Domestic Maritime Support (Sector) Project...3 Project Description 01/09/2009 2 3. PROJECT DESCRIPTION A. Project Impact and Outcome 1. The Project is expected to reduce economic disadvantage

Project Administration Memorandum

The project administration memorandum is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document, however, may not reflect the latest project or program changes.

Project Number: 40263 Grant Number: 0127 June 2009

Solomon Islands: Domestic Maritime Support (Sector) Project

TABLE OF CONTENTS 1. CONTENTS

2. PROJECT SUMMARY

A. Grant Processing History B. Project Cost C. Grant Amount D. Project Completion Date

3. PROJECT DESCRIPTION

A. Project Impact and Outcome B. Project Components and Outputs C. Special Features

4. LOGICAL FRAMEWORK 5. COST ESTIMATES AND FINANCING PLAN

A. Cost Estimates B. Financing Plan C. Cofinancing

Appendix 1 – Detailed Cost Estimates

6. IMPLEMENTATION ARRANGEMENTS AND SCHEDULE

A. Implementation Period B. Project Management Appendix 1 – Implementation Schedule

7. CONSULTANTS

A. ADB Guidelines on the Use of Consultants B. Consultant Recruitment Under the Project Appendix 1 – Outline Terms of Reference for Consultants

8. PROCUREMENT

A. Basic Principles of ADB Procurement B. Procurement of Goods and Works Under the Grant

1. International Competitive Bidding 2. National Competitive Bidding 3. Shopping

C. Misprocurement D. Updating the Procurement Plan

E. Intellectual Property F. Community Participation in Procurement Appendix 1 – Procurement Plan Appendix 2 – Sample Invitation for Bid Appendix 3 – List of ADB Member Countries Appendix 4 – Member States of the European Union

9. DISBURSEMENT

A. Basic Principles of ADB Disbursement B. Disbursement Letter C. Requirements for Disbursement

1. Basic Requirements 2. Withdrawal Application

D. Grant Disbursement Procedures 1. Direct Payment 2. Reimbursement 3. Imprest Fund Procedure

E. PCSS Number F. Disbursement Reports G. Contract Awards and Disbursement Projections Appendix 1 – Sample of a Disbursement Letter Appendix 2 – Withdrawal Application Form for Direct Payment and Reimbursement Appendix 3 – Summary Sheet for Direct Payment/Reimbursement/Replenishment/ Liquidation Appendix 4 – Example of a Comfort Letter for an Imprest Account Appendix 5 – Withdrawal Application Form for Imprest Fund Appendix 6 – Estimate of Expenditure for Imprest Account Appendix 7 – Statement of Expenditures for Contracts of US$100,000 and Below Appendix 8 – Imprest Account Reconciliation Statement Appendix 9 – Instructions for Preparing Withdrawal Applications/Summary of Supporting Documents Required for Processing Payment of Withdrawal Applications Appendix 10 – Worksheet for Quarterly and Yearly Contract Awards/Commitments and Disbursement Projections

10. PROJECT MONITORING AND EVALUATION

A. Monitoring and Evaluation B. Project Performance Report C. Project Reviews Appendix 1 – Grant 0127-SOL Project Performance Report (PPR)

11. PROGRESS REPORTS

A. Introduction B. Reports Required by ADB Under the Project

1. Quarterly Progress Reports 2. Project Completion Report 3. Annual Audit Reports

Appendix 1 – Pro Forma of the Executing Agency's Project Progress Report Annex 1: Framework and Guidelines in Calculating Project Progress Appendix 2 – Project Completion Report Outline

12. AUDIT REQUIREMENT

A. Introduction B. Audit Objective and Scope

1. Audit Requirements 2. Audit Procedures 3. Audit Selection and Appointment

C. Monitoring Compliance with Submission of APA Appendix 1 – Sample Audit Letter Appendix 2 – Audit Completion Checklist Appendix 3 – Auditor's Reports and Opinions Appendix 4 – Model Auditor Opinion for NonRevenue-Earning Agency

13. GRANT AGREEMENTS/COVENANTS Grant Agreement between Solomon Islands and Asian Development Bank Contribution Agreement between the European Community and Asian Development Bank 14. ANTICORRUPTION GUIDELINES

A. Anticorruption Policy B. How to Report Fraud or Corruption to ADB

15. DESIGN CHANGES 16. IMPLEMENTATION OF THE ASSOCIATED TA PROJECT

Appendix 1 – Technical Assistance

17. KEY PERSONS INVOLVED IN THE PROJECT

A. Recipient B. Executing Agency C. Project Management Unit D. Development Partners

18. ENCLOSURES (provided separately)

2 Project Summary 01/09/2009

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2. PROJECT SUMMARY A. Grant Processing History

Fact-Finding Mission 11-22 August 2008 Management Review Meeting 03 September 2008 Staff Review Committee Meeting 10 October 2008 Grant Negotiations 22-23 October 2008 Board Circulation 04 November 2008 Board Consideration and Approval 25 November 2008 Grant Agreement Signing 20 January 2009 Grant Effectiveness 10 February 2009 Inception Mission 29 June-3 July 2009 Grant Closing Date 30 June 2019

B. Project Cost $21.40 million1

C. Grant Amount

Asian Development Fund $14.00 million European Commission $5.25 million2

D. Project Completion Date 31 December 2018

1 Broken down as follows: $14.00 million from ADB, $5.25 million from European Commission, and $2.15

million from the Government of Solomon Islands. 2 Includes management fee of 2% of European Commission funds charged by ADB for administering cofinancing.

3 Project Description 01/09/2009

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3. PROJECT DESCRIPTION A. Project Impact and Outcome 1. The Project is expected to reduce economic disadvantage in remote rural areas. The outcome will be interisland shipping services that are frequent, reliable, and safe. B. Project Components and Outputs 2. The Project has two major components: Component A will construct rural wharves and jetties; Component B will establish a franchise shipping scheme (FSS) to support rural transport services through an output-based approach. Subprojects for both components will be analyzed and approved using the sector product modality.

1. Component A: Improvement of Rural Infrastructure

3. The Project will finance a portion of the Government’s planned maritime infrastructure works as documented in the National Transport Plan (NTP). Outputs will include about 12 wharves and jetties for either rehabilitation or reconstruction. Civil works will be undertaken primarily in remote areas of provinces that experience a greater incidence of poverty than the national average. Recurrent funding for maintenance through community contracts, supported by training, will be provided to improve sustainability.

2. Establishment of a Franchise Shipping Scheme (FSS)

4. The Project will design and implement an FSS to award franchises for provision of shipping services to remote areas that are considered commercially unviable. Seven routes have been identified as unviable. Outputs will be increased transport services on these routes, through subsidies to private sector operators, based on a minimum-subsidy tender process. Initial contracts will be for three years, with longer periods for subsequent terms possible. C. Special Features 5. Geographic Targeting. Remote communities without reliable maritime services are among the poorest areas of Solomon Islands. Rural populations have a higher incidence of poverty, lower agricultural productivity, lower life expectancy at birth, higher percentage of underweight children, lower levels of literacy and educational attainment, less access to safe water and sanitation, and less access to health services than those in provincial centers. These indicators are in part due to constraints in access to transport services. Improved services can catalyze growth and have a disproportionate impact on poverty. 6. Private Sector Development. Creation of an FSS and provision of targeted subsidies for services to commercially unviable destinations is expected to have a catalytic effect on both private sector ship operators and rural agricultural producers. By providing reliable scheduled services, producers should increase their output and lose less of it to spoilage. Increased demand for cargo and passenger services should in turn make rural routes commercially viable over time, providing opportunities for private sector participation. 7. Output-Based Approach. Under the output-based approach, subsidies will be tied to performance based on specifications for destination, frequency, and passengers and cargo

3 Project Description 01/09/2009

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carried. Franchise contracts will require certification from communities at target destinations that performance indicators have been met. This will create clear incentives to increase and improve services, while providing a safety net for operators until routes become commercially viable.

4 Logical Framework 01/09/2009

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4. LOGICAL FRAMEWORK

Design Summary

Performance

Targets/Indicators

Data Sources/

Reporting Mechanisms

Assumptions

and Risks

Impact

Economic disadvantage in remote rural areas is reduced.

Average annual income per household in the target areas will increase from $2,300 in 2008 to $3,000 in 2018.

Household income and Expenditure Survey 2005/6 and updates Project monitoring and evaluation reports

Assumption There is sufficient incentives for rural agriculture to grow in response to restored transport Risk Social and political stability could deteriorate.

Outcome Interisland shipping services are frequent, reliable, and safe.

Services on seven remote routes will increase from an average frequency of once a quarter in 2008 to at least once a month by 2018. The inward tonnage of copra per year in the target areas will Increase from 4,600 in 2008 to 5,800 in 2018. The number of passengers per year in the target areas will increase from 11,000 in 2008 to 26,000 in 2018. Reported problems with reliability and safety decline over 10 years.a

• Number of delayed services will decrease by 20% from 2008 to 2018.

• Number of accidents will decrease by 20% from 2008 to 2018.

FSS quarterly reports FSS quarterly reports FSS quarterly reports Community consultations during implementation

Assumptions Improved transport services will catalyze increased agricultural production. Transport providers have enough capacity to increase services. Sufficient depth in private sector transport market for competitive tenders. Private sector operators respond to opportunities. Risks Constrained commercial finance prevents private sector operators from improving vessels. Increasing fuel prices prevent routes from becoming commercially viable.

Outputs 1. Rural wharves

constructed or rehabilitated

At least 12 wharves and jetties constructed or rehabilitated by 2013

Project progress and completion reports MID asset inventory

Assumption There are sufficient private sector contractors to create a competitive environment.

4 Logical Framework 01/09/2009

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Design Summary

Performance

Targets/Indicators

Data Sources/

Reporting Mechanisms

Assumptions

and Risks

2. Franchise shipping

scheme established and operational

At least 6 route franchises successfully tendered and operational by 2010 At least 6 route franchises remaining operational by 2013

FSS quarterly reports

Risks Increased material and construction prices could cause a reduced scope. Institutional and legislative reforms could be delayed.

Activities with Milestones 1. General Recruitment of consultants by March 2009 Project management unit established by April 2009 Government to prepare and approve priority list of subprojects by July 2009 Procurement actions to commence by November 2009 Inception of civil works by January 2010 and completion by December 2012 Project performance and monitoring system established by July 2009

2. Project Components Rehabilitation or reconstruction of about 12 wharves to good condition by December 2012 Engagement of FSS management by July 2009 Design of FSS finalized and tenders called by December 2009 Regular service operating on several rural routes by January 2010, continuing for 4 years Implementation assistance provided from March 2009 to December 2018

Inputs • Asian Development

Bank: $14,0 million grant funded by Asian Development Fund

• Cofinancing: $5.25

million grant funded by the European Commission

• Government of Solomon

Islands: $2.15 million

FSS = franchise shipping scheme, MID = Ministry of Infrastructure Development. a Quantitative indicators to be refined and finalized following completion of baseline surveys.

5 Cost Estimates and Financing Plan 01/09/2009

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5. COST ESTIMATES AND FINANCING PLAN A. Cost Estimates 1. The project investment cost is estimated at $21.40 million, including taxes and contingencies.

Table 1: Project Investment Plan ($ million)

Item Amountb

A Base Costa 1. Civil works for rural wharves and jetties 9.20 2. Maintenance (routine and community engagement) 0.02 3. Franchise shipping scemec 4.78 4. Consulting services 3.46 Subtotal A 17.46

B Contingenciesd 3.94 Subtotal B 3.94 TOTAL (A+B)e 21.40

a In mid-2008 prices. b The Government does not charge taxes or duties on externally funded projects, but see (c). c Includes taxes for marine fuel, proportional to expected subsidy payment, compared to total operating costs. Taxes are reasonable at about 3.5% of total project costs and not targeted at ADB-financed projects. d Physical contingencies computed at 15% for civil works, and 5% for field research and development, training, surveys, and studies. Price contingencies computed at 7.5%; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. e Includes management fee of 2% of European Commission funds charged by ADB for administering cofinancing. Source: Asian Development Bank estimates. B. Financing Plan 2. The Government has requested a grant of $14.0 million from the Asian Development Fund to help finance the Project. The Government of Solomon Islands will provide $2.15 million as its counterpart contribution. The EC will provide grant cofinancing of $5.25 million equivalent, to be administered by ADB. As requested by the cofinancier, the EC funds will be front-loaded at the contract commitment level up to the maximum allocated amount of EC financing in individual categories. The financing plan is in Appendix 1 of this Section, and summarized in Table 2.

Table 2: Financing Plan ($ million)

Source Total % Asian Development Bank 14.00 65.4 European Commission 5.25 24.6 Government of Solomon Islands 2.15 10.0

Total 21.40 100.0 Source: Asian Development Bank estimates.


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C. Cofinancing 3. ADB’s strategy in Solomon Islands emphasizes coordination with development partners and encourages cofinancing. As described above, the EC has committed to provide joint cofinancing. For the EC to participate, it requires nondiscrimination in procurement processes against legal persons, firms, and foods established in EC-recognized official candidate countries, member states of the European Economic Area, and developing countries as specified by the Development Assistance Committee of the Organisation for Economic Co-operation and Development. Given that components of the Project are jointly cofinanced with EC, ADB has approved to allow procurement of eligible goods and services from countries eligible for procurement under EC regulations, even if they are not ADB member countries.


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DETAILED COST ESTIMATES

Table A1.1: Detailed Cost Estimates by Expenditure Category

SI$million US$million Item

Foreign Exchange

Local Currency

Total Cost

Foreign Exchange

Local Currency

Total Cost

% of Total Base Cost

A. Investment Costsa

1. Civil Works 50.52 20.33 70.86 6.56 2.64 9.20 52.7 2. Franchise Shipping Schemeb 21.26 15.56 36.81 2.76 2.02 4.78 27.4 3. Consultants 19.72 6.93 26.65 2.56 0.90 3.46 19.8 Subtotal (A) 91.50 42.82 134.32 11.88 5.56 17.44 99.9 B. Recurrent Costs 1. Wharf Maintenance 0.00 0.15 0.15 0.00 0.02 0.02 0.1 Subtotal (B) 0.00 0.15 0.15 0.00 0.02 0.02 0.1 Total Base Cost (A+B) 91.50 42.98 134.47 0.00 5.58 17.46 100.0 C. Contingencies 1. Physicalc 7.62 3.08 10.71 0.99 0.40 1.39 2. Priced 8.70 3.54 12.25 1.13 0.46 1.59 3. Franchise Shipping Scheme 5.01 2.39 7.39 0.65 0.31 0.96 Subtotal (C) 21.33 9.01 30.34 2.77 1.17 3.94 Total Project Cost (A+B+C)e 112.83 51.99 164.82 14.65 6.75 21.40 a In mid-2008 prices. b Includes taxes for marine fuel, proportional to expected subsidy payment compared to total operating costs. Taxes are reasonable at about 3.5% of total project costs

and not targeted at ADB-financed projects c Computed at 15% for civil works and 5% for field research and development, training, surveys, and studies. d Computed at 7.5% of costs. e Cost estimates include financing of bank charges where applicable. Source: ADB estimates.

Section 5 Appendix 1 P

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Table A1.2: Detailed Cost Estimates by Financier

(US$ million)

ADB European Commissiona

Government Item Cost Amount % of Cost

CategoryAmount % of Cost

categoryAmount % of Cost

Category A. Investment Costs

1. Civil Works 9.20 7.68 83.5 0.00 0.0 1.52 16.5 2. Franchise Shipping Scheme 4.78 2.46 51.5 2.11 44.1 0.21 4.4 3. Consultants 3.46 1.41 40.8 1.65 47.7 0.40 11.6

Subtotal (A) 17.44 11.55 66.2 3.76 21.6 2.13 12.2 B. Recurrenct Costs 1. Wharf Maintenance 0.02 0.00 0.0 0.00 0.0 0.02 100.0

Subtotal (B) 0.02 0.00 0.0 0.00 0.0 0.02 100.0

Total Base Cost 17.46 11.55 66.2 3.76 21.5 2.15 12.3 C. Contingencies 3.94 2.45 62.2 1.49 37.8 0.00 0.0

Total Project Cost 21.40 14.00 65.4 5.25 24.6 2.15 10.0 ADB = Asian Development Bank. a This amount also includes ADB’s administration fee, audit cost, bank charges, and provision for foreign exchange fluctuations (if any), to the extent that these items are not

covered by the interest and investment income earned on this grant, or any additional grant contribution by the European Commission (EC). As requested by the cofinancier, EC funds will be front-loaded at the contract commitment level up to the maximum allocated amount of EC financing in individual categories.

Source: ADB estimates.

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6 Implementation Arrangements and Schedule

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6. IMPLEMENTATION ARRANGEMENTS AND SCHEDULE

A. Implementation Period

1. The Project will be implemented over 10 years. Civil works will be completed in four years, whereas the FSS will be completed over 10 years. Both components will follow the same initial schedule as follows: detailed design, preparation of bidding documents, and tendering will start in January 2009; award of contracts for civil works and franchises are expected by December 2009; physical completion of civil works will be by 31 December 2012; completion of the FSS will be by 31 December 2018; and grant closing will be by 30 June 2019. This time frame takes into account appropriate construction periods for remote locations. The implementation schedule is in Appendix 1 of this Section.1 B. Project Management 2. The EA for the Project will be the Ministry of Infrastructure Development (MID). The Government will form a project steering committee2 to oversee and monitor all aspects of project implementation, including (i) policy guidance and coordination, (ii) subproject feasibility study and selection, (iii) project progress reports and other project documentation, (iv) regular reports of FSS budgets and activities, and (v) audited accounts and financial statements. 3. A project management unit (PMU), directed by the permanent secretary of MID, will be responsible for day-to-day implementation. Given MID’s limited technical staff resources, a consulting firm will be retained for these services. The PMU will be fully integrated with MID professional and technical staff as counterparts. The PMU will (i) conduct subproject baseline surveys, feasibility documentation, design, and supervision; (ii) manage tender processes; (iii) manage contracts; (iv) prepare withdrawal applications; (v) prepare project progress reports and a project completion report; (vi) maintain project accounts and complete grant financial records for auditing; (vii) monitor the Project’s socioeconomic impacts; (vii) train MID staff and build their project implementation capacity; and (viii) complete related project management activities, as necessary to implement the Project successfully and comply with ADB policies and guidelines. Due to poorly developed capacity in MID,3 the PMU will manage finances on EA's behalf. Outline terms of reference are in Section 7-Consultants. 4. Management of the FSS will be contracted to a professional management firm through national competitive bidding. The firm will also manage procurement of services as a procurement agent on behalf of MID. The management contract will be overseen by MID and supported by implementation assistance provided by the PMU.

1 This will be updated during the Inception Mission. 2 Chaired by the permanent secretary of the Ministry of Infrastructure Development; comprising members from the

Ministries of Finance and Treasury, Development Planning and Aid Coordination, and Rural Development; and including representatives of ADB, the EC, and the Solomon Islands Chamber of Commerce.

3 As described in the financial management assessment (see Supplementary Appendix I).

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IMPLEMENTATION SCHEDULE

2008 2009 2010 2011 2012 → 2018 Project Component Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Grant Effectiveness

Project Management

PMU recruitment

Pre-feasibility

Public consultations

Feasibility studies

Detailed design and bidding documents

Tendering, evaluation, and mobilization

Civil Works

Rehabilitation and construction

Franchise Shipping Scheme → Maritime Reform Act

Detailed design and bidding documents

Tendering, evaluation, and mobilization

Management Contract → SIMA = Solomon Islands Maritime Administration, PMU = project management unit. Source: Asian Development Bank estimates.

Section 6 Appendix 1 Page 1 of 1

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7 Consultants 01/09/2009

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7. CONSULTANTS A. ADB Guidelines on the Use of Consultants1 1. Basic Principles. Six main considerations guide ADB’s policy on selecting consultants:

need for high-quality services, need for economy and efficiency, need to give all qualified consultants an opportunity to compete in providing the

services financed by ADB, ADB’s interest in encouraging the development and use of national consultants

from developing member countries (DMCs), need for transparency in the selection process, and need for increasing focus on anticorruption and observance

2. Anticorruption Policy. ADB requires the consultants, borrowers/recipients, EAs, and beneficiaries under ADB-financed projects to observe the highest standards of ethics during the consultant selection process and in executing contracts. If ADB decides that representatives of a consultant, a borrower, a recipient, an EA, or a beneficiary, engaged in corrupt, fraudulent, collusive, or coercive practices during consultant selection or the execution of a contract, ADB may take any of the steps listed in section 1.23 of the Guidelines on the Use of Consultants. Staff should refer allegations of corrupt, fraudulent, collusive or coercive behavior to ADB's Integrity Division. [A separate section of this PAM (Section 14) is solely dedicated to the discussion of ADB’s Anticorruption Policy.] 3. Conflict of Interest. ADB considers a conflict of interest to be a situation in which a party has interests that could improperly influence that party’s performance of official duties or responsibilities, contractual obligations, or compliance with applicable laws and regulations. A conflict of interest may contribute to or constitute a prohibited practice under ADB’s anticorruption policy. ADB will take appropriate steps to address conflicts of interest and may reject a consultant selection if it decides that a conflict of interest has flawed the integrity of the selection process. 4. Without limiting the generality of the paragraph above, consultants (including sub-consultants) shall not be recruited under the following circumstances:

• A consultant that can also provide goods, works, and/or non-consulting services will not be selected to provide both consulting services and goods, works and non-consulting services for the same project. The consultant must choose to offer either consulting services or goods, works and non-consulting services for each project.

• A consultant will not be engaged for an assignment that conflicts with another of

the consultant’s assignments. For example, a consultant: that prepares engineering design for a project will not be engaged to prepare an independent environmental assessment of that project; advising a government on privatizing assets should not purchase or advise purchasers of the assets; and that

1 ADB's Guidelines on the Use of Consultants may be accessed through this weblink:

http://www.adb.org/documents/guidelines/consulting/Guidelines-Consultants,.pdf.


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prepares terms of reference (TOR) for an assignment will not be engaged for that assignment.

• A consultant with a business or family relationship with an ADB or

borrower/recipient’s staff member who is involved in preparing TOR, recruiting or supervising the consultant for an assignment will not be selected for the assignment unless ADB is satisfied that the conflict has been resolved.

5. Consultants should not bid for assignments when they have an actual or potential conflict of interest. Neither should a consultant should bid for an assignment when the schedule conflicts with or overlaps the schedule for another of the consultant’s assignments.

6. Recruitment Restrictions. The following restrictions apply to all proposed consultants, whether engaged as individuals or through a firm:

• Consultants must come from ADB member countries. Consulting firms must be registered in ADB member countries, and individual consultants must be citizens of member countries.2

• Consultants must be fully competent and qualified for the work they will do. • Consultants must be medically fit for their assignments, including any necessary

travel. • Government-owned enterprises and institutions may only work as consultants in

their own countries if they can establish that they are legally and financially autonomous, operate under commercial law, and do not depend on the borrowing/recipient government or a government agency. However, ADB may approve on a case-by-case basis a government-owned university or research center, or one of their staff, participating in an assignment when the enterprise or staff member has exceptional or unique qualifications and its participation is critical to the assignment.

• Current employees of EAs for ADB-financed loan or TA projects may not work as consultants on those projects.

• DMC government employees may not work as consultants in their own countries if there is a real or potential conflict of interest.

• ADB’s preference is not to recruit current DMC government employees who don’t work in EAs to work in their own countries. When government employees who don’t work in EAs must be engaged, as individuals or as members of a consulting firm’s team, and there is no real or potential conflict of interest:

the government must provide written approval, confirming that the employees are on leave without pay from their official positions and available to work full-time on the assignments; and

they must not work in their own departments.

2 ADB’s strategy in Solomon Islands, however, emphasizes coordination with development partners and encourages

cofinancing. The European Commision (EC) has committed to provide joint cofinancing, and for the EC to participate, it requires non-discrimination in procurement processes against legal persons, firms, and goods established in EC-recognized official candidate countries, member states of the European Economic Area, and developing countries as specified by the Development Assistance Committee of the Organisation for Economic Co-operation and Development. Given that components of the Project are jointly cofinanced with EC, ADB has approved to allow procurement of eligible goods and services from countries eligible for procurement under EC regulations, which are not ADB member countries.


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• Former DMC government employees may work as consultants in their former ministries, departments, or agencies provided there is no real or potential conflict of interest.

7. The following additional restriction applies to loan/grant project assignments:

• Borrowers/recipients may exclude consultants from countries that the borrowing country cannot make payments to, because it is complying with a decision of the United Nations Security Council.

8. Selection Methods. ADB's Guidelines on the Use of Consultants includes six methods to recruit consulting firms: (i) quality-and cost-based selection, (ii) quality-based selection, (iii) fixed budget selection, (iv) least cost selection, (v) consultants' qualifications selection, and (vi) single source selection (SSS). Individual consultants, meanwhile, can also be recruited directly (independent individual) or through an organization, such as a consulting firm, an academic institution, a government, or an international agency. B. Consultant Recruitment Under the Project 9. Consulting services are required to set up the Project Management Unit (PMU). All activities have been combined into a single consultancy. The Project will fund approximately 94 person-months of international consulting services and 164 person-months of national consulting services, provided by a firm. Specialist services recruited and outline terms of reference are in Appendix 1 of this Section. At the request of the Government, due to the EA’s inexperience in recruiting firms and negotiating international contracts, ADB selected the consultants in accordance with its Guidelines on the Use of Consultants (2007, as amended from time to time). The consulting firm was selected through quality- and cost-based selection procedure with 80:20 weighting for quality and cost respectively. To accelerate implementation, ADB approved advance action for the procurement of services. 10. Quality- and Cost-Based Selection Method (QCBS). QCBS is a method of selecting a consulting firm based on both the quality of the technical proposals and the costs of the proposed services in the financial proposals. This method consists of 4 steps: (i) an evaluation of the technical score of each firm’s proposal based on 1,000 points, (ii) the elimination of firms scoring below 750 points, (iii) the opening and evaluation of financial bids for firms scoring 750 points and above, and (iv) the weighting and combining of the technical and financial scores to reach a final score and a ranking among firms. 11. Shortlisting and Issuance of Request for Proposals (RFP). ADB shortlisted 6 firms from ADB’s member countries (and EC-recognized countries) with geographic balance and sought MID’s no-objection. ADB then issued the RFP prepared by ADB to the shortlisted consulting firms, inviting them to submit technical and financial proposals at the same time in separate sealed envelopes. Copy of the RFP was also sent to MID. The RFP explained the following:

• ADB will select a firm based first on the firm’s qualifications to perform the work,

and second on the cost of the firm’s services. • ADB will accept only one candidate expert for each position. If more than one

curriculum vitae is provided for any one position, no score will be given for that position.


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• ADB will accept only one proposal per firm except for national firms associated with and providing national consultants for international firms.

• ADB will publicly open the financial proposals received from the technically qualified firms and will return unopened the financial proposals received from the firms that do not qualify after completion of contract negotiations.

• ADB will review the firms’ financial proposals to make sure that they include the costs of all the services mentioned in their technical proposals. To compare and rank the proposals, ADB will correct and adjust them as necessary, and then convert other currencies to US dollars using the specified source for the exchange rates. The RFP will include a data sheet showing, among other items, the budget for the consulting service assignment. The data sheet will indicate if the budget is a maximum budget or an estimated budget. If a maximum budget is stated in the data sheet, the gross evaluated financial proposal (GEFP) (inclusive of provisional sum and contingency) proposals should not exceed the budget for the contract. If after evaluation the financial proposal exceeds the maximum budget outlined in the data sheet, the financial proposal will receive a score of zero. In a case where such a proposal still gets the highest combined score, the winning firm will be asked to bring down the financial bid to the budget stated in the data sheet without compromising the TOR. If the data sheet indicates an estimated budget, consultants will not be penalized for exceeding it.

13. Technical Evaluation. ADB evaluated both the technical and financial proposals and invited MID to join the consultant selection committee (CSC) meeting as an observer for scoring and ranking the consulting firms. After receiving the consultants’ proposals, ADB first securely stored the unopened financial proposals. Then, it opened and evaluated the technical proposals. 14. Opening of Financial Proposal. ADB advised the firms and MID of the time and place where the financial proposals of firms whose technical proposal scored 750 points or more were to be publicly opened. At the opening, ADB

• had the people attending sign an attendance sheet, • read aloud the technical scores of the qualified firms, • opened the financial proposals and read aloud the total prices, and • indicated the likely schedule for contract negotiations and commencement of the

assignment.

15. After the opening, ADB sent a letter advising the qualified firms, whether or not they attended, of the technical scores and total prices for each qualified firm. 16. Financial Evaluation. ADB next evaluated the financial proposals and recorded the results on standard forms provided to MID. ADB verified the price of each proposal using the procedure specified in the RFP. In doing so, it

• checked that the commercial terms in the proposal complied with the requirements in the RPF;

• corrected any mathematical errors and made sure that the proposal included the cost of all the services that the firm described in its technical proposal and for which the cost could be fairly estimated;


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• made sure that the provisional sums and the contingency amount were clearly and separately identified in the proposal in the same amounts as indicated in the data sheet;

• made sure that the proposal excluded any separately identified local income tax on the international consultants, and converted any prices in other currencies to the US dollars using the source for the exchanges rates that was identified in the RFP; and checked that the gross evaluated financial proposal (GEFP) (the proposed corrected for errors but including provisional sums and contingency) was within the assigned budget. If the GEFP exceeded the contract budget as shown in the data sheet, the financial proposal was considered financially non-responsive and to be allocated a score of zero.

17. Evaluations of financial proposals are confidential. ADB would disclose the details only to MID staff directly involved. Any attempt to influence an evaluation would be dealt with according to ADB’s Anticorruption Policy. 18. Final Ranking of Firms. ADB calculated the final score for each consultant by adding the weighting of the technical score to the weighting of the financial score. The technical proposals were given a weight of 80%, and the financial proposals a weight of 20%. The weights were specified in the RFP. ADB prepared the evaluation report and sought MID’s no-objection. 19. Contract Negotiations. The contract negotiations took place between MID and the first-ranked consultant. ADB joined as an observer. During the contract negotiation, only minor changes in the TOR, the consultant’s inputs, and the quantities of expenses were changed. The consultant’s proposed rates for remuneration and expenses were not – and could not be – changed. 20. Contract Signing and Notice to Proceed. Upon finalization of terms and conditions, the EA and first-ranked firm signed the contract, copy of which was also furnished ADB for its records. MID then issued a Notice to Proceed to consultant.

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OUTLINE TERMS OF REFERENCE FOR CONSULTANTS

A. Introduction

1. The project management unit (PMU) will provide day-to-day project management of the Solomon Islands Domestic Maritime Support (Sector) Project, within the Ministry of Infrastructure Development (MID) as the Executing Agency (EA). The project will consist of two major components: investments in rural wharves and jetties, and establishment of a franchise shipping scheme (FSS) to support rural transport services. 2. In addition, capacity development in MID is required to enable standards of design and implementation management to be sustained at a satisfactory level with minimal assistance after project completion. Also, capacity development is necessary for shipping operators to prepare tenders and manage business operations. Capacity development will be accomplished through on-the-job training conducted by the consultants, development and implementation of standard procedures for MID, and through training conducted by national business training providers for shipping operators. 3. The team may include, but is not limited to, a project manager, a maritime operation specialist, an economist, a civil engineer, a social and poverty specialist, an environmental specialist, a procurement specialist, a field superintendent, and provisional technical services, along with appropriate levels of support staff. All international positions should have national consultants as counterparts. The PMU will follow national labor regulations, and is expected to offer equal opportunities to women and minorities. Consultant selection will be via quality- and cost-based selection procedures with 80:20 weighting for quality and cost respectively. B. Civil Works Project Management

4. The primary objective of this component is to assess, design, tender, and supervise construction of about 12 wharves and jetties. The PMU will implement the project according to the terms and conditions specified in the grant agreement between the Government and the Asian Development Bank (ADB), and insure that the specified assurances under the control of the PMU are met. The PMU will consist of approximately 85 person-months of international consultants and 72 person-months of national consultants. The PMU will support MID in managing the Project, particularly in the following areas:

Project Manager (International, 41 person-months) (i) Conduct subproject feasibility assessments, including baseline data collection

and detailed feasibility studies, in accordance with ADB’s Guidelines for the Economic Analysis of Projects, Handbook for Incorporation of Social Dimensions, Environment Policy (2002), and Environmental Assessment Guidelines (2003).1 The assessment will incorporate economic analysis, environment assessment, and social impact assessments provided by Economist, Environmental Specialist, and Social and Poverty Specialist.

1 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila; ADB. 1994. Handbook for Incorporation

of Social Dimensions in Projects. Manila.



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(ii) Prepare final technical documentation, including engineering design and specifications, for subprojects. Technical documentation from ongoing projects can be adapted. Designs should be based on least-cost life cycle analysis of available local materials and procedures.

(iii) Prepare tender documents and conducting the tender process for all contracts for civil works, equipment, and consulting services under the Project, in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time) and Sample Bidding Documents.2

(iv) Administer, implement, and monitor international and national contracts for civil works and consulting services under the Project.

(v) Provide guidance to contractors after being awarded contracts to prepare documents and processes for implementation, monitoring, and reporting.

(vi) Review contractors’ regular monitoring reports. (vii) Ensure coordination with other projects being undertaken by MID,

development partners, other Government ministries, and the private sector. (viii) Facilitate participation of Government counterparts in ongoing capacity

development activities to ensure skills transfer. (ix) Build the capacity of MID staff through on-the-job training and establishment

of standard procedures that can be replicated for routine MID projects, as well as potential future externally funded projects.

(x) Refine tools based on past achievements, including manuals, guidelines and procedures, software and project management tools, knowledge management, and communications.

(xi) Assist MID in the management and supervision of community participation contracts and training staff in the implementation.

Economist (International, 3 person-months) (i) Conduct subproject feasibility assessment, including baseline data collection,

detailed feasibility studies, and economic analysis. (ii) Calculate economic rates of return for selected subprojects and for the overall

project. Civil Engineer (International, 6 person-months) (i) Contribute specialist advice including final designs and cost estimates to

subproject feasibility assessments. (ii) Prepare final technical documentation, including engineering design and

specifications, for subprojects. Technical documentation from ongoing projects can be adapted. Designs should be based on least-cost life cycle analysis of available local materials and procedures.

(iii) Ensure that engineering designs for wharves and jetties incorporate improved environmental protection and appropriate construction standards to withstand potential future natural disasters including sea level rise, earthquakes, and tsunamis.

(iv) Review all subprojects’ Environmental Monitoring and Management Plans (EMP), and provide technical advice to PMU staff on means to ensure compliance with environmental assurances under the Project.

2 ADB. 2005. Procurement of Works: Standard Bidding Document. Manila.



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(v) Refine tools based on past achievements, including manuals, guidelines and procedures, software and project management tools, knowledge management, and communications.

(vi) Provide opportunities through the Project for on-the-job training of MID staff in procedures, documentation, and systems developed under the Project and related activities.

Environmental Specialist (International, 5 person-months) (i) Prepare Initial Environmental Examinations (IEEs) for all subprojects,

including site specific EMPs. (ii) Assist MID with initial and ongoing pubic consultations for subproject feasibility

assessment. (iii) Conduct subproject feasibility assessments, including baseline data collection,

detailed feasibility studies, and environmental assessment. Social and Poverty Specialist (International, 5 person-months) (i) Conduct subproject feasibility assessments, including baseline data collection,

detailed feasibility studies, and social impact assessment. (ii) Assist MID with initial and ongoing public consultations for subproject

feasibility assessment and implementation of civil works. Procurement Specialist (International, 3 person-months) (i) Prepare bidding documents for subprojects. (ii) Assist in preparing tender documents and conducting the tender process for

all contracts for civil works, equipment, and consulting services under the Project.

(iii) Build the capacity of MID staff through on-the-job training and establishment of standard procedures that can be replicated for routine MID projects, as well as potential future externally funded projects.

Field Superintendent (International, 22 person-months)

(i) Provide field supervision of subprojects and oversight for other services deemed necessary for implementing the civil works.

(ii) Build the capacity of MID staff through on-the-job training and establishment of standard procedures that can be replicated for routine MID projects, as well as potential future externally funded projects.

(iii) Provide opportunities through the Project for on-the-job training of MID staff in procedures, documentation, and systems developed under the Project and related activities.

Deputy Project Manager (National, 42 person-months) (i) Support the Project Manager to administer, implement, and monitor

international and national contracts for civil works and consulting services under the Project.

(ii) Support for ensuring coordination with other projects being undertaken by MID, development partners, other Government ministries, and the private sector.



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(iii) Assist in preparing tender documents and conducting the tender process for

all contracts for civil works, equipment, and consulting services under the Project.

(iv) Assist in providing guidance to contractors after being awarded contracts to prepare documents and processes for implementation, monitoring, and reporting.

(v) Provide opportunities through the Project for on-the-job training of MID staff in procedures, documentation, and systems developed under the Project and related activities.

(vi) Provide hands-on training to national consultants and counterparts in the Transport Policy and Planning Unit on data collection, monitoring, and evaluation.

(vii) Assist the private sector in increasing its participation in maritime transport service provision to enhance capacity, increase efficiency and compliance with regulation, and improve the quality of services.

(viii) Establish a contract with a local business training provider to deliver small-business training in accounting and financial management to shipowners and operators.

(ix) Conduct workshops for shipowners and operators in preparing competitive tenders for the FSS, based on templates to be included in contract documents.

Environmental Specialist (National, 15 person-months) (i) Assist in conducting subproject feasibility assessments, including baseline

data collection, detailed feasibility studies, and environmental assessment. (ii) Integrate mitigation measures presented in the IEE into bidding documents

and ensure provisions are made for contractors to include their approach/costs for mitigations in their bidding documents.

(iii) Advise bid evaluation teams on ability of contractor proposals to achieve mitigation measures identified in the bidding documents.

(iv) Provide guidance to contractors after being awarded contracts to prepare EMPs that include implementation, monitoring, and reporting of their mitigation measures.

(v) Conduct site visit sport-checks of contractors’ mitigations and review contractors’ regular monitoring reports.

(vi) Monitor compliance with EMPs, as necessary, and ensure compliance with environmental assurance under the Project.

(vii) Facilitate participation of Government counterparts in ongoing capacity development activities to ensure skills transfer for improved sustainability of designs.

Social and Poverty Specialist (National, 15 person-months) (i) Assist in conducting subproject feasibility assessments, including baseline

data collection, detailed feasibility studies, and social impact assessment. (ii) Assist MID with initial and ongoing public consultations for subproject

feasibility assessment and implementation of civil works. (iii) Prepare community participation plans for each subproject and reporting

feedback as part of each subproject assessment and progress report.



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(iv) Assist MID in the management and supervision of community participation contracts and training staff in the implementation.

(v) Monitor socioeconomic impacts and prepare necessary reports. (vi) Facilitate participation of Government counterparts in ongoing capacity

development activities to ensure skills transfer for improved sustainability of designs.

C. Implementation of the Franchise Shipping Scheme

5. The FSS will support rural transport services through an output-based approach. The PMU will consist of approximately 9 person-months of international consultants and 52 person-months of national consultants. The PMU will undertake the following FSS establishment activities: Maritime Operation Specialist (International, 6 person-months)

(i) Finalize the routes eligible for the FSS and identify the required level of service.

(ii) Design a simple and efficient output-based subsidy mechanism that provides incentives for private operators to provide the required services at least cost to Government, and provides targeted support to isolated communities through a process of minimum-subsidy competitive tenders.

(iii) Assist in establishing systems for performance monitoring and payment methods.

(iv) Develop a competitive tendering scheme, prepare tender documents, and conduct the implementation of the tendering scheme for all contracts for the FSS, in accordance with ADB’s Procurement Guidelines and Sample Bidding Documents.

(v) Prepare workshops to provide technical assistance for operators and MID staff to participate in the tender process.

(vi) Design and implement an appropriate system of financial management for the FSS, including procedures for the operation of the project imprest bank account and the relationship with the National Transport Fund.

(vii) Establish a management contract with a national accounting firm to manage the day-to-day operations of the FSS, and assist MID in implementing it.

Procurement Specialist (International, 3 person-months)

(i) Establish systems for performance monitoring and payment methods. (ii) Assist in developing a competitive tendering scheme, preparing tender

documents, and conducting the implementation of the tendering scheme for all contracts for the FSS.

(iii) Assist in preparing workshops to provide technical assistance for operators and MID staff to participate in the tender process.

Deputy Project Manager (National, 42 person-months [sharing with civil works project management]) (i) Assist MID in the management and supervision of community participation. (ii) Assist MID with monitoring the FSS in terms of contract compliance, and

service provision under FSS operation.



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(iii) Support for the establishment of a management contract with a national

accounting firm to manage the day-to-day operations of the FSS, and the assistance for MID in implementing it.

Accountant (National, 10 person-months) (i) Assist MID with monitoring the FSS in terms of finance under FSS operation. (ii) Assist in establishing a management contract with a national accounting firm

to manage the day-to-day operations of the FSS, and assist MID in implementing it.

D. Monitoring

6. MID and the PMU will establish a project performance and monitoring system under the guidance of a Benefit Monitoring and Evaluation Specialist (National, 6 person-months). The PMU will conduct a baseline survey, monitor and evaluate the Project’s progress annually, and provide a final report within 6 months of the end of the contract. Specifically, it will also undertake the following:

(i) Prepare indicators for monitoring and evaluating project performance before project commencement, and refine and monitor these indicators during project implementation, in accordance with the design and monitoring framework, guidelines for project performance monitoring indicators, environmental management plans, and environmental assessment and review procedures, all of which are appendixes in the report and recommendation of the President to the Board of Directors (RRP) for the Project.

(ii) Prepare all documentation required by ADB for monitoring the technical progress of the Project, including the budget and implementation schedule, as well as quarterly payment and disbursement forecasts.

(iii) Monitor institutional strengthening and capacity building for incorporation into regular project progress reports.

(iv) Report all activities and monitoring outcomes under the Project in accordance with the RRP and the relevant grant agreement, including, but not limited to, quarterly reports, annual reports, and project completion report.

(v) Monitor service delivery and reporting by contractors for FSS activities and ensure timeliness and quality of reporting to support FSS management review.

E. Project Administration

7. For project administration, the PMU will fund approximately 76 person-months of national consultants. The PMU will support MID in administering the Project, particularly the following: Administrator (National, 41 person-months)

(i) Ensure that the Project is implemented in accordance with ADB guidelines, these terms of reference, and the laws of Solomon Islands, exercising efficient, effective, and economic implementation methodologies.

(ii) Prepare and maintain a detailed project implementation schedule for all project activities, and identify key milestones to be achieved, in accordance with the RRP and grant agreement.



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(iii) Provide the necessary secretarial services to ensure effective project administration.

(iv) Establish and administer a financial management system for the Project in accordance with the relevant ADB guidelines3 concerning administration of disbursements, imprest account replenishment, submission of withdrawal applications, and arrangement of direct payments to contractors.

(v) Report regularly to the project steering committee, and assist the transport policy and planning unit in providing the project steering committee with the services of a committee secretary for its substantive tasks.

(vi) Follow the Government’s environmental assessment procedure and obtain development consent prior to start of civil works, and comply with ADB’s Environmental Assessment Guidelines.

(vii) Prepare and implement a public communication plan covering activities under the Project in accordance with ADB’s Public Communications Policy (2005).

Bookkeeper (National, 23 person-months) (i) Provide the necessary accounting services to ensure effective project

administration. (ii) Manage and facilitate the timely disbursement of project funds in accordance

with ADB’s Loan Disbursement Handbook (2007, as amended from time to time).

Technical Service Provider (National, 12 person-months) (i) Provide the necessary technical service to ensure effective project

administration.

F. Outputs

8. The PMU shall produce the following outputs: (i) subproject assessments, including technical, environmental, and social impact

assessments, for all prioritized subprojects; (ii) designs and specifications for all civil works; (iii) evaluation reports for all proposed civil works contracts; (iv) executed civil works contracts; (v) project reports (as detailed in para. 9); (vi) detailed project performance monitoring system (including detailed indicators); (vii) public communications plan; (viii) FSS operation guidelines, procedures, and regulations; and (ix) FSS quarterly reports.

G. Reporting

9. The consultants will support the MID with reporting requirements, including: (i) inception report, within 4 weeks of start of the Project; (ii) quarterly progress reports in ADB format, submitted within 1 month of the end

of the quarter; (iii) draft final report and draft project completion report in ADB format; and

3 ADB. 2005. Financial Management and Analysis of Projects. Manila.



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(iii) final report and final project completion report 1 month after receiving the

comments on the draft final report from the Government and ADB.

H. Other Matters

10. The EA will provide office space, local transport as available, and administrative support. The consultants must provide equipment; workshops and surveys; and administrative support.

Table A1: Cost Estimates ($)

Item Foreign

ExchangeLocal

Currency Total

A. ADB Financinga

1. Consultants 2,390,000 400,150 2,790,150 a. Remuneration and Per Diem 2,358,000 387,550 2,745,550 i. International Consultants 2,358,000 2,358,000 ii. National Consultants 387,550 387,550 b. International and Local Travel 32,000 12,600 39,400 i. International 32,000 32,000 ii. Local 12,600 12,600 2. Reports and Communication 5,000 5,000 10,000 3. Equipment 27,500 27,500 55,000 4. Workshops and Surveys 25,000 25,000 50,000 5. Administration and Support Costs 183,225 61,075 244,300 6. Contingencies 263,100 51,900 315,000 Subtotal A 2,893,825 570,625 3,464,450 B. Government Financing 1. Remuneration of Counterpart Staff 0 92,800 92,800 2. Office Accommodation 0 180,000 180,000 3. Per Diem of Counterpart Staff 0 0 0 4. Transport 0 20,000 20,000 5. Administrative Support, Others 0 24,000 24,000 Subtotal B 0 316,800 316,800 TOTAL 2,893,825 887,425 3,781,250

ADB = Asian Development Bank. a Financed on a pro rata basis by ADB (68.8%), European Commission (20.6%), and Government (10.6%). ADB will administer ADB and EU financing. Source: Asian Development Bank estimates.


8 Procurement 01/09/2009

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8. PROCUREMENT A. Basic Principles of ADB Procurement 1. Procedures applicable to ADB-financed procurement are derived from principles in the Agreement Establishing the Asian Development Bank (the Charter), from experiences of ADB and other multilateral and bilateral development financing institutions, and from sound commercial practice. These principles and procedures are contained in the Procurement Guidelines (2007, as amended from time to time).1 2. Procurement for ADB-financed projects is guided by five principles:

(i) Eligible procurement sources. The proceeds of ADB financing can only be used

for procurement of goods and works supplied from, and produced in, member countries of ADB.

(ii) Economic and efficient use of loan or grant proceeds. There is a need for economy and efficiency in the implementation of the project, including procurement of goods and works involved;

(iii) Adequate and equal opportunity and information for ADB member countries to participate in supplying goods and related services and works. ADB’s interest is in giving all eligible bidders the same information and equal opportunity to compete in providing goods and works financed by ADB;2

(iv) Domestic contracting and manufacturing of industries in borrowing countries. ADB’s interest is also in encouraging the development of domestic contracting and manufacturing industries in the country of the Grantee; and

(v) Transparency and anticorruption. ADB gives due importance to transparency in the procurement process to achieve economy and efficiency, and to combat fraud and corruption. Allegations of corrupt or fraudulent practices should be referred to the Office of the General Auditor (OGA). ADB’s Anticorruption Policy requires Borrowers/Recipients, as well as bidders, suppliers, and contractors under ADB-financed contracts, to observe the highest standard of ethics during the procurement and execution of such contracts.

3. ADB's procurement procedures must be followed even if its grant only finances part of the contract. Where a project involves several contracts, the recipient may adopt its own procurement procedures for those contracts which will not involve the use of ADB grant proceeds. ADB must be satisfied, however, that the procedures will fulfill the Grantee's general obligation for the project being carried out efficiently and in conformity with sound engineering or other appropriate practices.

1 The Guidelines may be accessed through this weblink:

www.adb.org/Documents/Guidelines/Procurement/Guidelines-Procurement.pdf 2 ADB’s strategy in Solomon Islands, however, emphasizes coordination with development partners and encourages

cofinancing. The European Commision (EC) has committed to provide joint cofinancing, and for the EC to participate, it requires non-discrimination in procurement processes against legal persons, firms, and goods established in EC-recognized official candidate countries, member states of the European Economic Area, and developing countries as specified by the Development Assistance Committee of the Organisation for Economic Co-operation and Development. Given that components of the Project are jointly cofinanced with EC, ADB has approved to allow procurement of eligible goods and services from countries eligible for procurement under EC regulations, which are not ADB member countries.


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B. Procurement of Goods and Works Under the Grant 4. All procurement under the Project will follow ADB’s Procurement Guidelines. Civil works will be divided into packages. International competitive bidding procedures will be used for civil works contracts of more than $1 million, as they require specialized equipment and skills not available locally. National competitive bidding will be used for civil works contracts and FSS contracts up to $1,000,000. International firms may tender for contracts for FSS services under the same conditions that apply to national firms.3 Community participation contracts and goods and equipment valued up to $100,000 will be procured using the shopping method. All tender processes will include measures—including clear documentation, public tender openings, and confidentiality of financial projections—designed to prevent anti-competitive behavior.4 Technical and financial qualifications of contractors will be reviewed during bid evaluation for postqualification. Before the contract award, the procurement process and tender evaluation report will be subject to review and approval by ADB. Evaluation of international competitive bidding contracts may include a margin of preference for domestic contractors. The procurement plan is in Appendix 1 of this Section.

1. International Competitive Bidding (ICB)

5. The Procurement Guidelines require the use of appropriate standard bidding documents (SBDs) issued by ADB for International Competitive Bidding with minimum changes, acceptable to ADB, as necessary to address project-specific conditions. ADB's standard procurement documents for the prequalification of bidders, procurement of goods, and procurement of works are based on Master Procurement Documents prepared jointly by multilateral development banks and other public international financing institutions. The documents reflect the structure and the provisions of the Master Procurement Documents except where ADB-specific considerations have required a change. An important feature of these harmonized standard documents is that they can be used with minimum changes, as they do not contain explanations, footnotes or examples. They are each supported by a User's Guide which contains detailed explanations and recommendations. Where no relevant standard documents have been issued by ADB, the recipient shall use other internationally recognized bidding documents acceptable to ADB, and conforming to the extent possible to ADB's standard procurement documents. 6. The objective of international competitive bidding is to provide all eligible prospective bidders with timely and adequate notification of the Recipient's requirements, and an equal opportunity to bid for the required goods and works. 7. Preparation and Submission of Bidding Documents. The bidding documents for civil works-wharves will follow ADB’s standard bidding documents (SBDs) for works-small contracts.5 MID needs to prepare an invitation for bids (sample attached as Appendix 2 of this Section), review the bidding documents, incorporate the Environment Management Plan, and fill in necessary data, and send to ADB for clearance. 3 This may be achieved by registering a chartered vessel locally, by the operator establishing a domestic presence, or

by partnering with a domestic firm. See Supplementary Appendix E for details. 4 Financial projections related to potential subsidies under the FSS will be redacted from the public version of the

financial analysis in Supplementary Appendix B in accordance with ADB’s Public Communications Policy (2005). 5 Available in http://www.adb.org/Procurement/prequalification-bid-documents.asp#small, under “Works-Small

Contracts, SBD for Works-Small Contracts (Single-Stage: One-Envelope).”


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8. Invitation for bids require a minimum bidding period of 6 weeks. This period is counted from the publication date of the relevant invitation in the Business Opportunities section of adb.org, or locally in English (local newspaper), or the date when documents are available for issue, whichever is the latest, up to the date for submission of bids. The date, hour, and place for the latest delivery of the bids are to be clearly stipulated in the invitation. The manner for submitting bids must also be specified, and besides allowing for submission in person, delivery of bids by registered mail or electronically will similarly be acceptable and stated in the instructions to bidders. 9. Three copies of the invitation for bids and all related bidding documents for ICB (including instructions to bidders, conditions of contract, specifications, and bid forms) must be submitted to ADB for prior approval. The documents must reach ADB at least 21 days prior to the proposed date for issuing bidding documents to allow sufficient time for review and approval, and to allow time for a specific notice to be published on adb.org. The scope of ADB review will include:

(i) invitation for bids, (ii) instructions to bidders, (iii) bid data sheet, (iv) evaluation and qualification criteria, (v) bidding forms, (vi) list of eligible countries (available as Appendixes 3 and 4 of this Section), (vii) schedule of employer’s requirement, (viii) general conditions of contract, and (v) special conditions of contract.

10. Advertising. After ADB’s clearance of bidding documents, MID will advertise in the Solomon Islands, while ADB will advertise in adb.org. As soon as the invitation for bids is advertised in accordance with the Procurement Guidelines, MID will give a report to ADB on the advertising. Such a report shall include:

(i) name of the website or newspaper in which the invitation for bid was advertised, (ii) date of advertising, and (iii) copy of the published advertisement.

11. Opening of Bids. Bids delivered after the deadline for submission are to be returned unopened. Bids must be opened in public on the date and at the time and place stipulated in the documents. The name of each bidder and, where applicable, the total amount of its bid, discounts, bid security (if required), and other important information are to be read aloud and recorded. All the aforementioned information is to be included in the record of the opening of bids, together with the names of the representatives present. 12. Examination and Evaluation of Bids. The examination and evaluation of bids must be consistent with the methods, terms, and conditions set forth in the bid documents and follow the procedures set out in the Procurement Guidelines. The following checklist helps evaluate the procedures:


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• Bids should not be invited on the basis of a percentage premium or discount over the estimated cost.

• Bids should not be rejected only on the basis of a comparison with the EA’s estimate. • Extension of bid validity may be sought only under exceptional circumstances. • Factors, evaluation methodology, and evaluation criteria must be explicitly stated in

bidding documents and applied consistently; and the contract award must be to the bidder who submitted the lowest evaluated substantially responsive bid.

• Price negotiations with bidders before signing contracts is not acceptable, except when all bids received are substantially higher than the estimate and ADB gives prior approval to negotiate with the bidder who submitted the lowest evaluated substantially responsive bid for a price reduction, before resorting to rebidding.

• Price adjustments for inflation, and settlement of disputes by local courts or local arbitration, are acceptable.

13. Conditions of Contract. General conditions of contract are provided in the SBDs. Terms and conditions specific to the bidding are specified in the bidding documents. The Procurement Guidelines include provisions related to currency of payment, terms and method of payment, price adjustment, performance security, liquidated damages, language, transportation and insurance, and dispute resolution. These provisions should be reviewed when developing specific conditions of contract. The following guidance is also provided:

• Performance security is required for works contracts. Requirements for performance security are to be described in the bidding documents. Its form shall be either cash, or a guarantee. It must be issued by a reputable bank or financial institution. If the issuer is located outside the borrower’s country, it must have a correspondent in the borrower’s country to ensure enforceability. Performance security would normally be about 10% of the contract value.

• Liquidated damages are to be specified in the bidding documents. Normally,

liquidated damages will be limited to about 10% of the contract value. • Price adjustment provisions must be provided in contracts with delivery or completion

periods that exceed 18 months. The method and formula for price adjustment is specified by the EA and provided in the bidding documents. The formula indices will be given by the EA and the bidder, depending on the source (for example, some indices might reflect costs in the bidder’s home country, in which case they would be specified by the bidder as provided for in the bidding documents).

14. Proposal for Award. As soon as the bids are evaluated and MID has determined the lowest evaluated bid, the evaluation results and the proposal for award of contract are to be submitted to ADB for review and approval. The recommendation must be approved by ADB before a contract is awarded or a letter of intent is issued. For this, promptly after the bid evaluation but at least 30 days prior to expiration of bid validity, ADB must be given three copies of –

• an account of the public opening of the bids (together with the minutes of bid opening),

• a summary and detailed evaluation of the bids, • the proposal for award, • a draft contract, if such a draft differs from the draft previously approved by ADB, and


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• an appropriate certificate of eligibility for the proposed contract.

15. Award of Contract. If the contract proposed to be executed differs substantially from the draft approved by ADB or if any substantial amendment to the contract is proposed, the proposed changes are to be submitted to ADB for prior approval. Promptly after each contract is awarded, ADB is to be given three copies of the contract as executed. 16. Change orders that increase the original contract amount by more than 15% in aggregate require ADB prior approval. Material extensions in time, and modifications or waivers of conditions of contract similarly require prior approval of ADB. In all cases, contract amendments must be submitted to ADB for its records. 17. Domestic Preference. For ICB civil works contracts under the project, Solomon Islands is eligible to apply preference scheme to domestic contractors. Domestic contractors must meet eligibility criteria which shall be included in the bidding documents. ADB will not object if the borrower wishes to grant preference to state-owned construction corporations or firms, provided that they are eligible to bid. Model provisions in the bidding documents to apply domestic preference scheme for civil works contracts are as follows:

a. When comparing domestic bids with foreign bids, domestic contractors are granted a margin of preference in accordance with the following provisions:

i. For application of domestic preference, all bids are first classified into the

following two categories: Category I: for bids offered by domestic contractors and joint ventures eligible for the preference in accordance with the applicable criteria in para. 2; and Category II: for bids offered by other contractors.

i. The lowest evaluated bid in each category is determined by comparing all evaluated bids in each category.

ii. The lowest evaluated bids in each category are compared with each other

and if, as a result of this comparison, a bid from category I is found to be the lowest, it is selected for the award of contract.

iii. If, however, as a result of the comparison under (iii), the lowest bid is found to

be from category II, it is then compared with the lowest evaluated bid from category I. For this additional comparison only, an upward adjustment is made to the lowest evaluated bid price of category II by adding a amount equally to 7.5 percent of the bid price. If, after such comparison, the category I bid is determined to be the lowest, it is selected for the award of contract; if not, the lowest evaluated bid from category II is selected.

b. Domestic contractors and joint venture firms must meet the following minimum

criteria for eligibility under the domestic preference scheme:


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i. Domestic contractors • are incorporated or established under the laws of the borrower’s

country, • have majority ownership by nationals of the borrower, and • will not subcontract more than 50 percent of the total value of the work

to foreign contractors.

ii. A joint venture between a domestic contractor and its foreign partner is eligible for the preference only if

• The domestic partner(s) is individually eligible for the preference according to the criteria stated in 2 (i);

• The domestic partner(s) would not qualify for the work on technical or financial grounds without the foreign participation; and

• The domestic partner(s), under the arrangement proposed, carry out at least 50 percent of the value of the work

18. Contractors applying for the preference must provide information with their bids, including details of ownership. 2. National Competitive Bidding (NCB) 19. Preparation and Submission of Bidding Documents. The Recipient and ADB shall ensure that, prior to the commencement of any procurement activity under NCB, the Recipient's national competitive bidding procedures are consistent with the Procurement Guidelines. Any modifications or clarifications to such procedures agreed between the Recipient and ADB shall be set out in the Procurement Plan. Any subsequent change to the agreed modifications and clarifications shall become effective only after written approval of such change by the Recipient and ADB. 20. The contracts for civil works-maintenance and franchise shipping scheme (FSS) need to follow single-stage, one-envelope NCB bidding procedure without exclusion of foreign contractors. Again, it is strongly recommended that ADB’s Standard Bidding Documents-Small Contracts (SBD-Small Contracts) be adopted (see footnote 4). 21. A minimum of 4 weeks needs to be allowed for bidders to prepare their bids. This period is counted from the publication date of the relevant invitation in the Business Opportunities section of adb.org, or locally in English (local newspaper), or the date when documents are available for issue, whichever is the latest, up to the date for submission of bids. 22. Three copies of the invitation for bids and all related bidding documents for the NCB (including instructions to bidders, conditions of contract, specifications, and bid forms) must be submitted to ADB for prior approval. The documents must reach ADB at least 21 days prior to the proposed date for issuing bidding documents to allow sufficient time for review and approval. 23. Advertising. After ADB clears the invitation for bids and bidding documents, MID will advertise the invitation for bids in Solomon Islands, while ADB will advertise in adb.org. Advertising in the local language in local web or newspaper is acceptable. As soon as the


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invitation for bids is advertised in accordance with the Procurement Guidelines, MID will give a report to ADB on the advertising. Such a report shall include:

(i) the name of the website or newspaper in which the invitation for bid was advertised,

(ii) the date of advertising, and (iii) a copy of the published advertisement.

24. Opening of Bids. Bids delivered after the deadline for submission are to be returned unopened. Bids must be opened in public on the date and at the time and place stipulated in the documents. The name of each bidder and, where applicable, the total amount of its bid, discounts, bid security (if required), and other important information are to be read aloud and recorded. All the aforementioned information is to be included in the record of the opening of bids, together with the names of the representatives present. 25. Examination and Evaluation of Bids. The examination and evaluation of bids must be consistent with the methods, terms, and conditions set forth in the bid documents and follow the procedures set out in the Procurement Guidelines. The following checklist helps evaluate the procedures:

• Bids should not be invited on the basis of a percentage premium or discount over the estimated cost.

• Bids should not be rejected only on the basis of a comparison with the EA’s estimate.

• Extension of bid validity may be sought only under exceptional circumstances. • Factors, evaluation methodology, and evaluation criteria must be explicitly stated

in bidding documents and applied consistently; and the contract award must be to the bidder who submitted the lowest evaluated substantially responsive bid.

• Price negotiations with bidders before signing contracts is not acceptable, except when all bids received are substantially higher than the estimate and ADB gives prior approval to negotiate with the bidder who submitted the lowest evaluated substantially responsive bid for a price reduction, before resorting to rebidding.

• Price adjustments for inflation, and settlement of disputes by local courts or local arbitration, are acceptable.

26. Conditions of Contract. General conditions of contract are provided in the SBDs. Terms and conditions specific to the bidding are specified in the bidding documents. The Procurement Guidelines include provisions related to currency of payment, terms and method of payment, price adjustment, performance security, liquidated damages, language, transportation and insurance, and dispute resolution. These provisions should be reviewed when developing specific conditions of contract. The following guidance is also provided:

• Performance security is required for works contracts. Requirements for performance security are to be described in the bidding documents. Its form shall be either cash, or a guarantee. It must be issued by a reputable bank or financial institution. If the issuer is located outside the borrower’s country, it must have a correspondent in the borrower’s country to ensure enforceability. Performance security would normally be about 10% of the contract value.


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• Liquidated damages are to be specified in the bidding documents. Normally, liquidated damages will be limited to about 10% of the contract value.

• Price adjustment provisions must be provided in contracts with delivery or

completion periods that exceed 18 months. The method and formula for price adjustment is specified by the EA and provided in the bidding documents. The formula indices will be given by the EA and the bidder, depending on the source (for example, some indices might reflect costs in the bidder’s home country, in which case they would be specified by the bidder as provided for in the bidding documents).

27. Proposal for Award. As soon as the bids are evaluated and the EA has determined the lowest evaluated bid, the evaluation results and the proposal for award of contract are to be submitted to ADB for review and approval. The recommendation must be approved by ADB before a contract is awarded or a letter of intent is issued. For this, promptly after the bid evaluation but at least 30 days prior to expiration of bid validity, ADB must be given three copies of --

• an account of the public opening of the bids (together with the minutes of bid opening),

• a summary and detailed evaluation of the bids, • the proposal for award, • a draft contract if such a draft differs from the draft previously approved by ADB,

and • an appropriate certificate of eligibility for the proposed contract.

28. Award of Contract. If the contract proposed to be executed differs substantially from the draft approved by ADB or if any substantial amendment to the contract is proposed, the proposed changes are to be submitted to ADB for prior approval. Promptly after each contract is awarded, ADB is to be given three copies of the contract as executed. 29. Change orders that increase the original contract amount by more than 15% in aggregate require ADB prior approval. Material extensions in time, and modifications or waivers of conditions of contract similarly require prior approval of ADB. In all cases, contract amendments must be submitted to ADB for its records. 30. Domestic Preference. Domestic preference is not applicable under NCB.

3. Shopping

31. Shopping is a procurement method based on comparing price quotations obtained from several suppliers (in the case of goods) or from several contractors (in the case of civil works), with a minimum of three, to assure competitive prices, and is an appropriate method for procuring readily available off-the-shelf goods or standard specification commodities of small value, or simple civil works of small value. Requests for quotations shall indicate the description and quantity of the goods or specifications of works, as well as desired delivery (or completion) time and place. Quotations may be submitted by letter, facsimile or by electronic means. The evaluation of quotations shall follow the same principles as of open bidding. The terms of the accepted offer shall be incorporated in a purchase order or brief contract.


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32. The threshold for Shopping is currently set at $100,000 for all recipients, but may be adjusted in consultation with COSO depending on the capacity of the recipient. Contracts above the threshold would normally be procured following NCB or ICB procedures, unless another method (such as direct contracting, or limited international bidding) has been specifically agreed for in the relevant financing agreement and the procurement plan. 33. For the procurement of items below $10,000, the EA may purchase the items directly from the supplier. In such cases, ADB should be satisfied that the price paid is reasonable. C. Misprocurement 34. If procurement is not carried out in accordance with the Procur