Sri Lanka - Second Water Supply And Sewerage Project : Credit 1041 - Project Agreement - Conformed

OFFICIAL C L~~FNT~JCREDIT NUMBER 1041 CE DOCUMENTS Project Agreement (Second Water Supply and Sewerage Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL WATER SUPPLY AND DRAINAGE BOARD Dated - , 1980 CREDIT NUMBER 1041 CE PROJECT AGREEMENT AGREEMENT, dated '46,5% v bJ b2- , 1980, between INTERNATIONAL DEVELOPMENT ASSOCIATION hereinafter called the Association) and NATIONAL WATER SUPPLY AND DRAINAGE BOARD (herein- after called WDB). WHEREAS by the Development Credit Agreement of even date herewith between the Democratic Socialist Republic of Sri Lanka (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty million dollars ($30,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that WDB agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and WDB, the proceeds of the credit provided for under the Development Credit Agreement will be made available to WDB on the terms and conditions therein set forth; and WHEREAS WDB, 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, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. WDB shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause -2- to be provided, promptly as needed, the funds, facilities, ser- vices and other resources required for the purpose. Section 2.02. In order to assist WDB in carrying out the Project, WDB shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) WDB undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by WDB to replace or repair such goods. (b) Except as the Association may otherwise agree, WDB shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) WDB shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, training programs, contract documents and construction and procurement schedules for the Project, and any material modi- fications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) WDB: (i) shall maintain records and procedures 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) shall enable the Association's accredited 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) shall furnish to the Association at regular intervals all such information as the Association shall -3- reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between WDB and the Association, WDB 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 initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by WDB and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit. (d) WDB shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of WDB and any relevant records and documents. Section 2.06. WDB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, WDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) WDB shall at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) WDB shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by WDB of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.08. WDB shall maintain the unit established pur- suant to Section 2.09 of the First Project Agreement, and streng- then such unit to a level satisfactory to the Association. -4- ARTICLE III Management and Operations of WDB Section 3.01. (a) WDB shall at all times manage its affairs, plan the development of its properties and facilities and main- tain its financial position in accordance with appropriate administrative, engineering, public utility and financial prac- tices under the supervision of experienced and competent manage- ment; and shall cause its plant, equipment, properties and facilities to be maintained and all necessary renewals and repairs thereto to be made, all in accordance with appropriate adminis- trative, engineering, public utility and financial practices. (b) WDB shall take all steps as shall be required to provide it with revenues as determined in accordance with the provisions of Section 4.02 of the Development Credit Agreement. Section 3.02. (a) WDB shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its operations; (b) WDB shall not sell or otherwise dispose of any of its property or assets which shall be required for the efficient conduct of its operations. Section 3.03. WDB shall take out and maintain insurance with responsible insurers, or make other arrangements satisfactory to the Association, for protection against risks in a manner which shall be consistent with appropriate practice. Section 3.04. WDB shall continue to ensure that, in accor- dance with a timetable acceptable to the Association, senior financial positions on its staff shall be filled and its accoun- ting department shall be adequately staffed by WDB personnel or through provision of technical assistance. Section 3.05. WDB shall: (i) install consumer meters on existing connections in the Project Area at a rate of not less than 1,000 meters per month; and (ii) install new meters, where appropriate, on new connections promptly as such connections are provided. -5- Section 3.06. WDB shall by June 30, 1981 complete the installation of bulk meters to accurately measure flows from all treatment plants, major pumping installations and distribution reservoirs, and to accurately measure bulk supplies to local authorities of the Borrower in the Project Area. ARTICLE IV Financial Covenants Section 4.01. WDB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. WDB shall: (i) have its accounts and fin,ncial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year (including those for the fiscal year ending December 31, 1979) audited, in accordance with appropriate auditing principles consistently applied, by indepen- dent auditors acceptable to the Association (for the fiscal year 1980 such auditors shall be appointed by September 30, 1980, and thereafter said auditors shall be appointed by January 1 for the relevant fiscal year); (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial state- ments 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 Associa- tion shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. WDB shall implement a program satisfactory to the Association, for the annual revaluation of its fixed assets in operation. Section 4.04. Except as the Association may otherwise agree, WDB shall not incur any debt unless the net revenue of WDB for the fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date or such incurrence, whichever, is greater, shall be not less than 1.5 times the maximum debt service requirements for any succeeding fiscal year on all debt of WDB including the debt to be incurred. For the purposes of this Section: -6- (a) the term "debt" means all debt incurred by WD3 including debt assumed or guaranteed by WDB, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (b) the term "incur" with reference to any such debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred by WDB: (i) under a contract or loan agreement, on the date the contract or loan agreement providing for such debt is entered into; and (ii) under a guaran- tee agreement, on the date the agreement providing for such guarantee shall have been entered into; (c) the term "net revenue" means a gross revenue received by WDB from water supply, sewerage and drainage services, less all operating expenses, including adequate maintenance, taxes or payment in lieu of taxes, if any, and administrative expenses, but before provision for depreciation and interest and other charges on debt; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on such debt; and (e) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time such valua- tion is made, obtainable by WDB for the purpose of servicing such debt. ARTICLE V Effective Date; Termination; Cancellation and Suspension .Sect'ion 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 WDB thereunder shall terminate on the earlier of the following two dates: -7- (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty years after the date of this Agree- ment. (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 WDB 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 General Conditions. 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 herein- after 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -8- For WDB: National Water Supply and Drainage Board P.O. Box 14 Mt. Lavinia Sri Lanka Cable address: WATERBOARD Ratmalana Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of WDB may be taken or executed by its Chairman or such other person or persons as such Chairman shall designate in writing, and WDB shall furnish to the Association sufficient evidence of the authority and the authenticated speci- men signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively 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 BySa'a Regional Vice President South Asia NATIONAL WATER SUPPLY AND DRAINAGE BOARD * By Ji,a- Authorized Representative -9- SCHEDULE 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 "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, WDB 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 may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. WDB shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Bidders for the works included in the Project shall be prequalified 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 competitive 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; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. - 10 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Sri Lanka 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 Sri Lanka if the bidder shall have established to the satisfaction of WDB and the Association that the manufacturing cost of such goods includes a value added in Sri Lanka equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eval- uated 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 such - 11 - 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 With respect to the evaluation of bids for any contract for civil works included under Category (3) 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, WDB may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the following provisions: 1. Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification applying for such preference shall be asked to provide, as part of the data for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. . 2. After bids have been received and reviewed by WDB, 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 Contracts for the purchase of goods amounting to not more than the equivalent of $100,000 each and totalling in the aggre- gate not more than equivalent of $1,000,000 shall be procured in - 12 - accordance with local procurement procedures of the Borrower acceptable to the Association. E. Review of Procurement Decisions by the Association 1. Review of prequalification. WDB shall, before qualification is invited, inform the Association in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifi- cations and, where applicable, of their eligibility for domestic preference under Part D above and of the reasons for the exclusion of any applicant for prequalification and for such eligibility shall be furnished by WDB to the Association for its comments before the applicants are notified of WDB's decision, and WDB shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: (a) Before bids are invited, WDB 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, WDB shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other informa- tion 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 WDB 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. - 13 - (d) Two conformed copies of the contract shall be furnished to the As- ciation 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. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion 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, WDB shall inform the Associa- tion 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 provisions of this Agreement, shall promptly inform WDB and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 1980-. FOR SECRETARY