Afghanistan - Kabul Water Supply And Sanitation Project : Credit 0563 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 563 AF Project Agreement (Kabul Water Supply and Sanitation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND DA AFGHANISTAN DA OBO RASAWALO AOW CANILIZATION MOASSASA DATED JUNE 23, 1975 PROJECT AGREEMENT AGREEMENT, dated June 23, 1975, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and DA AFGHANISTAN DA OBO RASAWALO AOW CANALIZATION MOASSASA, a Government enterprise existing under the laws of the Borrower (hereinafter called MOASSASA). WHEREAS by the Development Credit Agreement of even date herewith between Republic of Afghanistan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to nine million dollars ($9,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Moassasa agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS the Borrower intends to enter into an agreement with the Canadian International Development Authority and the World Health Organization, or to make other arrangements, for the financing of a portion of the cost of Part D of the Project. WHEREAS by a subsidiary agreement to be entered into between the Borrower and Moassasa, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to Moassasa on the terms and conditions therein set forth; and WHEREAS Moassasa, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unles the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. 4 ARTICLE II Execution of the Project Section 2.01. Moassasa shall carry out Parts A, B and D of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. Section 2.02. (a) In order to assist Moassasa in the detailed engineering, bid preparation and evaluation for purposes of Parts A and B of the Project, Moassasa shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, and whose services shall be financed under the Tripartite Agreement or other arrangements made by the Borrower. (b) In order to assist Moassasa in the supervision of construction of works included in Parts A and B of the Project, Moassasa shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions of Schedule I to this Agreement. Section 2.04. (a) Moassasa undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent or made available to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by Moassasa to replace or repair such goods. (b) Except as the Association may otherwise agree, Moassasa shall cause all goods and services financed out of the proceeds of the Credit relent or made available to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) Moassasa shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material 5 modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) Moassasa: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent or made available to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent or made avaIlable to it and the goods and services financed out of such proceeds. (c) Moassasa shall enable the Association's representatives to examine all of its plants, installations, sites, works, buildings, property, equipment records and documents relevant to the Project. Section 2.06. Moassasa shall duly perform all its obligations under the Subsidiary Agreement. Except as the Association shall otherwise agree, Moassasa shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Agreement or any provision thereof. Section 2.07. (a) The Association and Moassasa shall from time to time, at the request of either party exchange views through their representatives with regard to the progress of the Project, the performance of their respective obligations under this Agreement, the performance by Moassasa of its obligations under the Subsidiary Agreement and other matters relating to the purposes of the Credit. (b) Moassasa shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, the performance by Moassasa of its obligations under this Agreement or under the Subsidiary Agreement. Section 2.08. Moassasa shall, not later than two months from the Effective Date, or such other date as shall be agreed between the Association and Moassasa, lesignate an officer of Moassasa who will, inter alia, assess the training needs of Moassasa's staff. Moassasa shall within seven months from the Effective Date prepare and furnish to the Association for its comments a training program for its staff. 6 Section 2.09. Moassasa shall not later than March 20, 1979 or such other date as shall be agreed between the Association and Moassasa, complete the installation of meters for all consumers with private water supply connections. Section 2.10. Not later than nine months from the date of this Agreement, or such other date as shall be agreed between the Borrower and the Association, Moassasa shall prepare a time-phased program, satisfactory to the Association, to complete not later than the date for the completion of the Project: (i) the phasing out of the old distribution system; (ii) the transfer of about 700 connections to the new distribution system; (iii) at Alaudin pumping station: (a) the installation of new chlorination and metering equipment; (b) the overhauling of existing pumps to their full rating; and (c) the renewal of electrical wiring. (iv) the repair of the defective outlet on the main storage tank at Demazang; and (v) the replacement of the defective water supply house connections. ARTICLE III Management and Operations of Moassasa Section 3.01. Moassasa shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. (a) Moassasa shall take all steps, within the laws and regulations of the Borrower, necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the carrying out of Parts A, B and D of the Project or for its operations. 7 (b) Except as the Association shall otherwise agree, Moassasa shall not transfer, or permit to be transferred, to any other person or entity any portion of its property the transfer of which would significantly affect the operations or the financial position of Moassasa. (c) Moassasa shall operate and maintain its plants, equipment and other property and from time to time make all necessary renewals and repairs thereof and shall at all times carry on its operations in an efficient manner under capable management and with competent staff and maintain its financial position, all in accordance with appropriate business, engineering and administrative practices. ARTICLE IV Financial Covenants Section 4.01. Moassasa shall maintain records adcquate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Moassasa shall maintain separate accounts for Parts A, B and D of the Project and for Kabul Water Supply. The said accounts will show Moassasa's overhead costs apportioned as betwecn the Kabul water supply system and its other operations on a basis satisfactory to the Association. Section 4.02. Moassasa shall: (1) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of Moassasa and the audit thereof as the Association shall from time to time reasonably request. Section 4.03.(a) Moassasa shall not later than nine months from the date of this Agreement, or such other date as shall be agreed between the Association and Moassasa, employ a duly qualified person to the position of Moassasa's financial advisor whose terms of reference shall be satisfactory to the Association. (b) Moassasa shall not later than three years from the Effective Date, or such other date as shall be agreed between he Association and Moassasa, establish aid implement a commercial accounting system for its operations. 8 Section 4.04. Moassasa shall take steps (i) promptly to inventory its assets on a continuing basis; and (ii) to value its assets, in accordance with principles satisfactory to the Association, not later than two years after the completion of transfer to Moassasa of public water supply properties and installations in Kabul pursuant to Section 3.03(a) of the Development Credit Agreement. Section 4.05. Except as the Borrower and the Association shall otherwise agree, Moassasa shall in respect of the water supply services in Kabul city: (a) levy commencing with the Borrower's fiscal year 1355, a tariff in an amount equal to 7.50 Afghanis per cubic meter on all consumers receiving metered water supply, or a progressive tariff which will produce an average rate of not less than 7.50 Afghanis per cubic meter of water delivered to all metered consumers. (b) maintain its tariff at the level of not less than 60 Afghanis per month, on all consumers receiving non-metered water supply until Moassasa is able to supply water to consumers without interruption of supply and, thereafter, at such monthly rate as shall be fixed in consultation with the Association. Section 4.06. (a) Without prejudice to the provisions of Section 4.05 of this Agreement, and except as the Association and Moassasa shall otherwise agree, Moassasa shall levy and maintain tariffs at such levels (and make such adjustments thereto as shall be necessary from time to time) as shall provide in any fiscal year revenues sufficient to cover all costs of Moassasa's operation and services (including depreciation) and, in addition, provide a rate of return on its capital invested. Such rate of return shall: (i) in respect of its operations as a whole, he established on a basis satisfactory to the Association and Moassasa being in no case less than the rate required to enable Moassasa to finance all of its debt charges and repayments in that fiscal year (insofar as they exceed depreciation provision) and all capital expenditure of Moassasa in that fiscal year not financed from loans or from additions to Moassasa's equity; and (ii) in respect of its Kabul water supply service, be not less than 2% in the Borrower's fiscal years 1359 and 1360, 6% in the fiscal years 1361 and 1362 and 7% in subsequent years, calculated on Moassasa's net fixed Kabul water supply assets in operation. (b) For the purposes of paragraph (ii) of this Section: (A) the return on Moassasa's net fixed Kabul water supply assets in operation shall be calculated in each fiscal year by using as the numerator the total revenues arising from Moassasa's water supply operations in Kabul, less all operating and administrative costs (including adequate maintenance and provision for 9 depreciation and for taxes or payments in lieu of taxes, if any, but excluding interest and other charges on debt) and as the denominator the average between the net current value of fixed water supply assets in operation at the beginning and at the end of each year in question; and (B) "net current value of fixed water supply assets" shall mean the gross value of Kabul water supply assets established under a method satisfactory to the Borrower and the Association at the time the calculation is made, less accumulated depreciation based on the same gross value. Section 4.,07. Except as the Association shall otherwise agree, Moassasa shall not incur any debt unless its net revenues for the fiscal year next preceding such incurrence, shall be not less than the maximum debt service requirement in any succeeding fiscal year on all debt including the debt to be incurred. For the purpose of this Section: (a) the term "debt" shall mean all indebtedness of Moassasa and debt guaranteed by Moassasa, maturing by its terms more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred- on the date of execution and delivery of a contract, loan agreement, guarantee agreement or other instrument providing for such debt; (c) the term "net revenues" shall mean gross revenues from all sources, adjusted to take account of Moassasa's tariff rates in effect at the time of the incurrence of debt even though said rates might not be in effect during all or part of the fiscal year or twelve-month period to which such reven'es relate, less all operating and administrative expenses and provisions for taxes, if any, but before provision covering depreciation, interest and other charges on debt; (d) the term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing rate of exchange at which such other currency is, at the time of such valuation, legally obtainable for the purposes of servicing such debt. 10 ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of Moassasa thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty five years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify Moassasa of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. 11 For Moassasa: Da Afghanistan Da Obo Rasawalo Aow Canalization Moassasa Mikro Royan Kabul Afghanistan Cable address: AOBO RASAWOLU MOASSASA Kabul Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of Moassasa may be taken or executed by its President or such other person or persons as the said President shall designate in writing. Section 6.03. Moassasa shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of Moasassa, take any action or execute any documents required or permitted to be taken or executed by Moassasa pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ W. A. Wapenhans Acting Regional Vice President Europe, Middle East and North Africa DA AFGHANISTAN DA OBO RASAWALO AOW CANALIZATION MOASSASA By /s/ A. Malikyar Authorized Representative 12 SCHEDULE Procurement A. General Procedures 1. Except as provided in Parts A.3 and D hereof, contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. In the event Moassasa or the Borrower, as the case may be, shall decide to give the margin of preference set forth in paragraph C.1 hereof to domestic contractors, all bidders for civil works included in Parts A and B of the Project shall be prequalified as described in part 2.2 of the Guidelines. 3. Contracts for civil works comprising water supply house connections and latrine improvements shall be awarded on the basis of competitive bidding advertised locally and in accordance with local procedures satisfactory to the Association. Drilling and related well equipment may be procured after inviting three quotations. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufactures 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to Moassasa or the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Afghanistan may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: 13 (1) Group A: bids offering goods manufactured in Afghanistan if the bidder shall have established to the satisfaction of Moassasa or the Borrower and the Association that the manufacturing cost of such goods includes a value added in Afghanistan equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Afghanistan not covered under Group A. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs 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 175% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Evaluation and Comparison of Bids for Civil Works; Preferences for Domestic Con tractors I. With respect to any contract for civil works included under Category t of the table set forth in Schedule I to the Credit Agreement, Moassasa or the Borrower, as the case may be, may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the following provisions: (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification applying also for such preference shall be asked to provide, as part of the information for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted 14 by the Association, a particular firm or group of firms qualifies for a domestic preference. The said classification, shall, inter alia, provide that partnerships of Afghan and foreign nationals will be considered for the eligibility of such preference only where: (a) the local firm will not be technically or financially qualified without the foreign participation; or (b) the partnership has been in existence and has domestically tendered within the preceding twelve months. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by Moassasa or the Borrower as the case may be, 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. Procurement Without Contracting Drilling of boreholes and other ancillary works may be carried on force account by the Water and Power Department of the Borrower through equipment made available to said department by Moassasa. E. Review of Procurement Decisions by Association I. Review of prequalification. Moassasa or the Borrower, as the case may be, before qualification is invited, shall inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and, where applicable, of their eligibility for domestic preference under Part C.1 above and of the bases for the exclusion of bidders from the list of prequalified bidders shall be furnished by Moassasa or the Borrower, as the case may be, to the Association for its comments before the applicants are notified, and Moassasa or the Borrower, as the case may be, shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts. 15 With respect to all contracts for equipment estimated to cost the equivalent of $50,000 or more and for civil works estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, Moassasa or 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 documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, Moassasa or the Borrower, as the case may be, 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 the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report, by the consultants referred to in Section 2.02(a) of this Agreement, on the evaluation and comparison of the bids received, together with the recommendation for award of the said consultants and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower or Moassasa, 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 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 withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph E.2 hereof, Moassasa or the Borrower, as the case may be, 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 (wherever applicable) with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award 16 of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and Moassasa and state the reasons for such determination.