Page 1 CONFORMED COPY CREDIT NUMBER 3624 UG Project Agreement (Uganda Decentralized Service Delivery: A Makerere University Training Pilot Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and MAKERERE UNIVERSITY Dated April 10, 2002 CREDIT NUMBER 3624 UG Page 2 PROJECT AGREEMENT AGREEMENT, dated April 10, 2002, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and MAKERERE UNIVERSITY. WHEREAS (A) by the Development Credit Agreement of even date herewith between The Republic of Uganda (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to four million Special Drawing Rights (SDR 4,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Makerere University agrees to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a Subsidiary Grant Agreement to be entered into between the Borrower and Makerere University, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to Makerere University on the terms and conditions set forth in said Subsidiary Grant Agreement; and WHEREAS Makerere University, in consideration of the Association’s entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. Page 3 ARTICLE II Execution of the Project Section 2.01. (a) Makerere University declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and educational practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Makerere University shall otherwise agree, Makerere University shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants’ services required for the Project shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. (a) Makerere University shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of this Agreement. (b) For the purposes of Section 9.06 of the General Conditions and without limitation thereto, Makerere University shall: (i) prepare, on the basis of guidelines acceptable to the Association and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Association and Makerere University, a plan for the future operation of the Project; and (ii) afford the Association a reasonable opportunity to exchange views with Makerere University on said plan. Section 2.04. Makerere University shall duly perform all its obligations under the Subsidiary Grant Agreement. Except as the Association shall otherwise agree, Makerere University shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Grant Agreement or any provision thereof. Section 2.05. (a) Makerere University shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its Page 4 obligations under this Agreement and under the Subsidiary Grant Agreement, and other matters relating to the purposes of the Credit. (b) Makerere University shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Makerere University of its obligations under this Agreement and under the Subsidiary Grant Agreement. ARTICLE III Management and Operations of Makerere University Section 3.01. Makerere University shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and educational practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. Makerere University shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and administrative practices. Section 3.03. Makerere University shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) Makerere University shall maintain a financial management system, including records and accounts, and prepare financial statements, all in accordance with accounting standards acceptable to the Association, consistently applied, adequate to reflect its operations and financial condition and to register separately the operations, resources and expenditures related to the Project. (b) Makerere University shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with auditing standards acceptable to the Association, consistently applied, by independent auditors acceptable Page 5 to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of the financial statements referred to in paragraph (a) of this Section, for such year as so audited; and (B) an opinion on such statements and report of such audit, by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning such records, accounts and financial statements, and the audit thereof, and concerning said auditors, as the Association may from time to time reasonably request. Section 4.02. Makerere University shall prepare, in accordance with guidelines acceptable to the Association, and furnish to the Association with its first application for withdrawal and thereafter not later than 45 days after the end of each calendar quarter, a Financial Monitoring Report for such period, which: (a) (i) sets forth actual sources and applications of funds for the Project, both cumulatively and for the period covered by said report, and projected sources and applications of funds for the Project for the six-month period following the period covered by said report; and (ii) shows separately expenditures financed out of the proceeds of the Credit during the period covered by said report and expenditures proposed to be financed out of the proceeds of the Credit during the six-month period following the period covered by said report; (b) (i) describes physical progress in Project implementation, both cumulatively and for the period covered by said report; and (ii) explains variances between the actual and previously forecast implementation targets; and (c) sets forth the status of procurement under the Project and expenditures under contracts financed out of the proceeds of the Credit, as at the end of the period covered by said report. Section 4.03. Makerere University shall have the independent auditors referred to in paragraph (b) of Section 4.01, appointed no later than September 30, 2002, or such later date as may be agreed to with the Association. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Page 6 Section 5.02. (a) This Agreement and all obligations of the Association and of Makerere University thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date fifteen (15) years after the date of this Agreement; and (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Makerere University of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telex or facsimile to the party to which it is required or permitted to be given or made at such party’s address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. Deliveries made by facsimile transmission shall also be confirmed by mail. telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party’s address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Facsimile: INDEVAS 248423 (MCI) or (202) 477-6391 Washington, D.C. 64145 (MCI) For Makerere University: Page 7 Makere University P.O. Box 7062 Kampala, Uganda Cable address: Facsimile: MAKUNIKA 541068 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Makerere University, or by Makerere University on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the Vice Chancellor of Makerere University or such other person or persons as Makerere University shall designate in writing, and Makerere University shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Callisto Madavo Regional Vice President Africa MAKERERE UNIVERSITY By /s/ Edith Grace Ssempala Authorized Representative SCHEDULE 1 Page 8 Procurement and Consultants' Services Section I . Procurement of Goods Part A : General Goods shall be procured in accordance with (a) the provisions of Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the provisions of the following Parts of this Section I. Part B : International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. Limited International Bidding Goods estimated to cost $100,000 equivalent or more per contract, up to an aggregate amount not to exceed $130,000 equivalent, and goods, which the Association agrees can only be purchased from a limited number of suppliers, regardless of the cost thereof, may be procured under contracts awarded in accordance with the provisions of paragraph 3.2 of the Guidelines. 3. National Competitive Bidding Office equipment and vehicles estimated to cost $30,000 equivalent or more per contract but less than $100,000 per contract, up to an aggregate amount not to exceed $385,500 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 4. National or International Shopping Miscellaneous equipment, supplies, materials and products estimated to cost less than $30,000 equivalent per contract, up to an aggregate amount not to exceed $50,000 equivalent, may be procured under contracts awarded on the basis of national or international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 5. Procurement from UN Agencies The following goods may be procured from IAPSO in accordance with the provisions of Page 9 paragraph 3.9 of the Guidelines: (a) Office equipment and vehicles estimated to cost less than $50,000 equivalent per contract, up to an aggregate amount not to exceed $368,500 equivalent; and (b) miscellaneous equipment, supplies, materials and products estimated to cost less than $30,000 equivalent per contract, up to an aggregate amount not to exceed $50,000 equivalent. Part C : Review by the Association of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II . Employment of Consultants Part A : General Consultants’ services shall be procured in accordance with (a) the provisions of the Introduction and Section IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Association in January 1997 and revised in September 1997 and January 1999, subject to the modifications thereto set forth in paragraph 2 of this Part A (the Consultant Guidelines), and (b) the provisions of the following Parts of this Section II. Part B : Quality- and Cost-based Selection 1. Except as otherwise provided in Part C of this Section, consultants’ services shall be procured under contracts awarded in accordance with the provisions of Section II of the Page 10 procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. 2. The following provisions shall apply to consultants’ services to be procured under contracts awarded in accordance with the provisions of the preceding paragraph. The short list of consultants for services estimated to cost less than $100,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Part C : Other Procedures for the Selection of Consultants 1. Quality-based Selection Services based on Partnership Agreements between Makerere University and Partner Institutions shall be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 through 3.4 of the Consultant Guidelines. 2. Selection Under a Fixed Budget Services may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines. 3. Least-cost Selection Services estimated to cost less than $100,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.6 of the Consultant Guidelines. 4. Selection Based on Consultants’ Qualifications Services estimated to cost less than $100,000 equivalent per contract for firms may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 5. Single Source Selection Services that meet the requirements set forth in paragraph 3.8 shall be procured in accordance with paragraphs 3.8 through 3.11 of the Consultant Guidelines with the Association's prior agreement. 6. Individual Consultants Page 11 Services for tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Part D : Review by the Association of the Selection of Consultants 1. Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant Guidelines. Selection of all consultants’ services shall be undertaken in accordance with such selection plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review (a) With respect to each contract for the employment of consulting firms estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 1, 2 (other than the third subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $25,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Association for its prior review and approval. The contract shall be awarded only after the said approval shall have been given. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. SCHEDULE 2 Implementation Program Section I : Project Implementation Plan 1. Makerere University shall prepare and transmit to the Association for comments, and thereafter adopt in form and substance acceptable to the Association, a Project Implementation Plan, setting forth the implementation and monitoring arrangements for the Project, including the administrative, financial and accounting procedures, the procurement and disbursement procedures, model forms for Partnership Agreements, terms of reference for consultants and staff Page 12 procedures, model forms for Partnership Agreements, terms of reference for consultants and staff of the Secretariat and criteria for the review and approval of Grants, as the same may be amended from time to time with the Association’s prior written consent, and such term shall include any schedules, tables and annexes to the PIP. 2. Makerere University shall carry out the Project in accordance with procedures set out in the Project Implementation Plan, and, except as the Association shall otherwise agree, shall not amend or waive any provision thereof, if such amendment or waiver may, in the opinion of the Association, materially or adversely affect the implementation of the Project. Section II : Institutional Structure 1. I@mak.com Makerere University shall maintain until the completion of the Project, I@mak.com in a form and with functions, staffing and resources satisfactory to the Association. I@mak.com is headed by a chairperson, who is the Vice Chancellor of Makerere University. I@mak.com shall be responsible for: (a) overall coordination, general oversight and policy guidance of the Project; (b) reviewing and approving quarterly and annual work plans and budgets for the Project; (c) receiving and reviewing applications for Grants, and awarding Grants to Grant Recipients under Part B.2 of the Project as set out in the Development Credit Agreement; (d) reviewing and approving training proposals, curriculum development proposals and research proposals; (e) reviewing and approving work plans and budgets submitted by the various Makerere University Units, Partner Institution Units and Local Governments; and (f) absorption and recording of lessons learned. 2. I@mak.com Secretariat Makerere University shall maintain until the completion of the Project a Secretariat in a form and with functions, staffing and resources satisfactory to the Association. The Secretariat is headed by an executive secretary assisted by a task manager, an administrative secretary, a research assistant, a financial manager and an accountant. The executive secretary shall report directly to the chairperson of I@mak.com . The Secretariat shall be responsible for: (a) receiving training proposals, curriculum development proposals and research proposals submitted by the various Makerere University Units, Partner Institution Units and Local Governments, and submitting them for approval to I@mak.com ; (b) preparing quarterly and annual work plans and budgets for the Project and submitting them to I@mak.com for approval; (c) receiving work plans and budgets submitted by the various Makerere University Units, Partner Institution Units and Local Governments, and submitting them to I@mak.com for approval; (d) procurement, financial management, audit and disbursement planning, coordination Page 13 (d) procurement, financial management, audit and disbursement planning, coordination and implementation; (e) ensuring that progress reports are submitted to it on a quarterly and annual basis by the Makerere University Units, Partner Institution Units and Local Governments involved in Project implementation; (f) carrying out reviews and monitoring the implementation of the Project; (g) coordinating the recruiting and activities of consultants involved in the Project; and (h) compiling, preparing and submitting reports on the progress of the Project to I@mak.com , the Borrower and the Association. 3. Makerere University Units Makerere University Units shall be responsible for: (a) designing and developing proposals for training programs, research and curriculum development for the Project, and submitting them to the Secretariat for approval by I@mak.com ; (b) implementing proposals approved under sub paragraph (i) of this paragraph; and (c) submitting quarterly and annual reports to the Secretariat. 4. Partner Institutions (a) Makerere University shall select Partner Institutions satisfactory to the Association, and furnish a list thereof to the Association by May 15, 2002. (b) Makerere University shall enter into Partnership Agreements with Partner Institutions for the purpose of collaborating in activities aimed at improving decentralized service delivery, on terms satisfactory to the Association, including disbursement and procurement arrangements, eligible activities and reporting requirements. The Partnership Agreements, or any provisions thereof shall not be amended or waived in a manner which, in the opinion of the Association, may materially and adversely affect the implementation of the Project or parts thereof. Partner Institutions shall be responsible for: (i) designing and developing relevant training programs, research and curriculum development proposals for the Project, and submitting them to the Secretariat for approval by I@mak.com ; (ii) implementing proposals approved under sub paragraph (i) of this paragraph; and (iii) and submitting quarterly and annual reports to the Secretariat. Section III : Annual Work Programs and Budgets Makerere University shall submit to the Association, for its review and approval, not later than May 30 of each year, beginning May 30, 2002, a proposed annual work program and budget for the forthcoming fiscal year. Page 14 Section IV : Grants Without limitation upon the provisions of Section II above, no Grants shall be provided to Grant Recipients out of the proceeds of the Credit unless I@mak.com has determined, on the basis of a selection process conducted in accordance with the guidelines set forth in PIP, that the Grant proposal satisfies the eligibility criteria set forth in PIP, including the following: (a) the Grant shall be for the types of activities set forth in Part B.2 of the Project as set out in the Development Credit Agreement; (b) the Grant activities shall be in accordance with standards set forth in PIP; and (c) no Grant shall be in excess of the equivalent of $25,000 for Academic Excellence Grants and $30,000 for Local Government Excellence Grants. Section V : Monitoring and Evaluation, Performance Indicators, Reports and Reviews 1. Makerere University shall together with the Borrower: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the indicators set forth in Schedule 3 to the Development Credit Agreement, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on a quarterly and annual basis for the duration of the Project, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Borrower and the Association, no later than 4 weeks after submission of each said report, or such later date as the Association shall request, the report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association’s views on the matter. 2. (a) In addition to the monitoring and evaluation reports required under paragraph 1 of this Section, Makerere University and the Borrower shall prepare or cause to be prepared, under terms of reference satisfactory to the Association, reports setting out the results of surveys and reviews of the lessons learned or being learned from the Project. The reports shall be furnished to the Association at four intervals during Project implementation as set out in detail in PIP, but beginning with a baseline study at the commencement of the Page 15 as set out in detail in PIP, but beginning with a baseline study at the commencement of the Project. (b) Makerere University shall by August 31, 2002, employ monitoring and evaluation consultants for the carrying out of activities under paragraph 2 (a) of this Section, in accordance with Section II of Schedule 1 to this Agreement. 3. Makerere University shall on or about eighteen months after the Effective Date, carry out jointly with the Borrower and the Association a midterm review of the progress made in carrying out the Project (hereinafter referred to as the Midterm Review). (a) The Midterm Review shall cover, amongst other things: (i) progress made in meeting the Project’s objectives; (ii) results of the monitoring and evaluation activities under the Project; and (iii) overall Project performance against Project performance indicators. (b) Makerere University and the Borrower shall, at least four weeks prior to the Midterm Review, furnish to the Association a separate report describing the status of implementation of each component of the Project and a summary report of Project implementation generally. (c) Makerere University and the Borrower shall, not later than four weeks after the Midterm Review, prepare an action program, acceptable to the Association, for the further implementation of the Project having regard to the findings of the Midterm Review and, thereafter, implement such action program.