Malawi - Blantyre Water Supply Project : Credit 0711 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 711 MAI Project Agreement (Blantyre Water Supply Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BLANTYRE WATER BOARD I Dated June 3, 1977 PROJECT AGREEMENT AGREEMENT, dated June 3, 1977, between INTERNATIONAL DEVELOP- MENT ASSOCIATION (hereinafter called the Association) and BLANTYRE . WATER BOARD (hereinafter called BWB). WHEREAS by the Development Credit Agreement of even date herewith between Republic of Malawi (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million dollars ($7,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that BWB agree to undertake such obligations toward the Association aF hereinafter set forth; WHEREAS BWB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth, and the symbol "MK" means Malawi Kwacha, the unit of the Borrower's currency. -3- ARTICLE II Execution of the Project Section 2.01. BWB shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. Section 2.02. In order to assist BWB in (a) carrying out detailed design of the facilities included in the Project, preparing tender documents, evaluating bids, and supervising their construction; (b) selecting and introducing the data processing equipment under Part D of the Project; and (c) carrying out Part E of the Project, BWB shall employ engineering and management consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions of Schedule 1 to this Agreement. Section 2.04. AWB shall: (a) from time to time starting not later than December 31, 1977, select the low-income areas of Blantyre to be included in the Project in accordance with criteria -4- satisfactory to the Association, and (b) promptly carry out the Project in respect of such areas. Section 2.05. (a) BWB undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by BWB to replace or repair such goods. (b) Except as the Association may otherwise agree, BWB shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) BWB shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modificatauns thereof or additions thereto, in such detail as the Association shall reasonably request. (b) BWB: (i) shall maintain records adequate to reflect the progress and cost of the Project and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph -5- (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. (c) BWB shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of BWB and any relevant records and documents. Section 2.07. BWB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, BWB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.08. (a) BWB shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. -6- (b) BWB 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 BWB of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.09. BWB shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project. -7- ARTICLE III Management and Operations of BWB Section 3.01. BWB shall at all times manage its affairs, maintain its financial position, plan its future expansion and conduct its business and undertaking, all in accordance with sound business, financial and public utility practices, and under the supervision of experienced and competent management assisted by adequate and competent staff. Section 3.02. Except as the Association shall otherwise agree: (a) BWB shall at all times take all necessary steps to maintain its existence and its right to carry on operations, and to acquire and retain all rights, powers, privileges and franchises which are necessary or useful for the purpose of complying with its obligations under this Agreement or for the efficient conduct of its business and undertaking. (b) BWB shall at all times operate and maintain the plants, machinery, equipment and other property owned or operated by it and promptly make all necessary repairs and renewals thereof, all in accordance with sound engineering and public utility practices. (c) BWB shall not sell, lease, transfer or otherwise dispose of any of the property or assets owned or operated by it which -8- are necessary or useful for the efficient conduct of its business and undertaking. Section 3.03. BWB shall exchange views with the Association on the qualifications of the candidates, before making any appointment to the positions of Engineer/Manager or of Clerk/Treasurer of BWB. Section 3.04. BWB shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.05. BWB shall: (a) not later than December 31, 1977, furnish to the Association a Lv.an of action to evaluate and upgrade BWB's maintenance and operation practices; (b) give the Association a reasonable opportunity to comment thereon; and (c) carry out such plan promptly thereafter. Section 3.06. BWB shall exchange views with the Association on the recommendations made by the consultants referred to in Section 2.02 of this Agreement in assisting BWB to select and introduce the data processing equipment under Part D of the Project, and to carry out Part E of the Project. -9- ARTICLE IV Financial Covenants Section 4.01. (a) BWB shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. (b) BWB shall use depreciation accounting to reflect its net income in accordance with generally accepted public utilities and commercial practices. Section 4.02. BWB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable 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 its financial statements for such year as so audited and (B) the 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 the accounts and financial statements of BWB and the audit thereof as the Assocation shall from time to time reasonably request. - 10 - Section 4.03. Except as the Association shall otherwise agree, BWB shall take from time to tirae all such action required on its part (including, without limitation, action with regard to the level and structure of its tariffs for the services it provides) as shall be required to obtain revenues to produce an annual rate of return of not less than 8% in 1978 and 1979, not less than 10% in 1980 and 1981, and not less than 9% in each year thereafter. For the purposes of this Section: (i) the annual rate of return shall be calculated as a percentage which shall be determined by dividing the net operating revenues for the year in question by half the sum of the value of the net fixed assets in service at the beginning of such year and the value of net fixed assets in service at the end of such year. (ii) "net operating revenue" means gross revenues from the application of its water supply tariff less all operating, maintenance and administrative expenses, taxes and any payments in lieu thereof, and provision for depreciation in accordance with methods satisfactory to the Association, but before provision for interest and other charges on debt. - 11 - (iii) "value of net fixed assets in service" means the gross value of fixed assets in service, valued in accordance with sound and consistently maintained methods of valuation (and annual revaluation) satisfactory to the Association, less the amount of accumulated depreciation; provided that when a major asset shall be brought into operation during the fiscal year the value of such asset shall be included in the foregoing computation only in respect of that part of the fiscal year during which such asset has been in operation. Section 4.04. Except as the Association shall otherwise agree, BWB shall not incur any debt unless its net revenues for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever amount is the greater, shall be not less than 1.5 times the maximum debt service requirement for any succeeding fiscal year on all debt, including the debt to be incurred. For the purposes of this Section: (a) "debt" means all debt of BWB maturing by its terms more than one year after the date on which it is incurred; - 12 - (b) debt shall be deemed to be incurred (i) under a loan agreement, on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such agreement, and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (c) "net revenues" means gross revenues from all sources, adjusted to take account of BWB's water supply tariff in effect at the time of incurrence of debt even though such tariff were not in effect during BWB's fiscal year or the twelve-month period to which such revenue relate, less all operating, maintenance and administrative expenses, and including provision for taxes, if any, but before provision for depreciation, interest and other charges on debt; (d) "debt service requirement" means the aggregate amount of amortization (including sinking fund contributions, if any), interest and other charges on debt; and (e) whenever it shall be necessary to value, in terms of the currency of the Borrower, debt denominated or payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable by BWB for - 13 - the purpose of servicing such debt, or if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. Section 4.05. BWB shall consult with the Association from time to time regarding its tariff structure, and any change thereof. Section 4.06. BWB shall revalue annually its fixed assets, in accordance with methods satisfactory to the Association. - 14 - 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. Section 5.02. (a) This Agreement and all obligations of the Association and of BWB 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) a date 24 years after the date of this Agreement. (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 BWB 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 Development Credit Agreement. - 15 - 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,, 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 here- inafter 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: INDEVAS Washington, D.C. For BWB: Blantyre Water Board P.O. Box 30369 Chichiri, Blantyre 3 Malawi Cable address: WATERBOARD Blantyre, Malawi - 16 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of BWB may be tiken or executed by the Chairman of BWB or such other person or persons as the Chairman of BWB shall designate in writing. Section 6.03. BWB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of BWB, take any action or execute any documents required or permitted to be taken or executed by BWB pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 17 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 Is/ Willi A. Wapenhans Regional Vice President Eastern Africa BLANTYRE WATER BOARD By /s/ D.Y.J. Kalilangwe Authorized Representative - 18 - SCHEDULE 1 Procurement A. International Competitive Bidding 1. Contracts for the purchase of goods or for civil works shall be procured in accordance with procedures consistent with those set forth in the Introduction and in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Bidders for civil works shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 19 - 2. Goods manufactured in Malawi may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Malawi if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in Malawi equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Malawi. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on - 20 - goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of custcims duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Evaluation and Comparison of Bids for Civil Works; Preference for Domestic Contractors With respect to any contract for civil works to be procured in accordance with the procedures described in Part A.1 of this Schedule, BWB may grant a margin of preference of 7-1/2% to - 21 - domestic contractors, in accordance with, and subject to, the following provisions: (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification applying also for such preference shall be asked to provide, as part of the data for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by BWB, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. - 22 - D. Review of Procurement Decisions by the Association 1. Review of prequalification. BWB shall, before qualification is invited, inform the Association in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification shall be furnished by BWB to the Association for its comments before the applicants are notified of BWB's decision, and BWB shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, BWB shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the - 23 - Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, BWB shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report,,by the consultants referred to in Section 2.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform BWB and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for with- drawal of funds from the Credit Account in respect of such contract. -24- 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, BWB shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform BWB and state the reasons for such determination.