IDB-financed Projects Doing Business Under IDB-financed Projects Basic Principles and Considerations Magda Theodate, Procurement Specialist Inter-American Development Bank Trinidad, June 2007

How to do Business with the IDB TABLE OF CONTENTS How to do Business with the IDB Get Acquainted with the IDB and learn how it works Identify Projects with Potential Opportunities Know the Procurement Principles Ins and Outs of the Procurement Policies The Bidding Process Advice to Prospective Bidders

Get Acquainted with the IDB

OVERVIEW Founded in 1959, oldest and largest of the regional multilateral development banks Largest source of development finance for Latin America & the Caribbean 47 Member countries - 26 Borrowing - 21 Non-borrowing (Republic of Korea, 2004) 1961-2006: approved US$145 billion in loans 2006: $6.4 billion approved, $6.5 billion disbursed Money is raised in various ways, including bonds issues

HISTORICAL PRIORITIES Poverty Reduction & Social Equity Sustainable Development & Growth Mostly provided public sector loans thru three operational departments: Region 1; Southern cone of South America Region 2; Mexico/Central America Region 3; Andean/Caribbean countries

Expanded Sector of Activities- Finance & Basic Infrastructure Sectors Energy Transportation Telecommunications Productive Agriculture Industry Social Education Health Urban Development Environment Water & Sanitation Reform Modernization of state and decentralization

NEW INITIATIVES Reorganization of the IDB as of July 1, 2007 INTERNAL: Reorganization of the IDB as of July 1, 2007 Four Vice-Presidencies with responsibility for: 1) Sector and Knowledge 2) Countries 3) Private Sector and Non-Sovereign Guaranteed Operations 4) Finance and Administration

CAPITAL SHARE & VOTING POWER 50% 30% 4% 11% 5% 4 30% 11% 5% 50%

ROLES Borrowing countries are asked to provide a portion of the cost of the entire project, sometimes in the form of human capital Only firms from members countries are eligible to compete for contracts for IDB-funded projects Borrowing countries have ministries or agencies called “executing agencies” that Often originate projects for loan or grant consideration of IDB Board of Executive Directors Plan the project with the project team and conduct all aspects of the procurement process Responsible for successful implementation of the projects IDB staff support and supervise the projects to ensure that Bank’s guidelines and policies are followed

Identify Where The Opportunities Are

2007-2008 PIPELINE: Project Distribution

POTENTIAL OPPORTUNITIES Public Sector Projects Preparation of Projects: * Contact Bank staff / team leader for feasibility studies and project preparation 2) Implementation of Projects: * Contact Executing Agencies (Government Ministries) for procurement requirements, bidding documents, contract information, procedures & payments Private Sector Projects * Contact PRI, IIC and MIF for due diligence contracts

Business Opportunities With IDB Procurement contracts with IDB direclty, mainly consulting services project preparation support ~ 5% Procurement contracts with Executing Agencies in projects financed by IDB works, goods consulting services ~ 95%

Project Concept Document 16 PROJECT CYCLE Negotiation and Approval Execution and Supervision Programming Identification Preparation Analysis Borrower & Bank Borrower & Bank Borrower & Bank Borrower & Bank Borrower & Bank Bank Project Concept Document PROGRAMMING MISSION The cycle begins with a programming mission from the Bank to borrowing countries to review their priority development programs. e.g. Power Plant IDENTIFICATION MISSION The specialists of the energy sector visit the country and the potential executing agency. There is an identification of the basic characteristics of the loan. For the first time the Bank publishes the Project Outline on the internet. There may be needs for consultancy works at this stage. PREPARATION MISSION The project team begins to asses feasibility of the project from different point of view: technical, financial, economic and environmental. They usually hire external consultants to conduct those assessments and studies. Then, the project team prepares a Project Concept Document to submit to the Loan Committee. Project Report PROJECT OUTLINE PROCUREMENT PLAN 1-2 Years 4-8 Years

Get to know the procurement principles & Ins & Outs of Procurement Policies

Principles and Considerations Governance Loan Contract governs Borrower/Bank legal relationship Procurement policies applicable through incorporation in Loan Contract Rights and obligations of Borrowers/Suppliers Governed by BD, not Policies or Loan Contract and Signed supply/construction contracts Only parties to Loan Contract derive rights thereon / claims on loan proceeds

Legal Relationship and Responsibility BANK LOAN CONTRACT POLICIES BORROWER X SUPPLIER CONTRACTOR CONSULTANT BIDDING DOCUMENT SUPPLY CONTRACT WORKS CONTRACT CONSULTING CONTRACT

Principles and Considerations Procurement Responsibility Borrower Project implementation Procurement Payment of project goods, works, and services Bank Loan Proceeds can be used Only for purposes the loan was granted With due attention to Economy and Efficiency Disbursements only at Borrower’s request Bank is not a party to procurement contracts

Principles and Considerations Procurement Responsibility of Bidders Carefully analyze ALL requirements of the bidding documents or request for proposal documents Strictly comply with the instructions and specifications/terms of reference in the bidding/request for proposals documents Require clarifications to documents in writing Review bid/proposal for compliance with the requirement before submitting Submit bid/proposal before deadline

Procurement Policies Goods and Works and General Services The Policies comprise 3 sections and 4 Appendices Appendices I: Review by the Bank II: Domestic Preference III: Guidance to Bidders IV: Procurement in Loans to the Private Sector Sections I: Introduction II: International Competitive Bidding III: Other Methods of Procurement

Procurement Policies Consulting Services The Policies comprise 5 sections and 4 Appendices Sections I: Introduction II: Quality and Cost Based Selection III: Other Methods of Selection IV: Types of Contracts & Important Prov. V: Selec. Of Individual Consultants Appendices I: Review by the Bank II: Instructions to Consultants III: Guidance to Consultants IV: Procurement in Loans to the Private Sector

New Areas of Selected Policies Eligibility Fraud and Corruption Misprocurement Qualification of Bidders

Eligibility Nationality and Origin Only firms and individuals from member countries can Receive payments from Bank funds Participate in Bank financed contracts Only goods originating in member countries Can be financed by the Bank (*) (*) Exception Goods labelled “made in the European Union”

Eligibility (cont) Nationality and Origin (cont) Exceptions: Firms or goods from a country may be excluded if Borrower’s law or official regulation prohibits commercial relations with that country Compliance with decision of UN Security Council prohibits imports from, or payments to, that country

Eligibility (cont) Conflict of Interest (Section 1.9) Consulting firm that prepares or implements project is disqualified from also Supplying Goods Constructing Works Supplying Services (does not apply to turn-key contracts) Ex: Firm hired to prepare environmental study for project, will not be engaged to actually implement the recommendations made in the study

Eligibility (cont) Government Enterprises of Borrower Can participate if they Are legally and financially autonomous Function in accordance with commercial laws Are independent (not an agency) of Borrower or Sub-borrower

Eligibility (cont) Declaration of Ineligibility by the Bank Firm cannot be awarded Bank-financed contract if Following investigation by the Borrower and Office of Institutional Integrity, evidence exists that it has engaged in act of Fraud and Corruption in Bank-financed project

Fraud and Corruption Fraud and Corruption are prohibited May include: Corrupt practice Fraudulent practice Coercive practice Collusive practice These practices are defined as follows:

Fraud and Corruption Definitions: Corrupt practice: Offering, giving, receiving or soliciting, directly or indirectly, anything of value to influence actions of another party Fraudulent practice: Any act or omission, including misrepresentation, which misleads, or attempts to mislead, a party in order to obtain financial or other benefit or to avoid an obligation

Fraud and Corruption Definitions (cont) Coercive practice Impairing or harming or threatening to impair or harm, directly or indirectly, any party or property of a party to influence the actions of a party Collusive practice Arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly actions of another party

Fraud and Corruption (cont.) Bank requirements The Bank, Borrowers, Executing and Contracting Agencies and Bidders, Contractors, Suppliers, Consultants and Concessionaries must: Adhere to highest ethical standards Report to the Bank suspected acts of Fraud and Corruption

Fraud and Corruption (cont) Sanctions In case of demonstrated Fraud and Corruption, the Bank may impose sanctions which can be public or private Not to finance Suspend disbursements Cancel and/or accelerate payment of part of the loan

Fraud and Corruption (cont) Sanctions (cont) Issue reprimand Declare individual, entity or firm ineligible, permanently or for a period of time, to be awarded or participate in Bank financed contracts Refer matter to appropriate law enforcement authorities Impose other sanctions, i.e.: Fines to reimburse the Bank for investigation costs

Fraud and Corruption (cont) Bank has right to require that: Bidders, Suppliers, Contractors, Consultants and Concessionaries Permit Bank inspection of accounts and records Permit Audit by Bank designated auditors Consultants Keep documentation for 3 years after completion Deliver information for investigation of Fraud and Corruption

Fraud and Corruption (cont) Borrowing country anticorruption laws can be applied At request of Borrower With agreement of the Bank Borrower may require Bidders to declare in Bids (large contracts) observance of Borrowing country’s laws against Fraud and Corruption

Fraud and Corruption (cont) Combating Fraud and Corruption (cont) Reporting allegations (Bank protects whistleblowers and witnesses) To OII: by confidential secure phone (hot line), e-mail, fax, mail, in person Directly to other recipients in the Bank President, Vice president, Managers, COF Representatives These other recipients must transmit allegation to OCFC within 72 hours

Fraud and Corruption (cont) Combating Fraud and Corruption Bank Functions and responsibilities OCFC: Oversight Committee on Fraud and Corruption Leads Bank fight against Fraud and Corruption Reports directly to the President OII: Office of Institutional Integrity (OCFC Secretariat) Investigating allegations of Fraud and Corruption Information and procedures: www. iadb.org/OCFC

Misprocurement Bank declaration of misprocurement Consequences The procurement conducted is not in accordance with Loan Contract and Procurement Plan After no objection, if based on incomplete, inaccurate or misleading information Consequences Bank does not finance contract, may exercise other remedies Bank policy: offers option to cancel loan portion assigned to contract

Qualification of Bidders What if the Borrower doesn’t like the bidder? Bank does not permit Borrower to: Deny pre or post-qualification to Bidder or Disqualify Bidder …for reasons unrelated to capability and resources to successfully perform contract

Bidder’s Right to Protest Procurement Process Bidder’s Right to Protest Bidders/Consulting Firms may submit a complaint in writing at any stage of the procurement process Procurement process is not suspended when complaint is submitted Contracting Agency resolves the complaint If Bank determines that its procurement policies have not been adhered to, Bank can declare misprocurement

The Bidding Process for Bank-financed Projects

Public Bidding Process Public Access to Award Bid results & notification small fees for documents Procurement Plan Bidding documents Public bid opening Contract Signing Bid Submission Clarifications Bid evaluation Publicity

Standard Procurement Documents Typical structure of SBD Instructions to Bidders Bidding Data Sheet Evaluation and Qualification Criteria Bidding Forms Eligible Countries Schedule of Requirements General Conditions of Contract Special Conditions of Contract Contract Forms Invitation for Bids (not a part of BD)

Standard Procurement Documents Available SBD / SPD / SRFP/Instructions Procurement of Goods Procurement of Health-Sector Goods Procurement of Books and Reading Materials Prequalification for Procurement of Works Procurement of Works Procurement of Works – Smaller Contracts Selection of Consultants

STARTING THE PROCUREMENT PROCESS Publicity General Procurement Notice (GPN) Published once within 30 days of loan’s approval by the Board of Directors in: United Nations periodical “Development Business” (online) IDB’s web site - Procurement Portal immediately thereafter: http://iadb.org/procurement

Competitive Bidding - Publicity STARTING THE PROCUREMENT PROCESS Competitive Bidding - Publicity Specific Procurement Notice (SPN) Required for International Competitive Bidding (ICB) - published in: United Nations periodical “Development Business” (online) IDB’s web site - Procurement Portal immediately thereafter Required for National Competitive Bidding (NCB) published in: The Country’s official web site for advertising government business opportunities; or One local newspaper of wide circulation

Goods and Works Bid Preparation Time Project Procurement Process Goods and Works Bid Preparation Time Days from publication of Specific Procurement Notice (SPN) to deadline for submission of bids Prequalification Applications 45 days Bids Goods 6 weeks Small Works 6 weeks Major Works 12 weeks

Consulting Services Proposal Preparation Time Project Procurement Process Consulting Services Proposal Preparation Time Days from publication of SPN to deadline for submission of proposals Request for Expressions of Interest 14 days Request for Proposal (shortlist: 6 firms) 4 weeks

Procurement Methods Goods and Works Consulting Services Preferably ICB Other methods Used when ICB not economic and efficient When used, Domestic Preference does not apply Consulting Services Default Method QCBS

Other Methods Goods and Works General Use Limited International Bidding (LIB) National competitive Bidding (NCB) Shopping Direct Contracting

Procurement Methods Consulting Services Six main selection methods: Quality & Cost Based Selection (QCBS) Quality Based Selection (QBS) Least Cost Based Selection (LCBS) Fixed Budget Based Selection (FBBS) Selection Based on Qualifications (CQS) Single Source Selection (SSS) (non competitive)

Procurement Methods Key Principles Timely adequate notification and advertising Equal opportunity to present bids Essential and fair conditions of contract Appropriate time for bid preparation and presentation Equal treatment of bidders Sound explicit evaluation criteria Non discriminatory requirements and specifications

Advice To Prospective Bidders

Goods and Works Who is Awarded the Contract? CONTRACT AWARD Goods and Works Who is Awarded the Contract? The Bidder whose bid has been determined to be the lowest evaluated bid and is substantially responsive to the bidding documents.

Consulting Services Who is Awarded the Contract? CONTRACT AWARD Consulting Services Who is Awarded the Contract? The Consulting Firm with the best evaluated proposal depending on the selection method.

Identify specific tenders Read & analyze docs Track projects HOW TO WIN CONTRACTS Identify specific tenders Read & analyze docs Track projects Copy best practices Be innovative & partner! Ask yourself: how did this firm secure this contract? Who else is active in that market? What would have set them apart from the competition? http://itsdc16.iadb.org/idbppi/aspx/ppProcurement.aspx

WINNING CONTRACTS Make thorough assessment of competitive advantage to determine priority / niche markets in region Review Country Strategies & Policy Documents Frequent and careful review of most promising projects: Sign up for RSS on IDB Procurement Portal Check IDB Web-site for new projects  Press Releases Subscription to UN Development Business Local newspapers (for National Competitive Bidding) Emphasize in-country/regional experience Invest in language capability: essential tool, proof of commitment in-country experience: including with CIDA, IDB, WB and explain how your expertise is distinct, relevant, state of the art and proven in the field

WINNING CONTRACTS Make contact: make and maintain Meet with investment officers / country coordinators for project info and feasibility studies Visit IDB Country Offices Meet with country government officials Meet with Embassy commercial staff Make alliances with local & international partners partnership on international bids local knowledge diversity, language skills etc Know your competition

Submissions In Response to: PUBLIC NOTICES General Procurement Notice (GPN) Specific Procurement Notice (SPN) Requests for Proposals (short-list) SUBMISSION Letter of Interest Expression of Interest (e.g, letter, brochures, references,exp.) Detailed technical & financial proposal

Where to Find the Bid Notices Request for Expressions of Interest or Other Procurement Notices Development Business: www.devbusiness.com IDB Procurement Web Site: www.iadb.org/ros/notice/notice_eng.htm Local newspapers: DB Online: US $550/ year Free of Charge (but IDB only) www.trinidadexpress.com & www.guardian.co.tt/

MORE INFORMATION: IDB Website http://www.iadb.org/ MORE INFORMATION: IDB Website

PROCUREMENT INFORMATION How to receive procurement information? Sign up for RSS! http://www.iadb.org/procurement/

MORE INFORMATION: Country Websites

COUNTRY STRATEGY PAPERS

PROCUREMENT NOTICES: General and Specific

IDB SOURCES OF INFORMATION 1) IDB Homepage: www.iadb.org General Basic Facts: www.iadb.org/info/ Annual Report: www.iadb.org/aboutus/I/hi_ar.cfm?language=English Sectors and Topics: www.iadb.org/exr/topics/index.htm 2) Projects Project Information & Procurement notices : http://condc05.iadb.org/idbppi/asp/mainpage.asp Project Documents and Public Information Center : http://www.iadb.org/exr/pic/?language=english 3) Events IDB Business Seminars: http://www.iadb.org/biz/ IDB-sponsored events: www.iadb.org/NEWS/DISPLAY/events.cfm?Language=English

Thank You! Q & A