Nepal - Primary Education Project : Credit 1463 - Credit Agreement - Conformed

OFFICIAL CREDIT NUNBER 1463 NEP DOCUMENTS Development Credit Agreement (Primary Education Project) between KINGDOM OF NEPAL and INTERNATIONAL DEVEIOPMENT ASSOCIATION Dated ,1984 CREDIT NUMER 1463 NEP DEVELOPMENT REDIT AGREEMENT AGREEMENT, dated , 1984, between THE KINGDOM OF NEPAL (herein te 11ed the Borrower) and INTER- NATIONAL DEVELOPMENT ASSOCIATION hereinafter called the Associa- tion). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) by agreement dated March 30, 1984 (hereinafter called the UNICEF Project Agreement), the UNITED NATIONS CHILDREN'S FUND (hereinafter call the UNICEF) has agreed to make a grant (herein- after called the UNICEF GRANT) to the Borrower in an aggregate principal amount of $1,700,000 to assist in financing the foreign exchange cost of the technical assistance required for carrying out Parts D and E of the Project, and in financing the technical assistance required for carrying out Parts A (i) (b), B (ii) (a), B (ii) (c) and B (ii) (d) of the Project on the terms.and condi- tions therein set forth; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the 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 Credit Agreements of the Association, dated June 30, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and-the following addi- tional terms have the following meanings: -2- (a) "MOEC" means the Borrower's Ministry of Education and Culture; (b) "NEC" means the National Education Committee estab- lished and operating pursuant to the Borrower's National Educa- tion Committee Act, 1971; (c) "OCE" means the Office of the Controller of Examina- tions established within MOEC; (d) "CTSDC" means the Curriculum, Textbook, Supervision Development Center established within MOEC; (e) "Project Implementation Board" means the board to be established pursuant to Section 3.04 of this Agreement; (f) "Project Implementation Unit" and the acronym "PIU" mean the unit to be established pursuant to Section 3.05 of this Agreement; (g) "Resource Center School" means the center to be established under Part A of the Project for purposes of providing to the respective Cluster of Schools, inter alia, in-service training, supervision system, and operation and management support; (h) "Resource Center Management Committee" means the committee to be established at each Cluster of Schools pursuant to the provisions of Section 3.07 of this Agreement; (i) "Cluster of Schools" means a group of about 8 to 12 primary education level schools which are serviced by a Resource Center School; (j) "School Management Committee" means the committee established by each local community within the Project Area for purposes of maintaining community support for the provision and maintenance of the school within its area of influence; and (k) "Project Area" means the Borrower's administrative districts of Dang, Dhankuta, Jhapa, Kaski, Surkhet and Tanahun. 3I ARTICLE II S The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to twelve million one hundred thousand Special Drawing Rights (SDR 12,100,000). Section 2.02. The amount of the Credit may be withdrawn from the 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 Association, for expenditures made (or, if the Association 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 Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1989 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to the Association 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 Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without re- strictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 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 the Association a service charge at thie rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.07. Commitment charges and service charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each January 1 and July 1 commencing July 1, 1994, and ending Janu- ary 1, 2034, each installment to and including the installment payable on January 1, 2004, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment 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 declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate edu- cational, administrative and financial practices, and shall pro- vide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limitation to the provisions of paragraph (a) of this Section, the Borrower shall carry out the Project sub- stantially in accordance with an implementation schedule satis- factory to the Association. Section 3.02. (a) In order to assist the Borrower in carry- ing out Parts A (i) (a), A (ii), B (i), D, E, G (ii) and H of the Project, the Borrower shall employ consultants whose qualifica- tions, experience and terms and conditions of employment shall be satisfactory to the Association, such ,consultants to be selected in accordance with principles and procedures satisfactory to the Association 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. (b) In order to assist the Borrower in carrying out Parts B (ii) (e) and G (i) of the Project, the Borrower shall employ architects whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association, such architects to be selected in accordance --ith principles and procedures satisfactory to the Association 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 C')in August 1981. (c) In order to assist the Borrower in carrying out Parts A (i) (b), B (ii) (a), B (ii) (c), B (ii) (d), D and E of the Pro- ject, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association, provided, however, that the con- sultants to be employed pursuant to the provisions of this para- graph for assisting in the carrying out of Parts D and E of the Project, shall be different from those employed for assisting in the carrying out of such Parts of the Project pursuant to the provisions of paragraph (a) of this Section. 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 Credit against hazards inci- dent to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any in- demnity shall be payable in a currency freely usable by the Bor- t) rower to replace or repair such goods. (b) The Borrower shall cause all goods and services financ- ed out of the proceeds of the Credit to be used exclusively for the purposes of the Project. Section 3.04. For purposes of ensuring a timely execution of the Project and adequate coordination among the agencies and de- partments of the Borrower participating in the carrying out of * the Project, the Borrower shall establish and, thereafter, main- tain a Project Implementation Board with such powers, functions, responsibilities and representation as shall be required for the purposes. -6- Section 3.05. The Borrower shall establish and, thereafter, maintain, within the'Office of the Secretary of MOEC, a Project Implementation Unit, headed by an officer with suitable qualifi- cations and experience, such Unit to be assigned, at all times, with such powers, functions, responsibilities, staffing and funds as shall be required to enable it to organize and administer education projects in Nepal, including the Project described in Schedule 2 to this Agreement. Section 3.06. The Borrower shall, prior to the establish- ment of a particular Cluster of Schools, est.blish and, there- after, maintain a Resource Center Management Committee, such Committee to be assigned, at all times, with such powers, func- tions, responsibilities and representation as shall be required to enable it to manage the Resource Center School concerned. Provided, however, that, in consultation with the Association, the above-mentioned obligation to maintain the Resource Center Management Committee may terminate on the basis of the findings and recommendations of the evaluation provided for in Section 3.08 of this Agreement. Section 3.07. The Borrower shall, prepare and furnish to the Association, for its approval, full working drawings and specifications for the buildings and related facilities under Part B (ii) (e) and G (i) of the Project, and, thereafter, the Borrower shall carry out such Parts of the Project in accordance with said working drawings and specifications, as so approved. Section 3.08. The Borrower shall: (a) evaluate the adequacy of the organizational structure of MOEC regional and district offices, including staff and budgetary requirements, for providing a cost effective imple- mentation of the Borrower's policy to decentralize its education system; (b) not later than July 1, 1987, furnish to the Associa- tion, for its review and comments, the results and recommenda- tions of such evaluation together with a draft comprehensive plan for the improvement of the Borrower's primary education and its administration; and (c) thereafter, taking into account the Association's com- ments, if any, take all such action as shall be necessary to -7- implement the said recommendations, and adopt and utilize such comprehersive plan. Section 3.09. Without limitation to the provisions of Sec- tion 3.01 (a) of this Agreement, the Borrower undertakes: (a) to select suitably qualified candidates from the educe- tion cadre of MOEC for training under the Project; (b) to retain, until the completion of the Project, all CTSDC and PIU staff trained under the Project; and (c) to use its best efforts to, upon completion of the Project and based on the actual needs of its Primary Education Sub-sector as well as on the quality of the work performed, appoint, within such Sub-sector, as regular staff and at adequate levels of seniority, the temporary staff hired for carrying out the Project. Section 3.10. (a) The Borrower shall furnish to the Associa- ti.on, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower shall: (i) maintain records and pro- cedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association 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 Credit and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) 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 Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and ini- tial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Devel- opment Credit Agreement and the accomplishment of the purposes of the Credit. Section 3.11. The Borrower undertakes to carry out, or cause to be carried out, the development of the Sano Thimi campus located near Kathmandu, in accordance with the Master Plan. For purposes of this Section, the term "Master Plan" means the plan prepared by the Borrower, in a manner and substance satisfactory to the Association, for the development of the Sano Thimi campus. Section 3.12. The Borrower shall take all such action as shall be necessary to acquire all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such acquisi- tion, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to the Project. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, records and separate accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies 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 Credit Account on the basis of statements of expenditure; (ii) retain, until one yqar after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which -9- withdrawals are requested from the Credit Account on the basis of statements of expenditure; and (iii) enable the Association's representatives to examinetsuch records. (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 auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than nine 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 Association shall have rea- sonably requested, including without limitation to the foregoing, a separate opinion by said auditors in respect of the expendi- tures and recordo referred to in paragraph (b) of this Section as to whether the proceeds of the Credit withdrawn from the 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 Association such other information concerning said accounts, records and expenditures and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. the Borrower shall: (a) promptly upon receipt of .the appropriate applications, issue or cause to be issued, such import licenses as shall be required for goods to be imported for the carrying out of the Project; (b) make available, or cause to make available, promptly as needed, all foreign exchange which shall be required therefor; and (c) with respect to locally produced materials which are subject to allocation, make, or cause to be made, allocations of such materials promptly and in such quantities as shall be required for the carrying out of the Project. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, thit: - 10 - (a) Subject to subparagraph (b) of this section, the right of the Borrower to withdraw the proceeds of any grant 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 Agree- ment providing therefor; (b) paragraph (a) of this section shall not apply if the Borrower establishes to the satisfaction of the Association that: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such grant; 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. 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 specified in paragraph (a) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (b) of such Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that all conditions of effectiveness of the UNICEF Pro- ject Agreement, other than the effectiveness of this Agreement, if that be the case, have been duly fulfilled; (b) that the Borrower has established the Project Imple- mentation Board pursuant to the provisions of Section 3.04 of this Agreement; (c) that the Borrower has established the PIU pursuant to the provisions of Section 3.05 of this Agreement, and has duly appointed to the PIU, in a manner and substance satisfactory to the Association, the following staff: an architect, an examination specialist from OCE, an& an education officer from CTSDC; and (d) that the Borrower has furnished to the Association, in a manner and substance satisfactory to the Association, the work- ing drawings and specifications for the buildings and related facilities referred to in Parts B (ii) (e) and G (i) of the Pro- ject. Section 6.02. The date, , 1984 is hereby specified for the purposes of Section 12,04 of the General Conditions. Section 6.03. The provisions of Sections 3.11 and 5.02 of this Agreement shall cease and terminate on the date on which the Development Credit Agreement shall terminate or on a date 20 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, Ministry of Finance of the Borrower 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 His Majesty's Government Kathmandu, Nepal Cable address: Telex: ARTHA 2499 NEP Kathmandu, Nepal For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 12 - Cable: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, hav6 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. KINGDOM OF NEPAL By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Aisa Api -13 - SCHEDULE 1 Withdrawal of"the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to 4ach Category and the percentage of expenditures for items so to be financed in each Category: 4mount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil Works 2,950,000 100% of foreign expenditures and 80% of local ex- penditures (2) (a) Building 2,150,000 100% of foreign materials and expenditures, 80% furniture of local expendi- tures (ex-factory cost) and 65% of local ex- penditures for other items pro- cured locally (b) Equipment, 1,900,000 100% of foreign vehicles, expenditures, 80% books and of local expendi- journals tures (ex-factory cost) and 65% of local expendi- tures for other items procured locally - 14 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (c) Educational 530,000 80% of local ex- and other penditures (ex- consumable factory cost) and materials 65% of local ex- penditures for other items pro- cured locally (3) (a) Technical 830,000 100% of local assistance expenditures for Parts A (i) (a), A (ii), B (i), D and E of the Project (b) Technical 760,000 100% assistance for Part G (ii) of the Project (4) Professional 750,000 100% services under Parts B (ii) (e) and G (i) of the Project, and studies under Part H of the Project (5) Salaries and 970,000 FY 1985: 100% allowances for FY 1986: 100% incremental staff, FY 1987: 85% and Project operating FY 1988: 20% costs and train- ing (6) Unallocated 1,260,000 TOTAL 12,100,000 -15- 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (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; (c) the term "incremental staff" means the Borrower's additional staff employed after January 1, 1984 for purposes of carrying out the Project; and (d) the term "FY" means the Association's fiscal year, commencing on July 1 and ending on June 30. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that the proceeds of the Credit shall not be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement 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 Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such Category as required to be consistent with the afore- mentioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement except that with- drawals, in an aggregate amount not exceeding the equivalent of SDR 330,000, may be made in respect of Categories 1, 3, 4 and 5 on account of payments made for expenditures before that date but after January 1, 1984. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be in- sufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: i) reallocate to such Category, to the extent required to meet - 16 - the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association 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 continue until all expenditures thereunder shall have been made. 6. If the Association 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 Credit, and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Asso- ciation's reasonable opinion,. represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 17- SCHEDULE 2 Description of the Project The objectives of the Project are to: (a) achieve a low cost qualitative improvement of the Borrower's primary education; and (b) strengthen the administrative and technical capacity of the Borrower's Education sector. The Project consists of the following Parts: Part A: (i) Establishment of about 70 Resource Center Schools in the Project Area, including (a) the construction, operation and maintenance of adequate buildings and facilities, and (b) provision of educational and train- ing materials and equipment. (ii) Rehabilitation and improvement of about 700 primary school buildings in the Project Area. Part B: (i) Strengthening of the policy making and long-term planning activities of MOEC and NEC through the carry- ing out of research in policy analysis. (ii) Strengthening of the administrative capacity of the Borrower's Education sector through, inter alia, the: (a) provision of training to MOEC staff for, inter alia, effective planning, budgeting and human resource management systems, and in organizing and administering of education projects in Nepal; (b) implementation of the Borrower's education decen- tralization policy; (c) restructuring of the organization of CTSDC; (d) development of an appropriate data resource system for monitoring and evaluatioq; -18- (e) construction, operation and maintenance of ade- quate facilities for CTSDC at Sano Thimi campus; (f) construction, operation and maintenance of ade- quate buildings and facilities for about four district offices of MOEC in four of the six districts in the Project Area, and of about two regional offices of MOEC at Pokhara and Dhankuta; and (g) provision of adequate office space and facilities for the PIU. Part C: Q Implementation of an appropriate training program to achieve the objectives of the Project for, inter alia, the school's head masters, managers, community leaders, and teachers working within each cluster of Schools, and for the Cluster of Schools' supervisory staff, district education officers, PIU staff and CTSDC staff. Part D: Monitoring and evaluation of Project related activi- ties. Part E: Provision of technical assistance to the PIU for the overall implementation of the Project. Part F: Provision of professional services for: (i) carrying out Part B (ii) (e) of the Project; and (ii) carrying out Part G (i) of the Project. Part G: (i) Construction, operation and maintenance of an adequate building for the specialized activities of OCE at Sano Thimi campus, including furnishing and equipment thereof. (ii) Evaluation and improvement of the examination system currently implemented by OCE. -19- Part H: Studies related to possible future education projects in Nepal. The Project is expected to be completed by December 31, 1988. . - 20- SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Part D hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Association 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 Tay be, a general procurement notice, in such form and detail and containing such information as the Asso- ciation shall reasonably request; the Association will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity 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 inter- national competitive bidding. 3. Bidders for civil work contracts estimated to cost the equivalent of $200,000 or more each shall be pre-qualified as described in paragraph 1.3 of Part A of the Guidelines. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the'sales and simi- lar taxes levied in connection with the sale or delivery, pur- suant 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. -21- B. Preference for Domestic Manufacturers In the procurement o goods in accordance with the procedure described in Part A of th s Schedule, goods manufactured in Nepal 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: bids offering goods manufactured in Nepal if the bidder shall have established to the satis- faction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in Nepal equal to at least 20% of the ex-factory bid price of such gooda. (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 (V delivery, pursuant to the bids, of the goods. Such lowest evalu- ated 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. 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 further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in -22- 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 3 is the lowest evaluated bid shall be selected. C. Preference for Domestic Contractors 1. With respect to the evaluation of bids for any contract for civil works included under Category 1 of the table set forth in Schedule 1 to the Development Credit Agreement and to be procured in accordance with the procedures described in Part A of this Schedule, the Borrower may grant a margin of preference of 7-1/2% to domestic contractors in accordance with, and subject to, the following provisions: Contractors applying for such preference shall be asked to provide, as part of the data for qualification, such informa- tion, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Associaion, a particular firm or group of firms qualifies for a domestic preference. The bidd- ing 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. 2. After bids have been received and reviewed by the Borrower, 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. D. Other Procurement Procedures 1. Contracts for civil works estimated to cost the equivalent of $800,000 each or less, may be let on the basis of competitive bidding advertised locally, in accordahce with procedures satis- factory to the Association. -23- 2. Contracts for the purchase of furniture estimated to cost the equivalent of $250,000 each or less, may be procured on the basis of competitive bidding advertised locally, in accordance with procedures satisfactory to the Association. 3. Contracts for purchase of building materials, equipment and vehicles estimated to cost the equivalent of $50,000 each or less, may be procured on the basis of competitive bidding adver- tised locally, in accordance with procedures satisfactory to the Association, provided, however, that in the aggregate such pro- curement shall not exceed the equivalent of $300,000. 4. Contracts for purchase of educational materials and consum- able materials for laboratories, workshops and offices may be procured on the basis of competitive bidding advertised locally, in accordance with procedures satisfactory to the Association. 5. Items referred to in paragraphs 2, 3 and 4 above estimated to cost the equivalent of . $30,000 each or less, up to an aggregate amount of $550,000 equivalent, may be procured through prudent shopping on the basis of at least 3 price quotations from different sources. 6. Books and instructional printed materials may be purchased directly from publishers or authorized distributors at the lowest quoted price. E. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for civil works estimated to cost the equivalent of $200,000 or more, and with respect to all contracts for the purchase of goods estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower 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 doct-sents shall require the Association's concurrence before it is issued to the prospective bidders. -24- (b) After bids have been received and evaluated, the Bor- rower 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 suf- ficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be incon- sistent 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 Association's concurrence, materially differ from those on which bids were asked or prequalification was 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 con- tract. 2. With respect to each contract not governed by the preceding paragraph (except for contracts on account of which withdrawals are allowed from the Credit Account on the basis of statements of expenditures), the Borrower 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 infor- mation as the Association shall reasonably request. The Associa- tion 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 issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be' inconsistent with the pro- visions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. e 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. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 2 , 1984. FOR SECRETARY