Honduras - Water Supply And Drainage Project : Loan 2421 - Municipality Project Agreement - Conformed

OFFICIAL LOAN NUMBER 2421 HO DOCUMENTS Municipality Project Agreement (Water Supply and Drainage Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and MUNICIPALIDAD DE SAN PEDRO SULA Dated , 1984 LOAN NUMBER 2421 HO MUNICIPALI PROJECT AGREEMENT AGREEMENT, dated 7 , 1984, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and MUNICIPALIDAD DE SAN PEDRO SULA (hereinafter called the Municipality). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Honduras (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million six hundred thousand dollars ($19,600,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Municipality agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and the Municipality, a portion of the proceeds of the Loan, as provided for under the Loan Agreement, will be made available to the Municipality on the terms and conditions therein set forth; and WHEREAS the Municipality, in consideration of the Bank's entering into the Loan 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 Loan Agreement, the Preamble to- this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. The Municipality declares its commitment to the objectives of the Project as set forth in paragraphs (a) and (b) of the Preamble to Schedule 2 to the Loan Agreement, and to - 2 - this end shall carry out, through DIMA, DIMA's Sub-project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency, in conformity with appropriate administrative, financial, engineering and public utility practices, and in accordance with the provisions of the Acuerdo Municipal. Section 2.02. (a) In order to assist the Municipality in carrying out DIMA's Sub-project, the Municipality shall, through DIMA, employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with prin- ciples and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Bor- rowers and by the World Bank as Executing Agency" published by the Bank in August 1981. The services of consultants employed pursuant to the provisions of this Section shall be assigned to DIMA. (b) Notwithstanding the provision of paragraph (a) above, the Municipality shall, through DIMA, not later than February 28, 1985, employ: (i) a consultant responsible for DIMA's finance and accounting; and (ii) a consultant responsible for DIMA's engi- neering and operations, all of whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. (c) The Municipality shall take all measures necessary to facilitate the work of consultants in the performance of their services under DIMA's Sub-project and shall make available to them all such information as shall be necessary for the success- ful execution of DIMA's Sub-project. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for DIMA's Sub-project and to be financed out of the proceeds of the Loan, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) The Municipality undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Borrower against hazards incident to the acquisition, trans- portation and delivery thereof to the place of use or installa- tion, and for such insurance any indemnity shall be payable in a currency freely usable by the Municipality to replace or repair such goods. - 3 - (b) The Municipality shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the purposes of DIMA's Sub-project. Section 2.05. (a) The Municipality shall, through DIMA, furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procure- ment schedules for DIMA's Sub-project, and any material modifica- tions thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Municipality shall: (i) maintain records and procedures adequate to record and monitor the progress of DIMA's Sub-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 Loan, and to disclose their use in DIMA's Sub- project; (ii) enable the Bank's representatives to visit the facilities and construction sites included in DIMA's Sub-project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) furnish to the Bank, through DIMA, at regular intervals, not less frequent than semi-annually, all such information as the Bank shall reasonably request concerning DIMA's Sub-project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Municipality of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of DIMA's Sub-project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Municipality and the Bank, the Municipality shall, through DIMA, prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execu- tion and initial operation of DIMA's Sub-project, its cost and the benefits derived and to be derived from it, the performance by the Municipality and the Bank of their respective obligations under the Municipality Project Agreement and the accomplishment of the purposes of the Loan. -4- (e) The Municipality shall enable the Bank's representa- tives to examine all plants, installations, sites, works, buildings, property and equipment of the Municipality, including any asset assigned to DIMA in accordance with the provisions of the Acuerdo Municipal, and any relevant records and documents. Section 2.06. The Municipality shall duly perform all its obligations under the Municipality Subsidiary Loan Agreement, including those of making available to DIMA, for the purposes of the Project, the proceeds of the Loan relent to the Munici- pality thereunder. Except as the Bank shall otherwise agree, the Municipality shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Municipality Susidiary Loan Agreement or any provision thereof. Section 2.07. (a) The Municipality shall, at the request of the Bank, exchange views with the Bank with regard to the pro- gress of DIMA's Sub-project, the performance of its obligations under this Agreement and under the Municipality Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) The Municipality shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by the Municipality of its obliga- tions under this Agreement and under the Municipality Subsidiary Loan Agreement. Section 2.08. The Municipality shall take all such action as shall be necessary to: (a) acquire as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities under DIMA's Sub- project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to DIMA's Sub-project; and (b) acquire, maintain and renew licenses, consents, franchises and other rights as may be necessary for carrying out DIMA's water supply, sewerage and drainage services. Section 2.09. The Municipality shall not, without the prior approval of the Bank, sell, lease, transfer or otherwise dispose of any of its properties or assets required for the efficient operation of DIMA, and shall not, without the prior approval of - 5 - the Bank, transfer, or assign, other than to DIMA, any of the Municipality's rights related to the provision of water supply, sewerage and drainage services in the San Pedro Sula Metropolitan Area. Section 2.10. The Municipality shall, not later than June 30, 1985, take all such measures as shall be necessary or advisable to ensure that: (a) DIMA's records of private wells for water consumption are updated; and (b) DIMA's registration and fee collection procedures for such wells are strengthened, all in a manner satisfactory to the Bank. Section 2.11. The Municipality shall, through DIMA: (a) not later than February 28, 1985, prepare and furnish to the Bank for its review and comments a cost recovery mechanism to generate revenues necessary to cover operating, maintenance and invest- ment costs of DIMA's drainage services; and (b) not later than November 30, 1985, after having taken into account comments of the Bank thereon, put into effect such mechanism. Section 2.12. (a) Except as the Bank shall otherwise agree, the Municipality shall, through DIMA, from time to time take all measures as shall be necessary or advisable to ensure that, at the applicable fiscal year's end, the proportion between DIMA's accounts receivable and month-sales for fiscal year 1985 and each fiscal year thereafter, shall not exceed the coefficient stipu- lated below in respect of each respective fiscal year: 1985 4.0 1986 3.3 1987 and 3.0 thereafter (b) For the purposes of paragraph (a) of this Section, the amount billed by DIMA on account of services shall be divided by 12, and the quotient so obtained shall be divided into the value of accounts receivable for the year in question. (c) For the purposes of paragraph (b) of this Section, the term "services" means water, sewerage and drainage services provided by DIMA in the year in question. Section 2.13. The Municipality shall, through DIMA: (a) not later than February 28, 1985, prepare and furnish to the Bank for its review and comments a water charge policy for unmetered - 6 - water consumption; and (b) not later than June 30, 1985 carry out such policy taking into account comments of the Bank thereon. Section 2.14. The Municipality shall, through DIMA: (a) not later than December 31, 1987, prepare and furnish to the Bank for its review and comments the study referred to in Part G of the Project; (b) based on the recommendation of such study and taking into account comments of the Bank thereon, agree, not later than June 30, 1988, on a plan of action to alleviate health hazards referred to in Part G of the Project; and (c) carry out such plan of action in accordance with a timetable satisfactory to the Bank. Section 2.15. The Municipality shall, through DIMA: (a) not later than December 31, 1985, prepare and furnish to the Bank for its review and comments a plan of action for the billing of and collection from DIMA's customers to cover expenses related to the civil works and goods referred to in Part C of the Project; and (b) not later than June 30, 1986 carry out such plan of action taking into account comments of the Bank thereon. Section 2.16. The Municipality shall, through DIMA: (a) not later than June 30, 1985, prepare and furnish to the Bank, for its review and comments, a study on policies for recruitment, classification, salary levels, performance evaluation and career development of DIMA staff; (b) put into effect, not later than December 31, 1985, recommendations of the study referred to under (a) above, taking into account comments of the Bank thereon; (c) prepare and furnish to the Bank, not later than June 30, 1985, for its review and comments, a study on DIMA's manpower require- me-nts and trainin; needs; (d) put into effect, not later than September 30, 1985, recoMmendations of the study referred to under (c) above, taking into account comments of the Bank there- on; (e) employ, not later than March-31, 1985, data processing staff for DIMA whose number, qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank; and (f) employ, not later than February 28, 1985 a human resoirces manager for DIMA whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Section 2.17. The Municipality shall: (a) not later than February 28, 1985, take all such measures as shall be necessary or advisable to ensure that DIMA is organized in accordance with the provisions of the Acuerdo Municipal; and - 7 - (b) furnish to the Bank promptly thereafter: (i) informa- tion on DIMA's organizational structure; and (ii) DIMA's balance sheet as of the date of DIMA's establishment, all satisfactory to the Bank. Section 2.18. The Municipality shall: (a) not later than February 28, 1985, furnish to the Bank a plan of action for the settlement of its outstanding bills for water supply, sewerage and drainage services owed to DIMA; (b) not later than June 30, 1985 carry out such plan of action taking into account comments of the Bank thereon; (c) pay its current bills for water supply, sewerage and drainage services owed to DIMA promptly when due; and (d) take all such measures as shall be necessary or advisable to ensure that DIMA, not later than March 31, 1985, completes installation of meters to measure water consumption by the Municipality. ARTICLE III Management and Operations of DIMA Section 3.01. (a) The Municipality shall take all such steps as shall be necessary or advisable to enable DIMA to carry on its operations and conduct its affairs in accordance with the provi- sions of the Acuerdo Municipal and with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. (b) Without limitation on the provisions of paragraph (a) of this Section, the Municipality shall enable DIMA to cause the position of the General Manager to be filled at all times with a person whose qualifications and experience shall be satisfactory to the Bank. Section 3.02. The Municipality shall take all such steps as shall be necessary or advisable to ensure that DIMA at all times operates and maintains its plants, installations, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. Section 3.03. The Municipality shall take out and maintain with responsible insurers, or make other provisions satisfactory - 8 - to the Bank, for insurance against such risks and in such amounts as shall be consistent with appropriate practices. ARTICLE IV Financial Covenants Section 4.01. (a) The Municipality shall maintain records and separate accounts adequate to reflect, in accordance with consistently maintained appropriate accounting practices, DIMA's operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statement of expenditures. (b) The Municipality shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statement of expenditures, and shall enable the Bank's representatives to examine such records. Section 4.02. The Municipality shall: (a) have the separate accounts referred to in Section 4.01 of this Agreement and financial statements (balance sheets, statements of income and expenses and related statements) related to DIMA's operations, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; - 9 - (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request; and (d) furnish to the Bank as soon as available, but in any case not later than four months after the end of each fiscal year such information, satisfactory to the Bank, as the Bank shall reasonably request concerning financial statements (balance sheets, statements of income and expenses and related statements) of the Municipality for such year. Section 4.03. Except as the Bank shall otherwise agree: (a) the Municipality shall from time to time take, or allow DIMA to take, as the case may be, all such measures in accordance with the provisions of the Acuerdo Municipal (including, without limitation, adjustments of the tariff structure or rate levels for charges DIMA applies for its water supply, sewerage and drainage services) as shall be required to produce an annual return on current net value of DIMA's fixed assets of not less than 4 percent in the fiscal years ending December 31, 1985 and December 31, 1986, and 7 percent in the fiscal year ending December 31, 1987 and thereafter. (b) Not later than September 30, 1985, and not later than September 30 of each year thereafter, the Municipality shall, on the basis of forecasts prepared by DIMA, satisfactory to the Bank, review the adequacy of the tariff structure and rates referred to in paragraph (a) of this Section to enable DIMA to earn the annual returns referred to in such paragraph and shall furnish to the Bank the results of such review promptly upon its completion. (c) If any review referred to in paragraph (b) of this Section shall show that DIMA would not earn the annual return referred to under paragraph (a) of this Section in the course of the fiscal year covered by such review, the Municipality shall promptly take or cause to be taken all the measures necessary to meet the requirements set forth in paragraph (a) of this Section. (d) For the purposes of this Section: (i) The annual return shall be calculated by dividing DIMA's net operating income for the fiscal year in question by one-half of the sum of the current net value of DIMA's fixed assets in operation at the beginning and at the end of that fiscal year. - 10 - (ii) The term "net operating income" means gross revenues from all sources related to DIMA's water, drainage and sewerage services less expenses related to DIMA's water, drainage and sewerage operations, including all operating, maintenance and administrative expenses of DIMA and taxes (or payments in lieu of taxes), and provision for depreciation on a straight-line basis at a rate of not less than 3 percent per annum of the average current gross value of DIMA's fixed assets in operation. Payments of principal of, and interest and other charges on, DIMA's Debt shall not be considered expenses. (iii) The term "current net value of DIMA's fixed assets in operation" means the gross value of DIMA's fixed assets in operation, less the amount of accumulated depreciation as stipulated in sub- paragraph (ii) above, as valued and revalued from time to time in accordance with sound and consis- tently maintained methods of valuation and reval- uation acceptable to the Bank. (iv) The term "DIMA's fixed assets" means any asset assigned to DIMA in accordance with the provisions of the Acuerdo Municipal. Section 4.04. Except as the Bank shall otherwise agree: (a) the Municipality shall produce for each of its fiscal years, after its fiscal year ending on December 31, 1984, total revenues equivalent to not less than the sum of its: (i) total expenses; (ii) debt-service requirements; and (iii) capital expenditures other than those for DIMA's Sub-project, to the extent that such expenditures are not financed by borrowings with an original maturity of more than one year; (b) before June 30 and December 31 in each of its fiscal years, after its fiscal year ending on December 31, 1984, the Municipality shall, on the basis of forecasts prepared by the Municipality and satisfactory to the Bank, review whether it would meet the requirements set forth in paragraph (a) of this Section in respect of such year and the next five fiscal years, and shall furnish to the Bank the results of such review promptly upon its completion; - 11 - (c) if any such review shows that the Municipality would not meet the requirements set forth in paragraph (a) of this Section, the Municipality shall promptly take all necessary measures (including, without limitation, adjustments to the rates of the Municipality's taxes and fees) in order to meet such requirements; and (d) for the purposes of this Section: (i) The term "total revenues" means the sum of all taxes, fees, and other sources of revenue. (ii) The term "total expenses" means all expenses, including administration and adequate maintenance of its services and properties, but excluding depreciation and other non-cash charges. (iii) The term "capital expenditures" means all expendi- tures incurred on account of fixed assets, includ- ing interest charged to construction. (iv) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund repayments, if any) of, and interest and other charges, on debt. (v) 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 lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. Section 4.05. Except as the Bank shall otherwise agree, the Municipality shall not incur any DIMA's Debt unless the net reve- nues of DIMA for the twelve consecutive months immediately pre- ceding such incurrence shall be at least 1.5 times the estimated maximum of DIMA's Debt service requirements for any succeeding twelve-month period following such incurrence on all DIMA's Debt, including DIMA's Debt proposed to be incurred. - 12 - For the purposes of this Section: (a) DIMA's Debt shall be deemed to be incurred: (i) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date of such contract, agreement or instrument; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into, but only to the extent that the guaranteed DIMA's Debt shall be outstanding. (b) The term "net revenues of DIMA" means gross revenues from all sources related to DIMA's water, sewerage and drainage operations, adjusted to take account of DIMA's rate levels for such water, sewerage and drainage operations, in effect at the time of the incurrence of DIMA's Debt even though they were not in effect during the twelve consecutive months to which such revenues relate, less all operating expenses of DIMA, including expenses accountable to administration, maintenance and taxes (or payments in lieu of taxes), but before provision for depreciation of assets and interest and other charges on DIMA's Debt. (c) The term "debt service requirements" means the aggre- gate amount of amortization (including sinking fund payments, if any) of, and interest and other charges on, DIMA's Debt. (d) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, DIMA's 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 of such valuation, obtainable for the purposes of servicing DIMA's Debt, or, in the absence of such rate, on the basis of a rate of exchange accept- able to the Bank. Section 4.06. Except as the Bank shall otherwise agree, and until the Closing Date, the Municipality shall not, in respect of DIMA's operations, undertake, or permit the undertaking of, capital expenditures accountable to any of its fiscal years which shall exceed one million dollars ($1,000,000) equivalent, other than expenditures for the purposes of the Project, unless the investment plan shall have been approved by the Bank. For the purposes of this Section, the term "capital expendi- tures" means all expenditures incurred on account of fixed assets, including interest charged to construction related to DIMA's water supply, sewerage and drainage operations. - 13 - Section 4.07. The Municipality shall, starting with the fiscal year ending on December 31, 1985, revalue annually DIMA's net fixed assets to such extent as shall be necessary or advis- able to reflect adequately, at the time of each such revaluation, the current value thereof in accordance with a sound and consis- tently applied method of valuation acceptable to the Bank. Section 4.08. The Municipality shall, through DIMA: (a) not later than December 31, 1985, prepare and furnish to the Bank, for its review and comment, an evaluation of DIMA's insurance requirements; and (b) not later than June 30, 1986, put into effect an insurance program for DIMA taking into account the Bank's comments on such evaluation. 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 Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of the Municipality thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the Municipality thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion 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 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: - 14 - For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Municipality: Municipalidad de San Pedro Sula Apartado Postal 663 San Pedro Sula Honduras Cable Address: MUNICIPALIDAD DE SAN PEDRO SULA San Pedro Sula Honduras 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 the Municipality, may be taken or executed by the Chairman of the Board of DIMA or such other person or persons as the Chairman of the Board of DIMA shall designate in writing, and the Chairman of the Board of DIMA shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen 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 collectively but one instrument. - 15 - 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT ByB /2 4/La B Regional Vice President LatinAmerica and the Caribbean MUNICIPALIDAD DE SAN PEDRO SULA By Authorized Representative - 16 - THE SCREDULE Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, goods and civil works under Parts A, C, D, E and F of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Municipality shall, through DIMA, prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of avail- ability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general pro- curement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Municipality shall, through DIMA, 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. 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; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 17 - B. Other Procurement Procedures Contracts for civil works estimated to cost less than five hundred thousand dollars ($500,000) equivalent each, but in the aggregate not to exceed one million dollars ($1,000,000) equiva- lent, and contracts for the purchase of equipment, materials and vehicles, estimated to cost less than fifty thousand dollars ($50,000) equivalent each, but in the aggregate not to exceed five hundred thousand dollars ($500,000) equivalent, may be awarded on the basis of competitive bidding advertised locally and in accordance with local procedures satisfactory to the Bank. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for civil works estimated to cost the equivalent of one million dollars ($1,000,000) or more, and all contracts for equipment, materials and vehicles estimated to cost the equivalent of one hundred thousand dollars ($100,000) or more: (a) Before bids are invited, the Municipality shall, through DIMA, furnish to the Bank, for 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 said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Municipality shall, through DIMA, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Municipality and state the reasons for such determination. - 18 - (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph (except for contracts on account of which withdrawals are allowed from the Loan Account on the basis of statements of expenditure), the Municipality shall, through DIMA, furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not con- sistent with the Guidelines or this Schedule, promptly inform the Municipality and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original price, the Municipality shall, through DIMA, inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Municipality and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day o 198 FOR SECRETARY