Conformed Copy - L4617 - Liao River Basin Project - Supplemental Letter 1

Page 1 PEOPLE’S REPUBLIC OF CHINA LIAONING PROVINCE January 18, 2002 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 USA Re: Loan No.4617 CHA (Liao River Basin Project) National Competitive Bidding Procedures Ladies and Gentlemen: We refer to the Loan Agreement (Loan Agreement) of even date herewith between the People’s Republic of China (the Borrower) and the International Bank for Reconstruction and Development (the Bank) for the above-captioned Project (the Project) and to the Project Agreement of same date between the Bank and the Borrower’s Liaonng Province. We also refer to The Law on Tendering and Bidding of the People's Republic of China (adopted at the 11th Session of the Standing Committee of the Ninth National People's Congress on August 30,1999, promulgated by Order No. 21 of the President of the People's Republic of China on August 30, 1999, and effective as of January 1, 2000) (the Bidding Law). In conformity with Article 67 of the Bidding Law, we are pleased to confirm our agreement to the following procedures to be applied in respect of the procurement of works under national competitive bidding procedures referred to in Section I, Part C.1 of Schedule 1 to the Project Agreement. As stated in said Part C.1, the works referred to therein may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines (as such term is defined in said Section I). In awarding contracts in accordance with such provisions, Liaoning Province shall pay particular attention to ensure, and cause the Project Participants (as defined in Section 1.02 of the Loan Agreement) and their Project Companies (as defined in Section 1.02 of the Loan Agreement) to ensure, that the following procedures are followed: (a) all invitations to prequalify or to bid shall be advertised in a newspaper of national circulation in the Borrower’s country; (b) such advertisement shall be made in sufficient time for prospective bidders to obtain prequalification or bidding documents and prepare and submit their responses; and in any event a minimum of 30 days shall be given to bidders between the date of advertisement in such newspaper and the deadline for submission of bids, and the advertisement and bidding documents shall specify the deadline for such submission; (c) qualification requirements of bidders and the method of evaluating the qualification of each bidder shall be specified in detail in the bidding documents; (d) all bidders shall be required to provide security in an amount sufficient to protect Liaoning Province, the Project Participant or the Project Company, as the case may be, in case of breach Page 2 of contract by the contractor, and the bidding documents shall specify the required form and amount of such security; (e) the time for opening of all bids shall be the same as the deadline for receipt of such bids; (f) all bids shall be opened in public; all bidders shall be afforded an opportunity to be present (either in person or through their representatives) at the time of bid opening, but bidders shall not be required to be present at the bid opening; (g) no bid may be rejected solely on the basis that the bid price falls outside any standard contract estimate, or margin or bracket of average bids established by Liaoning Province, the Project Participant or the Project Company, as the case may be; and (h) each contract shall be awarded to the lowest evaluated bidder, that is to say, the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (i) to be substantially responsive to the bidding documents and (ii) to offer the lowest evaluated cost. The winning bidder shall not be required, as a condition of award, to undertake responsibilities for work not stipulated in the bidding documents or otherwise to modify the bid as originally submitted. Please confirm your agreement to the foregoing by signing on the form of confirmation provided below. Sincerely yours, LIAONING PROVINCE By /s/ Zou Jiayi Authorized Representative CONFIRMED: INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Yukon Huang Authorized Representative