Zambia - Rural Water Supply Project : Credit 1362 - Credit Agreement - 2 - Conformed

O FFI CIAL DOCUMENTS SPECIAL FUND CREDIT NUMBER SF-2 ZA Special Fund Credit Agreement (Rural Water Supply Project) between REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator of the Special Fund established with funds contributed by certain members of the International Development Association Dated L, 1983 SPECIAL FUND CREDIT NUMBER SF-2 ZA SPECIAL FUND CREDIT AGREEMENT AGREEMENT, dated 1 /3 , 1983, between the REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and the INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator of the Special Fund established with funds contributed by certain mem- bers of the International Development Association (hereinafter called the Administrator). WHEREAS (A) by Resolution No. IDA 82-6 adopted on Octo- ber 26, 1982 by the Executive DirectorE, of the International Development Association (hereinafter callqd IDA) there has been established by IDA a Special Fund constituted by the funds which shall be contributed by certain members of IDA and administered by IDA acting as Administrator of such Special Fund, for the purpose of, and in accordance with, the provisions of said Resolution; (B) the Borrower has requested of the Administrator assist- ance from the resources of the Special Fund in the financing of the Project, described in Schedule 3 to this Agreement, and the Administrator has determined that such assistance would be in accordance with the provisions of the Resolution referred to above; (C) the Borrower has also requested IDA to provide addi- tional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and IDA (hereinafter called the Development Credit Agreement) IDA is agreeing to provide such assistance in an aggregate principal amount equivalent to nine million two hundred thousand Special Drawing Rights (SDR 9,200,000) (hereinafter called the IDA Cre- dit); and WHEREAS the Administrator has agreed, on the basis, inter alia, of the foregoing, to extend the Special Fund Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development -2- Credit Agreements of the International Development Association, dated June 30, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the International Development Association, as so modified, being hereinafter called the General Conditions): (a) the term "Association", wherever used in the General Conditions, means the International Development Association acting as the Administrator of the Special Fund referred to in the Preamble to the Special Fund Credit Agreement; (b) the terms "Development Credit Agreement", "Credit" and "Credit Account", wherever used in the General. Conditions, are amended to read "Special Fund Credit Agreement", "Special Fund Credit" and "Special Fund Credit Account", respectively; (c) the second sentence of Section 5.01 of the General Con- ditions is deleted; and (d) in Sections 6.02 and 7.01 of the General Conditions, the term "Association" shall also include the International Development Association acting in its own capacity. Section 1.02. Wherever 'used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Development Credit Agreement" means the agreement of even date herewith between the Borrower and IDA for the purpose of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Development Credit Agreements of IDA, dated June 30, 1980, as made applicable to such agreement, all agreements supplemental to the Development Credit Agreement and all schedules to the Devel- opment Credit Agreement; (b) "Department" means the Department of Water Affairs of the Ministry of Agriculture and Water Development of the Bor- rower; -3- (c) "Project Advance Account" means the account to be established and maintained pursuant to Section 3.01 (b) of this Agreement; (d) "Kwacha" means the currency of the Borrower; and (e) "District Councils" means the district councils estab- lished in January 1981 pursuant to the Local Administration Act, 1980 of the Borrower; and (f) "Special Account" means the account to be opened and thereafter maintained pursuant to Section 2.02 (b) of this Agree- ment. ARTICLE II The Special Fund Credit Section 2.01. The Administrator agrees to lend to the Bor- rower on the terms and conditions in the Special Fund Credit Agreement set forth or referred to, an amount in various curren- cies equivalent to five million six hundred thousand Special Drawing Rights (SDR 5,600,000). Section 2.02. (a) The amount of the Special Fund Credit may be withdrawn from the Special Fund Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Administrator, for expenditures made (or, if the Administrator shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Special Fund Cre- dit. (b) The Borrower shall, for the purposes of the Project, open and thereafter maintain in dollars a separate special account in its Central Bank on terms and conditions satisfactory to the Administrator. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 2 to this Agreement. (c) Withdrawals shall be made only on account of expendi- tures for goods produced in, or services supplied from, the -4- territories of (A) any Part II member of IDA; (B) any Part I member of IDA which fulfills the conditions set forth in para- graph 13 (d) (ii) of the Special Fund Resolution on the date of this Agreement, as determined by the Administrator. Section 2.03. Except as the Administrator shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Special Fund Credit shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be April 30, 1988, or such later date as the Administrator shall establish. The Admin- istrator shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to IDA a commitment charge at the rate of -one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Special Fund Credit not withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Special Fund Credit Agreement to the.respective dates on which amounts shall be with- drawn by the Borrower from the Special Fund Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as IDA shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in'this Agreement for purposes of Sec- tion 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.06. The Borrower shall pay to IDA a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the amount withdrawn from the Special Fund Credit Account and outstanding from time to time. Section 2.07. Commitment charges and service charges shall be payable semiannually on April 15 and October 15 in each year. Section 2.08. The Borrower shall repay to IDA the principal amount of the Special Fund Credit in semiannual installments pay- able on each April 15 and October 15 commencing October 15, 1993 and ending April 15, 2033, each installment to and including the installment payable on April 15, 2003 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment - 5 - thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.09. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate financial, economic, administrative, technical and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Pursuant to paragraph (a) of this Section, the Borrower shall open, and maintain until the completion of the Project, a Project Advance Account and shall deposit therein an initial amount of five hundred thousand Kwacha (K 500,000). Thereafter, the Borrower shall, at the beginning of each quarter, deposit the amount estimated to be required to cover expenditures for the Project during such quarter which are not to be covered by with- drawals from the Special Fund Credit Account or the IDA Credit account. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall employ engineering consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Administrator, such consultants to be selected in accordance with principles and procedures satisfactory to the Administrator on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981; provided, however, that the eligibility restri6- tions set forth in Section 2.02 (c) of this Agreement shall apply to the employment of such consultants and that the said Guide- lines shall be read as containing the said restrictions. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Special Fund Credit against hazards incident to the acquisition, transportation and delivery -6- thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Administrator shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Special Fund Credit to be used exclusively for the Project. Section 3.04. (a) The Borrower shall furnish to the Adminis- trator, promptly upon their preparation, the plans, specifica- tions, reports, contract documents and construction and procure- ment schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Administrator shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and, where appropriate, the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Special Fund Credit, and to disclose their use in the Project; (ii) shall enable the Administrator's accre- ditad representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Special Fund Credit and any relevant records and documents; and (iii) shall furnish to the Adminis- trator at regular intervals all such information as the Adminis- trator shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Special Fund Credit and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Administrator, the Borrower shall prepare and furnish to the Administrator a report, of such scope and in such detail as the Administrator shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Bor- rower and the Administrator of their respective obligations under the Special Fund Credit Agreement and the accomplishment of the purposes of the Special Fund Credit. - 7 - Section 3.05. The Borrower 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 carrying out the Project. Section 3.06. To ensure the carrying out of the Project as required under Section 3.01 above, the Borrower shall assign to the Department about eleven qualified and experienced accounting personnel, to be selected in consultation with the cost and management accountant employed under Section 3.02 of this Agree- ment and to be trained under Part D of the Project. Section 3.07. The Borrower shall use its best efforts to obtain from the District Councils their assurances that in the event that the new system of revenue collection and accounting for water supply operations adopted as a result of the recommen- dation of the cost and management accountant referred to in See- tion 3.06 requires the participation of the District Councils, they will follow such system and, if appropriate, will have their personnel trained for the purpose by the accountants assigned to the Department under Section 3.06. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall in respect of the Pro- ject, maintain or cause to be maintained separate accounts ade- quate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures of the Department of the Borrower's district admin- istrative centers and of any other department or agency of the Borrower responsible for carrying out the Project or any part thereof. (b) Without limitation to the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Special Fund Credit Account on the basis of statements of expenditure; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Special Fund Credit Account on the basis of statements of expenditure; and (iii) enable the Administrator's representatives to examine such records. -8- (c) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent (external) auditors acceptable to the Administrator; (ii) furnish to the Administrator, as soon as available, but in any case not later than six months after the end of each such year, a certified copy of the report of such audit by such auditors, of such scope and in such detail as the Administrator shall have reasonably requested, including without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures -and records referred to in para- graph (b) of this Section as to whether the proceeds of the Spe- cial Fund Credit withdrawn from the Special Fund Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Administrator such other information concerning said accounts, records and expenditures and the audit thereof as the Administra- tor shall from time to time reasonably request. Section 4.02. To ensure the efficient operation and mainte- nance of the water supply systems constructed under the Project, the Borrower shall ensure that: (a) the Department operate and maintain the piped systems for at least five years following their completion; (b) the District Councils remain responsible for the oper- ation and maintenance of village boreholes and wells; and (c) the Department assist the District Councils in training villagers in the maintenance of such boreholes and wells. Section 4.03. The Borrower shall take such steps as shall be necessary: (a) to make the tariff structure for water supply more equitable and to improve the collection and accounting procedures related thereto; including the adoption of a uniform accounting system for all water supply schemes operated by the Department; and (b) to achieve such tariff levels and structure as will ensure the recovery by the end of 1985 and thereafter of the full costs of operation and maintenance of water supply systems. The first adjustment for such purpose shall be made not later than January 1, 1984. - 9 - Section 4.04. The Borrower shall ensure that all collections for the supply of water be remitted promptly and that the Depart- ment maintains accounts therefor, as provided for in the plan of action approved under Section 4.03 above. Section 4.05. (a) The Borrower shall ensure that the Depart- ment be provided as and when needed with such funds as shall be required for the proper operation and maintenance of the water supply facilities operated by the Department and shall exchange views annually with the Association on the adequacy of such financing. (b) The Borrower shall investigate methods aimed at ensuring that the costs of operating and maintaining wells and boreholes be borne by the users thereof and shall exchange views with the Administrator on the results of such investigation by June 30, 1984. ARTICLE V Remedies of the Administrator Section 5.01. (a) For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof, namely, that subject to para- graph (b) of this Section: (i) The right of the Borrower to withdraw the proceeds of any grant, loan or credit made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement pro- viding therefor, or (ii) any such loan or credit shall have become due and payable prior to the agreed maturity thereof. (b) Paragraph (a) of this Section shall not apply if: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obli- gations under such agreement, and (ii) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. - 10 - Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof, namely, that the event speci- fied in paragraph (a) (ii) of Section 5.01 of this Agreement shall occur, subject to paragraph (b) of that Section. ARTICLE VI Effective Date; Termination; Designation of Administrator Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Special Fund Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Special Account has been opened; (b) the Project Account has been opened and the initial payment made therein in accordance with the provisions of Section 3.01 (b) of this Agreement; and (c) all conditions precedent to the effectiveness of the Development Credit Agreement, except for the effectiveness of this Agreement, have been fulfilled. Section 6.02. The date 1--c-#4-, /3, /9e?3 is hereby specified for the purposes of Section 12.04 of the General Condi- tions. Section 6.03. The obligations of the Borrower under Arti- cle IV of this Agreement shall cease and determine on the date on which the Special Fund Credit Agreement shall terminate or on a date fifteen years after the date of this Agreement, whichever shall be the earlier. Section 6.04. In the event that the Executive Directors of IDA decide to terminate the functions of IDA as administrator of the Special Fund pursuant to paragraph 17 of the Special Fund Resolution, the Administrator may, by notice to the Borrower, designate another party which, on the date specified in such notice, shall assume part or all of the rights and obligations of the Administrator under this Agreement in accordance with the Special Fund Resolution and such decision of the Executive Direc- tors, as specified in such notice. - 11 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time responsible for finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 50062 Lusaka, Zambia Cable address: Telex: MINFIN ZA 42221 Lusaka For the Administrator: Administrator of the Special Fund (International Development Association) 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) 64145 (WUI) 89650 (WUT) or 197688 (TRT) - 12 - 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. REPUBLIC OF ZAMBIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator of the Special Fund established with funds contributed by certain members of the International Development Association By Regional Vice President Eastern Africa - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Special Fund Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Special Fund Credit, the allocation of the amounts of the Special Fund Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Special Fund Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works (a) by contract 1,380,000 100% of foreign expenditures and 30% of local expenditures (b) by force 460,000 30% of local account expenditures (2) Vehicles, equip- 460,000 100% of foreign ment and tools expenditures, for workshops; 50% of local drilling rig expenditures for ex-factory cost and 45% of local ex- penditures for other items locally pro- cured (3) Consultants' and 1,380,000 100% of foreign experts' services; expenditures fellowships -14 - Amount of the Special Fund Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Initial deposit in 280,000 Amount due under Special Account paragraph 3 of Schedule 2 (5) Unallocated 1,640,000 TOTAL 5,600,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of,. and for goods produced in or services supplied from, any country other than the Borrower which is (A) a Part II member of IDA or (B) a Part I member of IDA which fulfills the conditions set forth in paragraph 13 (d) (ii) of the Special Fund Resolution on the date of the Special Fund Credit Agreement, as determined by the Administrator; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Disbursement under Category (1) (b) shall be made on the basis of statements of expenditures which shall be in form and shall contain information satisfactory to the Administrator. 4. The disbursement percentages have been calculated in com- pliance with the policy of the Administrator that the proceeds of the Special Fund Credit shall not be disbursed on account of pay- ments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, pro- curement or supply thereof; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Administrator may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such Category as required to be consistent with the aforementioned policy of the Administrator. - 15 - 5. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of expenditures made prior to the date of this Agreement. 6. Notwithstanding the allocation of an amount of the Special Fund Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Administrator has reasonably estimated that the amount of the Special Fund Credit then allo- cated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Administra- tor may, by notice to the Borrower: (i) reallocate to such Cate- gory, to the extent required to meet the estimated shortfall, proceeds of the Special Fund Credit which are then allocated to another Category and which in the opinion of the Administrator are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may conti- nue until all expenditures thereunder shall have been made. 7. If the Administrator shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditure for such item shall be financed out of the proceeds of the Special Fund Credit, and the Administrator may, without in any way restricting or limiting any other right, power or remedy of the Administrator under the Special Fund Credit Agreement, by notice to the Borrower, cancel such amount of the Special Fund Credit as, in the Administrator's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Special Fund Credit. - 16 - SCHEDULE 2 Special Account 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Special Fund Credit as set forth in the table in paragraph 1 of Schedule 1 to this Agree- ment; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Special Fund Credit allocated from time to time to Categories (1) through (3) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the t;erm "initial deposit" means an amount in dollars equivalent to the amount allocated to Category (4) and to be withdrawn from the Special Fund Credit Account and deposited in the Special Account pursuant to the first sentence of paragraph 3 to this Schedule. 2. Payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provi- sions of this Schedule. 3. The Administrator shall, at the request of the Borrower, withdraw on behalf of the Borrower from the Special Fund Credit Account and deposit into the Special Account the initial depo- sit. Thereafter on the basis of requests by the Borrower fur- nished to the Administrator at such intervals as the Administra- tor shall specify, the Administrator shall further so withdraw from the Special Fund Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Spe- cial Account with amounts equal to payments made out of the Spe- cial Account for eligible expenditures, but only to the extent that the amount of any such deposit, together with any amount remaining on deposit in the Special Account as of the date of such request, shall not exceed in the aggregate the equivalent of the initial deposit. Except as the Administrator may otherwise agree, each such deposit after the initial deposit shall be with- drawn by the Administrator from the Special Fund Credit Account - 17 - under the respective Categories (1), (2) or (3) and in the res- pective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pur- suant to paragraph 4 of this Schedule. 4. Prior to or at the time of each request by the Borrower for a deposit by the Administrator into the Special Account, after the initial deposit, the Borrower shall furnish to the Admini- strator in respect of each payment made by the Borrower out of the Special Account such documents and other evidence as the Administrator shall reasonably request, showing that such payment was made for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Sched- ule and unless otherwise agreed by the Administrator, no further deposit into the Special Account will be made by the Administra- tor (a) when the Administrator shall have determined at any time that all further withdrawals can be made directly by the Borrower from the Special Fund Credit Account in accordance with the pro- visions of paragraph (a) of Section 2.02 of this Agreement, or (b) when the total unwithdrawn amount of the Special Fund Credit allocated to Categories (1) through (3) for the Project, minus the amount of any qualified agreement to reimburse made by the Administrator and of any special commitment entered into by the Administrator pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the initial deposit, whichever shall be sooner. Withdrawal from the Special Fund Credit Account of the remaining unwithdrawn amount of the Special Fund Credit allocated to Categories (1) through (3) of the Project shall follow such procedures as the Administrator shall specify by notice to the Borrower and shall, except as the Administrator shall otherwise agree, be made only after and to the extent the Administrator shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the datd of such notice have been or will be utilized in making payments for eligible expendi- tures. 6. If the Administrator shall have determined at any time that: (a) any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule, or (ii) was not justified by the evi- dence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Administrator and, - 18 - unless otherwise agreed by the Administrator, prior to any fur- ther deposit into the Special Account by the Administrator, depo- sit into the Special Account or, if the Administrator shall so request, refund to the Administrator, an amount equal to the amount of such payment or the portion thereof not so eligible or justified; or (b) any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Administrator, and unless otherwise agreed by -the Administrator, refund to the Administrator such amount then outstanding in the Special Account. - 19 - SCHEDULE 3 Description of the Project The Project is designed to expand the facilities for the supply of potable water in the Districts of Ndola Rural, Samfya, Isoka, Kaputa, Kawambwa and Mbala in northern Zambia and to strengthen the capacity of the Department to carry out the poli- cies of the Borrower in the sector of water supply. The Project includes: Part A: Construction and installation of: 1. piped systems in the four district administrative cen- ters of Isoka, Mpulungu, Kawambwa and Samfya; and 2. point systems - wells and boreholes - in priority vil- lages in the six Districts (about 400 wells and 42 boreholes). Part B: Preparation of detailed designs for an additional three or four water supply schemes as a future project, including a feasibility study of the proposed scheme at Chilubi Island; preparation of detailed designs for point systems in the same locations. Part C: Construction and equipping with tools, equipment, vehicles and a two-year supply of spare parts, of provincial workshops at Kasama and Mansa, and at the six Districts; construction of housing for the staff of the Department in the Districts and at Lusaka. Part D: Training in accounting systems of staff of the Department; fellowships for training outside of Zambia in engineering of staff of the Department. - 20 Part E: Strengthening education in health and hygiene through the acquisition and use of educational materials, the rehabilitation of water supply and sanitation facilities at the six District Health Centers, the construction of housing for medical staff and the acquisition for use by such Centers of vehicles and spare parts. The Project is expected to be completed by October 31, 1987. - 21 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Subject to the eligibility restrictions set forth in Section 2.02 (c) of this Agreement and except as provided in Part C here- of, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (July 1980 edition) (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. The above-mentioned eligibility restrictions shall be stated in the tender or prequalification documents for the pro- curement of such goods and civil works. 2. For goods and works to be procured on the basis of interna- tional competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Administrator as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Administrator shall reasonably request; the Administrator will arrange for the publication of such notice in order to pro- vide timely notification to prospective bidders of the oppor- tunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Bidders for the construction of the piped systems will be given the option of bidding for one or more schemes. 4. Goods and civil works shall be bulked together in bidding packages to the maximum extent practicable for the purposes of bidding and procurement. 5. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported - 22 - goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Zambia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. 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. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bid's offering goods manufactured in Zambia if the bidder shall have established to the satisfaction of the Borrower and the Administrator that the manufacturing cost of such goods includes a value added in Zambia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eva- luated 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. - 23 - 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported goods offered in each group C bid, for the purpose of this fur- ther comparison only, an amount equal to: (i) the amount of cus- toms 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 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 3 is the lowest eva- luated bid shall be selected. C. Other Procurement Procedures 1. Contracts for the rehabilitation and construction of work- shops and staff housing may be awarded on the basis of the com- petitive bidding procedures normally applicable to the Depart- ment. 2. Construction of wells and boreholes in villages and at the Health Centers may be carried out by force account through the Department in accordance with procedures satisfactory to the Association or by local contractors who shall be selected on the basis of competitive bidding procedures normally applicable to the Department. D. Review of Procurement Decisions by the Administrator 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for works estimated to cost the equivalent of $700,000 or more and all contracts for goods estimated to costs the equivalent of $150,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Administrator, for its comments, the text of the invitations to bid and the specifications and other bidding documents, toge- ther with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in - 24 - the said documents or procedures as the Administrator shall rea- sonably request. Any further modification to the bidding docu- ments shall require the Administrator's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Administrator of the name of the bidder to which it intends to award the contract and shall furnish to the Administrator, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids -received, and such other informa- tion as the Administrator shall reasonably request. The Adminis- trator shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Administrator'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 Administrator promptly after its execution and prior to the submission to the Administrator of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Administrator, promptly after its execution and prior to the submission to the Administrator of the first application for withdrawal of funds from the Credit Account in respect of such contract, two con- formed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other inform- ation as the Administrator shall reasonably request. The Adminis- trator shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issu- ing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Administrator of the proposed modification, waiver, extension - 25 - or change order and the reasons therefor. The Administrator, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. Jn witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of , 198-3-. FOR SECRETARY