begins - II unt .nnted if prequalification used. 15.5 - 235 - Annex 15 Page 3 of 3 Hence: Total time, with prequalification-about 53 weeks. Total time, without prequalification-about 40 weeks. -236- мr. iи 'ah��•и ) Sвlессlт 5двдilе-lWс-F1пв�д Ст[гаси ---------г--- Е(� � 1 1 � � � 1 �. � � � etClvitla� (Wв) 1!)� + 51 6 7 д 9 lU U �2 U 10 l5 lo U ltl l9 IO ц!2 2l 24 ц гЬ 11 D1 29 !U )1 ц 11 Зь 15 b!7 Р fi'., .1 rs�.f «.i л.) .w W S1 н it А. 5В1RСС1аП SdYtWe I � . � � � ' I ' I I � I I� I I � В. fТМ�лцflьв[1т Yi I I I 7 � � � �, 1 ([f дсqwцftгвс4м t� и � � � � utd )--Рtервп адкR �пС � � I I I I I � I( I I( i I; � � � 1 1 I -.1дкКtiидеп[ [о eiJc ((еlех) I � I � f � � I I � � I - 6vYc f (ТС1е,х) - WDцah Mкctta�nc � - иwаtсепса - tvelW[B Wир+wи s7d Угфаге SТnп Ltп[ 1 с. егервгыlоп i � ' - 1йаЕс Tetms of юеiегепга I - Еы1ви Casc - ие[Ем �еАхит Ргооадисы игвfс г•апnес - Drafc lвссег оЕ Imiceclan - Расlгq4е)гл ВагУ (allai Wr 1 I - BNc Сат�и or с D. f(rm i � � 1 I - S7fort Lta[ I ' - �НН 51UR LL9C оЕ PL[i СО в,пЕ (т�) - flвik Те1е:) Е. Lnduclm ад Еи4ис3т I � - lnvlce Ropoвals (цlаг foc I � ) - Careulcsas - глоиlсапе 5ед Pnqaealв т Projec[ А�псУ (Иn(es и иlАс � - ltv,ec[ иFМУ rывlиагев - R�jhY А�ку СлгIЕ1[т Вев[- Че(Уо0д tУгт - ц (срlов !iк 5епс Ргнv(иие1У. ullгntгg PcWoeлl х�п гл ЕШk I (aUcv Еог ) - tlmk Pevtsr епе Га�ои (Ьу � � Те1аг) F. Гепегаее tkgoeloew�ь 1 i I - F1rn invi[e7 т Иеg�сцсlлre � I I � ( Tekx) - сап[тас[ -�7��У� � RлfC CanCTSC[ - ОсЬ@[ СQ/есп�ПС А�псУ �ив- ФLц - D[еЕ[ ГQКрСс OD Хц�[ (B1LW Еог - 8�веис �Ио ObJealo�s т Слцгесс - Сапсгве[ - tawlfa�[в lЬМ1lтк�т 9� РгаqицЕцвдап 3е пк е геqiдг�с for Ви1с-(3еsид easlga�as. � Annex V Page I of 2 Selection Activities for UNDP-Financed, Bank-Executed Contracts Time Activity (in Weeks) Securing Funds12/ Resident Representatives Agreement 1.0 Project Document Drafting 4.0 Project Document Agreement by Government, UNDP and 12.0 and Bank 12/ 17.0-;= Consultant Selection Draft Terms of Reference 2.0 Terms of Reference Agreement 3.0 i) by Government ii) by UNDP Short List Preparation 1.0 Selection Committee 1.0 Government "No Objections" 1.0 Invite Proposals (allow for postage) 1.5 Consultant's Visit and Prepare Proposals 3.5 L/ If prospect of UNDP financing is reasonably certain, these activities can run concurrently with consultant selection. Annex 17 Page 2 of 2 Consultants Services Selection Activities for UNDP-Financed, Bank-Executed Contracts Time Activity (in Weeks) -- Bank Receives Proposals 1.5 -- Evaluation by Evaluation Committee 2.0 - Selection Committee 1.0 - Firm Invited to Negotiate 2.0 -- Contract Negotiations 1.0 - Contract Signature 1.0 -- Consultant's Mobilization 4.0 -- Assignment Begins TOTAL -- about 25.0 weeks - .._ - "" й �� �� � . � � . '.� � � м в � � н дC а � � ёа iq Я � Я � в�1 Я � � Я i� Я � . Я Я � � � � � �1 н .i а � м � � ь ; о Н О� � 1� II `О i � а i 1 `� 1 и I �1 I i /'� II � ' � I � � i� � у/ F � � � в � � + � � � С �1 � pi � � О � � � � • � �л�� �� � �� � ��� i � � � � � 1 11 1 1 i11 1 1 11 1 1111 ! . Annex 19 Page I of 2 Consulting Services Mission Checklist Prior to Mission 1. Assemble following sample or draft documents to give to borrower. Terms of Reference (TOR) Letter of Invitation Supplementary Information for Consultants Contract Evaluation Sheets Rate Breakdown Sheets Selection Schedules 2. Staff should also take: copies of the "Guidelines on the Use of Consultants"; copy of Bank Staff Handbook on the Use of Consultants; Staff Ctiecklist for Consulting Contracts. During Mission 3. During mission the Guidelines, the seven selection steps and the documents should be discussed in detaile Staff should help the borrower: - draft the TOR, the letter of invitation (with Supplementary Information for Consultants); - draft the contract to be used; determine the selection procedure to be used (including the evalitation criteria); prepare the assignment cost estimate; prepare the time schedule for the selection process; determine bow the short list of firms will be prepared. - 241 - Annex 19 Page 2 of 2 4. Bank staff may also wish to conduct an informal seminar with the borrower's agency staff who will be involved in the selection process. An audio visual presentation (in English, French or Spanish) is availeble from EDI for Bank staff use. Transparencies and notes for seminar use are also available from the Regional Technical Assistance Unit or the Projects Policy Department Procurement Unit. Contact the Technical Assistance Unit for assistance two weeks prior to the mission. - 242 - Annex 20 Page 1 of 1 Development of Local Firms VOLUNTEER EXECUTIVE AGENCIES Country ORGANIZATION United States International Executive Service Corps, IESC 622 Third Avenue, New York, New York, 10017, USA Canada Canadian Executive Service Overseas, CESO Suite 350, 1130 Sherbrooke Street W, Montreal P.Q. H3A 2MB, Canada United Kingdom British Executive Service Overseas, BESO 116-119 Pall Mall, London SW1Y 5ED, United Kingdom France Echanges Et Consultations Techniques Internationaux ECTI, 3 Rue de Logelbach, F-75017 Paris, France Switzerland Senior Expert Corps, SEC Swiss Contact, Bellerviestr. 44, CR-8008 Zurich, Switzerland Japan Japan Expert Services Abroad, JESA The Netherlands The Netherlands Management Consultancy, NMCP P.O. Box 90730, The Hague 2509 LS, The Netherlands �'� ����� ������������.� � � R � � �� � � � в � �� � � � �� � � �� �� �� � � � . „�,�g , � � ���� � � �, �� �� �� � � �� ��,�� ��� ���� � � �� �� ��� ,�� � в � �' � ����������� - � � � �� � i i � � i � �� + � � . $ � � � �� � �����,� � ���� � � � �� ���� � � � . � � �� ��. � а � r � � � �� � �� �� ���� � �� � � � � � а � .. , . � . . '� • � � 1 � �� 1 � 1 1 � t 1 +�� � в п � .i � � � � п � � � � � ' � � я � i i i � �� i � i i �� i i i i � 3 � � � � � � � � � I I $ I � I � I � I I � I � I I I I I � �� . � �g+ � � ��� 1 1 �� � � i � ' � � 1 � I � � � f I I��� � I I I I � � I ( I I ( ( I � �� � �� � �' �� r � i i i i� i i i i i i i i i i i i i '�� � �� � (�� а - 244 Annex 22 Page I of 2 Sample Memo Calling Selection Committee Meeting TO: Projects Directors FROM: Division Chief SUBJECT: UNDP-Financed Consulting Assignment Colata Feasibility Study of Maxas Irrigation Scheme Selection of Consultants 1. This memorandum is to recommend that, in accordance with OPM 2.50, you call a selection committee meeting to select a short list of consulting firms to be invited to submit technical proposals to carry out the above consulting assignment. Background (one para.) 2, The potential of the Haxas irrigation scheme was identified by the Government of Colata and the Bank, during a recent agricultural sector mission. The possible scheme covering 50,000 hectares would entail a run Of the river operation v-ith headworks on the Bly River. The study would cover the technical and economic feasibility of the scheme and would address such issues as water user charges, creation of cooperatives and credit institutions and improved transportation in the area. The study terms of reference are attached. 3. The Government has asked, and UNDP has agreed, to finance the study at an estimated cost of $550,000. The Bank has agreed to be the executing agency. The Project Document has been drafted by the Bank and is expected to be signed by Government and UNDP next month. - 245 - Annex 22 Page 2 of 2 4. The study, which is expected to take nine nDnths, will be undertaken by a consulting firm working closely with the Department of Irrigation. The attached long list of 14 consulting firms was prepared from the Bank's DACON system, together with the inclusion of four firms who have written expressing their interest in the study. 5. I recommend that you call a selection committee meeting to prepare a short list of six firms and, besides yourself as chairman, that the committee comprise: 6. If you agree, I will arrange the meeting at a date and time of your convenience. Attachments cc: Messrs. I - 246 - Annex 23 Page 1 of 2 Sample Memo Recording Selection Committee Meeting (Short List Selection) TO: Files FROM: Project Officer SUBJECT: UNDP-Financed Consulting Assignment Colata Feasibility Study of Maxas Irrigation Scheme Selection of Consultants 1. A Selection Committee meeting, chaired by (Projects Director), met on November 3, 1984, to select a short list of consultants to be invited to submit proposals for the above assignment. The Committee comprised: , , , , 2. After considering the long list of 14 consulting firms proposed by Agriculture Division 1, the Committee selected the following six firms: Name Nationality In choosing this list, the Committee took into account the need for firms experienced in sandy soil irrigation, with the list having a wide geograph- ic spread, and the desire to include at least one firm from a developing country. - 247 - Annex 23 Page 2 of 2 3. The list was telexed to the government for its no objections on November 3, 1984. Those firms expressing interest and not included on the list have been notified in writing. Cleared with and cc: Messrs. cc: Messrs. I 248 - Annex 24 Page 1 of 2 After Proposal Evaluation Sample Memo Calling Selection Committee to Choose a Firm for Negotiations TO: Projects Director FROM: Division Chief SUBJECT: UNDP-Financed Consulting Assignment Colata Feasibility Study of Maxas Irrigation Scheme Selection of Consultants 1. The Bank, as executing agency for the above project, invited proposals from the six consulting firms selected by the Selection Committee held November 3, 1984. These proposals were received around January 5, 1985, and were evaluated by Messrs. , , , and MS. . The marking system used was as intimated to the consultants in the Letter of Invitation. The summary sheet of the evaluation is attached. 2. The firms scored the following marks: Name Nationality Points A Canada 76.7 B France 76.1 C USA 72.1 D Korea 69.4 E United Kingdom 65.6 249 - Annex 24 Page 2 of 2 While the urks for firms A and B are close, firm A demonstrated a clear understanding of the assignment and their proposed project manager has been employed on previous assignments in Colata. We, therefore, recommend that the Selection Committee invite firms A to negotiate a contract with the Bank. 3. If firm A is invited to negotiate a contract, it should be asked to replace its proposed agriculture credit specialist with one who has experience in West Africa. 4. I recommend that you call a Selection Committee meeting to consider the evaluation and select a firm for contract negotiations. Besides yourself as chairman, I suggest the Committee comprise: 5. If you agree, I will arrange the meeting at a date and time of your convenience. I Attachment cc: Messrs. Annex 25 Page 1 of 1 Sample Memo Recording Selection Committee Decision on Firm to be Invited to Negotiate Contract TO: Files FROM: Project Officer SUBJECT: UNDP-Financed Consulting Assignment Colata Feasibility Study of Maxas Irrigation Scheme Selection of Consultants 1. A Selection Committee meeting, chaired by (Projects Director), met on January 19, 1985, to review the results of the evaluation of proposals submitted by the short list of six firms selected at a previous Selection Committee meeting on November 3, 1984. 2. The Selection Committee concurred with the Evaluation Committee's recommendation that firm A be invited to negotiate a contract with the Bank. The Selection Committee also agreed that the invitation was conditional on firm A putting forward a replacement experienced in West African conditions for the proposed agriculture credit specialist. The c.v. of the replacement should be submitted prior to negotiations. 3. Agriculture Division 1 agreed to inform the firms ranked 3 to 6 that they had not been invited to negotiate a contract, with an indication to each of the reasons why their proposal was not successful. The second- ranked firm would be informed after the completion of successful negotia- tions with the first-ranked firm. If negotiations cannot be successfully completed with the first-ranked firm, then the second-ranked firm, firm B, will be invited to negotiate a contract. In that event, a condition of negotiation would be that firm B adjust its team such that it include greater expertise in soil salinity. Cleared with and cc: Messrs. cc: Messrs. Annex 26 Page 1 of 1 Sample of Letter to Unsuccessful Firms Firm C Dear Sir: Colata: Feasibility Study of Maxas Irrigation Scheme We would like to thank you for submitting a proposal to carry out the above study. The Selection Committee has now met, and I regret to inform you that another firm has been invited to negotiate a contract. Your proposal was fully responsive to the terms of reference and was considered to be well thought out, with a good approach to the assignment. Unfortunately, the staffing of the first-ranked firm was considered superior to yours and displayed more overseas experience. We would like to thank you for the time and effort which you took in preparing your proposal, and hope that there will be another opportunity when the Bank and your firm might collaborate on a project. Sincerely yours, Annex 27 Page 1 of 3 The Twinning of Agencies 27.01 The "twinning" of institutions in developing countries with simi- lar, but more mature organizations in other parts of the world has proved to be a very effective way to transfer know-how, train staff, and build up management capabilities. Professional relationships between operating entities offer advantages of complementarity and flexibility over time. The entity supplying technical assistance draws upon its own in-house resources in the functional areas that are relevant to the operation of such an entity and offers services, as needed, to the complementary functional areas in the twinned institution. 27,02 In some cases the twinning arrangement may need to be backed up by a third party, such as a consulting firm, to provide the worldwide ex- perience or access to the latest technological developments that an oper- ting entity may nst always possess. Technical assistance can be provided in a variety of ways--for example: specialists from the supplier organiza- tion may work with the client agency as advisers or in-line positions for short- or long-term assignments, or they may visit the client periodically according to an agreed schedule, say, two weeks every three-to-six months; the client's management and other staff may visit the supplier's plant; and the training offered can be formal, informal, or on-the-job, and can be carried out at the client's or the supplier's facilities (or at both places), and is usually available at various skill and technical levels. Depending on the terms of the contractual agreement, a client agency has the flexibility to define and alter its work program over time, addressing a variety of issues while maintaining a professional relationship with the technical assistance supplier. For the client, a relationship with the Annex 27 Page 2 of 3 twin allows "hands on" learning in a variety of ways, from a credible source--another entity actively and successfully engaged in the same work as the client. 27.03 Twinning arrangements very considerably, depending on whether the entities are public or private institutions, utilities, or universities; the arrangements also depend on whether the entity is actively seeking TA contracts or is only responding to requests on an ad hoc basis. Some private entities have set up subsidiaries of the parent group, bid on contracts to provide specific services over a limited time period, as would a consulting firm, and operate on a for-profit basis. Other entities sign letters of agreement that can lead to long-term cooperation, providing services at cost or close to it. Still other organizations provide a choice of administrative and cost arrangements, depending on the nature of the task at hand. Once the initial contractual assignment is completed, twinned institutions frequently maintain informal links with each other, establishing long-term relationships and possibilities for follow-up or additional contracts. 27.04 The entities that have established professional relationships of this kind include railways, power companies, water authorities, port authorities, irrigation agencies, universities, research centers, manage- ment institutes, forestry and agricultural institutes, dairy development boards, municipalities, national development banks, and mortgage banks. National and international associations have promoted the twinning concept; these include the International Water Supply Association and the Interna- tional Association of Ports and Harbors. On the industry side, twinning most often takes the form of joint ventures, with some type of equity participation involved. Annex 27 Page 3 of 3 27.05 Groups offering technical assistance under twinning arrangements are not exclusively from North America and Europe. Among the many examples from around the world are the Port of Singapore, the National Irrigation Administration of the Philippines, Indian Railways (RITE), and the Tunisian Water Authority (SONEDE). Twinning among developing country entities can increase the likelihood of transferring appropriate technologies, as well as enhance the opportunity for collaboration between the suppliers and the recipients of TA. For a developing country entity providing TA, a twinning arrangement can enhance its prestige, earn foreign exchange, and provide professional and personal rewards to its staff. Alphabetical List of Readings* Access to Specialized Foreign Bar Chart: Work Program and Time Expertise, Lack of. . . . . . 131 Schedule for Key Personnel, Annex 13. . . . . . . .* 225 See also Annex 20: Development of Local Firms: Volunteer Breakdown of Agreed Fixed Rates in Executive Agencies. . . . . 242 Consultants' Contracts: (L) Services in Field and (ii) Access to Training, Lack of. . 126 Services in Home Office. .208-209 Adequacy for thb Project. . . . .66 Budget, Cost Estimate. . . . . . 16 Advisory Services and Construction Calculation of Man-Month Rates. . Supervision (TORs). . . .. . .33 . . . . . . . . . . . . . 105-107 After Proposal Evaluation--Sample Checkliat (Mission), Consulting Memo Calling Selection Committee Services, Annex 19. . . . 240-241 to Choose a Firm for Negotia- tions, Annex 24. . . . . .248-249 Combining Technical Score and Price 75-76 Agriculture. . . . . . . . . . . 45 Commenting on Consultants in PCRs Air Fares and Other Reimbursables . . . . . . . . . . . . . 143-144 . . . . . . . . . . . # 114 Commitment. . . . . . . . . . . 134 Amendment Procedures. . . . . . .89 Comparing Prices. . . . . . . 74-79 Appropriateness. . . . . . . .44-45 Comparing Prices Above a Set Approval by Bank Staff (Short List) Technical Score. . . . . . . . 75 . . . . . . . . . . . . 53-54 Comparing Prices of Firms Within a Assignment Description (LOI). . .55 Certain Percentage of the Top Technically-Ranked Firm. . . . 75 Assignment Pressure. . . . . . .135 Compiling a Short List. . . . 50-51 Assignment Suitability for Counter- part Arrangements. . . . . . .135 See also Annex 27: The Twinning of Agencies. o . * 252-254 Association of Retired Profession- als. . . . . . . . . . . . . . .9 Completing Negotiations. . . . .116 Associations. . . . . . . . . . . 8 See also Annex 14: Examples of Contract Payment Schedules: 1 Attachments (LOI). . . . . . .55-56 thru 7. . . . . . . . . 226-232 Background (TOR). . . . . . . . .26 Constraints on Development. 122-132 Bank Negotiating Team. . . .153-154 Constraints Within the Profession . . . . . . . . . . . 0 125-132 Bank-Executed, UNDP-Financed Projects, Matrix of Staff Respon- Consultant's Authority. . . . . .90 sibilities, Annex 21. . . . . 243 Consultant's Tax Status. . . . . 62 Note: Broad-typed headings designate main chapter headings. - 1-2 - Consultants' Contracts . . . .81-97 Contract Negotiations . . . .98-116 See also Annex 10: Summary of See also Annexes 11 and 12: Contract Checklist. . . 219-221 Annex 11: Sample Telex: Notifi- Consultants' Proposals-- Personnel cation to Selected Consulting Evaluation Sheet, Annex 9.2. .217 Firm(s) . . . . . . . . . . 222 Consultants' Proposals--Personnel Annex 12: Typical Agenda: Sample Evaluation Sheet (Completed Contract Negotiations Agenda. Form), Annex 9.3. . . . . . . 218 . . . . . . . . . . . . 223-224 Consultants' Proposals--Summary Contract Payment Schedules: 1 thru Evaluation Sheet, Annex 9.1. .216 7 (Examples), Annex 14. . 226-232 Consulting . . . . . . . . . . .1-2 Contract, The. . . . . . . . . . 17 Consulting Firms . . . . . . . 3-10 Contributions. . . . . . . . .90-91 See also Annexes 1 and 2: Cost Estimate (Budget). . . . . .16 Annex 1: The International Feder- Cost Estimate, Consulting Services ation of Consulting Engineers --An Example, Annex 5. . .189-192 (FIDIC) and Its Member Associa- tions. . . . . . . . . .166-168 Cost-Plus-Fixed-Fee Contract. 85-86 Annex 2: The Latin American Counterpart Relationship. . 133-135 Federation of Consulting Engineers (FELAC) and Its Data and Assistance to be Provided Member Associations. . . . .169 by the Project Authority (TORs). . . . . . . . . .* 34-35 Consulting Services Cost Estimate, An Exawole, Annex 5. . . .189-192 Details of Selection Procedure. .57 Consulting Services--Mission Check- Development of Local Firms . . . . list, Annex 19. . . . . . 240-241 . . . . . . . . . . . . . 119-132 Contingencies. . . . . . . .113-114 Development of Local Firms: Volun- teer Executive Agencies, Annex Contingency Allowance. . .40-41, 92 20. . . . . . . . . . . . . . 242 See also: Example: Annex 5: Distinction between Turnkey and Consulting Services Cost Professional Services Contracts. Estimate, An Example. . 189-192 . . . . . . . . . . . . . . 86-87 Contract Checklist Summary, Annex Domestic Firms and Joint Ventures. 10. . . . . . . . . . . . 219-221 * . o . . . . . . . . . . . . 149 Contract Components. . . . . .87-88 Draft Terms of Reference for a Port Modernization Study, An Example, Contract Financing. . . . . 121-122 Annex 4. . . . . . . . .173-188 Contract is Silent. . . . . . . .95 Duration of Assignment. . . . . .38 Contract Mentions Liability. . . 95 Education. . . . . . . . . . . . 45 - 1-3 - Eligibility. . . . . . . . . . . 10 See also Annex 7.1: An Example of "Supplementary Information Energy. . . . . . . . . . . . . .46 for Consultants". . . . 199-205 Environment, Health, Population. 46 Financial Negotiations. . . 101-110 Estimating a Man-Month Rate. .38-39 See also Annexes 13 and 14: Estimating Consultant Services' Annex 13: Bar Chart: Work Program Costs . . . . . . . . . . . 36-41 and Time Schedule for Key Personnel . . . . . . . . . 225 Evaluating Technical Proposals. .63 Annex 14: Examples: Contract Evaluation . . . . . . . . .142-144 Payment Schedules: 1 thru 7. 226-232 Evaluation Example. . . . . . 68-73 Financing Consultants'Services See also Annexes 9.1-9.3: . . . . . . . . . . . . . . 19-21 Annex 9.1: Consultants' Firms Owned by Manufacturing or Proposals--Summary Evaluation Contracting Companies. . . . . .7 Sheet. . . . . . . . . . . .216 Firms Partly Owned by Governments.4 Annex 9.2: Consultants' Pro- posals--Personnel Evaluation Fixed Annual Percentage. . . . .111 Sheet. . . . . . . . . . .217 General Qualifications. . . . 65-66 Annex 9.3: Consultants' Pro- posals--Personnel Evaluation Geographic Origins of Invited Firms Sheet (Completed Form). . . 218 . . . . . . . . . . . . . . 51-53 Example of "Supplementary Infor- Government Corporations. . . . . .4 mation for Consultants," Annex 7.1. . . . . . . . . . . .199-205 Government Departments and Public Sector Organizations. . . . . . 5 Experience. . . . . . . . . . . .64 Government Staff as Line Members. Failure to Organize an Effective . . . . . . . . . . . . . 135-136 Professional Association. . . 132 Government's and UNDP's "No Fee. . . . . . . . . . . . . . .104 Objections". . . . . . . . . .149 FELAC: Latin American Federation Governments' Attitudes and of Consulting Engineers and Its Practices. . . . . . . . .122-125 Member Associations, Annex 2 .169 Government's Role During FIDIC: International Federation Execution. . . . . . . . .152-153 of Consulting Engineers and Its Member Associations, Annex 1. . Group Ratings. . . . . . . . . . 71 . . . . . .. .. .166-168 Groups of Firms. . . . . . . . . .7 Final Mark. . . . . . . . . . . .72 Home Office Work. . . . . . . . .39 Financial Information Required of the Firm. . . . . . . . . . . .57 Inability to Attract or Retain Qualified Personnel. . . . . .127 - 1-4- Inception Report (TORs). . . . . 32 Language Capability and Experience in the Region. . . . . . .66-67 Indemnification Clause. . . . . .96 Late Payment Penalties. . . . . 115 Individual Firm. . . . . . . . . 16 Latin American Federation of Con- Industry. . . . . . . . . . . 45-46 sulting Engineers (FELAC) and Its Member Associations, Annex 2: Insurance. . . . . . . . . . .96-97 . . . . . . . . . . . . . . 169 International Air Fares. . . . . 39 Letter of Invitation (LOI). . . . . . . . . . 16-17, 55-62, 150 International Federation of Consul- ting Engineers (FIDIC) and Its See also Annexes 7 and 8: Member associations, Annex 1. . . . . . . . . . . . . . . 166-168 Annex 7: Sample Draft Letter of Invitation (LOI) (for Unpriced International Travel. . . . 107-108 Proposals). . . . . . . 194-209 Invitation to Negotiate. . .151-152 Annex 8: Sample Draft Letter of Invitation (LOI) (Where Price See also Annex 7-1: An Example will be a Selection Factor). . of "Supplementary Information . . . . . . . . . . . . 210-215 for Consultants". . . . 199-205 Level of Effort (LOI). . . . . . 57 Irregular Practices in Selecting Consultants. . . . . . . .122-123 Liability. . . . . . . . . . . . 95 Joint Venture Arrangements. . . .88 Limitation of Liability. . . .95-96 Joint Ventures. . . . . 60, 129-131 Limiting Payment Withholding, . . 115-116 Lack of Access to Specialized Foreign Expertise. . . . . . .131 Listing of Associations of Retired Professionals, Annex 20. . . .242 See also Annex 20. Local Costs. . . . . . . . . . .40 Annex 20: Development of Local Firms: Volunteer Executive Local Firm's Capability. . .119-120 Agencies.. ........242 Local Firms' Advantages. . .120-121 Lack of Access to Training. . . 128 Local Items. . . . . . . . .109-110 Lack of Commercial Knowledge and Professionalism. . . . . .127-128 Local Law. . . . . . . . . . . . 94 Lack of Experience and Difficulty Local Laws and Regulations. . . .58 in Getting It. . . . . . .125-126 Local Subsistence Costs. . . . .114 Lack of Work Continuity and Cash Flow. . . . . . . . . . . 126-127 Low Rates. . . . . . . . . .123-124 Language Ability and Experience in Lump-Sum Contracts. . . . . . 83-85 Region. . . . . . . . . . . . .71 Man-Month Costs. . . . . . . . .113 - 1-5 - Man-Month Rates, Calculation of. Personnel Evaluation Sheet, Con- . .. . . . . . . . . . 105-107 sultants' Proposals--Annex 9.2. . . . . . . . . . . . . 217 Marking System, The. . . . . .67-68 Personnel Evaluation Sheet Matrix of Staff Responsibilities: (Completed Form), Consultants' Bank-Executed, UNDP-Financed Proposals--Annex 9.3. . . . . 218 Projects, Annex 21. . . . . . 243 Per Diem Costs or Subsistence. . 40 Mission Checklist, Consulting Services, Annex 19. . . . 240-241 Performance Schedule. . . . . . .89 Mobilization and Advance Payments. Personnel Recruitment Agencies. 6-7 115 Personnel. . . . . . . . . . .65-67 No Objections (Government's and UNDP's). . . . . . . . . . . .149 Physical Contingency. . . . . . 114 Non-Government Organizations (NGOs) Planning and Mission Checklist .117 See also Annexes 15-16-17-18-19: Non-Profit Organizations. . . . . 5 Annex 15: Selection Activities Notification to be Selected for Bank-Financed Contracts. Consulting Firm(s), Sample Telex, . . . . . . . . . . . . 233-235 Annex 11. . . . . . . . . . . 222 Typical Time Ranges. . . . .233 Objectives. . . . . . . . . . . .26 Annex 16: Selection Schedule-- Office and Engineering Equipment.39 Bank-Financed Contracts. . .236 Open Price Envelopes of All Firms Annex 17: Selection Activities Considered Technically Capable for UNDP-Financed, Bank- and Take Lowest Price. . . . . 77 Executed Contracts. . . 237-238 Origins of Contracts. . . . . 81-82 Annex 18: Selection Schedule-- UNDP-Financed, Bank-Executed Other Reimbursable Items. . 108-109 Contracts. . . . . . . . . 239 Other Sources of Expertise. . . 7-8 Annex 19: Consulting Services-- Mission Checklist. . . .240-241 Other Sources. . . . . . . . .20-21 Preference for In-House Technical Overhead Costs. . . . . . . . . 155 Departments. . . . . . . . . .125 Overseas or Inducement Allowance. Preference for Public Sector Firms . . . . . . . . . . . . . . . 104 . . . . . . . . . . . . . . . 125 Payment Delays. . . . . . . . . 125 Preliminary Estimates. . . . .36-37 Payment Provisions.110-111, 115-116 Preparing a Detailed Estimate for a Man-Month Assignment. . . . 37-38 Payment Schedules. . . . . . . .110 Price: Percentage Contracts. . . . . . .85 1-6 - Comparing Prices Above a Set Report Reproduction. . . . . . . 40 Technical Score. . . . . . . 75 Reports. . . . . . . . . . . . . 32 Comparing Prices of Firms Within a Certain Percentage of the Top Role of Bank Staff-Borrower Cos- Technically-Ranked Firm. . . 75 tracts, The . . . . . . . . 15-18 Comparing Prices. . . . . . 74-79 Role of Bank Staff in Evaluation . . . . . . . . . . . . . . . 77-79 Price Adjustment. . . . . . . . .91 Role of Bank Staff in UNDP- Price Escalation. . . . . . 111-113 Financed and Bank-Executed Projects, The . . . . . . 145-160 Price Variations Tied to Indices. . . . . . . . . 112-113 See also Annex 21: Matrix of Staff Responsibilities: Price/Point Comparicon. . . . . .77 Bank-Executed, UNDP-Financed Projects. . . . . . . . . . 243 Private Limited Companies. . . . .4 Salaries. . . . . . . . . . 154-155 Private Partnerships. . . . . . . 3 Sample Advertisement for Letters of Procedures to Safeguard Equity. . Interest, Annex 6. . . . . . .193 * .. .. .. . . .42-44 Sample Contract Negotiations Progress Reports (TORs). . . . . 33 Agenda, Typical Agenda, Annex 12. . . . . . . . . . . . 223-224 Project Document (PD) and Budget. 146 Sample Draft Letter of Invitation (LOI) (for Unpriced Proposals), Proposal Evaluation . . . . . 63-80 Annex 7. . . . . . . . . .194-209 Proposal Evaluation and Selection Sample Draft Letter of Invitation of Winning Firs. . . . . . 150 (LOI) (Where Price will be a Selection Factor), Annex 8. . See also Annex 24: After . .210-215 Proposal Evaluation-- Sample Memo Calling Selection Com- Sample Memo Calling Selection mittee to Choose a Firm for Committee Meeting, Annex 22. . Negotiations. . . . . 248-249 . . . . . . . . . . . . . 244-245 Proposal Cvaluation. . . . . . . 17 Sample Memo Recording Selection Committee Meeting--Short List Proposal Submission9 . . . . . . 59 Selection, Annex 23. . . .246-247 Public Companies. . . . . . . . . 4 Sample Memo Calling Selection Committee Meeting to Choose a Qualifications and Experience. .134 Firm for Negotiations, After Proposal Evaluation, Annex 24. Rates for Additional Work. ..92 . . . . . . . . . . . . . 248-249 Relationship with Manufacturers or Sample Memo Recording Selection Contractors. . . . . . . . .58-59 Committee Decision on Firm to be Invited to Negotiate Contract, Report for Selection Committee. .73 Annex 25. . . . . . . . . . . 250 - 1-7 - Sample of Letter to Unsuccessful Selection Schedule--UNDP-Financed, Firms, Annex 26. . . . . . . .251 Bank-Executed Contracts, Annex 18 239 Sample Telex: Notification to Selected Consulting Firm(s), Seven Steps to Select a Consulting Annex 11. . * . . . . . . . . 222 Firm . . . . . . . . . . . .13-14 Scope of Work (TOR). . . . . .27-29 Shipping of Personal Effects. . .39 Selection Activities for Bank- Short List of Firms. . . . . . . 16 Financed Contracts, Annex 15. . 233-235 Short List Selection Committee Meeting Record, Sample Memo, See also Annexes 22, 23, and 25: Annex 23. . . . . . . . . 246-247 Annex 22: Sample Memo Calling Short List, The . . . . . . . 49-54 Selection Committee Meeting. . . . . 244-245 Short Lists of Consulting Firms. . . . . . .. .. .147-149 Annex 23: Sample Memo Recording Selection Committee Meeting-- Skills Transfer. . . . . . . . .136 Short List Selection. . 246-247 Skills Transfer to Local Consulting Annex 24: Sample Memo Calling Firms. . . . . . . . . . .136-138 Selection Committee Meeting to Choose a Firm for Negotiations, Social Cost. . . . . . . . .103-104 After Proposal Evaluation, Annex 24. . . . . . . . 248-249 Staff Advice and Review. . . .47-48 Annex 25: Sample Memo Recording Staff Benefits. . . . . . . . . 155 Selection Committee Decision on Firm to be Invited to Negotiate Staff Responsibilities Matrix: Contract. . . . . . . . . . 250 Bank-Executed, UNDP-Financed Projects, Annex 21. . . . . . 243 Selection Activities for UNDP- Financed, Bank-Executed Contracts, Staff Review. . . . . . . . . 87-97 Annex 17. . . .237-238 Staff Substitutions. . . . . . . 89 Selection Committee, The. . . . . . . . . . . . . .147, 150-151 Subsistence or Per Diem Costs. . 40 Selection Committee Meeting Record Suggested Format of Curriculum of Short List Selection, Sample Vitae for Members of Consultant's Memo, Annex 23. . . . . . 246-247 Team, Annex 7-2. . . . . . . .206 Selection Committee Meeting--Sample Summary Evaluation Sheet, Consul- Memo Convening Meeting, Annex 22 tants' Proposals, Annex 9-1. .216 . . . . . . . . . . . . . 244-245 Summary of Contract Checklist, Selection Procedures . . 16, 42-48 Annex 10. . . . . . * . . 219-221 Selection Schedule--Bank-Financed Supervising Consultants' Contracts Contracts, Annex 16. . .. . .236 . . . . . . . . . . . . . 139-141 Supplementary Information for The Role of Bank Staff in Evalua- Consultants, An Example, Annex tion. . . . . . . . . . . . 77-79 7.1. . . . . . . . . . . .199-205 The Role of Bank Staff In UNDP- Tasks Required of Bank Staff in Financed and Bank-Executed Selection of Consultants. . . .15 Projects . . . . . . . . .145-160 Taxation. . . . . . . . . . . 92-93 See also Annex 21: Matrix of Staff Responsibilities: Bank- Telex Services. . . . . .. . . . 40 Executed, UNDP-Financed Projects. . . . . . . . . . 243 Telexes from Consulting Firms. . 60 The Selection Committee. . .150-151 Termination. . . . . . . . . .93-94 See also Annex 25: Sample Memo Terms of Reference (TOR) . . . . . Recording Selection Comittee . . . . . . 15-16, 22-35, 146-147 Decision on Firm to be Invited to Negotiate Contract. . . .250 See also: The Short List . . . . . . . .49-54 Considerations in Drafting Terms of Reference (TOR). . . . 23-25 The Twinning of Agencies, Annex 27 252-254 Example: TOR for a Port Modernization Study. . . .25-26 The World Bank's Perceived Prefer- ence for Foreign Firms. . . . 132 An Example: Annex 4: Draft Terms of Refereace for a Port Time Allowed for Proposal Submis- Modernization Study. . .173-188 sion. . . . . . . . . . . . 57-58 Terms of Reference (TOR), A Draft Time Available. . . . . . . . . 134 Example, Annex 4. . . . . 173-188 Time Based Contracts. . . . . 82-83 Terms of Reference for a Port Moderaization Study, A Draft Time Limit. . . . . . . . . . . .96 Example, Annex 4. . . . . 173-188 Time Schedule. . . . . . . . .31-32 The Contract. . . . . . . . . . .17 Time Schedule and Reports (TORs) The Government's Role During Execu- . . . . . . . . . . . . . . 31-35 tion. . . . . . . . . . . 152-153 Timing of Negotiation and Assign- The International Federation of ment Commencement. . . . . . . 61 Consulting Engineers (FIDIC) and Its Member associations, Annex 1 TOR Example: Annex 4: Draft Terms . . . . . . . . . . . . . 166-168 of Reference. . . . . . . 173-188 The Latin American Federation of Total Contingency Allowance. . .114 Consulting Engineers (FELAC) and Its Member Associations, Annex 2 Total Price Variation Contingency. . . . . . . . . . . . . . . . 169 . . . . . . . . . . . . .a 114 The Marking System. . . . . . 67-68 Training. . . . . . . . . . .29-30 The Role of Bank Staff--Borrower Contracts . * . . . . . . . 15-18 -1-9 - See also Annex 4: Draft Terms of See also Annex 25: Example of Reference for a Port Modern- Letter to Unsuccessful Firms. ization Study. . . . . .173-188 . . . . . . . . . . . . . . 251 Training in Consultants' Contracts Validity Period. . . . . . . .60-61 . . . . . . . 133-138 Vehicles. . . . . . . . . . . . .39 Training Institutions. . . . . . .5 Visit Requirements. . . . . . . .56 Training of Local Consultants. . 31 Volunteer Executive Agencies, Transfer of Skills. . . . . . . 136 Development of Local Firms, Annex 20. . . . . . . . . . . . . . 242 Transferring Skills to Government Staff. . . . . . . . . . . . .133 Work Plan. . . . . . . . . . .64-65 Transit Hotel Costs. . . . . . . 39 Work Plan and Staffing. . . 100-101 Transportation, Urban Development Work Program. . . . . . . . 134-135 and Water Supply. . . . . . . .46 Work Program and Time Schedule for Twinning of Agencies, The, Annex 27 Key Personnel--Bar Chart, Annexes . . . . . . 252-254 7-3 and 13. . . . . . . .207, 225 Type of Service. . . . . . . .46-47 World Bank, Financing Consultants' Services, Section 6. . . . . . 19 Types of Assignments . . . . .11-12 World Bank's Perceived Preference See also Annex 3: Types of for Foreign Firms, The. . . . 132 Services by Sector, Annex 3. . . . . . . .170-172 Types of Consulting Firms. . . . .3 Types of Contracts. . . . . . 82-87 Types of Services by Sector, Annex 3. . . . . . . . . . . . 170-172 Typical Agenda: Sample Contract Negotiations Agenda, Annex 12. . . . . . . . . . . . . . 223-224 Typical Time Ranges, Annex 15. . . . . . . . . . . . . . . 233-235 UN Agencies. . . . . . . . . . . .6 Unacceptable Proposal. . . . .79-80 Universities. . . . . . . . . . . 9 Unsuccessful Firms. . . . . . . 153