Project Procurement Risk Assessment Report...BTMA – Bangladesh Textile Mills Association BUTEX – Bangladesh University of Textiles DTE – Directorate of Technical Education e-GP

Skills for Employment Investment Program – Tranche 3 (PFRR BAN 42466-017)

Project Procurement Risk Assessment Report

June 2019

BAN: Skills for Employment Investment Program (Tranche 3)

http://www.adb.org/Documents/LinkedDocs/?id=42466-017-PFR

http://www.adb.org/Documents/LinkedDocs/?id=42466-017-PFR

CONTENTS

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I. INTRODUCTION 1

II. PROJECT PROCUREMENT RISK ASSESSMENT 3

Overview 3 Procurement Risk Assessment of Implementing Agencies 6 Strengths 20 Weaknesses 20 Procurement Risk Assessment and Management Plan 21

III. PROJECT-SPECIFIC PROCUREMENT THRESHOLDS 21

IV. PROCUREMENT PLAN 22

V. CONCLUSION 22

ABBREVIATIONS

ADB – Asian Development Bank BACCO – Bangladesh Association of Call Centers and Outsourcing BACI – Bangladesh Association of Construction Industry BASIS – Bangladesh Association of Software and Information Services BB-SME – Bangladesh Bank Small and Medium Enterprise Department BEIOA – Bangladesh Engineering Industry Owners’ Association BGMEA – Bangladesh Garment Manufacturers and Exporters Association BIGD – BRAC Institute of Governance and Development BIGM – Bangladesh Institute of Governance and Management BITAC – Bangladesh Industrial Technical Assistance Centre BMET – Bureau of Manpower, Employment and Training BRTC – Bangladesh Road Transportation Authority BTMA – Bangladesh Textile Mills Association BUTEX – Bangladesh University of Textiles DTE – Directorate of Technical Education e-GP – Electronic Government Procurement EPD – executive project director EWU – East West University GOB – Government of Bangladesh IFB – invitation for bids NCB – national competitive bidding NGO – nongovernment organization PIU – project implementing unit PKSF – Palli Karma-Sahayak Foundation PPA – Public Procurement Act 2006 PPR – Public Procurement Rules 2008 PPRA – Project Procurement Risk Assessment QCBS – quality and cost-based selection RFP – request for proposal RFQ – request for quote SDCMU – Skills Development Coordination and Management Unit SEIP – Skills for Employment Investment Program TTTI – Trust Technical Training Institute

EXECUTIVE SUMMARY This Project Procurement Risk Assessment (PPRA) Report has been prepared for the Skills for Employment Investment Program (SEIP) Tranche 3 to assess the capacity of the procurement management systems of the main implementing agency, the Skills Development Coordination and Monitoring Unit (SDCMU); and 25 project implementation units (PIUs) in implementing agencies and partners that manage skills training programs. The assessment determines the degree of procurement risks and suggests specific measures for risk mitigation. In May 2014, the Asian Development Bank (ADB) approved a multitranche financing facility of $350 million to support the government’s skilling initiatives through SEIP. The SEIP aims to enhance the productivity and employability of the growing workforce to reduce poverty and move the country into an accelerated growth path. By initiating large-scale private sector involvement to deliver sector-focused skills training, the SEIP helps scale up skilling of new entrants and up-skilling of existing workers to meet emerging demands in domestic and overseas markets. SEIP Tranche 1 (2014–2019) laid a solid foundation to expand the national training capacity and deliver market-responsive skills programs, by forging large-scale partnerships with the private sector and nongovernment organizations (NGOs) as well as public institutes. Tranche 1 has engaged 11 industry associations; more than 40 public training institutes across four government ministries and agencies; and other organizations to deliver training for over 200,000 people. Tranche 2 (2017–2021) has expanded the sectoral coverage of skills training by engaging additional industry associations; it has also introduced middle managerial training programs in collaboration with selected universities and research institutes. The proposed SEIP Tranche 3 (2020–2023) will continue existing partnerships with private, public, and nongovernmental implementing partners to further fortify the national training capacity and reinforce skills training for the new and existing workforce. This PPRA report represents updated assessments of SDCMU and implementing agencies and partners, most of whom were engaged during SEIP Tranche 1 and Tranche 2. The report includes first assessments for two newly proposed implementing partners under Tranche 3. The report provides updated assessments separately for (i) SDCMU, the main implementing agency; (ii) government implementing agencies and partners; (iii) industry associations; and (iv) universities and research institutes, as well as other public and nongovernment organizations. The main results from the assessments are the following. With respect to regulatory and institutional frameworks, the overall assessment suggests “moderate” risks. On capacity and implementation issues, the risk rating is “moderate.” The procurement environment in the public sector is rated as “moderate,” since national procurement procedure is being used. For the private sector, it is rated as “substantial” since they are not mandated to follow public procurement rules in procurement transactions. Strengths identified are as follows. SDCMU follows the national procurement procedure as well as ADB procurement guidelines. SDCMU staff have sound knowledge in the procurement of goods, works, and services under government funding. SDCMU has highly experienced procurement management professionals and consultants. Its process for information management and accountability measures are simple and satisfactory. A complaints and disputes management mechanism is in place, which addresses grievances related to procurements and contract administration. The PIUs of government agencies, universities and research institutes, and NGO implementing partners are fully staffed and follow the national procurement law, as well as ADB procurement guidelines. The staff in most of these PIUs have good knowledge of the

national procurement procedure. Their processes for information management and accountability measures are simple and satisfactory. These PIUs are aware of the complaints and disputes management mechanism related to procurements and contract administration. Among the weaknesses, industry associations are not fully aware of the public procurement procedure and are not conversant with the standard bidding documents and contract administration. The procurement environment in the private sector is not mandated to follow national procurement rules, nor practice any other international standard procurement procedure. Nevertheless, some industry associations have built up experience in procurement using public funds under the SEIP Tranche 1 and Tranche 2 projects. Overall, procurement risk rating for SDCMU is ‘’low’’ with a few risks that are not likely to occur but have low impact should they occur. The overall risk rating of four government agencies (Directorate of Technical Education [DTE]; Bureau of Manpower, Employment and Training [BMET]; Bangladesh Industrial Technical Assistance Centre [BITAC]; and Bangladesh Road Transportation Authority [BRTC]); four educational institutes (Bangladesh Institute of Governance and Management [BIGM], BRAC Institute of Governance and Development [BIGD], Bangladesh University of Textiles [BUTEC], and East West University [EWU]); Bangladesh Bank Small and Medium Enterprise Department [BB-SME]; and Palli Karma-Sahayak Foundation [PKSF] is “moderate” with a few risks that are likely to occur but have low impact if they occur. The risk ratings for 14 industry associations are “moderate to substantial” with a few risks that are unlikely to occur but have high impact if they occur. Mitigation measures are recommended to address the deficiencies in the procurement capacity of the agencies. The key mitigation measures include (i) capacity building of implementing partners on procurement of goods, works, and services; (ii) development of a procurement manual and standard documents for the implementing partners; and (iii) recruitment of additional consultants to support SDCMU in electronic procurement and contract management. These mitigation measures will reduce project procurement risks, including noncompliance, and ensure economy and efficiency in the implementation of the project.

I. INTRODUCTION 1. This Project Procurement Risk Assessment (PPRA) Report for the Skills for Employment Investment Program (SEIP) Tranche 3 has been prepared in accordance with the Asian Development Bank’s (ADB) Guide on Assessing Procurement Risks and Determining Project Procurement Classification (August 2015).1 The PPRA was conducted from March to May 2019 to assess the capacity of the procurement management systems of the Skills Development Coordination and Management Unit (SDCMU)—the main project implementing agency—and public, private, and nongovernmental implementing agencies and partners to determine the degree of their procurement risk and to suggest measures to mitigate potential risks. In preparing the report, the activities included reviewing project documents, aide memoires from review missions, ADB’s ongoing procurement experiences in Bangladesh, ADB’s Procurement Guidelines, government’s public procurement acts and rules, procurement capacity and risk surveys, and visits to and interviews with key personnel of SDCMU and implementing agencies and partners. The completed Procurement Capacity Assessment Questionnaires for SDCMU and all implementing agencies and partners are available upon request. 2. The SEIP, financed through a multitranche financing facility, aims to develop job-ready skills of new labor force entrants and enhance the skills of existing workers to increase their employment and productivity, which in turn would contribute to economic growth in Bangladesh. To this end, the SEIP focuses on sector-specific skills training for about 10 priority sectors that have been identified by the government. To deliver industry-relevant skills training for a large number of young men and women, SEIP has partnered with public, private, and nongovernment agencies, which implement sector-related skills training courses through a network of training providers. The SEIP’s major innovative feature was the establishment of partnerships with industry associations that are nationally and globally known entities unique to each of the priority sectors. The priority sectors covered under SEIP Tranche 1 included ready-made garments and textiles; construction; information technology; light engineering; leather and footwear; and shipbuilding. Under Tranche 2, sector coverage expanded to include agro-processing, hospitality and tourism, and caregiving. 2 Under Tranche 3, renewable energy will be included as an additional sector coverage for skills development.

3. Through the 10-year program consisting of three tranches, the SEIP aims to finance skills training for more than 800,000 persons overall, with a target of at least 60% job placement after training completion. The breakdown of target trainee numbers by tranche and by type of implementing agency and partner is in Table 1.

Table 1: Breakdown of Individuals to be Trained in Priority Sectors and Skills

Training Tranche 1

(2014–2019) Tranche 2

(2017–2021) Tranche 3

(2020-2024) Total

Public 48,940 48,500 134,450 231,890 Private 188,860 170,500 176,330 535,690 PKSF/NGOs 12,000 10,500 15,700 38,200 BB-SME 10,200 10,500 1,000 21,700

Total 260,000 240,000 327,480 827,480 BB-SME = Bangladesh Bank Small and Medium Enterprise Department, NGO = nongovernment organization, PKSF = Palli Karma-Sahayak Foundation. Source: Asian Development Bank.

1 ADB. 2015. Guide on Assessing Procurement Risks and Determining Project Procurement Classification. Manila. 2 Motor driving was added to Tranche 1 and Tranche 2 as a government’s priority initiative since 2018. Nursing and

caregiving training did not commence during Tranche 2, but it will start implementation under Tranche 3.

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4. Four different types of implementing agencies and partners have been engaged for Tranche 1 and Tranche 2 to deliver the training targets as described below.

(i) Public institutes. For Tranche 1 and Tranche 2, public training institutes across three different ministries have partnered for sector-focused skills training under SEIP. These include (i) 9 technical schools and colleges (TSCs) under the Directorate of Technical Education (DTE) in the Ministry of Education; (ii) 20 technical training centers (TTCs) under the Bureau of Manpower, Employment and Training (BMET) in the Ministry of Expatriate Welfare and Overseas Employment; and (iii) 4 Bangladesh Industrial Technical Assistance Centers (BITAC) under the Ministry of Industry. The Department of Youth and Development (DYD) under the Ministry of Youth and Sports was also engaged under Tranche 2, although training programs have not been implemented yet. Since 2018, motor driving skills training with basic maintenance have been introduced under Tranche 1. For this motor-driving training, Bangladesh Road Transportation Authority (BRTC) was added, along with additional TTCs under BMET and TSCs under DTE. All of these public training institutes will continue under Tranche 3 for motor driving skills. For additional sector training, the Sustainable and Renewable Energy Development Authority (SREDA) under the Ministry of Power, Energy, and Mineral Resources will be included for Tranche 3.

(ii) Industry associations. For Tranche 1, training partnerships were established

with 10 industry associations. 3 Industry associations deliver training courses through their own training centers, outsourced training institutes, or by establishing training centers within companies or factories. The industry associations under Tranche 1 included Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladesh Textile Manufacturers’ Association (BTMA), Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), Bangladesh Association of Construction Industry (BACI), Bangladesh Engineering Industry Owners’ Association (BEIOA), Bangladesh Association of Software and Information Services (BASIS), Bangladesh Association of Call Centers and Outsourcing (BACCO), Association of Export Oriented Shipbuilding Industries of Bangladesh (AEOSIB), and Bangladesh Women Chamber of Commerce and Industry (BWCCI). For Tranche 2, additional industry associations included the Bangladesh Agro Processors Association (BAPA), Industry Skills Council for Tourism and Hospitality Ltd (ISC-TH)., and Real Estate and Housing Association of Bangladesh (REHAB). All the industry associations will continue to deliver training under Tranche 3, based on the performance assessment conducted by SDCMU.4

(iii) Palli-Karma Sahayak Foundation (PKSF). PKSF, which is an umbrella

organization of nongovernment organizations (NGOs), was engaged from Tranche 1 to deliver skills training targeted for self-employment or other gainful

3 The industry associations selected under SEIP are nationally and globally well-known entities unique to the identified

priority sectors and are registered as not-for-profit trade organizations under the Trade Organization Acct, 1961 (amended).

4 SDCMU conducted performance assessments of each of the industry associations by a 3-member committee, covering the areas of training management, training outcomes, financial management, monitoring responsibility, etc. Although the degree of satisfactory performance varied by industry association, all associations were found to be satisfactory to continue the partnership under Tranche 3.

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employment. PKSF implements SEIP training courses through its established partnership arrangements with NGOs. Under Tranche 3, in addition to its current arrangement, PKSF will coordinate with other NGOs to implement skills programs specifically targeted at disadvantaged groups, as well as caregiver training courses.

(iv) Bangladesh Bank Small and Medium Enterprise Department (BB-SME).

Engaged under Tranche 1 to provide skills training, BB-SME will continue its partnership with SEIP for training targeted at entrepreneurship development.

5. For Tranche 2, new mid-level managerial training programs were introduced by four universities in close collaboration with industry associations to fill the middle management gap in priority industries. The universities include the Bangladesh University of Textiles (BUTEX) for the textiles industry; BRAC University for the knitwear industry; East West University for the leather goods industry; and Dhaka University for the ready-made garments (RMG) industry. The participants for the program include both employees in respective industries and university graduates interested in these industries. In addition, the Bangladesh Institute of Governance and Management (BIGM) was engaged to conduct policy analysis programs for mid-level civil servants and mid-level executives from the private sector and NGOs. All the mid-level management programs will continue under Tranche 3. 6. For Tranche 3, there will be two new agencies or partners for training implementation. The SREDA will be engaged for skills training related to renewable energy programs. The Trust Technical Training Institute (TTTI) will be engaged to deliver motor driving training with basic maintenance.

7. Following the loan agreement, the government ministries and divisions overseeing the SEIP program through respective public institutes will be considered as “implementing agencies,” which include DTE under the Ministry of Education; BMET under the Ministry of Expatriate Welfare and Overseas Employment; Ministry of Industry; DYD under the Ministry of Youth and Sports; and SREDA. All other entities, including industry associations, universities and research institutes, BB-SME, PKSF, and BRTC are considered as “implementing partners.”

II. PROJECT PROCUREMENT RISK ASSESSMENT

Overview 8. Assessments of the institutional capacity of procurement-related agencies in ADB’s developing member countries are important inputs in determining the extent to which country systems for procurement could be adopted in projects financed by ADB. The procurement risks assessments are intended to:

(i) identify risks that country, sector, agency, or project systems or practices could result in suboptimal use of ADB financing resources;

(ii) assess the severity of the risks; and (iii) develop a practical risk management plan to address those risks that could

adversely impact project implementation and/or achievement of project outcomes.

9. The procurement risk assessment would also:

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(i) provide information as to whether the procurement system or commercial practices of executing agencies and implementing agencies are acceptable to be used under country or agency procurement systems;

(ii) conduct sector assessments to provide a clearer picture of project implementation path; and

(iii) assess whether sectors have different legal and regulatory frameworks from international best practices.

10. To achieve the objectives of the assignment, the Project Procurement Risk Assessment Questionnaire based on ADB’s Guide on Assessing Procurement Risks and Determining Procurement Classification (Appendix 11) has been used for detailed procurement capacity assessments for the country and selected agencies. The completed Project Procurement Risk Assessment Questionnaire is available upon request.

1. National Procurement Environment

11. Until 2003, there was no standard and legal framework for public procurement in Bangladesh, and General Financial Rules (GFR) had regulated public procurement procedures and practices in Bangladesh. These rules were originally issued during the British period and slightly revised in 1951 under Pakistani rule. After Bangladesh’s independence, a few changes were made to these rules in 1994 and 1999, respectively. 12. With weak procurement performance in different government projects, a country procurement assessment was undertaken in 2001 to assess the prevailing public procurement policy, framework, institutions, and staff capacity. The country procurement assessment report5 prepared by the World Bank in 1999 (revised in May 2002), in agreement with the Government of Bangladesh, identified a number of deficiencies in the procurement system of the country:

(i) absence of sound legal framework governing public sector procurement; (ii) complex bureaucratic procedures causing delay; (iii) absence of planning; (iv) multiple layers in the approval and review process; (v) lack of adequate professional competence of staff for public procurement; (vi) generally poor quality of bidding documents and bid evaluation process; (vii) ineffective administration of contracts; (viii) absence of adequate mechanism for ensuring transparency and accountability.

13. To address the deficiencies, the government undertook initiatives to improve performance of public procurement progressively toward strengthening overall sectoral governance. A permanent unit, the Central Procurement Technical Unit (CPTU), was established in 2002. To ensure transparency and accountability in the procurement of goods, works, or services using public funds, and ensuring equitable treatment and free and fair competition among all persons wishing to participate in such procurement, the government enacted Public Procurement Act 2006 (hereinafter called PPA 2006) on 6 July 2006. Under the framework of PPA 2006, the government subsequently issued Public Procurement Rules 2008 (hereinafter called PPR 2008) effective 31 January 2008. These reflect the reform process taken by the government to streamline public procurement.

5 World Bank. 2002. Bangladesh—Country Procurement Assessment Report, Volume 1. Dhaka.

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14. Bangladesh currently has a uniform legal framework for procurement, which is comprehensive and accepted by international development partners. The objective of the legal framework is to provide procedures to be followed so as to ensure transparency and accountability in the procurement of goods, works, or services using public funds; and to ensure equitable treatment and free and fair competition among all persons wishing to participate in such procurement. The legal framework ensures non-discrimination in the bidding process. The national legislation ensures a transparent bidding process such as the publication of procurement plan, proper advertisement, availability of bidding documents from the advertisement date, providing bidding documents to those who wish to purchase, mandatory committees for bid opening and evaluation, allowing bidders to attend bids opening, sharing opening report at the bid opening meeting, mandatory external members in the evaluation committee, and strong complaints-resolution mechanisms. It has a standard bidding process as well as standard terms and conditions of contracts prepared in line with international best practices. It has effective contract management processes. All agencies using public funds are required to follow national procurement laws or development partners’ guidelines and regulations as per loan agreements.

2. Constraints in the National Procurement System

15. The national procurement law was prepared following the United Nations Commission on International Trade Law model and world best practices. Since its initiation, the law has been amended several times. There still remain several limitations for the national procurement system of Bangladesh, which include the following:

(i) In case of Open Tendering Method when used in the context of national contracting for works contracts, the cost estimate is not disclosed, and bids are rejected if the price is higher or less than 10% of the cost estimate.

(ii) With respect to the Limited Tendering Method as used in the context of national contracting for works contracts of less than 30 million taka (Tk), the cost estimate is disclosed, and bids are rejected if the price is higher or less than 5% of the cost estimate. In case of a tie in the prices bid, procuring entities are permitted to use a lottery system to determine the successful bid.

(iii) In case of Limited Tendering Method, past procurement experiences are not required for enlistment of bidders.

(iv) There is a provision in the law that allows for “multiple dropping”, meaning tenders may be submitted at more than one location designated by the procuring entity.

(v) Goods procurement does not allow joint venture bidding. (vi) There is no provision in the bidding document for cross-discount or least cost

combination procedure. (vii) National procurement framework does not allow certain globally accepted

consultancy services methods such as quality-based selection (QBS). It restricts use of 90:10 ratio in the quality and cost-based selection (QCBS) method. It allows a provision for performance security for consultancy services (for firms).

(viii) The government does not have any harmonized standard bidding or proposal documents. All documents remain as preliminary working drafts.

3. Electronic Government Procurement System

16. Currently, both manual and electronic systems are operating in the country and the national law does not compel the agencies to use the system. Bangladesh introduced an electronic government procurement (e-GP) system in June 2011. The system is a single web portal developed under e-GP guidelines and PPA 2006. The e-GP was piloted for four agencies,

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i.e., Roads and Highways Department, Bangladesh Rural Electrification Board, Bangladesh Water Development Board, and Local Government Engineering Department in 2011 and is now being rolled out to 1,291 agencies and organizations under 47 ministries. At present, a total of 254,837 bids have been invited through the portal. On average, 300 tenders are getting closed every day in the e-GP system. The system allows only national bidding for procurement of goods and works, and is running with full functionality up to contract award. Redundant internet connectivity (150 MBPS) from two separate vendors ensures access. All devices have redundancy to ensure availability. Operations can be recovered in any adverse situation within 4 hours. A capacity of 200 terabytes (TB) is provided for data storage and backup. The Bangladesh Computer Council and Bangladesh e-Government Computer Incident Response Team monitor and provide guidance on cyber security of the e-GP system. Furthermore, a World Bank project mission team also looks after the security preparedness of the e-GP system every 6 months. The system is operated under the e-GP Guidelines and PPA 2006. 17. The Bangladesh e-GP system is comprehensive, covering procurement planning up to final payment including contract management and performance measurement. There are different types of stakeholders using the system such as procuring entity, bidders, bank users, committee members, approving authority, government users, and administration members. All stakeholders are required to be registered in the system. All relevant forms for stakeholders are available online but they cannot go beyond their jurisdiction. The introduction of e-GP has contributed to substantial improvements in the overall efficiency of public procurement, with specific reference to reducing inappropriate, coercive, or collusive bidding practices; improving the speed of the procurement process; significantly reducing the number of complaints; and reducing overall transaction costs.

4. Overall Assessment of National Procurement System

18. The national procurement law is comprehensive and accepted by international development partners with some reservation for works procurement. The standard bidding document is prepared following the national law as well as international practices. Bid invitation procedures are transparent with broad advertising in print media. Tenders and contract award notices are both published, allowing sufficient time for the submission of bids. The permanent and independent Tender Evaluation Committee evaluates the bid. All bids submitted after the time prescribed are rejected and returned without being opened. Complaints and disputes management mechanism are in place, which address grievances related to procurements and contract administration. The introduction of e-GP has improved overall efficiency of the system, particularly in reducing inappropriate, coercive, or collusive bidding practices and improving the speed of the procurement transaction. Overall, the country’s legal and regulatory framework is robust despite a few minor deficiencies that can easily be corrected through a national competitive bidding (NCB) letter. The overall national procurement environment in respect of risks is rated as “moderate”.

Procurement Risk Assessment of Implementing Agencies 19. This section provides procurement management assessment for the main implementing agency, SDCMU, and training implementing agencies and partners under SEIP. For each type of implementing agency or partner, risk assessments in five areas have been conducted, namely, organizational and staff capacity, information management, procurement practices, effectiveness, and accountability measures.

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1. Skills Development Coordination and Management Unit

20. The Finance Division in the Ministry of Finance is the executing agency for SEIP. The project management unit, SDCMU, was established in 2015 for facilitating, coordinating, and monitoring the implementation of SEIP. The staff of the SDCMU is headed by its executive project director (EPD) and consists of government officials recruited through a competitive process (and on leave from their official posts), as well as other specialists competitively recruited as consultants. The SDCMU is guided by the national project director (currently the Secretary of the Ministry of Finance) and the project steering committee. 21. A procurement capacity and risk assessment has been conducted for SDCMU. The risk assessments for several procurement aspects are categorized as low, moderate, substantial, and high. Table 2 shows the risk assessment for each of these aspects, along with the overall risk rating.

Table 2: Procurement Risk Assessment for SDCMU

Risk Assessment Element SDCMU

Organizational and staff capacity Moderate Information management Low Procurement practices Moderate Effectiveness Low Accountability measures Low

Overall risk assessment Low Source: Asian Development Bank.

22. A brief description of the five areas of procurement risk assessment for SDCMU is presented below.

Organization and Staff Capacity

23. Being the main implementing agency and project management unit for the overall program, SDCMU is largely responsible for its own procurement as well as large and complex procurements of partner agencies under SEIP. It undertakes all types of procurement including goods, works and services, which mostly involve NCBs and shopping. 24. Presently, 55 full time staff,6 headed by the EPD, are working in SDCMU. All the staff in SDCMU have been recruited through a competitive process and contracted for the program. SDCMU consists of government officials on leave and other specialists recruited as consultants. For Tranche 1, all staff and consultants of SDCMU were financed by a cofinancing grant from the Swiss Agency for Development and Cooperation. From Tranche 2, their salaries have been financed by the project loan, as cofinancing was no longer available for Tranche 2. 25. There is no separate procurement unit in the SDCMU but a group of staff and consultants are specifically assigned to conduct all procurement activities of SDCMU and other partner agencies. Under the deputy executive project director (DEPD, Fund Management and Administration), one assistant executive project director (AEPD, Fund Management and Procurement); one project officer; and two procurement consultants conduct all procurement transactions.

6 SDCMU has 55 positions: EPD - 1, DEPD - 3, AEPD - 10, Project Officer - 8, Accounts Officer - 1, Accountant - 3 Computer Operator - 9, Support staff - 7, Cleaner - 2, and 10 consultants including 1 international consultant.

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26. The staff have adequate knowledge and experiences in the procurement of goods, works, and consultancy services. They are well versed with national procurement policies and procedures and the development partners’ procurement procedures. The head of the procurement team has more than 20 years’ experience in the procurement management field. He has a high level of English language proficiency (verbal and written). Moreover, SDCMU has established a seven-member permanent independent procurement evaluation committee (the Tender Evaluation Committee) headed by DEPD (Fund Management and Administration). The SDCMU office is well equipped with office equipment including computers to undertake all required procurement activities. 27. SDCMU is yet to use the e-GP. It is preparing for registration in the system. The relevant consultants have good knowledge of e-GP.

Information Management

28. The procurement capacity assessment of the SDCMU indicates that it has a manual filing and an IT-based record keeping system with adequate record keeping infrastructure, which includes record keeping systems, space, equipment, and personnel to administer the procurement record management function. 29. All the documents related to procurement, together with evaluation reports and signed contracts, are kept in safe custody for at least 5 years after project completion to be available for future inspection, audit, and institutional memory. Additionally, a copy of the original invitation document, bidding documents, winning bid or proposal, and contract papers are retained in a single contract file. Subsequently, copies of invoices and relevant documents with contract papers are kept in the account office for payment. However, the SDCMU does not have a systematic database for procurement information. There is a need for SDCMU to strengthen its information management system.

Procurement Practices

30. Procurement of Goods and Works. The agency follows the national procurement law. It also follows ADB’s procurement procedure when the procurement is financed by an ADB loan in full or in part. Since SEIP was approved in 2014 and implementation rolled out in 2015, SDCMU follows the old procurement framework for both Tranche 1 and Tranche 2. Given the continuity of project activities through Tranche 3, SDCMU will continue to follow the old procurement framework. 31. SDCMU generally uses NCB and shopping (RFQs) methods for goods and works contracts. Occasionally, it invites bids for goods through international competitive bidding (ICB) method, especially for training equipment. Technical specifications are usually prepared using own professional expertise. The preparation of the commercial and legal parts of bidding documents and the drafting of advertisements have been done by their own experts. 32. A systematic process to identify procurement requirements is in place. SDCMU follows a procurement planning process. Invitations to bid for NCBs and ICBs are advertised in respective media. Time limits for submission of bids have been provided in the advertisements and bid documents. Bids submitted after the prescribed time are rejected and returned without being opened. The bid opening sheet is not shared with bidders but information is read aloud at bid opening. Bids are evaluated by the respective independent committees including external experts and contracts are awarded to the lowest evaluated responsive bidders after receiving approval

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from the appropriate authority as per delegation of financial power. The execution of contracts and contract management activities need to be further improved as it was observed during assessment that a few contracts were extended or amended after the expiration of the original contract periods; some assignments were not accomplished within the contracted period under lumpsum contracts; and price adjustments of few contracts were not executed in a timely manners, etc. 33. Consulting Services. The SDCMU has significant expertise in the recruitment of consultants. It has experience in recruiting consultants following national procurement procedure as well as development partners’ consulting services recruitment procedures. It generally recruits consultants following QCBS, Consultants’ Qualification Selection, and Individual Consultant Selection methods using ADB’s consulting services recruitment procedure. 34. SDCMU has experience in the preparation of terms of reference (TOR), request for expression of interest (REOI), request for proposal (RFP), and evaluation of proposal. It has a seven-member independent proposal evaluation committee including two external members. It does have good expertise in the consultant recruitment process as it does for goods and works. The main concern is that SDCMU needs more staff to manage consulting contracts, given the large number of contracts for individuals and consulting firms. SDCMU needs to pay close attention to contract management by assigning staff exclusively to the task of contract management. 35. Electronic Government Procurement (e-GP) System. SDCMU is yet to be registered in the e-GP system. It will use the e-GP system mainly for procurement of works and goods.

Effectiveness 36. Procurement effectiveness depends on well-written technical specifications with a quality bidding document, evaluation as per the criteria mentioned in the document, quality contract management with good monitoring mechanism and timely payment, and effective management for settlement of complaints and disputes. The main risks for SDCMU related to effective procurement is the delay in processing and limited quality assurance. 37. Contractual obligations are monitored and tracked by DEPD (Fund Management and Administration), who reports directly to the EPD. The DEPD also monitors and tracks its contractual payment obligations. The accounts officer makes a payment within 20–30 days of receiving invoices, which are supported by relevant documents, compared to the standard 56 days’ period. The SDCMU diligently tracks its contractual performance as well as payment obligations. 38. The SDCMU follows national procurement laws and standard bidding and proposal documents (either standard tender document [STD] or request for expression of interest). The Public Procurement Act 2006 and Public Procurement Rules 2008 of Bangladesh describe the complaint resolution mechanism. There is a formal nonjudicial mechanism for dealing with the complaints and appeal, which is strictly followed by SDCMU. The procedure for dealing with disputes has been mentioned in the STD as well in the contract. All disputes are resolved through this procedure, which are supported by written narratives such as minutes of evaluation, minutes of negotiations, and notices of default or withheld payment at the contractual stage. The agency is aware of the process and no significant complaints and disputes have been observed during the assessment.

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Accountability Measures 39. The SDCMU follows national procurement laws (PPA 2006 and PPR 2008) that define the accountability measures in the procurement management. The PPR 2008 sets the TOR of every official involved in the procurement process starting from the approving authority at the top, down to the procuring entity. Most importantly, the PPR 2008 sets the time frame, especially for the completion of evaluation, issuance of notification of award, etc. 40. Staff involved in the procurement process are required to follow standard statements of ethics, and to declare any potential conflict of interest by removing themselves from the procurement process as per national law (PPR 2008). Detailed provisions on conflict of interest leading to ineligibility are clearly mentioned in laws, which are fully complied with during the entire procurement process. During the entire procurement process, SDCMU follows the code of conduct and ethics as per PPA 2006 and PPR 2008. 41. There is a specific committee consisting of technical members and finance members, including external members, for bid evaluation. The bid evaluation committee has the responsibility of evaluating and ensuring that the procurement procedures outlined by bidding documents are followed, and recommends awarding of contract. Approval of estimate, technical specification, bidding document, invitation for bids (IFB), evaluation report, contracts, etc. are outside the responsibility of the procurement committee and are done by the EPD of SDCMU. The same officials are not responsible for all procurement transactions, including payment; recording of procurement transactions and events; and custody of assets, which ensure low risk in accountability measures.

2. Government Implementing Agencies

42. There are four government agencies implementing the training program of SEIP. These are the Directorate of Technical Education (DTE) under the Ministry of Education; the Bureau of Manpower Employment and Training (BMET) under the Ministry of Expatriate Welfare and Overseas Employment; the Bangladesh Industrial Technical Assistance Centre (BITAC) under the Ministry of Industry; and the Bangladesh Road Transport Corporation (BRTC). Results of the procurement capacity and risk assessment for these agencies for Tranche 3 preparation is shown in Table 3.

Table 3: Procurement Risk Assessment for Implementing Agencies Risk Assessment Element DTE BMET BRTC BITAC

Organizational and staff capacity Substantial Moderate Moderate Moderate Information management Moderate Moderate Moderate Moderate Procurement practices Substantial Substantial Moderate Substantial Effectiveness Moderate Moderate Moderate Moderate Accountability measures Low Low Low Low

Overall risk assessment Moderate Moderate Moderate Moderate DTE = Directorate of Technical Education, BMET = Bureau of Manpower Employment and Training, BRTC= Bangladesh Road Transport Corporation, BITAC = Bangladesh Industrial Technical Assistance Centre. Source: Asian Development Bank.

43. Table 3 shows that the overall procurement-related risk is assessed as “moderate” for all four government agencies. For specific areas, accountability measures is assessed as “low” and information management and effectiveness is assessed as “moderate”. For some areas, the rating varies across the four agencies: “organizational and staff capacity” is assessed as substantial” for DTE, while it is assessed as “moderate” for the remaining three government

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agencies. Procurement practices is assessed as “substantial” for DTE, BMET, and BITAC, while BRTC is appraised as “moderate”. Among six sanctioned positions by SEIP, four staff are working at DTE. The procurement risk is that sole staff of the unit or DTE, i.e., the assistant director of the unit has some knowledge on procurement through RFQ and NCB including preparation of technical specifications and draft of bidding documents. If he is transferred to the other unit of DTE, the project may suffer in execution of procurement. The other three agencies generally procure through RFQs. They have limited experience in procurement transactions through NCB and other procurement methods including consultancy services. They have limited knowledge on the preparation of technical specification and drafting bidding documents. Therefore, they were assessed as “substantial” in the procurement risk category. The areas assessed as “substantial” are being addressed in the risk mitigation plan, with measures such as arrangement of awareness programs for procurement requirements, procurement capacity building programs, etc. that are recommended in the plan. The brief description of the above five procurement risk assessment areas for these agencies is summarized below.


44. For the implementation of SEIP training programs initially under Tranche 1 (DTE, BMET, and BITAC), no separate project implementation units were established, since all SEIP training courses were conducted in public institutes (TTCs under BMET, TSCs under DTEs, and BITACs). Also, training in public institutes is being financed by the government’s counterpart funding following its existing budgetary procedures. Any major procurement of equipment (e.g., training equipment) for these agencies has been carried out centrally by SDCMU; only training materials are procured through existing government procedures at public training institutes. When motor driving training programs were added under Tranche 1 and Tranche 2, PIUs were established within BMET, DTE, and BRTC. So far, only BRTC is allowed to carry out its own procurement. It undertakes procurement of goods by inviting bids through NCBs and RFQs. For other agencies like BMET and DTE, the main role of PIUs is to coordinate training activities, rather than to carry out any major procurement activities. For major procurement items for DTE and BMET (e.g., training equipment, motor vehicles), especially those financed by the ADB loan, it will continue to be carried out centrally by SDCMU. 45. As per the business plan, BMET, BITAC, and BRTC are fully staffed, while in DTE two positions (contractual) remain vacant as of December 2018. Most of the positions are filled by agency staff whose work includes their regular duties. The agency staff are compensated by allowances from SEIP. Few staff are recruited through competitive process and contracted for the program, since their main role is to coordinate and monitor the training activities. 46. There is no separate procurement unit in the PIU but a group of staff of PIUs are assigned to conduct procurement activities of the project, as needed. The staff have knowledge and experience in procurement of goods through RFQs and NCBs. They are acquainted with national procurement policies and procedures as well as the development partner procurement procedure. Two staff of PIU of DTE have knowledge and experience in procurement of goods. The jobs are transferable and it is the major source of procurement risk in PIU. All agencies’ permanent independent procurement evaluation committees (the Tender Evaluation Committee) are headed by PIU head. The PIU has well-established office equipment including computers to undertake the planned procurement. 47. The PIUs of BMET, BITAC, and BRTC are yet to use the e-GP system. The staff do not have knowledge and experiences in procurement through e-GP. The PIU of DTE has knowledge and experience in procurement through e-GP.

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48. The procurement capacity assessment of DTE, BMET, BITAC, and BRTC indicates that they have a manual filing and record keeping system with adequate record keeping infrastructure that includes record keeping systems, space, equipment and personnel to administer the procurement record management function. 49. All the documents related to procurement, including evaluation reports and signed contracts, are kept in safe custody for at least 5 years after project completion for future inspection, audit, and institutional memory. Additionally, a copy of the original invitation document, bidding documents, winning bid or proposal, and contract papers are retained in a single contract file. Subsequently, copies of invoices and relevant documents with contract papers are kept in the account office for payment. However, there is a need for strengthening information management system.


50. Procurement of Goods and Works. The DTE, BMET, BITAC, and BRTC follow the national procurement law, which is comprehensive and accepted by international development partners with some reservation for works procurement. They are required to follow ADB’s procurement procedure, if ADB funds are being used for any proportion of procurement. 51. The staff of PIU have experiences in procurement of goods under government funding and have familiarity with the development partner-funded procurement. They generally use RFQs methods for goods procurement. Sometimes, they use NCB for goods procurement. They do not have expertise on ICB packages. The staff do not have adequate knowledge on works contracts. They have inadequate knowledge on the preparation of technical specifications. The staff have limited experience in the preparation of the commercial part and legal part of bidding documents and drafting of advertisement. 52. The above-mentioned government agencies follow the procurement planning process. Invitations to bid for NCBs are advertised in respective media. Time limits for submission of bids are provided in the advertisements and bid documents. Bids submitted after the prescribed time are rejected and returned without being opened. The bid opening sheet is not shared with bidders but information is read aloud at bid opening. Bids are evaluated by the respective independent committees including external experts, and contracts are awarded to the lowest evaluated responsive bidders after receiving approval from the appropriate authority as per delegation of financial power. Some weakness is observed in the execution of contracts. 53. For Tranche 3, following previous practices under Tranche 1 and Tranche 2, any major procurement of training equipment or civil works for these agencies will be carried out centrally by SDCMU. Only training-related materials and tools, which are considered as part of the unit cost for training, will be procured by these agencies. BRTC has been allowed to procure its own goods and materials through its PIU under Tranche 1 and Tranche 2, and this will continue under Tranche 3, if required. For modernization of training facilities and equipment for BITAC under Tranche 3, all procurement of civil works and equipment will be undertaken by SDCMU. 54. Consulting Services. The above government agencies have expertise in the recruitment of consultants except for BRTC. BRTC has experience in recruiting consultants following national procurement procedures, generally through the QCBS method. The agency has experience in the preparation of TOR, REOI, RFP, and evaluation of proposal. It has an independent proposal

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evaluation committee including two external members. However, no major procurement is expected for BRTC under Tranche 3 other than routine recruitment of trainers for motor driving courses supported by SEIP. 55. Electronic Government Procurement System. The PIUs of BMET, BITAC and BRTC are yet to use the e-GP system. The staff do not have knowledge and experiences in procurement through e-GP. PIU of DTE has knowledge and experiences in procurement through e-GP.

Effectiveness

56. The contractual obligation is monitored and tracked by PIU staff and reported directly to the head of PIU. PIU also monitors and track its contractual payment obligations. The accounts office makes payment within 30 days of receiving invoices that are supported by relevant documents, compared to the standard 56 days’ period. The agency diligently tracks its contractual performance as well as payment obligations. 57. The agencies follow national procurement laws and standard bidding and proposal documents (STD/SRFP). The PPA 2006 and PPR 2008 describe the complaint resolution mechanism. There is a formal nonjudicial mechanism for dealing with complaints and appeals, which is strictly followed by the agencies. The procedure for dealing with the disputes has been mentioned in the STD as well in the contract. All disputes are resolved through this procedure, which are supported by written narratives such as minutes of evaluation, minutes of negotiations, and notices of default or withheld payment at the contractual stage. The agencies are aware of the process and no significant complaints and dispute-related evidence has been observed during the assessment.

Accountability Measures

58. DTE, BMET, BITAC and BRTC follow national procurement laws (PPA 006 or PPR 2008). Staff involved in the procurement process are required to follow a standard statement of ethics, declare any potential conflict of interest, and remove themselves from the procurement process as per national law (PPR 2008). Detailed provisions on conflict of interest leading to ineligibility are clearly mentioned in laws, which are fully complied with during the entire procurement process. During the entire procurement process, the above agencies follow the code of conduct and ethics as per PPA 2006 and PPR 2008. 59. All four agencies have procurement committees consisting of technical and finance members including external members for bid evaluation. The bid evaluation committee has the responsibility of evaluating and ensuring that the procurement procedures outlined in the bidding document are followed, and for recommending award of contract. Approval of estimate, technical specification, bidding document, IFB, evaluation report, contract, etc. are outside the preview of the procurement committee and done by heads of agencies. The same officials are not responsible for all procurement transactions including payment; recording of procurement transactions and events; and custody of assets, which ensures low accountability risk.

3. Industry Associations

60. There will a total of 13 industry associations (including one industry sector council) and one nonprofit organization to implement training programs under SEIP Tranche 3. All industry associations are registered under Section 28 of the Companies Act, 1994 as nonprofit organizations.

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61. For Tranche 1, nine industry associations were engaged to implement training programs for SEIP. Prior to the signing of contracts with these associations, procurement capacity assessments were carried out, although PIUs were not yet established at the time. All procurement under Tranche 1, including training equipment, office equipment, and office furniture, were undertaken centrally by SDCMU. No civil works were involved under Tranche 1. During the processing of Tranche 2, procurement capacity assessments were updated for these industry associations to assess the capacity of established PIUs. 62. During Tranche 1 implementation and for Tranche 2, four additional industry associations were engaged, which included BAPA, BWCCI, ISC-TH, and REHAB. Procurement capacity assessments were undertaken before the signing of contracts. Again, all major procurement of training equipment has been carried out by SDCMU, while the procurement of minor training tools and office furniture were allowed for some of these agencies. 63. For all these implementing partners, training programs are organized in their own training centers, outsourced training centers, or training centers attached to individual companies. The organization of training courses and training centers are the responsibility of industry associations based on an industry’s skill demands and job opportunities. All the details of training courses and training centers are outlined in the business plan, together with training capacity assessments for each of training centers. The business plan is being reviewed and endorsed by SDCMU, after which ADB clearance is sought. 64. All industry associations and other partners engaged under Tranche 1 and Tranche 2 will continue to implement training programs for SEIP Tranche 3, based on the new business plan. No industry associations will undertake the procurement of works or major training equipment; those activities will be done centrally by SDCMU. Based on the procurement capacity assessment, only selected industry associations will be allowed to carry out own procurement of minor office equipment and training materials required in own training centers, as needed. Table 4 summarizes the procurement risk assessment for each of these associations across different risk elements, in view of the scope of procurement activities to be carried out under Tranche 3. 65. Table 4 shows that the overall procurement-related risk is assessed as “moderate” for nine associations and “substantial” for four associations. However, for each element, the risk tends to vary. For procurement risk elements on “information management” and “effectiveness,” all 14 associations are rated as “moderate.” For “organizational and staff capacity” and “procurement practices,” all associations are assessed as “substantial.” For the areas rated as “substantial,” risk mitigation measures have been prepared in the procurement action plan. The brief description of risk assessments for each of the five areas is summarized in Table 4.


66. For all industry associations, PIUs have been established for SEIP training implementation. PIUs consist of chief coordinator, training coordinator, financial management, procurement, job placement, and other staff. PIUs are responsible for their own procurement (if not done centrally by SDCMU) as well as some procurement for their own training centers. PIUs undertake procurement of some goods, which are done mostly by inviting bids through RFQs. 67. As per the business plan, almost all industry associations are fully staffed except BEIOA and BWCCI. Three positions—Assistant Coordinator (Job Placement), Assistant Coordinator (Monitoring), and Executive Administrative Officer of BEIOA—are vacant. In BWCCI, the position

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Chief Coordinator is vacant since February 2019; other vacant positions are Training Coordinator and Account Assistant.

Table 4: Procurement Risk Assessment for Industry Associations

Name of Association

Risk Assessment Element Overall Risk Assessment

Organization & Staff Capacity


Procurement Practices Effectiveness


AESOIB Substantial Moderate Substantial Moderate Moderate Moderate BACCO Moderate Moderate Substantial Moderate Substantial Moderate BACI Substantial Moderate Substantial Substantial Moderate Substantial BAPA Moderate Moderate Substantial Moderate Moderate Moderate BASIS Substantial Moderate Substantial Substantial Moderate Substantial BEIOA Substantial Moderate Substantial Moderate Moderate Moderate BGMEA Substantial Moderate Substantial Moderate Substantial Substantial BKMEA Moderate Moderate Substantial Moderate Moderate Moderate BTMA Substantial Moderate Substantial Substantial Moderate Substantial BWCCI Substantial Moderate Substantial Moderate Moderate Moderate ISC-TH Substantial Moderate Substantial Moderate Moderate Moderate LFMEAB Substantial Moderate Substantial Moderate Moderate Moderate REHAB Moderate Moderate Substantial Moderate Moderate Moderate

AEOSIB= Association of Export Oriented Shipbuilding Industries of Bangladesh, BACCO = Bangladesh Call Center Operators' Association, BACI = Bangladesh Association of Construction Industry, BAPA = Bangladesh Agro-Processors Association, BASIS = Bangladesh Association of Software and Information Services, BEIOA = Bangladesh Engineering Industry Owners’ Association, BGMEA = Bangladesh Garment Manufacturers and Exporters Association, BKMEA = Bangladesh Knitwear Manufacturers and Exporters Association, BTMA = Bangladesh Textile Mills Association, BWCCI = Bangladesh Women Chamber of Commerce and Industry, ISC T&H = Industry Skill Council for Tourism and Hospitality Sector Ltd., LFMEAB = Leathergoods & Footwear Manufacturers & Exporters Association of Bangladesh, REHAB = Real Estate and Housing Association of Bangladesh. Source: Asian Development Bank.

68. While many industry associations do not have a designated procurement unit in the PIU, a group of staff are assigned to conduct all procurement activities of the project. The staff have knowledge and experiences in procurement of goods through RFQs, but they do not have adequate knowledge and experiences in NCBs. Most of the agencies do not have understanding on the standard bidding documents. Staff do not have experience in recruiting consultants or executing works contracts. All associations do not have a permanent independent procurement evaluation committee. Some of the associations form procurement committee on a case-to-case basis. The PIUs do not have knowledge and experiences in procurement through e-GP.


69. All industry associations have manual filing and record keeping systems with adequate record keeping infrastructure, including record keeping systems, space, equipment, and personnel to administer the procurement record management function. 70. All the documents related to procurement along with evaluation reports and signed contracts are kept in safe custody for at least 5 years after project completion for future inspection, audit, and institutional memory. Additionally, a copy of the original invitation document, bidding documents, winning bid or proposal, and contract papers are retained in a single contract file. Subsequently, copies of invoices and relevant documents with contract papers are kept in the account office for payment. There is a need for further strengthening information management system.

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71. Procurement of Goods and Works. Industry associations follow the national procurement procedure and have less familiarity with the procedure or requirement of development partners. The PIUs conduct a small amount of procurement transactions throughout the year, which include the procurement of only small value goods through direct cash purchase and RFQs. Most PIUs do not have experience in procurement through NCBs. They do not have experience in executing works contracts. In most cases, PIUs do not use standard bidding documents. They have limited knowledge on the preparation of technical specifications. They do not have adequate knowledge to prepare the commercial part and legal part of bidding documents. 72. Consulting Services. Most of industry associations do not have experience in recruiting consultants except for BACCO and BTMA. BACCO recruits consultants through single source selection (SSS) for curriculum development but the recruitment process was not followed properly. BTMA also recruits resource persons through SSS method. The staff are not familiar with standard consultant recruitment procedures. 73. Electronic Government Procurement System. The industry associations do not use the e-GP system. The staff do not have knowledge and experiences in procurement through e-GP.

Effectiveness

74. In most of the cases, the contractual obligation is monitored and tracked by PIU staff and reported directly to the head of PIU. The PIU also monitors and tracks its contractual payment obligations. The accounts officer makes payment within 30 days of receiving invoices supported by relevant documents. 75. The agencies follow national procurement procedure. The PPA 2006 and PPR 2008 describe the complaint resolution mechanism. There is a formal nonjudicial mechanism for dealing with the complaints and appeal. Except BACI, BASIS, and BTMA, most of the staff of PIUs are aware of the complaint resolution mechanism process and no significant complaints and disputes have been observed during the assessment. The staff of BACI, BASIS, and BTMA do not have experience in or knowledge on the formal nonjudicial mechanism for dealing with complaints.


76. The industry associations follow national procurement laws (PPA 2006 and PPR 2008). Except BACCO and BGMEA, most of the staff in the PIUs involved in the procurement process follow standard statements of ethics, declare any potential conflict of interest, and remove themselves from the procurement process as per national law (PPR 2008). Detailed provisions on the conflict of interest leading to ineligibility are clearly mentioned in laws, which are fully complied with during the entire procurement process by the industry associations. 77. All of the associations have a procurement committee consisting of technical and finance members including external members for bid evaluation. The bid evaluation committee has the responsibility of evaluating and ensuring that the procurement procedures outlined in the bidding document are followed, and recommending award of contract. Except BACCO and BGMEA, approval of estimate, technical specification, bidding document, IFB, evaluation report, contract

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etc. are outside the purview of procurement committee and these are done by the head of the agencies. The same officials are not responsible for all procurement transactions including payment; recording of procurement transactions and events; and custody of assets, which ensures low accountability risk. In the case of BACCO and BGMEA, the same officials are involved in the procurement and financial transactions and the same person is involved in the evaluation, contract approval, and payment process, which are the major sources of risk in the procurement transaction.

4. Universities and Other Implementing Agencies

78. The following four universities and one research institution have been implementing training programs for SEIP from Tranche 2, while two autonomous bodies have been from Tranche 1. One more autonomous body, the Trust Technical Training Institute (TTTI), will be engaged under Tranche 3 for implementation of motor driving training. For those previously engaged under Tranche 1 and Tranche 2, the procurement capacity assessment has been carried previously before signing the contract and undertaking training programs. Based on the previous assessments, the universities and BIGM are allowed to carry out their own procurement of goods, which mostly include office furniture and office equipment (e.g., computers, printers).7 79. A procurement capacity and risk assessment has been carried out for the above institutions as part of Tranche 3 preparation. The risk assessment for each procurement elements has been conducted for potential risk categorization of low, moderate, substantial, and high. Table 5 summarizes the assessments.

Table 5: Procurement Risk Assessment for Universities and Other Agencies

Name of Association

Risk Assessment Element Overall Risk Assessment

Organization & Staff Capacity


Procurement Practices Effectiveness


BIGM Substantial Moderate Moderate Moderate Moderate Moderate BRACU (BIGD) Low Moderate Moderate Moderate Moderate Moderate BUTEX Substantial Moderate Substantial Moderate Moderate Moderate EWU Substantial Moderate Substantial Moderate Moderate Moderate BB-SME Substantial Moderate Substantial Moderate Moderate Moderate PKSF Moderate Moderate Moderate Moderate Moderate Moderate TTTI Substantial Moderate Substantial Moderate Moderate Moderate

BIGM = Bangladesh Institute of Governance and Management, BIGD = BRAC Institute of Governance and Development, BUTEX = Bangladesh University of Textiles, EWU = East West University, BB-SME= Bangladesh Bank’s Small and Medium Enterprise Department, PKSF= Palli Karma-Sahayak Foundation, TTTI = Trust Technical Training Institute. Source: Asian Development Bank.

80. Table 5 shows that the overall procurement related risk is assessed as “moderate” for all seven education institutes and autonomous bodies. For risk elements such as “information management”, “effectiveness”, and “accountability measures”, all seven institutes are rated as “moderate.” “Organizational and staff capacity” is assessed as “substantial” for BIGM, BUTEX, EWU, BB-SME, and TTTI, while it is rated as “low” and “moderate” for BRACU and PKSF. “Procurement practices” is assessed as “substantial” for BUTEX, EWU, BB-SME, and TTTI, while it is rated “moderate” for BIGM, BRACU, and PKSF. Please note that TTTI is under preparation for the business plan to be implemented under Tranche 3, and hence it does not have an established PIU yet. The elements related to “substantial” are being addressed in the risk

7 Dhaka University, which was to implement mid-level managerial training programs, has not yet started the

implementation of proposed programs.

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mitigation plan, which need to be focused and implemented during implementation under Tranche 3. A brief description of above five procurement risk assessment elements is summarized below.


81. The PIUs have been established at BIGM, BRACU (BIGD), BUTEX, and EWU for implementation of mid-level executives training programs since Tranche 2, and at BB-SME and PKSF for skills training programs since Tranche 1. PIUs are responsible for their own procurement, mostly office equipment and training materials. PIUs undertake procurement of goods generally through NCBs and RFQs. 82. As per the business plan, all six agencies are fully staffed. Most of PIU positions at BUTEX, EWU, BB-SME, and PKSF are filled in by the institute’s existing staff and they are working in addition to their regular duties. The staff are compensated by allowances from SEIP except BB-SME. A few staff are recruited through a competitive process and contracted for the program. On the other hand, all staff of BIGM and BRACU are recruited on a contractual basis. TTTI is working with its existing staff. 83. Although there is no separate procurement unit in the PIU, a group of PIU staff are assigned to conduct all procurement activities of the project. The staff have knowledge and experience in procurement of goods through RFQs. Though they procured goods through a few NCB contracts, they do not have adequate knowledge in NCB procedures. Staff do not have experience in recruiting consultants or executing works contracts. One staff of PIU at EWU has knowledge and experience in procurement of goods. The jobs are contractual and is the major source of procurement risk in PIU. All agencies have a permanent independent procurement evaluation committee (the Tender Evaluation Committee). The staff do not have knowledge and experience in procurement through e-GP.


84. The procurement capacity assessment of the above institutes indicate that they have a manual filing and record keeping system with adequate record keeping infrastructure that includes record keeping systems, space, equipment, and personnel to administer the procurement record management function. 85. All documents related to procurement along with evaluation reports and signed contracts are kept in safe custody and are obliged for safekeeping at least 5 years after project completion for future inspection, audit, and institutional memory, as per memorandum of understanding with SDCMU. Additionally, a copy of the original invitation document, bidding documents, winning bid or proposal, and contract papers are retained in a single contract file. Subsequently, copies of invoices and relevant documents with contract papers are kept in the account office for payment. There is a need for further strengthening the existing information management system.


86. Procurement of Goods and Works. The BIGM, BUTEX, BB-SME, and PKSF follow the national procurement. BRACU (BIGD) follows BRAC University’s procurement procedure as well as BRAC (NGO) procurement procedures, which are similar to government procurement procedure. EWU has its own procurement procedure. It is a brief procedure that is prepared following government procedure and it refers to the PPR 2008 for detailed procedures.

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87. All institutes follow the national procurement procedure and have less familiarity with the procedures or requirements of development partners. The PIUs conduct a small amount of procurement transactions throughout the year and they procure only small-value goods through direct cash purchase and RFQs. Though a few staff have experience in procurement of goods through a few NCB contracts, most do not have sufficient knowledge and experience in procurement through NCBs. They do not have experience to execute works contract. In most cases, PIUs do not use standard bidding documents. They have limited knowledge on the preparation of technical specifications. The do not have adequate knowledge to prepare the commercial part and legal part of bidding documents. 88. Consulting Services. The above institutes do have expertise in the recruitment of consultants except BUTEX and EWU. They have experience in recruiting consultants by following national procurement procedure. It generally recruits consultants following QCBS, fixed budget selection, individual consultant selection, and single source selection. These agencies have experience in the preparation of TOR, REOI, RFP, and evaluation of proposal. The PIU staff of BUTEX and EWU do not have experience in the recruitment of consultants. 89. Electronic Government Procurement System. All of the institutes do not use the e-GP system. The staff do not have knowledge and experiences in procurement through e-GP.

Effectiveness

90. The contractual obligation is monitored and tracked by PIU staff and reported directly to the head of PIU. It also monitors and track its contractual payment obligations. The accounts office makes payment within 30 days of receiving invoices supported by relevant documents. The agency diligently tracks its contractual performance as well as payment obligations. 91. The agencies follow national procurement procedure and standard bidding and proposal documents (STD/SFRP). The PPA 2006 and PPR 2008 describe the complaint resolution mechanism. There is a formal nonjudicial mechanism for dealing with complaints and appeal that is strictly followed by the agencies. The procedure for dealing with disputes has been mentioned in the law. All disputes are resolved through this procedure, which are supported by written narratives such as minutes of evaluation, minutes of negotiations, and notices of default or withheld payment at the contractual stage. The agencies are aware of the process and no significant complaints and dispute-related evidence have been observed during the assessment.


92. Staff of the institutes involved in the procurement process are required to follow standard statement of ethics, declare any potential conflict of interest, and remove themselves from the procurement process as per national law (PPR 2008). Detailed provisions on conflict of interest leading to ineligibility are clearly mentioned in laws, which are fully complied with during the entire procurement process by the institutes and agencies. During the entire procurement process, the above agencies follow the code of conduct and ethics as per PPA 2006 and PPR 2008. 93. All of the universities and institutes have a procurement committee consisting of technical and finance members including external members for bid evaluation. The bid evaluation committee has the responsibility of evaluating and ensuring that the procurement procedures outlined by the bidding document are followed, and recommending award of contract. Approval of estimate, technical specification, bidding document, IFB, evaluation report, contracts, etc. are outside the preview of the procurement committee, and instead done by the heads of the

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agencies. The same officials are not responsible for all procurement transactions including payment; recording of procurement transactions and events; and custody of assets, which ensures moderate accountability risk.

Strengths

94. The country has a uniform legal framework for procurement that is comprehensive and accepted by international development partners. All agencies using public funds are required to follow national procurement laws or development partners’ guidelines and regulations as per loan agreements. The government has a set of standard bidding and proposal documents to be used for procurement. Use of standard bidding documents is mandatory for all public procurements using public funds. SDCMU follows public procurement rules and ADB’s procurement guidelines for any procurement financed by SEIP. SDCMU has a well-experienced procurement section with competent staff who have experience in delivering projects of a similar size and complexity as the proposed Tranche 3. The staff and consultants have vast experience in procurement of goods, works, and services under government funding and have familiarity with procurement procedures of development partners. They are conversant with standard bidding and proposal documents of GOB and ADB. Technical specifications have been prepared using own professional expertise. The preparation of the commercial part and legal part of bidding documents and the drafting of advertisement following standard bidding documents have been performed by their own experts. Annual audits and post-procurement reviews have been carried out regularly and there were no significant observations. 95. Other public implementing agencies, universities, and NGOs also follow public procurement rules while using public funds. The staff have experience in procurement of goods and services under government funding, using standard RFQs. Since these institutes are to carry out mostly the procurement of office equipment and training materials for SEIP, their experience should be sufficient in managing the required procurement of limited goods, if necessary.

Weaknesses

96. To ensure efficiency, economy, transparency, and fair competition in the procurement process, the use of e-procurement is a good solution. National laws do not compel the agencies to use the system. Both manual and electronic systems are operating in the country. Now the government encourages the agencies to use the system. There is no registration fees for government agencies, and they can register in the system at any time of the year. The Central Procurement Technical Unit, on behalf of government, has been providing e-GP training to the government officials free of cost throughout the year. SDCMU and other government agencies, except DTE, are yet to be registered in the e-GP system. They do not yet have experience to procure through the e-GP system. With proper training on its use and capacity building support, these agencies should be able to use the e-GP system and maximize the benefits in procurement transactions. 97. The private sector partners, namely industry associations, are not fully aware of public procurement procedures and are not conversant with the standard bidding documents and contract administration. Their procurement environment is not mandated to follow national procurement rules nor they do practice any other international standard procurement procedure. However, some of these partners do have experience in procurement using public funds under development projects. In such circumstances, based on the procurement capacity assessment, procurement risk mitigation measures have been prepared to build their capacity, so that more transparent transactions can be undertaken under SEIP.

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Procurement Risk Assessment and Management Plan

98. Given the implementation modality of training delivery established under SEIP Tranche 1 and Tranche 2, the project procurement risks assessment has been updated for implementing agencies and implementing partners, based on the analysis of their past procurement transactions, updated surveys of key project implementing units and personnel, and discussions with stakeholders. Most of the implementing agencies and implementing partners are the ones that had been engaged since Tranche 1 and Tranche 2. A few new agencies have also been included in the assessment. The strengths and weaknesses of procurement capacity were assessed from the perspective of (i) organizational and staff capacity; (ii) information management; (iii) procurement practices (goods and works, consulting services and payment practices); (iv) effectiveness; and (v) accountability measures. On the basis of the above assessments, a procurement action plan has been prepared considering the likelihood of occurrence and degree of impact, using the scales of high, substantial, moderate, low, along with mitigation and management measures. The action plan is in the facility administration manual (Appendix 3). All risks are not analyzed. The risks that are unlikely to impact upon the projects are discarded. However, important or high risks are taken into consideration, which is very likely to impact the implementation of the agency’s proposed procurement.

III. PROJECT-SPECIFIC PROCUREMENT THRESHOLDS 99. Except as ADB advises otherwise, the following process thresholds shall apply to procurement of goods and works (Table 6).

Table 6: Procurement and Consulting Methods and Thresholds Procurement of Goods and Works

Method Threshold Comments

International Competitive Bidding for Goods

$2,000,000 and above

National Competitive Bidding for Goods

Between $100,001 and $1,999,999

The first NCB is subject to prior review; thereafter, post-review

Shopping for Goods Up to $100,000

International Competitive Bidding for Works

$15,000,000 and above

National Competitive Bidding for Works

Between $100,001 and $14,999,999

The first NCB is subject to prior review; thereafter, post-review

Shopping for Works Up to $100,000

Consulting Services

Method Comments

Quality and Cost Based Selection

Consultants’ Qualifications Selection

Fixed Budget Selection External audit firm

Individual Consultants Selection

Single Source Selection Trainee Monitoring System, where training providers will be engaged using the customized grants contracts used in Tranches 1 and 2, no submission 1–4

NCB = National Competitive Bidding. Source: Asian Development Bank.

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IV. PROCUREMENT PLAN

100. The procurement plans of SEIP Tranche 3 are shown in the facility administration manual (Appendix 3). In Tranches 1 and 2, the SDCMU is responsible for major procurement of goods, works, and consulting services for the program. Tranche 3 includes two works packages: for renovation of BITAC and BACI training centers. Goods packages are also included for procurement of training equipment of BITAC and BACI. For Tranche 3, the number of consulting packages is 10, as several services will continue during the overlap period of Tranche 2 and Tranche 3. Two pools of individual consultancy packages have been included in the procurement plan for supporting SDCMU and other agencies. Three consultancy packages have been included as indicative packages for external audit, labor market study, and tracer study, which will be required beyond an 18-month period. 101. Fourteen industry associations, PKSF, and BB-SME will be engaged through single source selection to conduct industry-oriented training, which will basically continue the programs supported under Tranches 1 and 2. Given the need for certain associations to procure specified items, SDCMU may delegate the procurement to these associations, for which the procurement capacity assessment have been conducted at the loan processing stage. During implementation of Tranche 3, a monitoring and support mechanism from the SDCMU may be developed for the procurement activities of these associations.

V. CONCLUSION 102. This Project Procurement Risk Assessment (PPRA) was carried out for 25 implementing agencies and partners for SEIP Tranche 3 in accordance with ADB’s Guide on Assessing Procurement Risks and Determining Project Procurement Classification (August 2015). Among these agencies, 5 are government agencies including the project management unit (SDCMU), 14 are private sector associations, 4 are educational institutes, and 2 are NGOs. These agencies are more or less familiar with government procurement procedures as well as ADB’s procurement guidelines. The government agencies including SDCMU, educational institutes, and NGOs have experience in implementing government as well as ADB-funded projects. The main weaknesses of the private sector are their lack of experience in implementing development partner-financed projects, and the limited number of staff with procurement knowledge. 103. Based on the risk elements and considering the strength and weakness of procurement capacity, this review recommends adopting overall procurement risk rating for SDCMU as “Low’’ with few risks that have low impact and not likely to occur. If they should occur, the risk rating for four government agencies (DTE, BMET, BITAC, and BRTC); four educational institutes (BIGM, BIGD, BUTEX, and EWU); BB-SME; and PKSF is “moderate”, with few risks likely to occur and to have low impact, if they do occur. For the remaining 14 private sector associations, the risk ratings range from “moderate” to “substantial” with few risks unlikely to occur but have high impact, if they should occur. 104. To mitigate procurement risks, public procurement procedure as well as ADB procurement procedures must be followed. The agreed standard bidding documents for goods and works, and RFP document of ADB must be used. Annual procurement plans; advertisement of invitations for bids in respective media; sufficient time limit for bid preparation; proper formation of bid opening committee and bid evaluation committee; awarding the contract to the lowest evaluated responsive bidders after receiving approval from appropriate authority; regular monitoring; post-review; and complaint mechanism should be ensured. To assure quality and to strengthen

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institutional capacity, periodic updating of procurement plans and post-procurement review of implementing partners may help improve the procurement capacity of the relevant agencies. The detailed procurement risk mitigation plan has been described in the Procurement Risk Assessment and Management Plan. It is expected that with the implementation of the recommended risk-mitigating measures, the procurement management capacity of the proposed implementing agencies will be strengthened and project procurement risk will be reduced, thus providing reasonable assurance that funds of GOB and ADB will be used for their intended purposes. The general recommendations on procurement environment and agency are in Table 7.

Table 7: Procurement Risk Assessment and Management Plan

Risk Description Risk Rating Mitigation Measures Responsibility

Lack of experience in using the national online procurement system may affect project implementation progress

Moderate • SDCMU will designate staff to handle electronic procurement for the project and undergo the required training for e-GP

• ADB will provide support to SDCMU in using e-GP

SDCMU, ADB

Limited knowledge of government procurement rules and standard procurement documents

Moderate • SDCMU will organize regular procurement workshops to familiarize the implementing partners on government procurement rules and standard procurement documents

SDCMU, Implementing Partners

Lack of well- established practices for procurement of goods, works, and services

Moderate • SDCMU will develop a manual for procurement of goods, works, and services including standard documents to guide the implementing partners


Lack of systematic database on procurement information at SDCMU and inadequate monitoring of procurement transactions of implementing partners

Moderate • SDCMU will develop a web-based procurement monitoring system that can track progress of procurement activities from advertisement until contract completion

• Annual fiduciary reviews will include post-review of procurement transactions done by the Implementing Partners


Weak contract management capacity to monitor multiple consultant contracts

Low • SDCMU will hire consultants with expertise on contract management to monitor consultants’ contracts

SDCMU

ADB = Asian Development Bank, APP = annual procurement plan, CPTU = Central Procurement Technical Unit, GOB = Government of Bangladesh, e-GP = Electronic Government Procurement, PPA = Public Procurement Act, PPR = Public Procurement Rules, SDCMU = Skills Development Coordination and Monitoring Unit. Source: Asian Development Bank.