fidic minutes

Inter American Development Bank

INTRODUCTION

The Inter American Development Bank (IADB) hosted a set of meetings with the Federation of Consulting Engineers (FIDIC) on Tuesday, February 19, 2008 and jointly with the World Bank (WB) on Thursday, February 21, 2008.

The Meetings held on Tuesday February 19, 2008 with FIDIC:

Participants:

o FIDIC Delegation John Boyd – President Pablo Bueno Tomas – Executive Committee – Liaison with the

IADB Enrico Vink – Managing Director

o IADB Katharina Falkner-Olmedo – Chief Project Procurement,

Financial Management and Portfolio Monitoring Division Sabine Engelhard – Senior Procurement Specialist Tomás Socías – Procurement Specialist María Camila Padilla – Consultant

Discussions and Presentationso Mrs. Falkner-Olmedo welcomed the FIDIC Delegation.o The Bank’s realignment and division’s new functions emphasize on

the importance of efficient fiduciary work (risk management), reduction of transaction costs (streamline processes, move to ex-post review), capacity building (increase capacity of executing agencies, and of the Bank, seek cultural change).

o Infrastructure projects are again a Bank’s priority as basis for development.

o The Bank is broadening it clientele by granting loans to private borrowers through non sovereign guaranteed loans.

Minutes of the meeting with the International Federation of Consulting Engineers (FIDIC)

WELCOMING REMARKS

o In order for training to be effective in executing agencies, it must be directed at the Institution as a whole and not to individuals due to high rotation of personnel.

o $2.5 thousand billion dollars is invested in infrastructure each year.o FIDIC stated that private firms’ participation in Banks financed

projects has decreased therefore, the projects´ quality has decreased. The inclusion of high quality firms in the end reduces costs for the projects. Possible reasons for decrease of private participation of firms in Banks financed projects: Corruption Problems with local laws and procedures

o FIDIC is having a growing demand for training, especially regarding Integrity and Sustainability, both from private firms as well as from Multilateral Development Banks.

o FIDIC is seeking closer alliances with MDBs

Participants:o FIDIC Delegationo IADB

Nestor Roa – Infrastructure Specialist Sabine Engelhard – Senior Procurement Specialist Cristobal Silva – Principal Multisector Specialist Tomás Socías – Procurement Specialist María Camila Padilla – Consultant

Discussions and Presentationso Currently infrastructure projects financed by the Bank are mostly

highways which include maintenance, but also some urban projects as MRTs.

o Challenges in infrastructure relate to securing supplies, and not hiring engineering firms because the engineering industry is well developed in most countries of the Region.

o In Ports projects the Bank is motivating countries to combine traditional financing skills with new financial market products.

o Main options are: loans to countries: technical assistance; non financial instruments.

o The Bank provides Countries with implementation planning advice. In Infrastructure the trend is to include engineering consulting services within the works contract.

o There is a growing conscience toward environmental assessments and protection by borrowing Countries, as well,

INFRASTRUCTURE AND TRANSPORTATION

the Bank is assessing if environmental projects and environmental sections of projects comply with Bank’s policies.

o There is also a trend toward Project Management Companies.o Bank needs more suppliers for smaller projects.o There are mixed experiences. Countries with bad experiences

do not want to replicate this model, whereas if it works it is usually very successful.

o Currently, commercial banks are hiring engineering consulting firms to carry out limited recourse projects risk assessments.

o FIDIC believes that in the evaluation of technical offers curriculum vitae are given too much weight. FIDIC also raised the issue of firms working regularly with databases versus firms who use employees on their proposals. This practice does not value the capacity of the company, but the capacity of individuals. It cannot be a requirement that individuals be permanent personnel of the firm bidding.

o It is necessary for experience requirements to respond to the needs of the project.

o FIDIC suggests that the amounts of contracts being awarded in the region is too low and does not entice multinational engineering firms to transfer capacity to local companies.

o Harmonized contracts for consultants are desired, and tax issues are still a challenge for consultants.

o FIDIC have developed papers on Public Private Partnerships and they will be made available to IADB.


Miguel Coronado – Attorney – Legal Department Sabine Engelhard – Senior Procurement Specialist Tomás Socías – Procurement Specialist María Camila Padilla – Consultant

Discussions and Presentationso For the Bank to incorporate integrity and anticorruption the legal

department of the Bank has included language into the contracts in order to process corruption cases. Also there is a list of sanctioned firms and individuals on the Bank’s webpage.

o Contact in Sanctions Committee is Javier Jimenez.o Design and prefeasibility studies attract very little interest from

bidders because firms are waiting for the construction project or

LEGAL

for the supervision contracts because this is where the money is.

o Supervision contracts should usually be done under lump sum. o It is necessary for the bidding documents to determine what the

procedure is when investigating fraud and corruption. o Countries sometimes may not be satisfied with the results of the

Bank’s investigations on fraud and corruption.o FIDIC has developed an integrity managing system for firms, to

make sure they are not supplier of fraud and corruption. As well, FIDIC designed a way for executing agencies not to be receivers of fraud and corruption.

o FIDIC believes that the entity should evaluate if the company has a system to control and prevent fraud.

o It is advisable to set out limits for design liability.


Stephen Zimmermann – Chief – Office of Institutional Integrity Roberto de Michele – Senior Policy Advisor – OII Sabine Engelhard – Senior Procurement Specialist Tomás Socías – Procurement Specialist María Camila Padilla – Consultant

Discussions and Presentationso The Bank does not have the power to sanction public officials,

therefore it only sanctions corrupt payment givers. No VDP program.

o Creating incentives for private/public sector actors to be more active in integrity

o Promote guidelines for integrity for Government procurement agencies. More proactive with prevention. Help borrowers with own integrity programs.

o Improving Bank to meet its fiduciary responsibilities.o Red Flags matrix being introduced through testing.o There is a high transactional cost to change the policies, but the

possibility would be to start a pilot project in a singular project, an industry or a particular country.

o Anticorruption Activities Trust Fund can be a source of funds to finance the pilot.

o Mexico could be a good country to start the pilot. It would be interesting to develop the project pilot jointly with the WB. FIDIC

INTEGRITY

can talk with the Mexican companies who have accepted integrity systems to participate in the pilot. It is necessary to ascertain what political environment there is and if there is interest from the government.

o Private parties state that as long as government procurement agencies’ personnel do not receive decent salaries, the corruption problem will not go away.

o FIDIC’s proposal is to include points for firms which have a system to control fraud or corruption. The Banks should not and do not endorse any particular system. This inclusion encourage the industry to adopt integrity systems in order to get higher points in the selection processes. It will allow FIDIC to push its members to include integrity systems.

o In order to incorporate this system it is necessary to offer the industry help to set it up. (Money and Time)


Nathaniel Jackson – Senior Private Sector Specialist John Graham – Investment Officer – Structured and Corporate

Financing Department Sabine Engelhard – Senior Procurement Specialist Tomás Socías – Procurement Specialist María Camila Padilla – Consultant

Discussions and Presentationso Non sovereign guaranteed transactions -limited recourseo Areas of Groupo Bank’s approval is 9 billion a year. The Group will have 1.5

billion.o The difference between the Group and Commercial Banks is the

Group has a greater emphasis toward environmental and social sector. The group’s finance span is 17 to 20 years where as commercial banks is 12 to 15 years.

o In order for a company to be eligible the majority of voting rights must be from an entity from a member country.

o The group can finance up to 25% of project cost, the rest is financed by commercial banks.

o Sustainability and Integrity is checked through due diligence and must comply with the equator principles

PRIVATE SECTOR

o The group provides other services such as structures or tenures but the client must be charged separately. The consulting firms that are hired are paid by the private company indirectly but are contracted/hired by the Bank without consulting with the company. The company may look through the long list a decide on a short one, but the Bank makes the final decision.

o Options such as ACTF in Norway might be possible to fund a joint public/private project testing integrity systems.

Meetings held on Thursday 21, 2008 with FIDIC and WB:

Participants:o FIDIC Delegation

John Boyd – President Pablo Bueno – Executive Committee member Enrico Vink – Managing Director

o IADB Stephen Zimmermann – Chief – Office of Institutional Integrity Roberto de Michele – Senior Policy Advisor – OII Sabine Engelhard – Senior Procurement Specialist Nelly Wheelock – Senior Procurement Specialist María Camila Padilla – Consultant Emilie Chapuis - Consultant

o WB Patricia Baquero – Senior Procurement Specialist

Discussions and Presentationso One day workshop to be held on June 9, 2008 at the World

banko FIDIC’s general objective for this and the sustainability

workshop is to identify specific projects on which FIDIC could collaborate with the MDBs, so the Banks could identify, prior to the workshops, countries that would be willing to participate in possible pilot projects

o FIDIC would present their guidelines on Government Procurement Integrity Management System (GPIMS) as a proposal and the guidelines on Business Integrity Management System (BIMS) as the counterpart for the private sector

o AIDB would introduce its Red Flags System and Risk Assessment tool

o Possible Subjects for the Workshop: Presentation by FIDIC tools: GPIMS, BIMS Presentation by OII and INT – investigation mechanisms Presentation by IADB on Red Flags System and lessons

learnedo Case studies: real cases submitted by all the Banks in order to

create a single case involving all of the following:: Infrastructure Fraud and corruption taking place throughout the project Set of risks on every stage of the project

o Possible issues to be included: Agents

INTEGRITY WORKSHOP

Disclosure by potential bidders, existing sanctions by Banks or Governments

Information given by the Executing Agency to potential bidders

Examples of each one of the acts of fraud and corruption, specially gray areas which are interpreted differently in each country

o Would the tools available (from Banks and FIDIC) pick up the integrity issues? Are prevention tools adequate?

o Most of the time in the Workshop should be allocated to the case study

o FIDIC will propose a facilitator with hands-on experience who can handle the discussion

o Conclusions for the workshop Next steps The outcome of the workshop should be a pilot project

choosing a country or group of projects as pilots


John Boyd – President Pablo Bueno – Executive Committee member Enrico Vink – Managing Director

o IADB Sabine Engelhard – Senior Procurement Specialist María Camila Padilla – Consultant


Discussions and Presentationso The changes determined by the HoPs at their last meeting in

Tunis as needing further discussion with FIDIC were presented but not discussed as these include items from CICA which have been rejected

o The HoPs’ WG will present the HoPs prior to their next meeting in June 2008, recommendations for additional changes that could be introduced to the General Conditions to achieve a better cross-harmonization among all master documents

o FIDIC prefers to wait until other possible changes are introduced to the MDB Harmonized General Conditions of Contract in order to consolidate these after discussion with all

MDB HARMONIZED GENERAL CONDITIONS OF CONTRACT

affected parties. Any proposed changes need to be looked at in terms of the impact on commercial operations, including the growing list if translations now available.

o Country Systems will take a very long time to be widely accepted and implemented. Even after its acceptance, many countries will still be using the “Master Documents”, so it is worthy to continue efforts to cross-harmonize them

o Furthermore, when designing their own legal procurement systems, countries look toward the master documents of the Banks and FIDIC’s documents.

o Although not related to the MDB Harmonized Conditions of Contract, the issue of harmonization of the Banks’ Request for Proposals was discussed. In BIMILACI a couple of issues on individual consultants were discussed, but the harmonization efforts did not result in complete actions because the conditions of the Banks were too different.

o IADB is now harmonized with the WB in terms of policies, and the WB will be reviewing its Standard Request for Proposals document shortly. Probably after the WB finishes its review, it would be possible to resume the MDB harmonization efforts for this master document


John Boyd – President Pablo Bueno – Executive Committee member

o Enrico Vink – Managing Directoro IADB

Natasha Ward – Environmental Specialist Cristobal Silva – Principal Multisector Specialist Sabine Engelhard – Senior Procurement Specialist Nelly Wheelock – Senior Procurement Specialist Veljko Sikirica – Projects Specialist Yassuo Nishimoto - Consultant María Camila Padilla – Consultant


Discussions and Presentationso One day workshop to take place on June 10, 2008 at the Inter

American Development Banko The Proposed Agenda: :

SUSTAINABLE PROCUREMENT WORKSHOP

MDB’s position on sustainable procurement: “MBD’s analysis and proposal towards a harmonized position on and guidelines on Procurement for Sustainable Development

FIDIC’s position on project sustainability management (PSM): “its evolution and current practices

Case Study: examples of real situations Propose a Pilot Program involving several issues on

sustainability: to be coordinated with other Banks

Presentation on FIDIC’s Project Sustainable Management guidelines Broad definition Points specific to a project Includes social issues Includes environmental issues which need

updating The document can be used by any client (private

or public): governments at an educational level and private companies as specific project solutions

Next Steps Review clauses of the MDB’s Master Bidding

Documents that may need to include sustainable procurement modifications

Propose Clients Assistance Program in SP FIDIC’s “Project Sustainable Management

Document” Guideliness, published in 2004 must needs to be updated with clients’ feedback: narrow down list of things to do in specific projects based on experience.

MDB’s involvement will bring a new perspective to SP

Develop the idea of post-project consequences


Katharina Falkner-Olmedo – Chief Project Procurement, Financial Management and Portfolio Monitoring Division

Cristobal Silva – Principal Multisector Specialist Sabine Engelhard – Senior Procurement Specialist Veljko Sikirica – Projects Specialist

COUNTRY SYSTEMS

Nelly Wheelock – Senior Procurement Specialist Silvia Casares – Procurement Specialist Eugenio Hillman – Procurement Specialist María Camila Padilla – Consultant Bruno Costa - Consultant

o WB Bernard Becq – Chief Procurement Policy Officer Patricia Baquero – Senior Procurement Specialist

Discussions and Presentationso Presentation by Bernard Becq - Chief Procurement Policy

Officer, World Banko A wide consultation process on the proposed approach to

conduct a piloting program to use country systems in procurement was conducted in 78 countries with a broad participation of stakeholders in governments, private sector and civil society

o A number of international private sector associations and national private sector representative groups have reservations about the piloting program to use country systems (Japan, Germany and France), or are opposing it (USA), or propose that it be delayed until international best practices are agreed with them

o The approach is to select pilot countries and pilot projects on a selective basis. It is likely that under the proposed methodology many countries would not be considered for the pool of potential participating countries

o The methodology was revised following the many comments obtained during the consultation process

o Revised Country Procurement Systems Assessment Methodology There will be more flexibility to enter the piloting program for

countries but a stricter assessment at the project level The assessment process will be conducted in thee stages

(which could to some degree be carried out simultaneously), the first two at the country level, the last one at the project level

Stage 1. Qualitative analysis of the country broad analysis of governance to “preselect” countries as potential candidates

prescreening of countries based on fiduciary assessment tolls (such as CPARs) and their commitment to policy reforms

OECD/DAC benchmarking tool prepared by the Joint Venture as a follow-up to the Paris Declaration of Aid

Effectiveness to assess country systems against generally-accepted good practice benchmarks

Stage 2. Consistency and equivalence of country procurement policies and procedures with the World Bank’s procedures and policies Main policy provisions to be retained by the World Bank:

o Fraud and corruptiono Eligibilityo Complaints mechanisms o Advertisingo Remedies

Bank oversight, including in particular ex post reviews Review of international competition procedures (ICB

equivalent) on the basis of a detailed matrix that goes through all clauses

Three principal deviations regarding ICBo Currencyo Language o SBDs would still apply but in a different manner-

review of SBDs at the project level (not national SBDs) against a checklist of necessary clauses as per the harmonized list

Political implications of participating or not for countries o Manage the “selection” process and access for

countries in all Regionso Work with countries to provide incentives and support

in increasing capacity in coordination with other donors

Harmonization expected at the country level given that the methodology relies on tools (OECD/DAC) and equivalence with the same set of policies and harmonized clauses of Master Procurement Documents

Countries may have to take remedial actions such as issuing necessary laws as gap filling measures

Stage 3 Assessment of compliance, performance, capacity and fiduciary risks at the pilot project Level

Can be conducted in parallel to country level Identification of projects at the same time as initial

dialogue with countries Selection: in line with the Country Assistance Strategy

and choice of sectors as well as projects in the pipeline

Executing Agencies with good overall ability to implement projects

Four steps procedure

o Compliance: track record of Executing Agencies to comply with their country own procurement systems

o Performance: past performance against indicators of effectiveness and efficiency

o Capacity: assessment of Executing Agency (inter alia staffing).

o Procurement Risk Analysis: web-based dynamic assessment and management tool to identify and track risks

Possibility use Bank Standard Bidding Documents for large standardized contracts if requested by country, e.g. for non standardized contracts

Review process could exclude a country from CPS if situation changes significantly in that country

Options for third party audits Specific treatment of consulting services (most to be

excluded from the piloting program) All large complex assignments (above specified

ceilings) that require international shortlists to still be procured under Bank guidelines

Smaller assignments under the ceilings may rely on country systems after said systems are evaluated and approved

o The piloting program will associate the private sector in the various assessments and in the monitoring.