Document of The World Bank Report No: 18521-AR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30.303 MILLION TO THE REPUBLIC OF ARGENTINA FOR A YEAR 2000 TECHNICAL ASSISTANCE PROJECT November 24, 1998 Argentina, Chile, and Uruguay Country Management Department Poverty Reduction and Economic Management Department Latin America and the Caribbean Regional Office CURRENCY EQUIVALENTS Currency Unit = Peso Arg. $ 1 = US$1 FISCAL YEAR January - December 31 ABBREVIATIONS, ACRONYMS AND GLOSSARY AFIP Federal Public Revenue Administration ANSES National Social Security Administration Application (or A set of computer programs designed to perform repetitive procedures, usually on system) a large number of data. BNA State commercial bank CAS Country Assistance Strategy Contingency Plan In the context of the Year 2000 program, a plan for responding to the loss or degradation of essential services due to a Year 2000 problem in an automated system or equipment. It generally describes the steps an enterprise would take to ensure the continuity of its core processes. Embedded systems Computer chips forming integral part of any electronic equipment using computer technology GOA Government of Argentina Interface A boundary across which two systems communicate IT Information Technology Millennium compliant Unaffected by the change from 19XX to 20XX PCU Project Coordination Unit PFS Secretariat of Public Function in the Office of the Chief of Cabinet of Ministers PPF Project Preparation Facility Quality assurance All the planned and systematic actions necessary to provide adequate confidence that a product or service will satisfy given requirements for quality Risk assessment An activity performed to identify risks and estimate their probability and the impact of their occurrence SOE Statement of Expenses SFP Secretariat of Public Function in the Office of the Chief of Cabinet of Ministers TAL Technical Assistance Loan Testing The process of exercising a product to identify differences between expected and actual behavior Validation The process of evaluating a system or component during or at the end of the development process to determine whether it satisfies specified requirements Y2K The potential problems that might be encountered by computer hardware, software, etc. in processing year-date information for years beyond 2000 (the "Year 2000 problem") Y2KEU Task force of the Information Technologies Under Secretariat of the Secretariat of Public Function assigned to the "Y2K" program Vice President: Shahid Javed Burki Country Director: Myrna Alexander Sector Director: Guillermo Perry Task Team Leader: Luis-Jos6 Mejia Page 1 Argentina Year 2000 Technical Assistance Project CONTENTS A. Project Development Objective .............................................................................................. 4 1. Project development objective and key performance indicators.. .................4 B. Strategic Context ........................................................................................................................ 4 1. Sector-related CAS goal supported by the project ................ .........4 2. Main sector issues and Government strategy............................4 3. Sector issues to be addressed by the project and strategic choices....................... 8 C. Project Description Summary ............................................................................................... 9 1. Project components ............................................. 10 2. Key policy and institutional reforms supported by the project ........ ........... 10 3. Benefits and target population..................O...... ..............10 4. Institutional and implementation arrangements ...........l................l D . Project Rationale ................................................................................. ...................................... 13 1. Project alternatives considered and reasons for rejection......... ................13 2. Major related projects financed by the Bank and/or other development agencies...........14 3. Lessons learned and reflected in proposed project design ......... ..... .........14 4. Indications of borrower commitment and ownership.................................................15 5. Value added of Bank support in this project ................................. 15 E. Summary Project Analyses ............................................16 1. Economic........................................... ......... 16 2. Financial .................................................... 17 3. Technical .................................................... 17 4. Institutional .................................................. 17 5. Social ...................................................... 17 6. Environmental assessment ......................7..... ............17 7. Participatory approach.....................7....... ...............17 F. Sustainability and Risks ............................................................................................................. 18 1. Sustainability ................................................. 18 2. Critical risks ............................................... 18 3. Possible controversial aspects ......................................... 19 G. M ain Loan Conditions .......................................................................................................... 19 1. Effectiveness conditions ..................... ..............19 Page 2 H. Readiness for Implementation ............................................................................................ 19 I. Compliance with Bank Policies ............................................................................................ 19 Annexes Annex 1. Project Design Summary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 5. Project Processing Budget and Schedule Annex 6. Documents in Project File Annex 7. Statement of Loans and Credits Annex 8. Country at a Glance Page 3 Argentina Year 2000 Technical Assistance Project Project Appraisal Document Latin America and the Caribbean Regional Office Country Management Unit 7 Date: November 20, 1998 Task Team Leader/Task Manager: Luis-Jos6 Mejia Country Manager/Director: Myrna Alexander Sector Manager/Director: Guillermo Perry Project ID: 57449 Sector: Public Sector Management Program Objective Category: Economic Management Lending Instrument: T.A.L. Program of Targeted Intervention: No Project Financing Data [X] Loan For Loans/Credits/Others: Amount (US$m/SDRm): $30.303 million Proposed terms: [X] Single currency, USD Grace period (years): 5 [X] Variable, Libor-based Years to maturity: 15 Commitment fee: 0.75% Service charge: 0.0% Front-end fee: 1.0% Financing plan (US$m): Source Local Foreign Total Government 13.0 13.0 IBRD 16.303 14.0 30.30 Total 29.303 14.0 43.30 Borrower: Republic of Argentina Responsible agency: Secretariat of Public Function, Office of the Chief of Cabinet of Ministers Estimated disbursements (Bank FY/US$M): 1999 2000 2001 Annual 8.303 17 5 Cumulative 8.303 25.303 30.303 Project implementation period: January 1999 - June 2001 Expected effectiveness date: January 15, 1999 Expected closing date: December 31, 2001 4 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1). To assist the Government of Argentina on an urgent basis to contain the disruption in the country's social and economic infrastructure that would be caused by the failure of critical central government systems to process dates properly after December 31, 1999. The key performance indicators would be (1) the estimated economic and social damage avoided; and (2) the number of identified critical functions able to continue operations with minimum disruption through June 30, 2001 as a result of the proposed remediation. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 16505-AR Date of CAS discussion: May 15, 1997 Date of CAS update: March 17, 1998; November 4, 1998 While the latest CAS for Argentina, dated April 25, 1997, did not explicitly include the project as a potential operation in the FY 97-00 period, the need for such support has more recently become apparent and was included in the latest CAS Update dated November 4, 1998. As the full effects of the incipient problem become manifest, there will be a need for substantial rehabilitation of Argentina's computerized systems in order to restore full productive effectiveness. These would in turn support the objectives of sustained economic growth and protection of the economy from shocks, as contained in the CAS. The proposed operation further protects and supports many institutional reforms and advances made in the past several years in terms of the Government's economic management capacity. 2. Main sector issues and Government strategy: A problem has arisen in Argentina and world wide because the software and chips used in its manifold computerized systems are unable to properly handle dates in the year 2000. This difficulty (known as the "Y2K problem") is likely to cause date-based automated processes to malfunction. The origin of the problem is that early computer programmers adopted a two-digit code to represent years. One explanation is that they had to work around the constraints imposed by the then limits on the size of computer memory and expenses of storing data. A useful technique for doing so was to represent dates with an implied century. This made economic sense in reducing the amount of storage required and improving computers' processing speed (one megabyte of magnetic disk storage in 1965 cost about $760, compared to seventy five cents today). To the extent that the eventual consequences of using date shortcuts were contemplated in the 1960-70s, it was believed that the underlying programs would be replaced well before the century changed-or that there would be ample time to correct the problem. Nobody expected software to last as long as it actually has. Now though, beginning in year 2000, computer systems will need to differentiate between respective dates in the 201h and 21st centuries in order to remain effective and not behave erratically (i.e., to be "Year 2000 compliant"). The significance of this problem derives from the high dependence of Argentina's economy and society on computers. These systems have become integral to almost every aspect of life as they are now commonplace in business and scientific applications, both in operating systems and in the micro chips used for many control devices. For many years, the Government and private sector have been carrying out operational, managerial support and service functions through increasingly automated and integrated telecommunications networks. These are at the heart of their institutional performance. Moreover, as 5 information and communications technologies have become more versatile, accessible and integrated, their roles have increased. Already many critical policy and most administrative reforms proposed to improve public sector management (including those supported by Bank projects) require effective information systems for their implementation. These include: systems for tax collection, pension administration, banking regulation and supervision, administration and regulation of union-run health care plans, operation of water, energy, telecommunications, train and other transport systems, monitoring and evaluation of education attainment, tracking of disease incidence and other indicators of health status, public sector payrolls, and financial management. These systems in turn rely substantially on computer software (respectively constituting the applications enabling the computers to perform specific tasks or embedded in chips that are components of myriad systems and tools). The software thus embodies the procedural logic of institutional functions, and as such are valuable assets that require careful management. Safeguarding these assets into the 21s" century is the immediate task of overcoming the vulnerability to the Y2K problem. Although simple in origin, this difficulty can have serious consequences. The failure to mitigate it could affect hardware, embedded chips, languages and compilers, operating and security systems, database management, transaction-processing systems and more. They could corrupt data, crash programs or completely fail to operate, causing huge amounts of records and statistics to be compromised. Any entity with time-sensitive data from nuclear reactors and hospitals to financial institutions could be ham ed. Essential services, e.g., benefit payments, transport or emergency facilities could be severely disrupted. Moreover, numerous agencies and enterprises rely heavily on exchanges of information to support their work and have considerable interaction with each others' systems'. The most immediate economic and financial consequence of Y2K for the Government and the rest of the economy is the large cost that many institutions will have to incur in fixing their systems to prepare for the 21St century. This includes the opportunity cost of not being able to undertake other investments during the remainder of the 1990s because of the need to focus resources on Year 2000 conversions. Moreover, the country's macroeconomy may be adversely affected by the disruptions in economic growth and social order that could result from the aforementioned types of systemic problems and failures to prepare adequately for the date change. Therefore, the Government of Argentina, along with the private sector, has an overriding interest in seeing that the country's computer systems, together with those of their customers and vendors, are rendered "millennium compliant"-or face severe consequences. Action is needed to repair, update or replace those systems which are deficient or untrustworthy. In most instances, the basic task is to inventory the present applications, find the source code of all programs, identify and correct date calculations, recompile all these changes, and test to make sure that what has been changed is correct. What makes all this particularly challenging is the need to: (a) find all of the places where date problems might lead a program to miscalculate or terminate; (b) coordinate the repair of all parts of the overall system so that no one repair interferes with the operations of other parts of the system; (c) test the repair by using data that accurately mimics the processing that will occur in the next decade; and (d) complete the remediation in adequate time. It might be necessary to convert existing applications in order to renovate them or develop new ones; in some instances, to retire or decommission an existing application or system component. With some packaged software, the approach might be a small addition to the original code that bypasses or corrects the problem. Alternatively, codes written for customized applications may call for finding words that denote time and adding two extra digits-or instructing the computer to treat every date before a certain ' Addional examples can be found in the project fdes. 6 year as belonging to the next century. There are numerous complications though. It is believed that many companies know even less about their embedded systems than about their software, a knotty problem because manufacturers of equipment will use different sources of embedded chips, resulting in some of their production being compliant, some of it not. Also Y2K affects every system that has an external interface. These could be inundated by the proposed changes from systems with which they interface (fixes that will have to be fielded simultaneously). And the fact that 2000 is a leap year compounds the issue. For the Argentine Government, the core factors underlying its strategy are the following: * January 1, 2000 will surely arrive and Y2K-caused disruptions are equally foreseeable. But there is far less certainty as to what will happen to the aforementioned and other systems and facilities as a result, i.e., how widespread the problems will be, how much will need to be fixed, and what it will cost to do so. * It would be prudent before then to get meaningful diagnoses of the extent of the possible damage and to try to avert and contain it as expeditiously as possible in order to lessen the costs of failure. * There is insufficient time left in this relatively limited interval to plan and put in place all of the precautionary measures that should theoretically be taken, let alone convert to new application software. * The Government needs to demonstrate that it is firmly addressing the "Y2K problem," and to stimulate broad scale civic participation in the process. In doing the latter though, the last thing the authorities want to do is to generate fear that could compound whatever disruption might ensue. In Argentina, as elsewhere, the Government has come only relatively recently to address these problems. But it has done so with a proactive approach, on which it has sought to accelerate progress subsequently. At the outset, it took constructive steps to develop a comprehensive strategy. One of its elements was to raise a high level of awareness of "Y2K" by disseminating wide scale publicity about its nature so as to alert the citizenry, as well as to defuse and correct possible misleading impressions. It also sought to ensure that there was an official program in each public sector institution to address the problem. It squarely placed the responsibility on each agency for definitive actions in its sphere, instructing every one to develop a strategic plan and to allocate significant resources to the problem. This was complemented by indications of selective assistance for those which could be most sensitively and seriously hurt. In light of the imminence of Year 2000 and the impossibility of being fully compliant in time, the Government has set out a phased approach to mitigating the possible damage, along with contingency provisions. The authorities appreciate that the full extent of the problem's dimensions will not be readily determined. They have therefore deemed it essential to approach the problem with a prioritizing focus. The Government's strategy calls for simultaneous successive cycles of mini-project development, side- by-side with the implementation of the aforementioned first round of "Y2K" mitigation measures. Some of the critical functions are easy to identify (for example, pensions and taxes) and are already being addressed and included in a first round likely systems to be supported. Other systems will only be identified later during project execution on the basis of the competing agencies' respective importance for the security and welfare of Argentines, their income and payment obligations, legal transactions and elements of personal confidentiality (ref. Sections below on "sector issues" and "Implementation arrangements."). These provisions would be accompanied by the parallel development of contingency 7 plans for testing and mitigating those sectors not covered in this first round (as well as for those systems which prove to still need mitigation after Year 2000). Another element of the Government's strategy was the recognition of the need to accompany these actions with national education and mobilization campaigns, for which the authorities usefully enlisted the Internet. This is intended to lessen the risks and liabilities of the approaching difficulties, and public apprehension that the Government is insufficiently attentive to the issues. The Office of the Chief of Cabinet of Ministers, the hub of central government initiatives, led the defining work and continues to oversee the program. In mid-1997, the Cabinet Office alerted all ministries and secretariats to the need to gear themselves up for "Y2K" program activity. In August 1997, it established a special task force ("Unidad Ejecutora 2000-Y2KEU") in the Civil Service Secretariat's then Directorate for Information Technologies for tackling the problem. The Directorate has the regular task of dictating the regulatory framework for technology policies related to computer science, teleinformatics, multimedia technologies and other electronic means and systems aspects. The Cabinet Office charged the Directorate with providing technical assistance to the national public agencies on "Y2K". The Y2KEU team initially commissioned self-audits of the federal agencies in order to get a first impression of the extent of the possible problem and of the potential priority rankings of remediation cases. The team likewise began publicizing the issue, and convening meetings of concerned federal officials to set out the methodologies for testing and curative actions. They followed this by launching the preparations for corrective measures in what they tentatively identified to be the most sensitive public service sectors. By early 1998, Y2KEU began, with Bank help, to provide technical support to several of these agencies for inventorying their conditions in some detail and analyzing Y2K's impact, which led to the development of initial action plans by several of these agencies. This initially involved the national social security administration organization (ANSES), which after advice from the Y2KEU has already launched testing and remedial actions. There has also been collaboration with the federal tax and customs entity (AFIP), the state commercial bank (BNA) and others. IBRD consultants have participated in these activities, advising on suitable software for security and encryption standards, tools for estimating resource requirements for assessments, conversions and testing, etc. Since these actions, Y2KEU has maintained a steady stream of meetings and communications with federal agencies, concerning their action plans, standards for their fulfillment and progress on these matters. Alongside of these public sector initiatives, it is important to note that individual Argentine public agencies and private enterprises have made numerous strides. The financial sector seems to have made most progress (as appears to be true internationally). Early on, the Central Bank set targets for the nation's banks to become "Y2K compliant," which it has been monitoring on a quarterly basis. As early as 1996, Argentina's 121h largest bank, the "Banco Credicoop", started making assessments and converting applications to test every line of code, screen and report, both in terms of mainframe systems and at the desktop level. It reported in July 1998 that it had been "tracking the Y2K bug" through its systems, reviewing 3.5 million lines of COBOL, 800,000 lines of Assembler, 500,000 lines of NCL and many desktop and comparable applications, as well as trips into the data logic of databases and transaction processors. It calculated that it was then 35 percent done with its repairs. In mid-1998 also, the Central Bank (in addition to the aforementioned goal-setting) was reported to have organized a special group of banks to collaborate on this issue, and was attempting to conduct a series of inter-enterprise tests, starting with six banks and their ATM networks. It contemplates a 120-bank test in April 1999. Further, the nation's principal oil and gas company, YPFSA, reported that it has made substantial progress towards becoming "Y2K-compliant." In addition, while there is no known census of private firms' activities, many time-sensitive businesses are known to have already started attacking their millennium problems. Moreover, as elsewhere, a consultant industry has developed within Argentina to 8 provide conversion and related IT solutions, as well as to apprise (and stimulate) individual businesses on how to engage in such activities. In advancing the arrangements for implementing the "Y2K" program, the Government has recently taken the following steps: (a) It restructured the organizational framework for the program so as to clearly distinguish between the regulatory functions of the ex-Information Technologies Directorate and those authorities and capacities required for speedy, effective implementation of this Project's activities through the newly established project coordination unit (PCU) These matters are detailed in Section C, Project Description Summary of this PAD. (b) In July 1998, it elevated the ex-Information Technologies Directorate to the level of Under Secretariat, with which all federal agencies are obligated to clear their "Y2K" programs prior to new purchases of IT-related goods or services. (c) Simultaneously, it charged the regulatory agencies supervising essential infrastructure-type services with seeing that "Y2K" requirements also applied to institutions under their jurisdiction (even those which are no longer Government-operated). Y2KEU has been meeting with these agencies to follow up on their related measures. (d) After initial delays in launching the PCU, the Government has appointed a suitable officer to head the Unit and has been recruiting staff to fill its other positions. With interim short-term consultant assistance, the Unit has stepped up the PPF-funded initial mobilization and implementation tasks. (e) In parallel, the Government and the Bank have been collaborating in undertaking assessments of the risks involved in the implementation of existing Bank-supported projects for ensuring that, to the extent possible, the portfolio is shielded by Y2K disruption. In addition to possible disruption of significant utilities and other services, breakdowns in payment and transfer systems leading to substantial delays in the flow of funds to and from the Bank, and to and from project entities, could lead to substantial delays in project execution, as well possibly as financial problems for the Bank and its borrowers. (To this end as well incidentally, all new projects being appraised will hereafter include a specific assessment on "Y2K" risks and any corrective action that need be taken before end FY99. These assessments focuses on determining which projects could potentially be affected by the problem, and setting out to adopt an adequate level of practices and safeguards. These could be financed from project contingency funds). 3. Sector issues to be addressed by the project and strategic choices: The main issue for the Government is now how to organize itself better and more rapidly to undertake the timely measures needed to address this urgent situation while simultaneously minimizing possible misallocation of funds to lower priority activities in mitigating the problem. The authorities appreciate that they need to maintain close surveillance over the Y2K program because of the continuing deficiencies in implementation capacity at all levels of government, particularly for tasks with short deadlines and undefined scope at the outset. Given the pressures of time, the Government has decided to provide financing in the first instance for critical central agencies and functions, rather than take a broad based approach which would include all agencies As noted, priority rankings would be made for the envisaged assistance based on the results of analyses of the potential economic, social and political impact of non-remediation. This is intended to lessen the risks and liabilities of the approaching dangers and to achieve benefits as soon as possible. The 9 PPF-funded activities will help identify other major critical sysLems, diagnose the effort required to make them millennium-compliant, estimate the resources required, and prepare the initial action plans. Activity is underway for development of guidance for the first public information activities, pilot courses for those who would prepare the entities chosen for the mitigation measures, and conducting rounds of these courses. A national educational and mobilization campaign will alert the public and private sectors to possible dangers of failures to achieve "Y2K-compliance," and information on best practices will be made available. Although one of the first Bank clients to address the issue of Y2K compliance, Argentina is beginning remediation efforts very late, and it would not be possible to repair all identified non-compliant systems. Government therefore proposes, in addition to remediation efforts, to prepare during 1999 to take recovery measures on all critical systems starting on January Ist, 2000. Recovery activities and on-going remediation would be necessary for at least one year after this.date. Given that the magnitude of the problem is still largely unknown and costs may outstrip available fLnding, it also possible that remediation and recovery activities may taken longer than that and require additional resources. It should also be highlighted that the project scope does not include provincial governments nor the private sector. With respect to the former, it is anticipated that provincial governments may avail themselves to Bank-financing for Y2K activities under the on-going Provincial Development II project (Ln. 3877-AR) which has as much as $ 80 million of uncommitted funds. An agreement has been reached with the Ministry of Interior which administers the above loan to follow the same approach as envisaged under the proposed operation. In the case of the private sector, the Government's role will be limited to promoting Y2K awareness and encouraging regulatory agencies in the areas of electricity, gas, telecommunications, transport and finance/banking to ensure compliance in their respective sectors. C: Project Description Summary With the appreciation that the task exceeded Y2KEU's capabilities, the Government requested a Bank loan, preceded by a US$ 1.5 million PPF advance for preparing the overall program and advancing implementation. The project will entail support for: (a) advancement of the initial inventories of the agencies' computer systems; (b) the development of the detailed guidelines to govern the remediation works and the initial implementation of the first cases; (c) definition of the eligibility criteria for individual agencies' acquisitions of Project funds for these works; (d) elaboration of the guidelines for procurement of goods and services and their review, as well as the other essential components of project execution; and (e) technical assistance and training regarding the methodological aspects (e.g., testing and uses of tools) of solving Y2K computer operations problems. The project will further provide support for particular entities and systems in order for them to proceed with the testing, modification and verification of changes in priority computerized systems of federal agencies designed to remedy or otherwise mitigate the effects of the "Y2K problem." These activities (sub-projects) would be financed during the period January 1, 1999 to June 30, 2001, with retroactive financing of eligible expenditures after July 1, 1998. The project's support will be allocated on the basis of a series of agreements with the agencies selected for the remediation works or "sub-projects", based on the application of eligibility criteria and the decision of an Executing Committee (elaborated in the Institutional and Implementation Arrangements section below). The works would extend from the technical assistance required for planning the "Y2K" activities through the investments needed for carrying out the remediation measures, together with quality assurance and other tests to verify satisfactory results. 10 Loan funds would be used to reimburse expenditures incurred or to pay contractors directly against their invoices for these activities, as well as the incremental operating costs of the agencies involved in them. Consultants would be employed throughout these processes to assist the benefiting agencies and the project coordination unit in these operations. They would as well provide independent monitoring and verification of suitable technical solutions, as well as effective competition and transparency in procurement decisions. Given the strong element of public good and timeliness at stake, these "sub-projects" would be initially and partly financed on a grant basis. All of the first year's project implementation expenses would be provide,, from the proposed Loan. None of the benefiting agencies would be obligated to repay from their respective operating budgets, the Bank's share of financing of their "sub-projects." However, they would begin to finance these subprojects in their respective second year's project implementation period. Therefore, the Bank's share of the aforementioned beneficiaries' incremental operating costs would decline proportionately beginning in the second year of implementation. These same provisions would be applied to any of the uses of Loan 3877-AR, the Second Provincial Development Project, for comparable "Y2K" activity at provincial levels. In addition to these sub-projects, the project would also include technical assistance for on-going mini- project preparation study and more detailed design of project implementation measures. Simultaneously, an expert in information dissemination would provide guidance for carrying out a broad based information campaign. A second expert will design a "train the trainers" course to prepare the first agencies chosen for mitigation measures and local consultants for participating in the project. Finally, a firm(s) would be engaged to verify the status of Y2K remediation activities by critical sector entities in the public or private sector. 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown): Component Category Cost Incl. % of Bank- % of Contingencies Total financing Bank- CUSM) _ (US$M) financing Support Activities Inst. Build./Other 7.9 18.2 6.9 23.0 Remediation and Rescue Inst. Build./Other 31.5 72.7 19.5 64.0 Project Coordination Project Mgt. 2.1 4.8 2.1 7.0 PPF Refinancing 1.5 3.5 1.5 5.0 Front-end fee 0.303 0.7 0.3 1.0 Total 43.303 100.0 30.303 100.0 2. Key policy and institutional reforms supported by the project: The project does not attempt to address long-term institutional problems in the management of the Government's information systems. The institutional support provided under the project concentrates on the Government's Year 2000 Execution Unit and the project coordination unit to enable them to perform their tasks during the life of the project and to help implementing agencies prepare their remediation assistance requests. 3. Benefits and target population: The primary benefit of the project will be the preservation or restoration of vital economic and social activities resulting from the infrastructure and services, under the purview of the central government, kept operative or rehabilitated. The benefits would be spread broadly throughout Argentina as a result and are expected to be most evident in: (1) the continued functioning of core government services, most notably, tax, pension, health insurance and other fiscal transfers and payments; (2) other services such as 11 animal/plant health services, import and export processing, training, social protection programs, registration, national identity cards, passports, licenses, and related access to public services; and (3) greater likelihood of the continuity of basic public services such as electricity, gas, water, telecommunications, transport, financial systems and banking. The intended benefits will be estimated as part of the process of setting priorities for individual sub-projects and will include the gains (or prevention of losses) from each of the investments made in order to achieve compliance or to remedy the costs of not being compliant. 4. Institutional and implementation arrangements: A Project Coordination Unit (PCU) reporting to the Secretary of Public Function will be in charge of project implementation and administration. The PCU would carry out initial studies and activities, prepare guidelines for diagnoses and subproject implementation plans, prepare terms of reference, analyze the impact of non-remediation for selected agencies, review implementation plans, as well as managing the project. The PCU will prepare monthly action plans for approval by an Executing Committee composed of the National Director (the Secretary of Public Function) and two of the Secretariat's UnderSecretaries. The Executive Committee's functions would also include decisions, guided by national priorities, as to which particular economic or social function or respective Government agencies merit the highest ranking among the full range of potentially affected programs, which would be reported quarterly to the Cabinet of Ministers. In the absence of any known international models, the Government would be obliged to choose among competing claimants in an essentially rationing (or "triage") process. It has thus to set priorities for identifying those systems that matter most in public sector functioning, fixing those that can be fixed, and drawing up contingency plans to cope with the rest. The Bank would provide assistance through the review of the lists of proposed priority agencies, and would also approve each "sub-project". Within the project, this process would consist of the application of a set of eligibility criteria for choosing among competing claims for combined Government-Bank funds, to be presented by the interested agencies. These criteria were agreed to during negotiations. They include: (a) the measure of the economic and/or social benefits applicable to a given agency or function that preventing or alleviating the Y2K problem could provide; and (b) the state of readiness of that particular agency to undertake Y2K testing and remediation. The authorities might elect to designate as their most important core functions the retention and secure provision of power, water and sewerage, telecommunications, transport and banking services. These comprise critical elements of public safety (as well as depending heavily on networks). In order to prepare the ground and speed the way for action, the PCU would see that an initial risk assessment and impact analysis of core business processes in the priority sectors have been carried out. These actions would be completed prior to the effectiveness of the recommended Loan. The main line of activity under the project would be the testing and remediation functions of the individual agencies selected. They would bear the principal responsibilities for the implementation of these activities in their respective organizations, as well as their subsequent maintenance. They would prepare the proposals for Y2K activities for PCU review in the first instance, and, if selected, subsequently prepare the work programs and plans for the conduct of these operations. In this connection, it is expected that the agencies would employ consultant firms for these activities under financing from the proposed Loan, rather than individual consultants. During negotiations, the Government provided assurances that current agency staff members would have to resign from the public service in order to compete for contracts to be let for this work. 12 The PCU would be assisted in its operations by the aforementioned "Year 2000 Execution Unit" (Y2KEU). The latter consists of an experienced group of information technology professionals who are quite knowledgeable on Year 2000 problems, as well as the capabilities and conditions of their counterparts in the principal central government institutions. It would advise the agencies on diagnoses, preparation and approval of plans, and would assist the PCU on technical aspects of Y2K; it might also be enlisted to heip overcome Y2K problems in particular agencies. Similarly, it might provide a useful resource for procurement and contracting matters. The PCU will draft the model operational agreement with agencies, which will spell out their responsibilities, conditions and both parties' obligations. The PCU would ensure that the applications provide the requisite information, and it subsequently would sign the agreements with those chosen. Finally, the PCU would be responsible for the preparation of the later stages of the project in accordance with IBRD norms. In the light of the broad scope of these responsibilities, the large number of participants and the urgent nature of the problem, the PCU would receive up-front training in Y2K issues, management and planning, decision-making, conflict resolution, etc. Procurement, contracting and administrative support for the implementation of the subprojects would be carried out by the PCU (whose composition is shown below). Due to the urgent nature of the operation, it has been agreed that at least in the initial stages, this project would be non-LACI eligible. To avoid delay, an existing Project Administration Unit (National Pension Administration TA Project, Loan 4131) would provide administrative, accounting and procurement services; this unit would at the same time train two consultants (already hired) in project procurement and accounting. This Unit's financial management procedures have been reviewed by a Bank Financial Management Specialist and found suitable for the initial stages of the project. A LACI-compatible project management and accounting system has been identified and negotiations to acquire it are in progress. All procedures and other aspects of the Project's activities would be governed by an operating manual satisfactory to the Bank, whose formal adoption is a condition of Effectiveness. It would contain the model operational agreement, the agency eligibility criteria, the terms of beneficiary financial assistance, etc. The Executing Committee would analyze and have to approve the substantive content of agency proposals, their underlying strategies and their merits for assistance. Its procedures and operating policies would emphasize transparency, competition and fairness, as well as the importance of establishing program norms at internationally acceptable levels of quality. The Ministry of Economy will transfer counterpart budget funds to the project account which the PCU will manage. The unit also will manage the Special Account, prepare all requests for reimbursement from the Bank and keep all project records and accounts. Project accounts, financial statements, the Special Account and the SOEs would be audited annually by independent auditors satisfactory to the Bank. Audits would be submitted to the Bank no later than six months after the end of each fiscal year. Technical, performance and financial reviews would be conducted quarterly by an independent audit entity agreed with the Borrower. Supervision would be carried out by the Bank's Task Team, which would review implementation of the project on a quarterly. 13 Project Coordination Unit Project Coordinator (Economist) Impact Evaluation and Project Administration Quality Assurance Unit Information I Y2K Executing Unit I Implementation Y2K Compliance Dissemination Unit Monitoring Testing L - - - - - - - - - - - Institutional placement of the PCU President Office of the Chief of Cabinet of Ministers Secretariat Public Secretariat of Fiscal Secretariat fStrategic Secretariat of Function Equity Control Parliamentary and Institutional Relations Project Coordination Unit Undersecretariat for Undersecretariat for Information Technoto Public Sector Management Year 2000 Executing Unit D: Project Rationale 1. Project alternatives considered and reasons for rejection: * Draw on the existing Bank-financed portfolio (which provides support for many significant Federal agencies) rather than initiating new lending. On-going projects could conceivably be 14 amended to mobilize some funds and deploy established implementation machinery to pursue Y2K remediation in the cases of individual Government agencies currently being assisted. However, there is no necessary correlation between current Borrowers and those on the priority agency list. Y2K expertise would have to be developed in each project execution agency. Finally, coordination with "Y2KEU" would still be necessary. * Direct project management by each agency was rejected in favor of a central Project Coordination Unit due to the multiplicity of agencies involved in implementation and because the repetitive nature of interventions (consulting, acquisition of equipment) favors a strong central unit. * More definitive, comprehensive planning before undertaking the Project: The imminence of the emerging problems limits the preparatory period. A slow implementation start is therefore not a realistic option. Moreover, the project approach has to be relatively experimental given the considerable unknowns of the emerging situation, and therefore there is a limit on what would be gained by further study. In addition, the scheme calls for on-going project preparation activity (including empirical learning from the initial stages) which should compensate for design oversights or errors at the outset. Project design and operating procedures will concentrate on the problem identification and remediation process. Actual implementation will be composed of the initial steps of project execution and simultaneously the beginning of successive cycles of subproject development financed by the project. * Direct support to Provincial Governments. The project will provide advisory services on request to the Provincial Program Coordination Unit in the Interior Ministry for the latter's conduct of Y2K-related activities at provincial levels. However, financing for all testing, remediation, etc. actions would have to be provided by resources of the Provincial Development II Loan. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): None. 3. Lessons learned and reflected in the project design: There is no known prior Bank experience in dealing with the Y2K problem in individual borrowing countries to draw on or lessons to be reported. Moreover, although there has been much written about how many institutions around the world began to examine and fix their computerized systems in recent years, there is relatively little rigorous evaluation of the data available on this experience. Several countries have already applied national programs, although a mid-1998 review indicated that only 19 of 120 of the Bank's borrowing countries had then initiated such activity. Estimates of program costs run to hundreds of billions of dollars for correcting and testing affected systems world-wide. A commonly used, considered reliable illustration is the estimate of the size of the problem in a medium-sized USA state, North Carolina (population 7 million). Credible estimates call for expending over $300 million to fix the problem in its government systems alone. Nonetheless, what is known from the latter has been gleaned and some of it applied in the design of the proposed Project. This has mainly concerned the development of the requisite planning . One aspect of this has been the need for setting national priorities and determining which systems are the most critical, in conjunction with drawing up contingency plans for what will go awry or be uncompleted. A second aspect has been emphasis on the elaboration of diagnoses to check computerized systems in order to identify potential problems that could be caused by the Year 2000 date change. From this, as well as the growing body of knowledge-sharing within Argentina's own information technology community, a scheme has been drawn up for use in the project which comprises a roadmap as to which critical steps must be taken. 15 A second ingredient of international experience reflected in project design concerns the selection of sectors to be deemed as priorities for proposed Y2K remediation efforts. One survey showed enormous variation among countries, within which finance appeared to predominate; then air transport, telecommunications and energy; followed by water and surface transport. InfoDev's seminars and other sources have shown a general tendency among borrowers towards: (a) according the fields of banking and finance, power and gas, water and telecommunications the highest priority ; (b) placing transport facilities in second place; and (c) adding health and defense facilities. The more advanced countries appear to be focussing on potential failures that threaten public safety. Overall, governments have placed differing emphases on particular sectors in reflection of diverse views on which "risks" they consider best warrant premiums, i.e., economic, public safety, health, political. The main lesson has been that each government must set its own priorities in remediation strategies within the constrained finances, capacity and time available. This experience has guided the approach used in the Project for definition of the eligibility criteria to be used in selection of the Argentine agencies to benefit from the recommended Loan. In addition, the design of this project follows the lessons of successful "emergency" activities. The objective is focused and its activity would be priority-driven. The plan for managing the operation and for its close, independent surveillance draws on the demonstrated need for sufficient flexibility to react to unforeseeable circumstances. Decision-making authority and project implementation are highly centralized so as to reduce the chances for bottlenecks. Furthermore, the project does not pursue any sector policy objectives and has no conditionality in this respect. The approach for monitoring and evaluation emphasizes adaptable action plans and work programs. On the other hand, the Government's implementation record has been mixed, with numerous agencies having weak capacity in management and procurement. Under these circumstances, the "best practice" in other emergency-type projects was to centralize procurement responsibility. This is being replicated here. Similarly, TA is to be provided in order to help the implementation unit prioritize investments in order to try to maximize their impact and demonstration effects. 4. Indications of borrower commitment and ownership: The Government has already designed a suitable strategy for approaching the Y2K problem. It likewise drew up the program to carry out that strategy, including the establishment of an appropriate organizational framework for its direction and implementation. The Cabinet Office has repeatedly demonstrated strong political support for and interest in the program. It intends to issue a resolution requiring all Federal Government agencies to become "Y2K - compliant" by September 1999. 5. Value added of Bank support in this project: The Bank's involvement is intended to assist Argentina in coping with the potentially serious disruption that could occur, possibly causing significant economic contraction and social difficulties. Bank support is therefore aimed at helping the Government obtain widespread recognition of, and mobilize mitigating measures for, these problems. Because of the emergency-type circumstances, Bank assistance in project management in such cases should be valuable in mounting and carrying out the operation on a timely, effective manner-along with strong screening and control procedures. The Bank's presence would thus help ensure that the PCU has and maintains adequate accounting, monitoring, management systems, technical review and auditing of these relatively widely dispersed activities. More broadly, the Bank is in a position to assist the Argentine government tap into a world-wide effort to cope with the Y2K problem and can offer a way for Argentina to benefit from the experiences of other countries through its web-site, support under InfoDev, and other international linkages that the Bank has formed. 16 E: Summary Project Analysis 1. Economic: The nature of the Y2K problem puts much at risk and represents a threat to "business-continuity". The less prepared government agencies or any other business units are for Year 2000, the more costly it will be to fix. Achieving or reinstating system integrity belatedly will become more expensive, and there could be litigation over service or production failures. Further, it is likely that there might be an increasing cost for information technology workers as their supply is unlikely to be able to keep up with demand. And the failure to make processes millennium-compliant quickly could cause productivity losses. Therefore, the issue is less a technology problem than a potential business liability, and the project's full economic benefits will be in reducing or containing that cost. No ex-ante economic analysis (ERR) of project returns is possible until specific investments or sub-projects are identified and analyzed, particularly because of the unpredictable extent of testing work, the most time-consuming part of the task. This issue has been recognized by several countries, and addressed in different ways. A good example of how to evaluate potential investments in becoming Y2K compliant is the United States General Accounting Office's "Year 2000 Computing Crisis: Business Continuity and Contingency Planning" publication (August 1998), which can be found in the project files. Individual sub-projects to financing under the project would be selected based on: a. An assessment of the impact of the operation of their particular service or function on: * Public safety * Public health * Public security (economic and national security) * Preservation of law and order b. Consequential damages: major effects of non-Y2K-compliance on these and/or: * adequate supply and distribution of water, power, sewerage, transportation * public administration operations * health and education services * tax and other collections * social security and other social program disbursements * trade * banking and other financial system operations * resolution of legal disputes involving sizeable amounts of monies * others c. Collateral damages: effect of non-Y2K-compliance by this agency on other critical agencies' functions d. Estimate of the cost of consequential damages versus the cost of preventive remediation Investments per se would be limited to the least cost alternative for "emergency" prevention and rehabilitation, and must be demonstrably technically sound in accordance with agreed criteria. No estimate is made of the potential benefits from upgrading of hardware and software, which will most likely increase productivity and spawn additional unanticipated benefits. 17 2. Financial The uncertainty of the Year 2000 issue precludes a realistic estimation of the costs of making all priority computer systems compliant and the final cost estimate at this point is open-ended. Because of the uncertain nature of the work involved, the Government needs to be prepared to invest additional resources and/or ration what is available to the priority systems. Close monitoring of the program and the adoption of contingency plans will be a critical factor in ensuring that whatever resources are available are directed to the most critical systems. In addition, perhaps the largest part of repairing the system will be the testing entailed, whose expenses are difficult to forecast. However, in the long-run, the cost of operating the upgraded Y2K systems should pose no or very little incremental costs over the present costs of operating these same systems and should not pose a long-run problem of sustainability. 3. Technical: The basic technological questions are generally well understood and the solutions per se do not present any technological challenge. As noted earlier, the problems tend to be more the uncertainty on the extent of the problem, particularly because of imbedded systems, and the lack of historical records to diagnose and remedy old systems. Another technical constraint tends to be the availability of technically qualified and skilled staff/consultations to undertake the work. The adequacy of design specifications and cost estimates for agency subprojects would be reviewed by the project coordination unit and independent technical experts provided by the external procurement agency. 4. hstitutional: Executing agencies: The present institutional capacity in the Secretary of Public Function is considered adequate but needing strengthening, primarily in order to be able to cope with the urgent nature of the work. Generally, Argentina has a relatively well developed information system industry which can be tapped, along with external consultants, for the project. The existing capacity would be strengthened with technical assistance. The executing unit would consist of the project director, with operational responsibilities (including overall project administration and supporting activities) assigned to the Project Coordination Unit within that Secretariat. The latter's Y2K Executing Unit (Y2KEU) would provide technical backup to the PCU. The responsibility for the execution of each subproject will rest with the individual agency selected for Y2K testing and remediation works. 5. Social: The project is expected to have a positive net social impact. The government programs and services likely to be included in the project a priori would be selected on the basic of their contribute to social and economic welfare of a large population. Moreover, the project would also have an impact more broadly throughout Government and the private sector, and should help workers and owners to avoid (or lessen) destabilization of economic activity. The information dissemination campaign will be an important facet of the project in order to keep the public abreast of the need for changes and to explain, in the case of new requirements, the impact that that may have on their eligibility for certain public services. 6. Environmental assessment: Environmental Category [ ] A []B [X] C The proposed project is expected to have no environmental impact. 7. Participatory approach: a. Primary beneficiaries and other affected groups: The project uses a priority-driven approach to identify eligible investments within the Federal public service, which are requested by the concerned agencies. The latter figure among the primary beneficiaries, which ultimately include those segments of the Argentine population they serve. 18 b. Other key stakeholders: Provincial governments and the private sector. These stakeholders will be kept informed of the process and any changes to public services because of the need to be Y2K compliant. Moreover, in the case of provincial governments, they will be supported via the Provincial Development II loan. F: Sustainability and Risks 1. Sustainability: The subprojects in and of themselves are inherently irreversible and should not pose any significant incremental cost in terms of future operation. Further, if the "Y2K" damage is severe enough and the affected infrastructure is sufficiently valuable, the stakeholders would have an economic incentive to maintain the remedial measures. At present, there are no provisions for government budgetary support beyond the implementation of the project's investment phase. As noted above, that may prove to be inadequate to cover all systems and more investment will be needed. In addition, without continuing maintenance, some infrastructure could be exposed to continuing damage in the future. 2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1): Risk Risk Risk Minimization Measure Rating Annex 1, cell "from Outputs to Objective" Ministerial Decree on Y2K compliance is not N Discussions with political levels and issued. opposition parties will be necessary Insufficiency of qualified technicians available M Argentina has a substantial and growing for hire information technology industry, which can be readily supplemented from at least equivalent expertise in Brazil and Chile. Market demand drives government information M Government must be prepared to take technology experts to the private sector measures to keep critical experts within government agencies Estimated amount proves insufficient to deal N A 2nd project can be quickly prepared. with the Y2K issue Annex 1, cell "from Components to Outputs" Weak PCU management and implementation S (a) Hire high caliber consultants; (b) hire capability aiming to fulfill future, not present needs (i.e., initial over-dimensioning); (c) full PCU in operation by project effectiveness; (d) Bank support to focus on this issue; Low agency capacity to implement subprojects S Ensure that the PCU can provide technical assistance to buttress implementation Ineffective or inefficient allocation of resources M (a) National Director to make funding by PCU decisions based on technical recommendations and impact analyses; (b) Use of a procurement agency; (c) comprehensive operational manual Overall Risk Rating, S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 19 The risk of implementation capacity weakness is, based on past expaienca, very high and a determining factor to the Success of is project. 3. Posiblie ContowwalApec: No signiAcant issues arM anticipatd. G: Main Loan Condition I. Effectivenes conditions: * Adoption of operating manual goveming project activitief * TORs and Shortlists for independent entities for tecdmical, procedural and flaancial reviews * Procurement agency hired S Full PCU in operation * Agreed plan of action for to fit semester * First Y2K impact study completed * Issuance of a resolution by the Chief dCabinsc of Minister requiring all Federa Government entities to be substantially Y2K-compliant by September 1999 H Readiness for Implementation I The engineering design documents for the first year's activities are sompiete and ready for the start of project:implementation. [] Not applicable. [] The procurement documnts for the first year's activities are complete and ready for the start of project implementation. Will not be ready due to the emergency nanoe of the project [I The Project Implemcntstion Plan has been appraised and found to be realistic and of satisfactory quality. Will be ready by qffeciveness [3 The following items are lacking and are discussed under loan conditions (Section G): L. Compliance with Bank Policies 1] This project complies with all applicable Bank policies for emergency operations. [X] The following exceptions to Bank policies are recommended for . see procurement annex). The project complies with all other applicable Bank poli Myrns Alexander e Country Director See ir r Task Team Leader 20 Annex 1 Project Design Summary Argentina: Year 2000 Technical Assistance Project Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions Evaluation Sector-related CAS Goal: Services provided by the main Project is not listed in CAS as sector agencies (e.g., Health, it responds to a national Defense, Social Security and emergency that was recognized Justice) are not affected by the as such after the last CAS Y2K discussion. Contribute to ensure the maintenance of the country's productive and service systems Project Development Objective: To contain or Problems arising after GOA reports The private sector, remediate the impact of the December 31, 1999 in Specialized provincial, municipal Year 2000 disruption. identified critical functions are publications, both governments, NGOs carry not caused by problems in official and private out remediation or rescue computer systems due to the Mass-market Press activities complementing change in the millennium. those of the GOA Outputs: Identified systems and critical Certifications issued Engagement by the I. Computer systems and functions have been remediated by the UE2000 various institutions and critical functions Y2K or rescued before 2000. Quarterly reports by private sector to carry out compatible Non-remediated systems are the SFP to Cabinet remediation or rescue 2. Impact of Y2K evaluated those of lesser-impact critical Agency reports activities for systems and in critical sectors of the functions reviewed by the SFP operations not in the country's productive and Sectors determined as critical Copies of project service structure evaluated before end of March publications and 3. Information on the scope 1999. videos of the impact of the Y2K Two publicity campaigns in issue disseminated among mass-market and specialized the targeted population media before 2000. Project Components/Sub- Inputs: components: 1. Entities assign It. Inventory of critical US$1.5m Quarterly progress adequate counterpart functions report, aggregating personnel 2. Project Coordination US$2.1lm PCU and agency 2. Consulting firms and 3. Design, development and US$31.5m reports individual consultants implementation of available remediation and rescue 3. Counterpart budgets activities assigned for 1999 4. Information dissemination US7.9m (counterpart funds (best practices, impact available) study results, others) 21 Annex 2 Year 2000 Technical Assistance Project Project Description Component A: Support Activities Activities carried out by the PCU in support of Y2K remediation. Some of these activities are already on- going, financed by a PPF. * Initial estimates of entities and systems at risk confirmed by teams of selected consultants; common approaches, tools and methodologies for use by the various entities be identified centrally. * Publicity campaign to alert public and private sector entities to the Y2K problem; telephone hot-line assistance; creation and maintenance of a website with best practices and pointers to appropriate websites. * Technical analysis of diagnostics and evaluation of the economic impact of non-Y2K-compliance, as an input to decision-making in the selection of agencies for financing. * Acquisition, provision and training in the use of tools and methodologies to the Y2K executing units, in order to profit from best practices and economies of scale. * Development of common administrative systems for economies of scale and simplicity. Component B: Remediation and Rescue Agencies selected for financing will implement their remediation subprojects, assisted by the PCU, financed from this Loan (remediation activities are taken before Year 2000 to prevent problems). Technical Assistance would be provided by the PCU to agencies in carrying out Y2K diagnostics, technical and impact analysis, preparing implementation plans, preparing terms of reference and supervision of consulting firms; preparing equipment specifications; etc. The activities for each agency are expected to be as follows: * Diagnosis * Technical Analysis * Impact Analysis * Allocation of funds (Executing Committee) * Detailed analysis: identified components, problems * Identified remediation options and cost estimates * Evaluation and selection of option to use * Preparation of remediation plan, comprising activities, inputs, resources, testing plan, conversion plan, deployment plan, training plan, monitoring indicators, and contingency plans. * Implementation of remediation plan aimed at non-Y2K-compliant systems, accomplished via one or more of the following: * Replacement of commonly-used systems by standardized software 22 * Upgrade of the hardware/software platform infrastructure if necessary for compliance. * Modification of existing systems * Quality assurance (verification of successful testing) * Implementation of contingency plans (following (a) through (e) above). Contingency plans refer to rescue activities, i.e., those taken later to recover from previously unidentified problems, from failed remediation plans, or from non-Y2K-compliant exogenous effects (e.g., non-compliant up-stream entities). Component C: Project Administration Activities proper of a project's coordination and administration, such as: * Prepare, review and analyze agency non-Y2K-compliance impact studies. Ensure that all subproject implementation, testing and contingency plans presented by the agencies are adequate and comply with PCU-issued guidelines * Send proposed agency selections and supporting documentation to the Bank for approval * Ensure that all subproject implementation plans are carried out in time and within budget, through monitoring of progress and results and taking appropriate action, including assistance to agencies requiring it. * Provide procurement advice to the agencies, maintain the project accounts and prepare quarterly progress reports for submission to the Bank for review. * Liaise with a procurement agency for actual procurement; this agency would in addition be responsible for quarterly advertisements in the Development Business and advertisements in local newspapers as appropriate, and for the preparation and maintenance of a registry of interested individual consultants and firms. * Ensure that a quarterly technical review is carried out by an independent agency agreed with the Bank. * Ensure that a quarterly procedural and financial review is carried out by an independent agency agreed with the Bank. 23 Annex 3 Year 2000 Technical Assistance Project Estimated Project Costs Project Comnponent Local Foreign Total -----------------------US $ milion-------------- A. Support Activities 7.4 0.5 7.9 B. Remediation and Rescue 18.0 13.5 31.5 C. Project Coordination 2.1 0.0 2.1 Total 27.5 14.0 41.5 PPF Reimbursement 1.5 1.5 Front-end Fee 0.303 0.303 Total Project Cost 29.0 14.303 43.303 24 Annex 4 Year 2000 Technical Assistance Project Procurement and Disbursement Arrangements Procurement The procurement of goods under the project will be conducted in accordance with the Bank's guidelines "Procurement under IBRD Loans and IDA Credits, January 1996, revised August 1996 and September 1997". The procurement of consultants will follow the Bank's guidelines, "Selection of Consultants by World Bank Borrower, January 1997 revised September 1997". To expedite implementation, an existing experienced project administration unit will carry out procurement and train procurement staff. Procurement methods (Table A) A general procurement notice will be made quarterly in the Development Business; all other advertisement will be done through the local press. The notice will request expressions of interest, which will be maintained by a procurement firm hired to assist the PCU, and from which long- and short-lists of consulting firms will be prepared. For the procurement of goods, International Competitive Bidding will be used for contracts estimated at US$350,000 or more, and may be used for lesser amounts, although due to the urgent nature of the operation, and the periodic advertisement in the Development Business, one month's notice to present offers will be considered sufficient. National Competitive Bidding may be used for contracts estimated at less than US$350,000 and more than US$50,000; Shopping will be used for contracts estimated at equal to or less than US$50,000. Consultants' assignments other than individual consultants and manpower-intensive service contracts (see below) will be procured through Quality and Cost-based Selection (QCBS). Individual consultants will be procured in accordance with the procedure in Part V of the Consultant Guidelines. The Bank's Standard Request for Proposals and Forms of Contract will be used. Manpower-intensive service contracts involving repetitive activities (e.g., file and data-base verification and clean-up) will be procured through Least Cost Selections Method (LCSM). Prior revieit thresholds (Table B) Full prior review by the Bank will be carried out for the first three procurement activities of each procurement type and the first consulting firm procurement for each participating agency. All bidding documents for contracts above $350,000 (for goods) and US$200,000 (for consulting services) will be reviewed by the Bank. Prior review for bidding documents for individual consultants with contracts of less than US$50,000 per year will not be necessary as long as the activity has been defined in a semi- annual plan of action agreed with the Bank. Other terms of reference and equipment specifications will be reviewed by the procurement agency and by the Bank through sampling during supervision missions. Acquisition of miscellaneous supplies and operational expenses of less than $1,500 per contract, up to a maximum of US$100,000 per year for the Project Coordination Unit may be carried out through comparison of prices without prior review. 25 Disbursement Allocation of loan proceeds The loan will be disbursed over a period of 2.5 years. Disbursements will be made against eligible project expenditures for goods and services. As shown in Table C, goods will be financed at 100% for imported (foreign) items, 100% for those from ex-factory sources, and 83% for locally purchased items. Consulting services will be financed at 100% (excluding taxes), and operating costs will also be financed at 100%. Use ofstatements of expenses All disbursements against contracts below the following thresholds will be made against Statements of Expenditures: * US$350,000 for goods * US$200,000 for consulting firms * US$50,000 for individual consulting contracts For these expenditures under SOE, detailed supporting documents showing evidence of payments to contractors and suppliers will be kept at the PCU. These documents will be made available to Bank supervision missions and the annual audits. Special account: To facilitate disbursement against eligible expenditures, the Government will establish in a bank satisfactory to the IBRD a Special Account (SA) to be operated by the PCU under terms and conditions satisfactory to the IBRD. The IBRD would, upon request, make an Authorized Allocation of US$5 million. Applications for the replenishment of the SA would be submitted monthly or when 20 percent of the initial deposit has been utilized, whichever occurs earlier. The replenishment application would be supported by the necessary documentation, the SA bank statement, and a reconciliation of this bank statement. The SA would be audited annually by independent auditors acceptable to the Bank. 26 Annex 4, Table A: Project Costs by Procurement Arrangements' (in US$million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other N.B.F 1. Goods Computer Equipment 8.5 4.5 1.5 14.5 (8.5) (2.5) (1.0) (12.0) 2. Services Consulting Firms 11.0 11.0 (9.0) (9.0) Individual Consultants 6.0 1.01 7.0 (1.5) (1.5) File update services 7.0 3.04 10.0 (7.0) (7.0) 3. Miscellaneous PCU supplies and operational 0.5 0.5 expenses (0.5) (0.5) Front-end Fee 0.303 0.303 (0.303) (0.303) Total 8.5 4.5 26.303 4.0 43.303 (8.5) (2.5) (19.303) (30.303 Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). The procurement arrangement for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. Figures in parenthesis are the amounts to be financed by the Bank loan/IDA credit Some of the remediation work will more logically be carried out by information technology staff in agencies, familiar with their own systems. Government is therefore proposing to finance a certain amount of extra-ordinary hours of work, using counterpart funds. See previous footnote. 27 Annex 4, Table Al: Consultant Selection Arrangements (optional) (in US$million equivalent) Selection Method Total Cost Consultant Services (including Expenditure Category contingencies) QCBS QBS SFB LCS CQ Other N.B.F. A. Firms 11.0 7.0 3.0 21.0 (9.0) (7.0) (16.0) B. Individuals 6.0 1.0 7.0 (1.5) (1.5) Total 11.0 6.0 7.0 4.0 28.0 (9.0) (1.5) (7.0) (17.5) Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank loan. 28 Annex 4, Table B: Thresholds for Procurement Methods and Prior Reviewo Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review / Estimated Total Value Subject to Prior Review US $ thousands US $ millions 1. Goods Computer Equipment <50,000 National Shopping Computer Equipment <350,000 NCB or ICB 4.5 Computer Equipment > 350,000 ICB 6.5 Computer Equipment >$100,000 or >20% of Sole-Source 2.0 components full replacement value 2. Services Individual Consultants 50,000 QBS 0.5 Consulting Firms 200,000 QCBS 6.0 File Update Services 2 200,000 LCS 5.0 Total value of contracts subject to prior review: 24.5 sThresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation' and contact the Regional Procurement Adviser for guidance. 29 Annex 4, Table C: Allocation of Loan Proceeds Expenditure Category Amount in Financing Percentage US$million Goods 12.0 100% foreign, 83% local ex-factory and 83% local purchase Services 16.0 100% excluding taxes PCU Supplies and Miscellaneous 0.5 100% excluding Operational Expenses taxes PPF Refinancing 1.5 Front-end Fee 0.303 Total 30.303 30 Annex 5 Year 2000 Technical Assistance Project Project Processing Budget and Schedule A. Project Budget Planned Actual (At final PCD stage) US$95,000 US$60,000 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 7 5 First Bank mission (identification) 5/11/1998 5/11/1998 Appraisal mission departure 11/2/1998 11/9/1999 Negotiations 11/9/1998 11/24/1998 Planned Date of Effectiveness 1/15/1999 / /19 Prepared by: Secretariat of Public Function, Office of the Chief of Cabinet of Ministers Preparation assistance: PPF Bank staff who worked on the project included: Name Specialty Luis-Jos6 Mejia Sr. Public Sector Management Specialist Maria Victoria Lister Quality Assurance Officer Herman Nissenbaum Consultant Daniel Hurrell Information Technology Ludovico Tassoni Jr. Operations Assistant 31 Annex 6 Year 2000 Technical Assistance Project Documents in the Project File* A. Project Implementation Plan N/A B. Bank Staff Assessments N/A C. Other Selection criteria for selecting agencies for financing PCU Training Plan Operational Manual (after Effectiveness) Miscellaneous Y2K and support documentation *Including electronic files. ANNEX 7 Status of Bank Group Operations in Argentina Operations Portfolio Difference Last PSR )etween expectet Supervision Rating b/ and actual disbursements aj Development Proect Fiscal . Original Amount in US$ Millions Implementation ID Year Borrower Purpose IBRD IDA Cancellations Undisburse Orig rm Rev' Obectives Progress Number of Closed Proiects: Active Projects AR-PE-5968 1987 SEGBA SEGBA V 276 0 0 55.62 55.61 0 S S AR-PE-6005 1991 REPUBLIC OF A PROVINC DEV PROJ 200 0 0 7.51 7.49 0 S S AR-PE-5977 1991 ARGENTINE RE WTR SUPPLY II 100 0 36 19.9 55.91 19.91 S S AR-PE-6036 1993 GOVERNMENT YACYRETA II 300 0 0 1.01 1 0 S S AR-PE-6003 1993 GOVT OF ARGE RD MAINT & REHAB S( 340 0 0 30.23 20.87 0 NA S AR-PE-6062 1994 MIN OF ECONO CAPITAL MKT TA 8.5 0 0 2.37 2.35 0 S S AR-PE-6025 1994 GOVT OF ARGE MTNAL CHILD HLTH & 100 0 0 11.04 5.74 0 HS HS AR-PE-6060 1995 GOVT OF ARGE MUNIC DEVT 11 210 0 0 158.24 -19.9 0 HS HS AR-PE-5992 1995 GOVT OF ARGE SECONDARY ED I 190 0 0 131.94 110.32 0 S U AR-PE-6018 1995 ARGENTINE RE PROV DEVT II 225 0 0 192.56 24.24 0 U S AR-PE-45687 1996 REP. OF ARGRI H. INSURANCE TA 25 0 0 5.11 -0.32 0 HS HS AR-PE-40909 1996 REP. OF ARGEI H. INSURANCE REFOF 350 0 0 100 125 0 HS S AR-PE-38883 1996 REPUBLIC OF.A ENT.EXPORT DV. 38.5 0 0 18.9 18.89 1.34 S S AR-PE-34091 1996 REP OF ARGEN HIGHER ED REFORM 165 0 0 120.51 81.44 59.52 S S AR-PE-6055 1996 GOVT. OF ARGI MINING SCTR DEVT 30 0 0 6.36 -2.54 0 HS S AR-PE-6030 1996 REPUB OF ARC PROVCL HLTH SCTR E 101.4 0 0 84.49 51.34 0 S U AR-PE-6040 1996 GOVERNMENT FORESTRY/DV 16 0 0 12.13 0.64 0 S S AR-PE-6057 1996 GOVT OF ARGI SECNDARY ED 2 115.5 0 0 100.55 49.39 -14.95 S S AR-PE-37049 1996 GOVT OF ARGE PUB.INV.STRENGTHG 16 0 0 15.32 10.32 0 U U AR-PE-40904 1996 REPUBLIC OF P BANK REFORM 500 0 0 166 166 0 S S AR-PE-46821 1997 GOVT.OF ARG PENSION TA 20 0 0 15.37 2.74 0 S S AR-PE-43418 1997 REPUBLIC OF P AIDS PREV.&STD CTR 15 0 0 10.41 -0.35 0 HS HS AR-PE-39584 1997 GOVT OF ARGE B.A.URB.TSP 200 0 0 177.66 21.67 0 S S AR-PE-6052 1997 GOVT OF ARGE FLOOD PROTECTION 200 0 0 195.37 16.05 0 S S AR-PE-5980 1997 GOVT OF ARGE PROV ROADS 300 0 0 296.94 56.93 0 S S AR-PE-6010 1997 GOA PROV AG DEVT I 125 0 0 122.15 7.5 0 S S AR-PE-6059 1997 ARGENTINE RE MTL.CHD.HTH.2 100 0 0 90.15 1.14 0 S HS AR-PE-40808 1997 GOA N.FOREST/PROTC 19.5 0 0 18.13 -0.7 0 S S AR-PE-55935 1998 GOVERNMENT EL NINO EMERGENCY 42 0 0 42 14 0 S S AR-PE-55477 1998 GOVT OF ARGE MINING TA 39.5 0 0 39.5 12.94 0 S S AR-PE-51695 1998 GOVERNMENT P.RFM(R.NEGRO) 75 0 0 50 25 0 S S AR-PE-51693 1998 GOVERNMENT P.RFM(SALTA) 75 0 0 30 0 0 HS HS AR-PE-50713 1998 MINISTRY OF E MODEL COURT DEV. 5 0 0 5 0.75 0 S S AR-PE-6050 1998 REP OF ARGEK POLLUTION MGT. 18 0 0 18 1.16 0 S S AR-PE-6006 1998 MIN. OF ECONC P.RFM(TUCUMAN) 100 0 0 45 0 0 S U AR-PE-6041 1998 GOVERNMENT SMALL FARMER DV. 75 0 0 72.5 13.56 9 S S AR-PE-49269 1998 ARGENTINE RE SOC PROTEC 3 284 0 0 284 0 0 AR-PE-50714 1998 REPUBLIC OF P SECOND.ED 3 119 0 0 119 86.5 0 S S AR-PE-51694 1998 GOVERNMENT P.RFM(S.JUAN) 50 0 0 40 25 0 S S AR-PE-52590 1998 REPUBLIC OF P NAT HWY REHAB&MAI 450 0 0 450 205.63 0 S S AR-PE-6058 1999 REPUBLIC OF A SOC.PROTECT 4 90.75 0 0 90.75 0 0 HS HS Total 5,709.65 0 36 3,451.72 1,253.31 74.82 Closed Active Projects Pro4ects Total Total Disbursed (IBRD and IDA) 2,221.93 7,343.55 9,565.48 of which has been repaid 235.63 3,238.85 3,474.48 Total now held by IBRD and IDA : 5,438.01 4,105.42 9,543.43 Amount sold 0 12.79 12.79 of which ra: 12.79 12.79 Total Undisbursed 3,451.72 0.69 3,452.41 1. Actual disbursements to date minus intended disbursements to date as projected at appraisal. 2. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Note: Disbursement data is updated at the end of the first week of the month. ANNEX 8 Argentina at a glance 9/16/98 Latin Upper. POVERTY and SOCIAL America middle- Argentina & Carib. income Development diamond* 1997 Population, mid-year (millions) 35.2 494 571 Life expectancy GNP per capita (Atlas method, US$) 8,570 3,880 4,520 1 GNP (Atlas method, US$ billions) 302.0 1,917 2,584 Average annual growth, 1991-97 Population (%) 1.1 1.7 1.5 GNP Gross Labor force (%) 1.9 2.3 1.9 p .rs per primary Most recent estimate (latest year available, 1991-97) capita enrollment Poverty (% of population below national poverty line) 26 Urban population (% of total population) 88 74 73 Life expectancy at birth (years) 73 70 70 Infant mortality (per 1,000 live births) 22 32 30 Child malnutrition (% of children under 5) 2 Access to safe water Access to safe water (% of population) 64 73 79 Illiteracy (% of population age 15+) 4 13 15 Gross primary enrollment (% of school-age population) 107 111 107 Argentina Male .. .. Upper-middle-income group Female .._.._ _. KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic ratios* GOP (US$ billions) 51.2 110.9 298.7 322.7 Gross domestic investment/GOP 30.7 17.5 18.5 18.9 Trade Exports of goods and services/GDP 9.2 8.2 8.9 8.7 Gross domestic savingslGOP 34.0 19.3 18.1 18.2 Gross national savings/GDP 34.1 14.8 16.5 16.4 Current account balancelGDP 1.3 -2.6 -1.3 -2.9 Domestic Interest payments/GDP 0.9 3.3 1.9 2.0 Savings Investment Total debt/GDP 18.1 47.3 32.4 32.4 Total debt servicelexports 34.4 82.8 47.2 49.3 Present value of debt/GDP .. .. 29.5 Present value of debt/exports .. .. 277.7 .. Indebtedness 1976-86 1987-97 1996 1997 1998-02 (average annual growth) GDP 0.6 3.8 4.8 8.6 4.0 -Argentina GNP per capita -1.9 2.9 3.7 7.1 3.1 Upper-middle-income group Exports of goods and services 2.8 8.5 6.7 9.1 6.5 STRUCTURE of the ECONOMY 1976 1986 1996 1997 Growth rates of output and investment (%) (% of GDP) 40 Agriculture 8.2 7.8 7.7 7.3 T Industry 50.9 37.4 35.5 36.4 20 Manufacturing 39.1 27.4 24.7 24.8 Services 41.0 54.8 56.8 56.3 0 . 92 93 94 96 97 Private consumption 56.6 .. .. .. -201 General government consumption 9.4 .. - GDI - GDP Imports of goods and services 5.9 6.3 9.2 9.4 1976-86 1987-97 1996 1997 Growth rates of exports and imports 1%) (average annual growth) Agriculture 1.2 2.8 3.0 3.3 1oo Industry -1.5 3.5 5.0 11.2 s0 Manufacturing -1.3 3.0 5.3 9.2 60 Services 2.1 4.1 4.9 7.7 40 Private consumption 20 General government consumption . Gross domestic investment -4.8 7.5 8.8 26.5 -207 92 9 4 Imports of goods and services 1.1 19.5 18.2 27.1 - Exports -Imports Gross national product -0.4 4.2 4.6 8.1 Note: 1997 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) comoared with its income-aroup averaoe. If data are missino. the diamond will be incomplete.
Группа Всемирного банка · Project Appraisal Document
Argentina - Year Two Thousand Technical Assistance Project
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