Nicaragua - Basic Education Project : Credit 2689 - Credit Agreement - Conformed

CREDIT NUMBER SloSCj -NI Development Credit Agreement (Basic Education Project) between REPUBLIC OF NICARAGUA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated N exc5-e\ V1 ,1995 CREDIT NUMBER ;z,q NI DEVELOPMENT CRODIT AGREEMENT AGREEMENT, dated C\a <c)" (1 1995, between REPUBLIC OF NICARAGUA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Association has received a letter dated January 27, 1995 from the Borrower describing a program of actions, objectives and policies designed to achieve a reform of its education sector (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Association in the financing of the Project; WHEREAS (B) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; 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 cof.zitions set forth in this Agreement; NOW iHEFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "FISE" means Fondo de Inversi6n Social de Emergencia, the Borrower's social investment fund established as a public decentralized entity with juridical personality pursuant to Decree No. 59-90 dated November 20, 1990 and published in the Official Gazette on December 13, 1990, as amended by Decree No. 43-94 dated October 28, 1994; -2- (b) "FISE Implementation Agreement" means the agreement to be entered into between the Borrower and FISE pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such terms includes all schedules to such agreement; (c) "MED" means the Borrower's ministry of education; (d) "Operational Guidelines for School Councils" means the guidelines to be issued by MED pursuant to the provisions of Section 5.01 (c) of this Agreement, in form and substance satisfactory to the Association, for establishing administrative and financial control procedures for municipal education councils and autonomous centers, including rules and criteria for the payment of teachers' incentives; (e) "Operational Manual" means the manual to be adopted by MED pursuant to the provisions of Section 5.01 (a) of this Agreement, in form and substance satisfactory to the Association, establishing the procedures for implementation of the Project; (f) "School Repair Subproject" means a subproject for minor repairs of a primary school which is eligible for financing by MED in accordance -. .i me provisions of the School Repairs Operational Manual (as defined be1C-); (g) "School Repairs Operatio"al Ivianual" means the manual to be adopted by MED pursuant to 1 provisions of Schedule 1, paragraph 3 (c) of this Agreement, in form Lu substance satisfactory to the Association, establishing the procedures for the promotion, identification, appraisal, approval, implementation and monitoring of School Repair Subprojects; and (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE H The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to twenty three million one hundred thousand Special Drawing Rights (SDR 23,100,000). -3- Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Associa".ion shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in Banco Nacional de Desarrollo on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1999 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association 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 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 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. -4- Section 2.06. Commitment charges and service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each March 1 and September 1 commencing September 1, 2005 and ending March 1, 2035. Each installment to and including the installment payable on March 1, 2015 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. -5- Section 2.09. The Minister of Education or the person or persons he shall designate in writing is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken undei the provisions of Section 2.02 of this Agreement and Article V 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 through MED, with the assistance of FISE in respect of Part D of the Project, all with due diligence and efficiency and in conformity with appropriate administrative, financial, educational and environmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with monitoring indicators set forth in the Annex to a supplemental letter of even date herewith. (c) The Borrower shall, through MED, enter into an implementation agreement with FISE, under terms and conditions which shall have been approved by the Association which shall include, inter alia, their respective obligations in the implementation of Part D of the Project. (d) The Borrower shall exercise its rights under the FISE Implementation Agreement in such manner as to protect the interests of the Borrower and the Association, and to accomplish the purposes of the Credit, and, except as the Association shall otherwise agree, the Borrower shall not change, assign, amend, abrogate or waive the FISE Implementation Agreement or any provision thereof. (e) Without limitation to paragraph (a) of this Section, the Borrower shall allocate in its annual budget for calendar years 1996 through 1999 the following minimum amounts, as counterpart funds for the financing of the Project: -6- (i) $500,000 equivalent for calendar year 1996; (ii) $1,200,000 equivalent for calendar year 1997; and (iii) $2,200,000 equivalent for calendar years 1998 and 1999. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services 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 3.03. The Borrower undertakes that, unless the Association shall otherwise agree, School Repair Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or referred to in the School Repairs Operational Manual. Section 3.04. Without limitation to its obligations under Article IX of the General Conditions, the Borrower shall: (a) furnish or cause to be furnished to the Association in form and substance satisfactory to the Association: (i) not later than January 31 and July 31 each year, a report containing, inter alia: (A) the Project activities carried out during the preceding six months; and (B) the expenditures made in respect of such activities; and (ii) not later than December 31 each year, any modifications proposed for the following year in respect of the monitoring indicators referred to in Section 3.01 (b) of this Agreement; (b) not later than November 30 each year furnish to the Association for its approval operating plans for each part of the Project to be implemented during the following calendar year; (c) not later than January 31 each year, review with the Association its progress in the implementation of the Project and in meeting the monitoring indicators referred to in Section 3.01 (b) of this Agreement; (d) not later than January 31, 1997 review with the Association, in addition to the matters referred to in paragraph (c) hereof: (i) its progress in the implementation of the Program; (ii) its progress made in the institutional strengthening of MED; and (iii) the results of the achievement tests applied to primary school students; and (d) if after any of the reviews referred to in paragraphs (b) and (c) hereof the Association is not satisfied.with the progress made in the carrying out of the Project: (i) -7- not later than sixty days after the respective review, prepare a plan of action satisfactory to the Association aimed at achieving adequate progress in the carrying out of the Project and in meeting its objectives; and (ii) take promptly all actions included in such action plan. Section 3.05. Without limitation upon the provisions of Article IX of the General Conditions, the Borrower shall: (a) prepare and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, a plan, of such scope and in such detail as the Association shall reasonably request, for the future operation of the Project; (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan; and (c) thereafter, carry out said plan with due diligence and efficiency and in accordance with appropriate practices, taking into account the Association's comments thereon. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound 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) The Borrower shall: (i) have the records and separate accounts referred to in paragraph (a) of this Section including those for the Special Account 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 four months after the end of each such year, a certified -8- COpy Of 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 said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: -9- (a) MED shall have adopted the Operational Manual; (b) the FISE Implementation Agreement has been executed on behalf of the Borrower and FISE; and (c) MED shall have issued the Operational Guidelines for School Councils. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the FISE Implementation Agreement has been duly authorized and ratified by the Borrower and FISE and is legally binding upon the Borrower and FISE in accordance with its terms. Section 5.03. The date -To V t 6 , 1995 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Sections 3.04 and 3.05 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date 15 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. Except as provided in Section 2.09 of this Agreement, the Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Frente al Edificio de la Asamblea Nacional Managua, Nicaragua Telex: BCN NK 2460 - 10 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 NI CARAGUA By f \eia Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By 4S c~A'\T~)c Regional Vice President Latin America and the Caribbean - 11 - 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 each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil Works 5,230,000 90% (2) Goods 9,100,000 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 85% of local ex- penditures for other items pro- cured locally (3) Printing and 200,000 100% distribution of textbooks, training guides and other educational materials (4) Training 2,040,000 100% (5) Consultants' 2,240,000 100% Services (including FISE's fee) - 12 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (6) Teacher 2,040,000 100% until with- Incentives drawals under this Category have reached an aggre- gate amount equivalent to SDR 480,000; thereafter, 80% until withdrawals have reached an aggregate amount equivalent to SDR 1,160,000; thereafter, 50% until withdrawals have reached an aggregate amount equivalent to SDR 1,840,000; and 25% thereafter - 13 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (7) Incremental 550,000 100% until with- Operating Costs drawals under this Category have reached an aggre- gate amount equivalent to SDR 210,000; thereafter, 80% until withdrawals have reached an aggregate amount equivalent to SDR 340,000; thereafter, 50% until withdrawals have reached an aggregate amount equivalent to SDR 480,000; and 25% thereafter (8) Unallocated 1,700,000 TOTAL 23,100,000 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; - 14 - (c) the term "Incremental Operating Costs" means the salaries of incremental administrative and technical staff, incremental operating costs, travel allowances for Project supervision, maintenance of educational facilities and equipment and vehicles, and office supplies and materials required for the implementation of the Project; and (d) the term "Teacher Incentives" means the bonuses to be paid to primary school teachers in accordance with the Operational Guidelines for School Councils. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 280,000 may be made on account of payments made for expenditures before that date but after June 13, 1994; (b) payments for expenditures under Part C.2 of the Project, unless MED shall have furnished to the Association a set of teac hing manuals, satisfactory to the Association, for the implementation of Part C.2 of the Project; and (c) payments for expenditures under Part A.3 of the Project, unless MED shall have adopted the School Repairs Operational Manual. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures: (a) under Categories (6) and (7) of the table in paragraph I of this Schedule; (b) under contracts for goods and works in respect of which the procedures for prior review set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines referred to in Schedule 3 to this Agreement will not be required in accordance with the provisions of Section I, Part D, paragraph 1 (a) of such Schedule; and (c) for consultants services in respect of which prior review will not be required pursuant to the provisions of Section II, paragraph 2 of such Schedule, all under such terms and conditions as the Association shall specify by notice to the Borrower. - 15 - SCHEDULE 2 Description of the Project The objectives of the Project are to improve the efficiency, quality and equity of basic education in the Borrower's territory. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: School Decentralization 1. Provision of technical assistance: (a) (i) to restructure MED to assume its new functions under the school decentralization program, at the central, departmental and municipal levels; (ii) to define technical and pedagogical norms and administrative procedures for operation and supervision of the decentralized school system to be implemented by the Borrower; (iii) to reform and strengthen the educational supervision system and develop evaluation methods and instruments to assure the quality of educational processes; (iv) to study the determinants of educational costs per student at the pre-primary, primary and secondary levels and design a resource allocation system based on criteria of efficiency and equity; (v) to develop a national system of financial administration and control to help assure an efficient use of resources; and (vi) for study tours by selected MED staff to countries in the region where successful decentralization projects are being implemented; (b) to develop the institutional capacity of the decentralized schools and municipal councils, so that they may be able to carry out their school management, reporting, program development, budgeting, financial management, maintenance program, and personnel management responsibilities, and to provide staff training related thereto; (c) to carry out a national information campaign to acquaint the educational community and the public at large with the purposes and the benefits of local management of schools and to encourage local interest and participation of parents in forming educational councils; (d) to design and implement an integrated information system that will operate at the central, departmental and municipal levels, with links to selected autonomous schools and municipalities; and - 16 - (e) to design and implement an evaluation and monitoring system to follow up on accomplishments of decentralization goals and monitor results on key educational and financial indicators. 2. Provision of performance incentives to primary school teachers working in schools with decentralized management. 3. Carrying out of School Repair Subprojects. Part B: Educational Materials Provision and utilization of textbooks for: (a) language and mathematics for first and second grade primary schools students; and (b) language, mathematics, social sciences and natural sciences for third to sixth grade primary school students. Part C: ExRansion of Pre-Primary Education 1. Provision of technical assistance: (a) to develop and implement a non-formal preschool education program, and to improve the educational content of programs in existing community preschools and child care centers; (b) to strengthen MED's capacity to implement and supervise the preschool programs referred to in C.1 (a) above and to supervise and evaluate the expansion of informal preschool education coverage; (c) to strengthen community participation in preschool education including, inter alia, the fostering of parent involvement in day care centers, and the education of parents in various aspects of child development; (d) to strengthen non-governmental organizations and other agencies that attend to children in selected communities; and (e) to carry out public information, education and communication campaigns to promote community awareness about children and their needs. 2. Training of MED's staff, municipal trainers and community educators in the management and implementation of the preschool education programs referred to in Part C.1 (a) above, including the distribution of teaching manuals required therefor. - 17 - Part D: School Infrastructure 1. Construction: Construction and equipping of about 239 primary schools including the provision of water and basic sanitary services required for their operation. 2. Rehabilitation: Rehabilitation and equipping. of about 216 primary schools including the rehabilitation of their sanitary services. 3. Water and Sanitary Services: Provision of water and sanitary services to about 139 primary schools. The Project is expected to be completed by June 30, 1999. - 18 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods Part A: International Competitive Bidding 1. Except as provided in Part C hereof, books (other than social science textbooks) and other goods, shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1992 (the Guidelines), and in accordance with the following additional procedures: (a) When contract award is delayed beyond the original bid validity period, such period may be extended once, subject to and in accordance with the provisions of paragraph 2.59 of the Guidelines, by the minimum amount of time required to complete the evaluation, obtain necessary approvals and clearances and award the contract. The bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. With respect to each contract made subject to the Association's prior review in accordance with the provisions of Part D. 1 (a) of this Section, the Association's prior approval will be required for: (i) a first extension of the bid validity period if the period of extension exceeds sixty (60) days; and (ii) any subsequent extension of the bid validity period. (b) In the procurement of goods in accordance with this Part A. 1, the Borrower shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Association shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall use bidding documents based on other internationally recognized standard forms agreed with the Association. 2. To the extent practicable contracts for textbooks shall be grouped into three bid packages. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A. 1 hereof, goods manufactured in Nicaragua may be granted a margin of preference in - 19 - accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. (a) Works under Part D of the Project estimated to cost the equivalent of $1,500,000 or less per contract shall, and goods (including furniture) estimated to cost the equivalent of $150,000 or less per contract, up to an aggregate amount equivalent to $1,700,000, social science textbooks estimated to cost the equivalent of $150,000 or less per contract up to an aggregate amount equivalent to $1,800,000, and educational kits for preschools estimated to cost the equivalent of $100,000 or less per contract up to an aggregate of $700,000 and educational supplies estimated to cost the equivalent of $150,000 or less per contract up to an aggregate amount equivalent to $600,000 may, be procured under contracts awarded on the basis f competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. (b) In the procurement of works and goods in accordance with the procedures described in Part C.1 (a) hereof, the Borrower shall use standard bidding documents agreed with the Association. 2. Works under Part D of the Project estimated to cost the equivalent of $150,000 or less per contract, up to an aggregate amount equivalent to $5,000,000, works for School Repair Subprojects estimated to cost the equivalent of $10,000 or less per contract up to an aggregate amount equivalent $1,600,000, educational materials estimated to cost the equivalent of $25,000 or less per contract up to an aggregate amount equivalent to $200,000, and goods estimated to cost the equivalent of $25,000 or less per contract up to an aggregate amount equivalent to $500,000, printing services estimated to cost the equivalent of $10,000 or less per contract up to an aggregate amount equivalent to $900,000, educational supplies estimated to cost the equivalent of $25,000 or less per contract up to an aggregate amount equivalent to $100,000 may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Works for School Repair Subprojects estimated to cost the equivalent of $10,000 or less per contract, up to an aggregate amount equivalent to $600,000 may be procured through direct contracting consistent with the provisions of paragraph 3.5 (f) of the Guidelines, using the system of regional standard unit prices for direct contracting developed by FISE, and all in accordance with procedures acceptable to the Association. - 20 - Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract procured pursuant to the provisions of Part A. 1 hereof and the first two contracts for goods and for works procured pursuant to the provisions of Part C. 1 (a) and C.2 hereof, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Emplovment of Consultants 1. In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall 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 (the Consultant Guidelines). For complex, time-based assignments, the Borrower shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, the Borrower shall use other standard forms agreed with the Association. - 21 - 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Association review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to: (a) contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each; or (b) contracts for the employment of individuals estimated to cost less than $50,000 equivalent each. However, this exception to prior Association review shall not apply to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Association; (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above; or (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above. - 22 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (7) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (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 Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $3,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Association shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $1,000,000 until the aggregate amount of withdrawals from the Credit Account plus the total amount of all outstanding special commitments entered into by the Association pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $2,000,000. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. - 23 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Association, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Association pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Association shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account pursuant to the provisions of Section 6.02 of the General Conditions; or - 24 - (d) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that 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 Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY