Nepal - Water Supply and Sewerage Project : Credit 0470 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 470 NEP Development Credit Agreement (Water Supply and Sewerage Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MAY 8, 1974 CONFORMED COPY CREDIT NUMBER 470 NEP Development Credit Agreement (Water Supply and Sewerage Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MAY 8, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated May 8, 1974, between KINGDOM OF NEPAL (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the deletion of Sections 5.01 and 6.02(h) thereof and to the renumbering of Section 6.02(i) into 6.02(h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "WSSB" means the Water Supply and Sewerage Board, established on November 5, 1973 by Order under the Development Board Act, 1956, as amended; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and WSSB pursuant to Section 3.02 of this Agreement, as the same may be amended from time to time; (c) "Project-in-Charge" means the chief executive officer of WSSB; and (d) "fiscal year" means WSSB's fiscal year. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to seven million eight hundred thousand dollars ($7,800,000). 4 Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972, and in accordance with, and subject to, the provisions set forth in Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1978 or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of I%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May 15 and November 15 commencing May 15, 1984, and ending November 15, 2023, each installment to and including the installment payable on November 15, 1993 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 5 ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out, or cause WSSB to carry out, the Project with due diligence and efficiency and in conformity with appropriate administrative, engineering, financial and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. The Borrower shall onlend the proceeds of the Credit to WSSB under a subsidiary loan agreement satisfactory to the Association, which shall be entered into within three months of the date of this Agreement, or by such other date as may be agreed between the Borrower and the Association. Except as the Association shall otherwise agree, the Subsidiary Loan Agreement shall provide, inter alia, that WSSB shall pay periodically to the Borrower amounts representing: (a) interest on the principal amount of the loan withdrawn and outstanding from time to time at the rate of six per cent (6%) per annum which shall commence to accrue five years from the date upon which the Subsidiary Loan Agreement becomes effective; and (b) amortization of the principal amount of the loan over a period of twenty-five years from the date upon which the Subsidiary Loan Agreement becomes effective, including a grace period of five years. Section 3.03. (a) In order to assist WSSB in the preparation of detailed engineering design and bidding documents, the evaluation of bids and the supervision of the construction included in Parts A, B and C of the Project, the Borrower shall employ or cause WSSB to employ, engineering consultants acceptable to the Association upon terms and conditions satisfactory to the Association. (b) In order to assist WSSB in carrying out the studies included in Part D of the Project, the Borrower shall employ, or cause WSSB to employ, consultants acceptable to the Association upon terms and conditions satisfactory to the Association. Section 3.04. In carrying out the civil works included in the Project, the Borrower shall employ, or cause WSSB to employ, contractors acceptable to the Association upon terms and conditions satisfactory to the Association. 6 Section 3.05. (a) The Borrower undertakes to insure, cause to be insured, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit 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 the Borrower or WSSB to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.06. (a) The Borrower shall furnish or cause to be furnished to the Association, promptly upon their preparation, the plans, specifications, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be maintained 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, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited representatives to examine the Project, the goods financed out of the proceeds of the Credit, WSSB's property and equipment, and any relevant records and documents: and (iii) shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. Section 3.07. The Borrower shall take, or cause WSSB to take, all such action as may be necessary to purchase or otherwise acquire, in accordance with a timetable to be agreed between the Borrower and the Association, all such land and rights in respect of land as shall be required for carrying out the Project, and shall furnish, or cause WSSB to furnish, to the Association, when so requested, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 3.08. The Borrower shall cause WSSB to take such action as may be necessary, including but not limited to the carrying out of the exploratory drilling and well-testing program referred to in Part C of the Project, to develop an adequate water supply for the implementation of the Project. 7 Section 3.09. By July 15, 1977, or such other date as may be agreed between the Borrower and the Association, the Borrower shall cause WSSB to carry out Part D(ii) of the Project with the assistance of the consultants referred to in Section 3.03(b) of this Agreement. Section 3.10. In order to assist WSSB in the planning of its water supply and sewerage development program, the Borrower shall install hydrological equipment at sites selected in consultation with WSSB and collect, process and distribute the data collected therefrom to WSSB as required. Section 3.11. Except as the Association shall otherwise agree, the Borrower shall, or cause WSSB to: (a) by July 15, 1974, adjust and maintain water rates and charges at levels which have been approved by the Association; and (b) by July 15, 1977, establish and maintain sewerage rates and charges at levels which have been approved by the Association. Section 3.12. By July 15, 1975, or such other date as may be agreed by the Borrower and the Association, the Borrower shall transfer to WSSB from its Department of Power the sites and facilities at Pharping required for the Project. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall cause WSS3 to maintain records adequate to reflect in accordance with consistently maint-ined sound accounting practices the operations and financial condition of WSSB. (b) The Borrower shall cause WSSB to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related. statements) for each fiscal year audited, in accordance with sound 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 six 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 8 information concerning the accounts and financial statements of WSSB and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. (a) The Borrower shall cause WSSB to operate WSSB's business and conduct its affairs in accordance with sound business, en1ineering, financial and public utility practices and under the supervision of qualified and experienced management assisted by qualified and adequate staff and to operate, maintain, renew and repair its plants, equipment and property in accordance with sound engineering and public utility practices; (b) Without limitation or restriction on the generality of the provisions of paragraph (a) of this Section, the Borrower shall: (i) cause WSSB at all times to fill the position of Project-in-Charge with a person whose qualifications and experience are appropriate to such position; (ii) make arrangements satisfactory to the Association for the provision of technical assistance to WSSB in the fields of administration, engineering and finance until the completion of the Project; and (iii) appoint qualified Nepalese counterpart staff to assist the experts referred to in sub-paragraph (ii) of this paragraph. Section 4.03. The Borrower shall cause WSSB: (a) to take all action reasonably required to maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of WSSB's business; (b) to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice; and (c) not to sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying on of its business, without the consent of the Association. Section 4.04. Except as the Association shall otherwise agree, the Borrower shall: 9 (a) ensure that any exemption from the levy of water and sewerage rates and charges by WSSB shall be made only after consultation with the Association; (b) pay water rates and charges to WSSB for all water consumed through standpipes; (c) after the sewerage system is operational, cause sewerage rates and charges to be levied upon all consumers connected to the sewerage system; and (d) cause WSSB to make available to the Association for comment any rules proposed to be issued by WSSB. Section 4.05. Except as the Association shall otherwise agree, by July 15, 1974, the Borrower shall: (i) transfer to WSSB all assets and liabilities of the water supply and sewerage systems included in the Project in the Kathmandu Valley and Pokhara; (ii) transfer to WSSB such professional and technical staff of its Department of Water as shall be required for the operation of the water supply systems referred to in Sub-section (i) of this Section; and (iii) publish in the Nepal Gazette a notification of the transfer referred to in Sub-section (i) of this Section. Section 4.06. (a) Except as the Association shall otherwise agree, the Borrower shall take, or cause WSSB to take, from time to time such action as may be necessary (including, but without limitation to, adjusting and maintaining rates and charges for water supply and sewerage services) to provide revenues sufficient to produce an annual rate of return on the average value of WSSB's net fixed assets in operation of at least 1% in fiscal years 1976 to 1978, at least 2% in fiscal year 1979, at least 3% in fiscal year 1980, at least 5% in fiscal year 1981 and increasing to at least 8% in fiscal year 1987 and thereafter. (b) For the purposes of paragraph (a) of this Section: (i) The annual rate of return shall be calculated by relating the net operating income of WSSB for the fiscal year in question 10 to the average of the net depreciated value of WSSB's fixed assets in operation at the beginning and at the end of the year in question; (ii) "Net operating income" shall mean the difference between (A) gross operating revenues accruing from WSSB's water supply and sewerage services; and (B) all operating costs of WSSB's water supply and sewerage services, including administrative expenses, adequate maintenance and provision for depreciation on all depreciable assets in operation, based upon the agreed estimated useful life of such assets, computed in accordance with the straight-line method, and excluding interest and other charges on debt; and (iii) "Net depreciated value of WSSB's fixed assets in operation" shall mean the gross value of such assets, valued in accordance with methods agreed between the Borrower and the Association, less accumulated depreciation. Section 4.07. (a) Except as the Association shall otherwise agree, the Borrower shall not incur, or permit to be incurred, any debt for the benefit of WSSB unless WSSB's net revenues for the fiscal year next preceding the date of such incurrence or for any later twelve-month period ending prior to the date of such incurrence, whichever net revenues are the greater, shall be at least 1.5 times the maximum debt service requirements for any succeeding fiscal year on all debt incurred for the benefit of WSSB, including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means all debt incurred by or on behalf of WSSB, including debt assumed or guaranteed by the Borrower, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (ii) the term "incur" with reference to any debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (1) under a contract or loan agreement, on the date such contract or loan agreement providing for such 11 debt is entered into and (2) under a guarantee agreement, on the date the agreement providing for such guarantee is entered into but shall be only counted to the extent that the underlying debt is outstanding; (iii) the term "net revenues" means total revenues from all sources, adjusted to take account of WSSB's rates and charges in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve-month period to which such revenues relate, less all operating and other expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (iv) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (v) 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 rate of exchange at which such other currency is obtainable by the Borrower, at the time such valuation is made, for the purposes of servicing such debt, or, if such other currency is not so obtainable at the rate of exchange that will be reasonably determined by the Association. ARTICLE V Consultation, Information and Inspection Section 5.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the administration, operations and financial condition of WSSB and, in respect of the Project, of the departr.e:n-s or agencies of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and 12 (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments. and the external debt of the Borrower, of any of its administrative subdivisions and of any agency of the Borrower or of any such administrative subdivision. Section 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of WSSB and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by either of them of its obligations under the Development Credit Agreement. Section 5.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE VI Taxes and Restrictions Section 6.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 6.02. The Development Credit Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. 13 ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon, and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified, namely, that the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of WSSB or for the suspension of its operations, in such manner as would materially and adversely affect the carrying out or efficient operation of the Project. Section 7.03. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified, namely, that the event specified in Section 7.02 of this Agreement shall occur. ARTICLE VIII Effective Date; Termination Section 8.01. The date August 9, 1974 is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.02. The obligations of the Borrower under Sections 4.01 through 4.04, 4.06 and 4.07 of this Agreement and the provisions of Sections 7.02 and 7.03 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty-five years after the date of this Agreement, whichever shall be the earlier. 14 ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Secretary to the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Secretary to His Majesty's Government Ministry of Finance Kathmandu Nepal Cable address: ARTHA Kathmandu 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. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 15 in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. THE KINGDOM OF NEPAL By /s / Yadu Nath Khanal Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Mervyn L. Weiner Acting Regional Vice President Asia 16 SCHEDULE I 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 amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures CategorY Dollar Equivalent) to be Financed 1. Civil works 1,750,000 60% of total expenditures 11. Pipeline, equip- 2,000,000 ment, materials, supplies and vehicles a. Imported 100% of foreign expenditures (c. i. f.) b. Locally 100% of local manufactured expenditures (ex-factory) Ill. Consultants' 1,650,000 100% of total services expenditures IV. Unallocated 2,400,000 TOTAL 7,800,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower; and 17 (c) the term "total expenditures" means the aggregate of foreign and local expenditures. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Categories II and III on account of expenditures incurred after December 1, 1972 in an aggregate amount not exceeding the equivalent of $260,000; and (b) payments for taxes imposed directly under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required tberefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimat of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 18 5. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of total expenditures under Category I shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. * 19 SCHEDULE 2 Description of the Project The Project is part of the Borrower's program from 1974 through 1977 to improve and expand the water supply and sewerage systems in the Kathmandu Valley and the Town of Pokhara. It consists of the following Parts: Part A: Water Supply Systems (i) Construction and equipping of about three deep wells, a pumping station including a new intake and improvement of the intakes at the Pharping springs; the installation of related pipelines, including a 4.5 kilometer steel transmission line to the water treatment facilities at Shainbu; and the repair and replacement of existing pipelines in the Kathmandu Valley; (ii) Construction and equipping of three intakes, a collecting chamber and related pipelines from Kali Khola springs to Pokhara, including, inter alia, the construction of an exploratory well; (iii) Construction of an about 4500 m3 capacity storage reservoir at Mahankalchaur and the improvement and expansion of the distribution network, including the installation of pipelines, house connections and water meters, in Kathmandu, Lalitpur and Pokhara; (iv) Installation of pipelines in about eight villages in the Kathmandu Valley; (v) Improvement and repair of existing reservoirs, treatment plants and headworks in the Kathmandu Valley and Pokhara and the construction of staff housing, a workshop, a garage and a water distribution depot; and (vi) Provision of equipment for maintenance, leak detection and hydrological data collection, and the provision of billing machines and vehicles. Part B: Sewerage Systems (i) Construction and installation in Kathmandu of about 3 kilometers of outfall sewers, about 4.5 kilometers of trunk 20 sewers and about 23 kilometers of lateral sewers, and repair of existing sewerage systems; (ii) Construction and equipping of a pumping station at Kirtipur, waste stabilization ponds at Dobighat and the provision of maintenance facilities and a vehicle; and (iii) Construction and installation of a collection network about 7 kilometers in length for Lalitpur and about 1.5 kilometers of trunk sewers, including appropriate waste stabilization ponds at Kodku. Part C: Exploratory Drilling and Well-Testing Program (i) Drilling and equipping of two wells for Kathmandu and installation of about 4 kilometers of related pipelines, drilling and equipping of one well for Bode, two wells at Sankhu and, to the extent that such wells do not provide sufficient yields, such other wells as may be agreed between the Borrower and the Association; (ii) Testing of the existing exploratory well at Pharping; and (iii) Provision of submersible pumps and electricity supplies for the wells referred to in paragraph (i) of this Part. Part D: Studies (i) Feasibility studies and preliminary and detailed engineering for further stages of the Borrower's water supply and sewerage development program; and (ii) A review of WSSB's rates and charges for water supply and sewerage services. Part E: Training Overseas and local training of WSSB staff. 21 SCHEDULE 3 Procurement A. Contracts Governed by Guidelines 1. With respect to any contract for civil works estimated to cost the equivalent of $50,000 or more and with respect to any contract for pipeline, equipment, materials, supplies or vehicles estimated to cost the equivalent of $25,000 or more: (a) If bidders are required to prequalify, the Borrower 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 qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by the Borrower to the Association for its comments before the applicants are notified and the Borrower shall make such additions to or deletions from the said list as the Association shall reasonably request. (b) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure 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. (c) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.03(a) of this Agreement on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants, and the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, promptly inform the Borrower and state the reasons for such determination. (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. 22 (e) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 2. (a) With respect to any other contract for civil works or pipeline, equipment, materials, supplies or vehicles, the Borrower may procure such items pursuant to its usual procurement procedures and without resort to international competition, provided that (i) quotations for the supply of such items are obtained from at least two competing suppliers and (ii) the aggregate of expenditures on items so procured shall not exceed the equivalent of $250,000. A conformed copy of each contract relating to such procurement shall be sent to the Association promptly after its execution and prior to the date of the first application for withdrawal of proceeds of the Credit in respect thereof. (b) Notwithstanding the provisions of paragraph (a)(i) of this Section, the Borrower may carry out by force account minor extensions of existing water supply and sewerage systems and minor repairs of other existing facilities which are each estimated to cost less than the equivalent of $50,000, provided that all expenditures under this paragraph for work done by force account shall be included in the $250,000 limitation referred to in paragraph (a)(ii) of this Section. B. Supplemental Rules on Bid Evaluation and Comparison 1. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally supplied goods, shall be excluded, except to the extent hereinafter provided. 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 locally manufactured goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement referred to in Section 2.03 of this Agreement. 2. For pipeline, equipment, materials, supplies and vehicles included in the table set forth in paragraph 1 of Schedule 1 to the Development Credit Agreement, the Borrower may grant a margin of preference to goods manufactured in the Kingdom of Nepal in accordance with, and subject to, the following provisions: (a) After evaluation, responsive bids will be classified in one of the following groups: 23 (1) Group A: bids offering goods manufactured in the Kingdom of Nepal if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in the Kingdom of Nepal equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: bids offering goods manufactured in the Kingdom of Nepal other than bids classified in Group A. (3) Group C: bids offering any other goods. (b) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes in goods to be imported and any sales or similar taxes on goods to be supplied locally, to determine the lowest evaluated bid of each group. The lowest evaluated bids of each group 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 purposes of award. (c) If, as a result of the comparison under paragraph (b) above, the lowest bid is a bid from Group C, all Group C bids shall be further compared with the lowest bid from Group A, as determined under paragraph (b) above, after adding to the c.i.f. bid price of goods to be imported offered in each Group C bid, for the purpose of this further comparison only, an amount equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of goods offered in such Group C bid, or (ii) 15% of the c.i.f. bid price of such goods. If the Group A bid in such further comparison is the lowest, it shall be selected for purposes of award; if not, the lowest bid from Group C, as determined under paragraph (b) above, shall be selected for purposes of award. 3. The bidding documents shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference.