Conformed Copy - L7058 - Metro Manila Urban Transport Integration Project - Supplemental Letter 2

Page 1 August 8, 2001 REPUBLIC OF THE PHILIPPINES International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Loan No.7058 PH and GEF Trust Fund Grant No. TF029804 PH (Metro Manila Urban Transport Integration Project) Representations and Assurances on Procurement Dear Sirs and Madams: I am writing on behalf of Republic of the Philippines (the "Philippines") in respect of the Loan Agreement, of even date herewith, entered into between Republic of the Philippines and the International Bank for Reconstruction and Development (the "Bank"), in respect of the above-noted project and am pleased to provide the Bank the following representations and assurances: 1. The Philippines represents that the conflict existing between the Philippines procurement procedures and the Bank’s "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and revised in January and August 1996, September 1997, and January 1999 together with the Bank’s "Guidelines for the Selection and Employment of Consultants by World Bank Borrowers" published by the Bank in January 1997 and revised in September 1997 and January 1999 (together the "Bank’s Guidelines") is eliminated through the amendment (approved by the Philippines President on January 10, 1990) of the Implementing Rules and Regulations of Presidential Decree No. 1594 relating to procurement of works, the Implementing Rules and Regulations of Executive Order No. 302 relating to procurement of goods, and the Guidelines for the Procurement of Consultant Services for Government Projects implementing Executive Order No. 164. Section IV (2) of the amended Implementing Rules and Regulations of Presidential Decree No. 1594 regarding applicability in relevant part provides: "...nothing in these implementing rules and regulations shall negate any existing and future commitments with respect to the bidding and award of contracts financed partly or wholly with funds from international financial institutions..." Likewise, Section 1.2.2 of the Implementing Rules and Regulations of Executive Order No. 302 provides: "...For supply contracts financed partly or wholly with Official Development Assistance (ODA) funds from International Financing Institutions (IFIs), as well as from bilateral and other sources, the corresponding loan/grant/credit agreement between the government and the concerned IFI shall prevail." Similarly, Section 9.3 of the Guidelines on the Procurement of Consulting Services for Government Projects in relevant part provides: "...these guidelines shall not negate any existing and future commitments with respect to the selection of consultants financed partly or wholly with funds from international financial institutions..." In any event, the Philippines understands and agrees that, in Bank-financed Projects, the Bank Guidelines are and will continue to be recognized and given full force and effect. 2. The Philippines further confirms that Section 11 of Republic Act No. 8182 of June 1996, which (a) provides for preferential treatment for Filipino consultants, suppliers and manufacturers; and (b) prohibits feasibility and design consultants from participating in any subsequent phase of project implementation, does not modify the applicability of Section 4 of Republic Act No. 4860 (the "Foreign Borrowing Act"). Section 4 of Republic Act No. 4860, as amended, states in relevant part: "In the contracting of any loan, credit or indebtedness under this Act, the President of the Philippines may, when necessary, agree to modify the application of any law granting preferences, or imposing restrictions on, international competitive bidding...". Said Section 4 remains in full force and effect. Thus the Bank’s Guidelines relating to the employment of consultants will be fully applicable in the above noted Project. 3. The Philippines specifically assures you that, unless otherwise agreed to in writing by the Bank, the following procedures will apply to all goods and works contracts to be financed by the Bank for the above-noted Project following the Philippines national competitive bidding procedures ("NCB"): Page 2 a. NCB bidding opportunities, including those which are invited by local government units, shall be advertised in national newspapers of general circulation, with sufficient time for bidders to prepare offers, which is normally 30 days, unless different venues and time are specifically agreed upon by the Bank; b. Foreign suppliers and contractors from eligible countries will be allowed to participate, if interested, without first being required to associate or enter into a joint venture with local firms; c. Except for major or complex works, where prequalification is required, prequalification of contractors may be conducted upon prior concurrence of the Bank; d. If any bidder is denied access to the bidding process for reasons unrelated to its financial and technical qualifications to perform the contract, the Bank shall be consulted prior to such denial; e. Bid submission deadlines, times and location specified in the bidding documents will be strictly adhered to; and bids submitted after the specified date and time and location, shall be returned unopened to the bidder; f. The Bank’s domestic or regional preferences will not be applied in the evaluation of bids, and other preferences in effect in the Philippines will not be used except with the prior concurrence of the Bank; g. Bracketing and ceiling will not apply, unless specifically agreed by the Bank in advance of bidding; h. Single responsive bids will not be rejected without prior Bank concurrence, and rebidding will not be mandatorily required when fewer than three responsive bids are received; i. Bid opening shall be open to those who wish to attend; and the deadline for submission of bids should be the same as that for bid opening, or immediately thereafter; j. Suppliers and contractors will not be required to purchase local goods or supplies or to hire local labor, except unskilled labor; k. Explicit bid evaluation criteria will be set forth in the bid documents; and l. Material modifications of contract scope and conditions during implementation require prior Bank concurrence. 4. The Philippines further assures you that, unless otherwise agreed to in writing by the Bank, the following rules shall apply for the procurement of all works contracts to be financed by the Bank for the above-noted Project and procured according to national competitive bidding procedures: a. Prior registration, licensing and/or other government authorization will not be a requirement for purposes of participating in bidding competitions; such registration, licensing and/or other government authorization may, however, be required from the selected bidder as a prior condition to signing the contract; and b. All contractors will be allowed to compete for contracts to the upper limit of their classification. 5. The Philippines also assures you that, unless otherwise agreed to in writing by the Bank, the following procedures will be adhered to in respect of the procurement of consultants' services to be financed by the Bank: a. Mandatory joint venture or association with Philippine consulting firms will only be required if (i) there are sufficient number of capable domestic firms available to allow reasonable freedom of choice for the invited foreign firms; (ii) the desirable contribution by either firm will not be constrained by any prescribed manner or extent or participation; and (iii) association with specified named firms selected by the borrower will not be required; b. Qualified consulting firms, which come to the attention of the agency requiring services by means other than a specific expression of interest in response to an announcement of a future project for consulting services, will also be eligible for the shortlist; Page 3 c. When circumstances warrant and with prior Bank no objection, consulting firms may be asked to continue working on a project beyond the phase for which their services were originally contracted; d. Price adjustments in consultants contracts will remain in effect whether budgetary funds are available or not; in addition, there will be no ceiling on price adjustments under Bank financed contracts; e. The Bank’s Standard Forms of Contract for Consultants’ Services for Complex Time-Based Assignments and for Lump Sum Remuneration shall be used for contracts financed by the Bank; f. The "Percentage of Construction Cost Method" will not be used to determine the compensation of Bank-financed consultancy services; and g. When consultancy services include the provision of vehicles, their origin shall not be restricted to Philippine sources. 6. The Philippines understands that the Bank intends to rely on the representations and assurances contained herein for entering into the Loan Agreement in respect of the Project. It further agrees that, unless otherwise agreed to in writing between the Philippines and the Bank, these representations and assurances will form an integral part of said Loan Agreement. Very truly yours, By /s/ Jose Isidro Camacho Authorized Representative