AFGHANISTAN COUNTRY PROCUREMENT ASSESSMENT: CONSULTING...

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AFGHANISTAN COUNTRY PROCUREMENT ASSESSMENT: CONSULTING SERVICES June 2007 Procurement Services Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. 68156 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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  • AFGHANISTAN

    COUNTRY PROCUREMENT ASSESSMENT:

    CONSULTING SERVICES

    June 2007

    Procurement Services Unit

    South Asia Region

    This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed

    without World Bank authorization.

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  • ABA Afghan Builders Association

    ADB Asian Development Bank

    AICC Afghanistan International Chamber of

    Commerce

    AISA Afghanistan Investment Support

    Agency

    ARDS Afghanistan Reconstruction and

    Development Services

    ARDS PU Afghanistan Reconstruction and

    Development Services Procurement

    Unit

    ARTF Afghanistan Reconstruction Trust Fund

    ASCE American Society of Civil Engineers

    Bank The World Bank

    CEU Contract Evaluation Unit

    CMO Contract Management Office

    CPIA Country Policy and Institutional

    Performance Assessment

    CQS Selection Based on the Consultants

    Qualification

    CSC Civil Service Commission

    DFID UK Department for International

    Development

    EC Evaluation Committee

    EoI Expression of Interest

    EPAP Emergency Public Administration

    Project I and II (World Bank)

    FBS Fixed Budget Selection

    FTP Full Technical Proposal

    GDP Gross Domestic Product

    GoA Government of Afghanistan

    GTZ Gesellschaft fuer Technische

    Zusammenarbeit (German Development

    Agency)

    IDA International Development Association

    IRS Internationally Recruited Staff

    LCS Least Cost Selection

    LICUS Low-Income Countries Under Stress

    LM Line Ministry

    LRS Locally Recruited Staff

    MoE Ministry of Economy

    MoEW Ministry of Energy and Water

    MoF Ministry of Finance

    MoFA Ministry of Foreign Affairs

    MoLSA Ministry of Labor and Social Affairs

    MQS Minimum Qualifying Score

    NGO Non-Governmental Organization

    NO No Objection

    NSP National Solidarity Program

    ODA Official Development Assistance

    PA Public Administration

    PACBP Public Administration Capacity

    Building Project

    PC Procurement Consultant

    PDT Peace Dividend Trust (NGO)

    PLO Procurement Liaison Officer

    PMU Project Management Unit

    PPL Public Procurement Law

    PPU Procurement Policy Unit (within the

    MoF)

    PR Rules of Procedure for Public

    Procurement in Afghanistan

    PRR Priority Reform & Restructuring

    Framework

    PRP Procurement Reform Program

    PU Procurement Unit (within ARDS)

    QBS Quality-Based Selection

    QCBS Quality- and Cost-Based Selection

    RFP Request for Proposals

    SPC Special Procurement Commission

    SRFP Standard Request for Proposal

    SSS Single-Source Selection

    STP Simplified Technical Proposal

    ToR Terms of Reference

    TSU Technical Support Unit

    TTL Bank Task Team Leader

    UNDP UN Development Programme

    Guidelines 2004 Bank Guidelines on the Selection

    and Employment of Consultants by

    World Bank Borrowers

    Vice President : Praful C. Patel

    Country Director : Alastair J. Mckechnie

    Sector Director : Barbara Kafka

    Sector Manager : Els Hinderdael-Forger

    Task Team Leader : Shawkat M.Quamrul Hasan

  • PREFACE ...................................................................................................................................................................II

    EXECUTIVE SUMMARY ...................................................................................................................................... III

    INTRODUCTION ....................................................................................................................................................... 1

    COUNTRY ECONOMIC BACKGROUND ........................................................................................................................ 1 PUBLIC AND PRIVATE SECTOR DEVELOPMENT .......................................................................................................... 1 SECURITY SITUATION ................................................................................................................................................ 1 CONSULTING SERVICES IN AFGHANISTAN ................................................................................................................. 2 PAST DEVELOPMENTS AND TA IN THE AREA OF PUBLIC PROCUREMENT .................................................................. 2 OBJECTIVES AND EXECUTION OF ASSESSMENT ......................................................................................................... 3

    FINDINGS & RECOMMENDATIONS .................................................................................................................... 4

    BANK POLICY ON SELECTION OF CONSULTANTS ....................................................................................................... 4 The Banks Response to Crises, Emergencies and Fragile States ....................................................................... 4 Weighing QBS against QCBS .............................................................................................................................. 5

    GOA POLICY ON CONSULTANTS ................................................................................................................................ 5 LEGAL AND REGULATORY PROCUREMENT FRAMEWORK .......................................................................................... 6

    The New Public Procurement Law ...................................................................................................................... 6 Rules of Procedure for Public Procurement ........................................................................................................ 6 Recommendations to Improve the Legal and Regulatory Framework ................................................................. 8

    AFGHAN INSTITUTIONAL FRAMEWORK & ORGANIZATION OF PROCUREMENT .......................................................... 8 ARDS Procurement Unit ...................................................................................................................................... 8 Line Ministries ..................................................................................................................................................... 9 Procurement Policy Unit ................................................................................................................................... 10 Special Procurement Commission ..................................................................................................................... 10 Contract Management Office ............................................................................................................................. 10 Appeal and Complaint Mechanisms ................................................................................................................... 11 Professional Consulting Associations ................................................................................................................ 11 Recommendations to Improve the Institutional Framework .............................................................................. 11

    AFGHAN PROCUREMENT PROCEDURES AND PRACTICES .......................................................................................... 11 Available Procurement Manuals or Guidelines ................................................................................................. 11 Availability of Standard Request for Proposals ................................................................................................. 11 Recommendations to Improve Procedures & Practices ..................................................................................... 11

    BANK PROCUREMENT CAPACITY ............................................................................................................................. 11 PA PROCUREMENT CAPACITY ................................................................................................................................. 12

    Procurement Capacity of PC within ARDS ........................................................................................................ 12 Previous and Ongoing Capacity Building and Training .................................................................................... 12 Capacity within Line Ministries - Key Constraints and Challenges .................................................................. 13 Procurement Capacity in Provinces and Districts ............................................................................................. 13

    CAPACITY-BUILDING APPROACH BY PACBP AND PRP .......................................................................................... 13 RISKS WITHIN CAPACITY-BUILDING APPROACH BY PACBP AND PRP .................................................................... 14

    Efficient Selection of Consultants ...................................................................................................................... 14 Development of National Consultants................................................................................................................ 14 Capacity Building of the PA ............................................................................................................................... 15 Recommendations .............................................................................................................................................. 15

    CORRUPTION AND INTEGRITY IN PROCUREMENT OF CONSULTANTS ........................................................................ 16 Steps to be taken by Government ....................................................................................................................... 17 Steps to be taken by the Donor Community ....................................................................................................... 17

    PUBLIC SECTOR DEMAND FOR CONSULTING SERVICES ........................................................................................... 17

  • Domestically Funded Demand ........................................................................................................................... 17 Consulting Services Funded by the Bank ........................................................................................................... 18

    INTERNATIONAL SUPPLY OF CONSULTING SERVICES .............................................................................................. 19 International Participation ................................................................................................................................ 19 Performance on Consulting Service Contracts .................................................................................................. 20 Remuneration Levels .......................................................................................................................................... 20 Recommendations .............................................................................................................................................. 20

    DOMESTIC SUPPLY OF CONSULTING SERVICES ........................................................................................................ 21 The Local Consulting Sector .............................................................................................................................. 21 Main Areas of Expertise ..................................................................................................................................... 21 Performance on Public Contracts and Remuneration Levels ............................................................................ 22 Capacity Assessment of Afghan Consultancies .................................................................................................. 22 Developing Capacity of the Domestic Consulting Sector .................................................................................. 23 Overcoming the Information Gap on Consultants ............................................................................................. 24 Recommendations .............................................................................................................................................. 24

    RISK ASSESSMENT ................................................................................................................................................... 25

    ANNEX 1: LIST OF PERSONS MET ............................................................................................................................ 26 ANNEX 2: DETAILS OF GOA-FUNDED CONSULTING CONTRACTS SINCE DECEMBER 2004 ....................................... 29 ANNEX 3: BANK-FUNDED CONSULTING ASSIGNMENTS, 2003-2006 ........................................................................ 30 ANNEX 4: ASSESSMENT OF 10 BANK-FUNDED CONSULTING ASSIGNMENTS ON EOI & SUBMISSION RATES ............ 36 ANNEX 5: ASSESSMENT OF 12 BANK-FUNDED CONSULTING ASSIGNMENTS ON BILLING RATES ............................. 37

  • PREFACE

    This report was prepared by Martin Ehrenberg (Consultant, SARPS), who visited Kabul,

    Afghanistan from November 21 to December 3, 2006. It builds on the findings and

    recommendations arising from the 2005 World Bank assessment, Public Procurement for

    Development Effectiveness, prepared by Quamrul Hasan (SARPS) and Peter Trepte (Consultant

    SARPS), part of a larger Bank review of public finance in Afghanistan.1

    During the mission, meetings were held with government agencies staff, international

    consultancies currently implementing donor-financed projects in Afghanistan, academic

    institutions, private sector firms (in particular Afghan consultancies), non-governmental

    organizations (NGOs), associations, and with the resident missions of the European Commission,

    GTZ, ADB, and DFID.

    The assessment involved extensive interactions with Government agencies, whose valuable

    cooperation was indispensable and also greatly beneficial. Deepal Fernando, Senior Procurement

    Specialist, and Nargis Hakimy, Program Assistant (Procurement) in the Banks Country Office,

    provided very valuable support, advice and background information. Mariam Sherman, Acting

    Country Manager in Afghanistan, offered advice and guidance in the country throughout the

    mission. The list of persons met may be found in Annex 1.

    This work was carried out with guidance and supervision from Gian Casartelli (OPCPR), who

    extensively reviewed the report and provided many recommendations, and Quamrul Hasan

    (SARPS). Overall leadership was provided by Els Hinderdael (Regional Procurement Manager,

    SARPS).

    Ludmilla Butenko (SAC01), Nancy Zhao (SAROQ), Paul Sisk (SARFM), Devesh Mishra

    (ECSPS), Joel A. Turkewitz (SARPS), and Nagaraju Duthaluri (SARPS) reviewed the report and

    provided insightful comments.

    1 Afghanistan Managing Public Finances for Development, Volume II: Improving Public Financial Management

    and Procurement, December 22, 2005, World Bank Report No. 34582-AF.

  • AFGHANISTAN COUNTRY PROCUREMENT ASSESSMENT:

    CONSULTING SERVICES

    EXECUTIVE SUMMARY

    1. Afghanistan is striving to emerge from a prolonged period of military occupation, wars and the Taliban rule. The countrys security situation remains critical, especially outside of

    Kabul, yet the economy is stable and continues to grow. In the reconstruction process the country

    is receiving extensive donor support.

    2. Taking into consideration the World Banks country assistance strategy, this report examines whether Afghanistans Public Administration (PA) has access to the services it needs

    from international and national consultants under Bank and Afghan procurement rules. Both, the

    Banks selection procedures and the Governments (GoA) policy, laws, rules of procedure, and

    practices are examined to determine whether they (1) lead to efficient consulting contract awards

    and (2) support the development of local consulting firms. The demand and supply of

    international and domestic consulting services are assessed. In addition, this assessment

    identifies the key constraints that hamper the evolution of the domestic consulting sector.

    3. Suggestions are provided on what the GoA and the Bank could do to create an environment suitable for (1) qualified international consultants; and (2) the development of

    sustainable local consulting capacity necessary to help Afghanistan to implement its reform

    programs.

    SUMMARY OF MAIN FINDINGS

    4. Apart from the security situation, the capacity to enforce legislative reforms and the effectiveness of the PA remain critical at all levels of government and also affect the selection

    and use of consulting services. The key challenges to an efficient selection of consultants are:

    5. Limited access to qualified consultants: Based on an assessment of Bank-funded assignments from the years 2005 2007 the average number of proposals submitted per

    assignment by international consultants is only about 2.5, of which just 2.1 are awarded a score

    above the Minimum Qualifying Score (MQS). According to interviews conducted by the

    mission, international consultants do not have sufficient incentives for seeking assignments in

    the country. Many firms refrain from participating due to security concerns for their personnel.

    Lack of trust in the capacity of the PA also discourages their participation. The entry costs

    required to set up and conduct business in Afghanistan are very high. At present, those firms

    willing to work in Afghanistan are reluctant to send qualified and experienced staff to

    Afghanistan. As a consequence, the quality of the services obtained is often questionable.

    6. A local consulting sector barely exists yet. Only a few local firms have evolved over the past five years. Their main constraints are lack of qualifications and experience and limited

    familiarity with procurement processes. As a result domestic firms, if they participate at all,

    frequently fail to meet qualification criteria set by the Bank or the GoA. Lack of trust in the

    fairness and the transparency of procurement handled by the PA also discourages their

    participation.

  • Afghanistan CPA: Consulting Services Executive Summary page iv

    7. Weak procurement capacity: Procurement staff has limited familiarity with basic principles of procurement and with the stages of the procurement process. In particular, the

    executing agencies have difficulty in (1) drafting ToR; (2) organizing and conducting

    evaluations; and (3) evaluating the quality of Expressions of Interest (EoIs) and proposals. Once

    the consulting firms are selected, supervision and management of the consultants are weak.

    8. Weak English and IT skills: The low level or absence of English and IT skills is hindering capacity-building efforts. International and national procurement personnel are facing

    serious problems in interacting with local staff. The work of local translators sometimes creates

    confusion instead of facilitating communication.

    9. GoA legal and regulatory framework: While the new Public Procurement Law (PPL) adopted in October 2005 has considerably improved the legal basis of public procurement, it

    lacks (1) the necessary foundation of a clearly stated policy on consultants; and (2) a chapter

    devoted solely to consultants selection. In addition, the Procurement Policy Unit drafted Rules

    of Procedure for Public Procurement in Afghanistan which became effective on April 12, 2007.

    While these procurement rules provide sound guidance through the process of consultants

    selection and contain appropriate provisions on enforcing transparency, fair competition and the

    administrative review of procurement proceedings, they still have several shortcomings

    concerning the procurement of consultants. For example, the rules lack (1) simplified procedures

    such as the use of Simplified Technical Proposals (STP); (2) provisions on the continuation of

    assignments subject to satisfactory performance of the incumbent; and (3) necessary details on

    the selection process such as the weight allocated to price under Quality- And Cost-Based

    Selection (QCBS) or indicative weights for evaluation criteria. In addition, their complex

    structure will make it difficult for PA staff to understand and apply the rules of procedure on

    procurement. Supporting documents such as the Standard RFP and procurement manuals are not

    yet available.

    THE BANKS CURRENT STRATEGY

    10. The ongoing four-year Bank-funded Public Administration Capacity Building Project (PACBP) that started in 2005 is addressing these key challenges through three main procurement

    subcomponents:

    Subcomponent 1: Technical Assistance on procurement facilitation;

    Subcomponent 2: Capacity building of Borrowers procurement staff; and

    Subcomponent 3: Legal and institutional framework development.

    Under subcomponent 1 the Afghan PA currently draws on advisory services of an international

    Procurement Consultant (PC) to facilitate and assist international and domestic procurement

    processes. Further support for capacity building (subcomponent 2) and for the completion of the

    legal and regulatory framework for procurement (subcomponent 3) is included in the Bank-

    funded Procurement Reform Program: Procurement Capacity Building and Legal & Institutional

    Framework Development (PRP) that started on 17 March 2007.

    KEY RISKS

    11. This report finds three risks that might affect the strategy defined by PACBP and its related PRP, in the areas of consultant selection, development of national consultants, and

    capacity building for the PA.

  • Afghanistan CPA: Consulting Services Executive Summary page v

    Efficient Selection of Consultants

    12. Since it is a priority for reconstruction that the Afghan PA be reestablished, the Bank projects focus on building basic procurement capacity. The PACBP provides training to a limited

    number of key staff while the PRP includes a broad program for hundreds of trainees from all

    levels of government. However, due to PACBPs limited outreach and PRPs broad focus,

    training will only concentrate on basic subjects. In particular, PA staff will not receive training

    on consultant selection tasks, such as preparing ToR and assessing the quality of proposals.

    While specialized capacity building may be too much to expect at this stage, many parties

    interviewed expressed concerns about the credibility of the selection process given current

    deficiencies in the performance of these tasks. The same PA officials who have trouble drafting

    ToR then later are responsible for evaluating the proposals. Given this critical gap and the

    reluctance of consultants to seek assignments in Afghanistan, it is reasonable to conclude that the

    PA needs further support in evaluating proposals.

    Development of National Consultants

    13. The PRP includes basic training courses for local firms which will focus on (1) creating awareness about the new Public Procurement Law; and (2) procurement procedures for goods,

    works and consulting services. However, the following issues also need to be addressed:

    (1) The GoA and Banks procurement procedures do not sufficiently take into account the technical and administrative weakness of the PA and the local consulting firms and apply

    complex standard procurement methods where simplified ones are needed.

    (2) Neither PA nor donors have adequate information on locally available expertise and are facing difficulty identifying the few available local resources.

    Capacity Building of the PA

    14. While the PRP provides for a comprehensive capacity-building approach, its effectiveness may face serious challenges since interaction between international and national

    procurement staff is hindered by language barriers, unfamiliarity of nationals with IT systems

    and the lack of qualified translators. In addition, the training program could be compromised by

    the small number of local staff trainable in the complex procurement processes required by Bank

    or GoA regulations. Experienced PA staff is often poached by donor agencies and NGOs and the

    lack of qualified counterpart personnel in the Afghan PA often renders on the job training

    impossible. When counterpart staff is available low motivation due to low pay and limited

    opportunity for merit based promotion undermine the knowledge transfer.

    SUMMARY OF MAIN RECOMMENDATIONS

    Key Recommendations to the Government of Afghanistan

    R1: The GoA may consider developing a comprehensive policy paper on professional and expert consultants to meet the specific needs of the PA and to encourage the creation of local

    consulting firms. The 2005 Public Procurement Law only reflects basic policy principles for

    selection of consultants while the new Rules of Procedures provide the principles and

    procedures of consulting services in details. The GoA should explore the possibility of

    improving the pertinent rules of procedures depending on the changes in the country

    circumstances. Once ministries have clearly defined their mandates and their respective

    functions, a review of the range of services that local consulting firms could provide to the PA

  • Afghanistan CPA: Consulting Services Executive Summary page vi

    should be performed to decide which functions could be outsourced to local consultants.

    Drawing on experience with present Bank-funded public administration reform programs and its

    recommendations on HR planning and management, the policy should also address capacity

    building of PA staff through training and incentives.

    R2: The GoA should consider reviewing the procurement rules of procedures provisions on consultants selection in light of the special situation in Afghanistan. Since both the PA and local

    consulting sector are weak, the use of Simplified Technical Proposals (STP) should be

    considered for routine assignments designed to attract local attention. The regulation should also

    provide for the continuation of assignments subject to satisfactory performance and necessary

    details on the selection process such as the weight allocated to price under Quality- And Cost-

    Based Selection (QCBS) or indicative weights for evaluation criteria. The consultants

    implementing the PRP could provide advice on the revision of the procurement rules of

    procedure.

    R3: The PA is still a long way away from being able to efficiently select consultants. The GoA (with support from the Bank) should therefore consider assigning reputable consulting

    firms with strong procurement expertise in the field of the specific projects to the task of

    conducting proposal evaluations under major Bank-funded projects in close cooperation with the

    PA. The same consultants could also be entrusted with the quality and administrative control of

    the contracts and with building capacity. In particular, Bank-funded projects that cannot rely on

    the support of internationally staffed Project Management Units (PMUs) or Technical Support

    Units (TSUs) should benefit from this approach. For smaller Bank-funded projects, specialized

    individual consultants should be assigned to Evaluation Committees.

    R4: Since Afghan consultancies can best develop their capacity through associations with international firms, the Requests for Proposals (RFP) and the Terms of Reference (ToR) for

    internationally competed assignments funded by the GoA should clearly identify, whenever

    possible and feasible, those components that can be executed by local consultants. In case no

    competent Afghan consultancies exist, the tender documents should clearly require from

    international firms to transfer skills and know-how to local individual advisors. Once these

    individual consultants were involved in internationally executed projects and developed their

    capacity under the supervision of experienced international consultants, they would be in a

    position to establish their own consulting companies.

    R5: Since international consultants and PA staff are having difficulty interacting effectively, the GoA (with Bank support) may consider conducting a study on local translator training

    centers and implementing a training program for translators. It is also recommended to raise the

    level of English and IT skills of national procurement staff. Therefore, the GoA may consider

    developing and implementing training modules for procurement staff in the area of English, IT

    and computer skills.

    Key Recommendations to the Bank

    R6: For Bank-funded projects that are too small to justify the use of international consulting firms as under Recommendation 3 (R3), the Bank should encourage Bank staff to more actively

    support the weakest counterpart agencies. Bank specialists in the required areas should

    extensively review and also provide input to draft ToR regarding objectives, components,

    activities, milestones, and evaluation indicators. Common weaknesses in TA projects such as the

    fragmentation into small assignments of short duration, inadequate monitoring or the disregard

  • Afghanistan CPA: Consulting Services Executive Summary page vii

    of local circumstances should be avoided by better procurement planning, and effective

    supervision.

    R7: Since continuity is essential for successful capacity building, but international participation is low and entry costs for international firms are very high in Afghanistan, the Bank

    should consider including a provision for continuation of work by the same consultant under

    Single-Source Selection (SSS) in the initial RFPs whenever justified by the characteristics and

    the circumstances of the projects.

    R8: Mirroring Recommendation 4 to the GoA (R4), the Bank should (1) provide incentives for local participation by encouraging international and local firms to form partnerships and

    associations whenever feasible; and (2) require from international firms to transfer skills and

    know-how to local individual advisors.

    R9: When drafting ToR, the security situation should be taken into account. Especially when the services are not related to capacity-building activities that need to take place locally, the ToR

    should provide for international consultants to perform services from outside the country to the

    greatest extent possible.

    R10: For consultants selections under Bank rules and conducted by the PA, the following precautions are recommended: (1) Quality-Based Selection (QBS) and Fixed Budget Selection

    (FBS) should be applied to standard assignments; (2) QCBS should only apply when clearly

    justified by the nature of the ToR; and (3) Simplified Technical Proposals (STPs) should be used

    as much as possible. Information on local consulting firms already made available by other

    stakeholders such as the NGO Peace Dividend Trust should be disseminated to the Banks staff

    and TTLs. Whenever possible and feasible local firms should be considered for small

    assignments generally procured under SSS.

    R11: To facilitate the preparation of projects and procurement plans, the Bank should consider requesting the Procurement Consultant to improve the quality of its monthly progress report by

    including data on the participation of international and national consulting firms such as (1)

    average number of EoI, size of shortlists, proposals submitted; (2) countries of origin of short-

    listed, responsive and winning firms and their categories (NGOs, consultancies, government

    agencies, etc.); (3) average billing rates; (4) number and nature of assignments for which the

    ToR require the participation of national firms; (5) nature of assignments limited to national

    participation; and (6) number and nature of assignments in which local firms are associated with

    international firms. Alternatively, the Procurement Consultant could be requested to prepare an

    annual report focusing on the points described above and complementing the monthly progress

    reports.

    R12: Finally, the Bank could also consider cooperating with two stakeholders already providing support and training to local consulting firms. The Banks PRP could (1) draw on the

    experience of the NGO Peace Dividend Trust on training courses in procurement for local

    companies; and (2) collaborate with the Engineering Capacity Building Project for local

    consulting engineering companies implemented by the American Society of Civil Engineers

    (ASCE).

  • AFGHANISTAN COUNTRY PROCUREMENT ASSESSMENT:

    CONSULTING SERVICES

    Introduction

    Country Economic Background

    1. Afghanistan is striving to emerge from a prolonged period of military occupation, wars and the Taliban rule and remains one of the worlds poorest countries with an estimated per

    capita GDP of only US$355 in 2006/07.2 The countrys security situation remains critical,

    especially outside of Kabul, yet in recent years the economy has continued to grow in this

    volatile political, economic and security environment. Real GDP for 2006/07 is estimated at

    US$8.88 billion and projected to grow by 11% in 2007/08 (excluding opium production). The

    macroeconomic environment has been stable and inflation returned to a moderate level in

    2005/06 (approx. 5%).

    Public and Private Sector Development

    2. Starting in 2002, the GoA has introduced a number of structural reforms. A new Income Tax Law, a revised Customs Code, a modern Public Finance and Expenditure Management Law,

    a strengthened Procurement Law, Rules of Procedure for Public Procurement, a new Civil

    Service Law, and a revised Law on Foreign and Domestic Investment are in place. Fiduciary

    standards have been strengthened and administrative reforms have been undertaken. The GoA is

    committed to fiscal discipline but fiscal sustainability remains a challenge. In 2004/05, total

    public expenditures amounted to US$3.4 billion, of which only US$0.9 billion was implemented

    by the GoA. Revenue mobilization remains low at 5.5 percent of GDP in 2005/06, one of the

    lowest ratios in the world, and domestic revenues cover only half of total operating expenditures

    in the Governments core budget. Almost all public sector consulting services contracts are

    externally funded. Continued progress in reform of Afghanistans Public Administration (PA)

    and the rule of law are critical for progress, but PA capacity is still very limited.

    3. Achievements in private sector development include the establishment of the Afghanistan Investment Support Agency (AISA) as a one-stop shop to register firms,

    3 approval of a Banking

    law, licensing of more than a dozen commercial banks, and creation of an Industrial Park

    Authority.

    Security Situation

    4. Apart from challenges of education, health, and infrastructure, the lack of security is the main obstacle to Afghanistan's reconstruction program. The country has not yet fully emerged

    from its state of conflict and the security situation in the country has deteriorated since April

    2004. Even major NGOs are reluctant to send their national staff to the provinces where conflict

    is ongoing. International experts avoid travel within the country, and when they do, they either

    keep a low profile or hire extensive and costly security support. As a result, studies and reports

    2 See Bank document Interim Strategy Note Islamic Republic of Afghanistan for the Period FY07-FY08 (February

    2007), p. 6, Table 1: Macroeconomic Indicators. 3 Afghanistan is ranked 17 out of 175 countries for ease in starting a business according to the Banks Doing

    Business Report 2007.

  • Afghanistan CPA: Consulting Services Main Report page 2 of 37

    are frequently based on old data since visiting missions in dangerous provinces are rarely

    feasible. Compared to the provinces where the conflict is ongoing the security situation in Kabul

    is relatively stable. However, attacks on international staff, threat warnings, and seizure of

    explosives are common. Risks related to security lead to a low level of interest from potential

    bidders, higher costs and/or delays in assignment execution. The security situation is not likely to

    change in the medium term and will limit operational activities while requiring substantial

    security expenses.

    Consulting Services in Afghanistan

    5. Traditionally, most technical departments of the PA covered in-house their limited needs for planning, research, studies, designs, and supervision services. However, nearly 30 years of

    unrest reduced Afghanistan to political and economic ruin. The process of political

    reconstruction following the end of the Taliban regime in 2001 has had barely any significant

    impact on the creation of a domestic consulting service sector as yet.

    6. One of the most dramatic consequences of decades of turmoil was the loss of knowledge capital as the majority of skilled labor left the country. Young and qualified professionals,

    mainly educated in Pakistan, prefer to pursue careers outside Afghanistan. The risky operating

    environment in Afghanistan is also reducing the incentive for qualified foreign consultants to

    undertake assignments in the country.

    7. While extensive donor support could encourage local consultancies to emerge, the exodus of local capacity is still seriously hampering their development. The lack of basic

    professional management, English language and IT skills prevents domestic firms from emerging

    and participating in development projects. At present the local consultancy market is very small.

    The domestic supply of consulting services is discussed in detail below (paras. 69 ff).

    Past Developments and TA in the Area of Public Procurement

    8. Steps to improve the Afghan procurement environment were initiated under the First and Second Emergency Public Administration Projects (EPAP I and II) funded by the Bank starting

    in 2002. Under the Procurement Strengthening Component of the EPAP I, the Government

    appointed a consulting firm as the PAs central Procurement Consultant (PC) responsible for

    handling procurement operations under IDA and other donor-funded aid within the Procurement

    Unit (PU) of the Afghanistan Reconstruction and Development Services (ARDS).4 The purpose

    was to put in place emergency procurement capacity and to facilitate rapid and transparent

    utilization of donor resources for reconstruction.

    9. A progress review conducted in January 2004 identified key constraints in achieving EPAP I and EPAP IIs objectives and recommended further actions to be addressed by the Bank-

    funded Public Administration Capacity Building Project (PACBP), being implemented May

    2005 June 2009. Additional consulting services to be provided under the procurement

    component of PACBP were approved in 2004 and can be grouped into three main categories:

    Procurement services (subcomponent 1);

    Technical assistance on capacity building (subcomponent 2); and

    Legal and regulatory framework development (subcomponent 3).

    4 The PC provided procurement services to the Afghan Assistance Coordination Authority (AACA) until the AACA

    was dissolved in September 2003 and the AACA unit responsible for procurement was renamed ARDS.

  • Afghanistan CPA: Consulting Services Main Report page 3 of 37

    The procurement support services (subcomponent 1) are provided by the PC (currently RITES

    Ltd. from India) within ARDS.5 This assignment includes capacity building of local procurement

    counterpart staff to be trained as Procurement Liaison Officers (PLOs).

    10. Based on recommendations of the 2005 Bank assessment, Public Procurement for Development Effectiveness,

    6 the following tasks were accomplished:

    A Procurement Policy Unit (PPU) within the Ministry of Finance (MoF) was established in August 2006; and

    Rules of Procedure for Public Procurement to implement the new Public Procurement Law (PPL) were prepared by the PPU and became effective on April

    12, 2007.

    11. The international consulting firm responsible for implementing the most recent relevant assignment, the Procurement Reform Program: Procurement Capacity Building and Legal &

    Institutional Framework Development (PRP), commenced work on March 17, 2007.7 The

    objectives of this assignment cover the subcomponents 2 (capacity building) and 3 (legal and

    regulatory framework development) of PACBP and are:

    To develop local procurement capacity within Line Ministries (LMs) and to enable them to progressively carry out procurement;

    To train the PA and as far as practicable the private sector in procurement procedures and practices under the new Public Procurement Law (PPL); and

    To develop procedures under the national law and to provide further support to the PPU.

    Objectives and Execution of Assessment

    12. Taking into consideration the Banks country assistance strategy, this report examines whether Afghanistans PA has access to the services it needs from international and national

    consultants under Bank and Afghan procurement regulations. It is based on a mission that visited

    Afghanistan from November 21 to December 3, 2006; due to the security situation in

    Afghanistan and travel restrictions, the mission was limited to Kabul. The mission met with

    government agencies staff, international consultancies currently implementing donor-financed

    projects in Afghanistan, academic institutions, the private sector firms (in particular Afghan

    consultancies), non-governmental organizations (NGOs), associations, and with the resident

    missions of the European Commission, GTZ, ADB, and DFID (the list of persons met is attached

    to the report as Annex 1).

    13. The report investigates both the capacity and competence of the purchaser (PA) and also the ability of suppliers (consulting firms) to provide the required services. The Banks selection

    procedures and the Governments (GoA) policy, laws, rules of procedure, and practices are

    5 Crown Agents from UK performed the role of the Procurement Consultant (PC) from August 2002 until August

    2004. The consulting service contract with their successor RITES from India was signed in September 2004. 6 Part II (p. 52 79, prepared by Quamrul Hasan, SARPS, and Peter Trepte, Consultant) of Volume II: Improving

    Public Financial Management and Procurement, World Bank Report No. 34582-AF: Afghanistan Managing

    Public Finances for Development (In Five Volumes), December 22, 2005. 7 Charles Kendell & Partners Ltd./UK in association with the International Development Law Organization/Italy

    (IDLO) and the Chartered Institute of Purchasing and Supply/UK (CIPS).

  • Afghanistan CPA: Consulting Services Main Report page 4 of 37

    examined to determine whether they (1) lead to efficient consulting contract awards8 and (2)

    support the development of local consulting firms. The demand and the supply of international

    and domestic consulting services are assessed. In addition, this assessment identifies the risks

    concerning the current Bank capacity-building strategy and the key constraints that hamper the

    evolution of the domestic consulting sector.

    14. Suggestions are provided on what the GoA and the Bank could do to create an environment suitable for (1) qualified international consultants and (2) the development of

    sustainable local consulting capacity necessary to help Afghanistan to implement its reform

    programs.

    Findings & Recommendations

    Bank Policy on Selection of Consultants

    The Banks Response to Crises, Emergencies and Fragile States

    15. Bank Task Team Leaders (TTLs) interviewed for this report stressed the need to flexibly apply the 2004 Bank Guidelines on Selection and Employment of Consultants in Afghanistan due

    to the weak national institutions and the high risk of conflict. However, neither the Banks

    approach to Low-Income Countries Under Stress (LICUS), of which Afghanistan is a severe

    case, nor its response to crises or emergencies allow for disregarding the Guidelines. The Banks

    approach to LICUS only suggests outsourcing procurement functions in post-conflict

    environments.9 The Banks rapid response to crises and emergencies is designed to facilitate the

    Banks rapid response to emergencies and is limited to the immediate aftermath until regular

    procurement procedures can be used without comprising the timely delivery of assistance.10

    16. Nonetheless, the Banks procurement tools to cope with crises and post-conflict countries have been useful in assessing the main obstacles to efficient consultants selection in

    Afghanistan and providing recommendations for this report. The Banks response to crises and

    emergencies suggests the following procurement-related activities: (1) increased flexibility in the

    use of simplified procurement methods; (2) outsourcing of procurement and the ability to draw

    on pre-qualified procurement and project management agents through sole-source (SSS) or

    qualification-based (CQS) selection; (3) sole sourcing of consulting firms already working in the

    area and which have a proven track record for the provision of technical assistance; (4) extension

    8 Efficient contract awards result from the consideration of the Banks main policy principles defined in Art 1.4 of

    the 2004 Bank Guidelines when selecting consultants: (1) high-quality services; (2) economy and efficiency; (3)

    equal opportunities for all qualified consultants; (4) the development and use of national consultants; and (5)

    transparency. 9 Low-Income Countries Under Stress (LICUS) cover a spectrum of fragility, including countries with deteriorating

    governance, those in prolonged political crisis, post-conflict transition countries and those in gradual but still fragile

    reform processes. See Low-Income Countries Under Stress Update, OPCS, World Bank, December 19, 2005.

    LICUS are identified by weak Country Policy and Institutional Performance Assessment (CPIA) ratings. Severe

    LICUS, as Afghanistan, score lowest within this grouping. 10

    The Bank policy on rapid response to crises and emergencies policy is not intended to address economic or social

    impacts associated with prolonged poor performance by a country. It replaced the policy on emergency recovery

    assistance in March 2007. See Bank document R2007-0010 of January 17, 2007 (revised March 2007), Toward a

    New Framework for Rapid Response to Crises and Emergencies, its Supplemental Note (R2007-0010/1), and its

    Annex C (Draft OP/BP 8.00, Rapid Response to Crisis and Emergencies applicable to emergency operations

    submitted for approval after March 1, 2007).

  • Afghanistan CPA: Consulting Services Main Report page 5 of 37

    of contracts issued under existing projects for similar activities through increase in their

    corresponding contract amounts; and (5) encouraging Bank teams working on emergency

    operations to actively support counterpart agencies at various stages of the procurement process,

    including preparation of ToR, RFP, and drafting of shortlists.

    Weighing QBS against QCBS

    17. The use of Quality- and Cost-Based Selection (QCBS) has recently been questioned by many Bank TTLs in view of the high deviations in proposal prices observed in consultants

    selections. As a result, quality becomes less decisive since price turns out to be the overriding

    selection factor in many cases. This may lead to poor proposals gaining the highest overall score

    and thus to poor quality services. The prudent use of Quality-Based Selection (QBS) could

    reduce this risk by placing the main focus on quality. The benefits of using QBS should

    particularly be considered for major capacity-building or management/procurement agent

    services, which generally have a strong impact on the development of the PA and the

    implementation of projects.

    GoA Policy on Consultants

    18. The GoA has not yet developed a specific policy on consultants, which could form the basis for a legal and regulatory framework that effectively addresses the needs of the PA and the

    consulting firms. The 2005 Public Procurement Law only reflects basic policy principles for

    selection of consultants while the new Rules of Procedures (see paras. 22) provide the

    procedures of consulting services in details. However, a review has not been conducted yet

    covering

    The range of services that domestic consulting firms could provide to the PA;

    The domestic consulting sector, its characteristics, and its capacity to implement assignments funded by the GoA; or

    The quality of services that consultants have already provided to the public sector.

    To date, no consultant association has been formed in Afghanistan that could participate in a

    public sector dialogue on policy and contribute views on regulatory issues. Considering the

    weakness of the few existing consulting companies, it is presently too early to establish a

    consulting association in Afghanistan.

    Recommendation:

    19. Once ministries have clearly defined their mandates and their respective functions, a review of the range of services that local consulting firms could provide to the PA should be

    performed to decide which functions could be outsourced to local consultants. The GoA may

    then wish to consider drafting a strategy/policy paper on professional and expert consultants in

    the medium term to meet the specific needs of the PA and to encourage the creation of local

    consulting firms. The policy on consultants could cover the following areas:

    Outsourcing: Relying on present public sector reforms, the policy should indicate areas and functions for which the GoA will require the support of

    professional and expert consultants;

    Management & Capacity Development: Drawing on experience with present public administration reform programs and its recommendations on common

  • Afghanistan CPA: Consulting Services Main Report page 6 of 37

    functions like HR planning and management, the policy should address capacity

    building of the PA through training and incentives;

    Enabling Environment & Policy Dialogue: The policy should foresee means for an institutionalized public-private dialogue. This dialogue should explore

    opportunities for developing a favorable fiscal and employment policy for

    consulting firms.

    Legal and Regulatory Procurement Framework

    The New Public Procurement Law

    20. The new Public Procurement Law (PPL) prepared by the Procurement Unit (PU) of ARDS and enacted in October 2005 has considerably improved the legal basis for public

    procurement. Considering the need for reforms, the new law is certainly to be considered a major

    achievement. A proposed amendment to the PPL recently has been referred to Parliament after

    approval by the Cabinet extending the timeframe where interim procurement arrangements shall

    apply.11

    21. However, it is recommended that the following shortcomings be addressed in future amendments.

    (1) The new PPL lacks the necessary foundation of a comprehensive policy on consultants procurement (see previous section);

    (2) The PPL lacks a well-defined and user-friendly chapter on consultants selection;

    (3) The Dari language version PPL that was approved is reported to be inconsistent with the original English version from which it was translated.

    Rules of Procedure for Public Procurement

    22. The PPLs complexity and its lack of a chapter devoted to consultants procurement will make it difficult to apply under the present situation in Afghanistan. Therefore, regulations or

    rules of procedure on procurement compliant with international best practice and addressing the

    needs of both the GoA and the domestic consulting sector are fundamental for effectively

    implementing the PPL. In accordance with Art. 106(1) PPL the Procurement Policy Unit (PPU)

    developed Rules of Procedure for Public Procurement in Afghanistan which became effective on

    April 12, 2007.12

    These procurement rules (PR) provide sound guidance through the process of

    consultants selection and contain appropriate provisions on enforcing transparency, fair

    competition and the administrative review of procurement proceedings.13

    However, since the

    11

    The amendment concerns Art 104 (a) and (b) PPL. The extended timeframe for interim procurement arrangements

    are three and five years instead of one and two years respectively. 12

    The PPU had originally drafted regulations on public procurement. However, the Afghan Ministry of Justice

    decided that this document was mostly procedural in nature and did not have to be submitted to the GoA for

    approval. Therefore, the regulation was renamed rules of procedure, approved by the Ministry of Finance and issued

    by the PPU in accordance to Article 106(1) PPL. 13

    See for example Articles 157 PR (Records) and 81 PR (Publication of Notices) on transparency, Article 162 PR

    on declarations on conflicts of interest, Article 164 PR on post-employment restrictions on public officials, Article

    165 PR on avoidance of conflict of interests in consulting services, or Articles 170 ff PR on the administrative

    review.

  • Afghanistan CPA: Consulting Services Main Report page 7 of 37

    consulting firm responsible for implementing the PRP will no longer provide support to the PPU

    in improving the PR,14

    some of the remaining shortcomings of the PR are summarized here.

    (1) User-friendly Chapter on Consultants Selection: The PR lack user-friendly provisions on the selection of consultants that will allow the PA to apply the

    national law on procurement correctly. While the PR distinguish between non-

    consultancy services and consultants services they do not provide clear guidance

    on these two procedures. Several provisions concerning the selection of

    consultants can be found only when referring to other chapters of the procurement

    rules.15

    (2) Definition of Consultants and Mixed Shortlists: The PR neither define the term consultants

    16 nor do they mandate that the shortlist shall only comprise

    consultants of the same category, similar capacity, and business objectives. Thus,

    a management consulting firm might find itself in the position that it has to

    compete against a non-profit organization. If a mixed shortlist is unavoidable

    under the circumstances, QBS instead of QCBS should be applicable. In addition,

    the PR should define the terms professional and expert consultants.

    (3) Simplified Technical Proposals (STP): The PR provide for Quality- and Cost-Based Selection (QCBS), Quality-Based Selection (QBS), Fixed-Budget

    Selection (FBS), Least-Cost Selection (LCS)17

    and Single-Source Selection

    (SSS)18

    but lack specific rules for small assignments designed to attract the

    attention of local consultancies. Presently even for small assignments standard

    procedures apply while simplified procedures could be a major incentive for

    increased participation of evolving Afghan consultancies. Considering the

    widespread corruption stakeholders do not advocate the use of Selection Based on

    the Consultants Qualification (CQS). However, an alternative solution would be

    the use of Simplified Technical Proposals (STP) for routine assignments with

    insignificant downstream impacts.19

    Considering the limited capacity of domestic

    procurement staff and the local consulting sector discussed below,20

    the use of

    STPs could help to (1) improve the selection of consultants; and (2) encourage

    participation of local consulting firms.

    14

    Originally it was foreseen that the consulting firm implementing the PRP would have been responsible for

    drafting (to the extent required) and modifying the existing rules on procurement and assisting the GoA towards its

    finalization. However, amendments to the ToR for the PRP resulted in the deletion of this specific objective. 15

    For example, Article 80(1) PR simply states that procuring entities shall ensure that they have complied with all

    relevant requirements of Chapter II while this chapter also refers to the procurement of goods and (non-consultancy)

    services. Furthermore, the provision listing all available methods for consultants selection (Article 84(2) PR) lacks

    a clear reference to SSS regulated in Articles 27(1), 29 and 114ff PR. 16

    Article 3(7) PR only defines consultants services as activities of a professional, intellectual and advisory nature

    that do not lead to a measurable physical output but does not refer to different categories of consultants such as

    consulting firms, NGOs, auditors, UN agencies, universities, or research institutions. 17

    See Article 84(2) PR. 18

    See Articles 27(1), 29 and 114ff PR. 19

    For details see Section 2 (Instructions to Consultants) of the May 2004 edition of the Bank Standard RFP (SRFP).

    According to best practice STP should be used when the following conditions are met: (a) the assignment is unlikely

    to have significant downstream effects; (b) the assignment is of routine nature and the ToR already define in detail

    the objectives, tasks, and required outputs; (c) the consultants previous work experience has been sufficiently

    evaluated during shortlisting; and (d) capacity building is not a specific component of the assignment.

    20 See PA Procurement Capacity, paras. 40 ff and The Local Consulting Sector, paras. 69 ff.

  • Afghanistan CPA: Consulting Services Main Report page 8 of 37

    (4) Quality-Based Selection (QBS): QBS should be made mandatory for complex and specialized assignments with high downstream effects, and assignments that

    can be carried out in substantially different ways. Currently, Article 84 (4) PR

    only states that QBS may be used for these types of assignments, thus leaving

    room for the inappropriate use of QCBS.

    (5) Continuation of Consulting Assignments: The PR lack a provision for awarding a consultant an assignment that is a continuation of the initial contract subject to

    its satisfactory performance in the previous assignment.

    (6) Disclosure of Staff Months or Estimated Costs: According to best practice the RFP should disclose either the estimated staff months or the cost estimate (not

    both) whenever available to allow for comparable proposals.

    (7) Weight Allocated to Price under QCBS: The weight allocated to price under QCBS should be addressed within the PR.

    (8) Indicative Weights for Evaluation Criteria: The PR should provide for indicative weights to be used for the evaluation criteria. It is recommended to add

    them to the evaluation criteria defined in Article 96(3) PR.

    Recommendations to Improve the Legal and Regulatory Framework

    23. While a revision of the PPL would depend on the policy on consultants to be elaborated in the medium-term, the GoA should consider adjusting the PR by addressing the eight

    shortcomings just listed. As originally foreseen, the consultants implementing the PRP could

    provide advice on the revision of the PR.

    Afghan Institutional Framework & Organization of Procurement

    ARDS Procurement Unit

    24. The assignment of the Procurement Consultant (PC) within the PU of ARDS has two major objectives:

    (1) Procurement facilitation for all goods, works & services under operations financed directly by IDA, by the IDA-administered Afghanistan Reconstruction

    Trust Fund (ARTF), by budgetary expenditures from domestic resources21

    as well

    as, to the extent feasible, by EU, ADB and other donors; and

    (2) Capacity Building and training for ARDS key staff on procurement-related matters.

    Under supervision of ARDS the PC is assisting the Line Ministries (LMs) in procuring

    consultancy services starting with the issuing of Expressions of Interest (EoI) and shortlisting of

    consulting firms, through preparation of RFPs, receipt and opening of proposals, assistance in

    evaluation of proposals, obtaining World Banks clearance, and issue of notification of awards.

    25. Procurement for contracts using donor funds are usually subject to the rules of the respective donor organizations. However, the PC is increasingly conducting procurement for

    21

    Excluding any procurement related to police, military or paramilitary.

  • Afghanistan CPA: Consulting Services Main Report page 9 of 37

    projects financed by the GoA22

    (either own resources or budget-support proceedings) subject to

    domestic procurement rules.

    26. The table below presents the procurement of consulting services contracts assisted by the PC from 15 August 2002 until 31 March 07:

    23

    Selection Method No. of Contracts Value US$M % Contracts % Value

    QCBS 49 109.50 40.5% 44.6%

    QBS 8 13.21 6.6% 5.4%

    CQS 12 9.54 9.9% 3.9%

    SSS 52 113.19 43.0% 46.1%

    Total 121 245.44 100% 100%

    Due to the need for emergency responses a high number of consulting contracts has been

    awarded under SSS. However, 43 contracts were sole-sourced from August 2002 to November

    2004. Only 9 contracts have been awarded under SSS since December 2004.

    The Banks Department of Institutional Integrity (INT) has reviewed all cases facilitated by the

    PC, but its report has not been finalized yet.

    Line Ministries

    27. One of the key constraints identified in former reviews was that there is no consistency in the organizational structures of the Line Ministries (LMs) with regard to the procurement

    functions and processes. Despite the procurement structure foreseen by the new PPL, the various

    LM seem to have adopted different models of organizing procurement. Some ministries have

    procurement departments, while in others procurement is conducted through service or planning

    departments. According to the interviews procurement officers in LMs are sometimes not

    involved in procurement processes. The reasons for disregarding available procurement

    personnel seem to be:

    (1) Lack of trust in the capacity of the procurement personnel;

    (2) Lack of management, English and IT skills of procurement personnel and a history of frequent delays and non-performance of procurement personnel;

    (3) Lack of communication between trained procurement staff and senior officials and consequently no awareness that qualified procurement personnel might be

    available; and

    (4) Desire to retain control over the procurement process without interference of procurement personnel.

    28. In some LMs (e.g. the Ministry of Rural Rehabilitation and Development) management and procurement consultants are responsible for all matters regarding the procurement of

    services and the implementation of Bank projects. Other LMs (e.g. the Ministry of Urban

    Development), with Bank or donor support, have created Project Management Units (PMUs) and

    Technical Support Units (TSUs) and are drawing on the services of international personnel

    22

    Procurement of goods, works or services of a value exceeding US$200,000 is to be handled exclusively by the PU

    of ARDS. 23

    Prior to appointment of the current PC (RITES Ltd.), Crown Agents from UK were providing similar services to

    ARDS. The table presents all procured consultancy contracts facilitated by both RITES and Crown Agents.

  • Afghanistan CPA: Consulting Services Main Report page 10 of 37

    specialized in budgeting, finance management and procurement. International procurement

    advisors within PMUs are assigned to handle the procurement, to closely cooperate with local

    staff and to build capacity within the respective LM by constant on-the-job training. Ministries

    which currently have no PMU or TSU generally demand further support and expatriate staff

    specialized in procurement for building capacity in their counterpart procurement teams.

    29. The clarification and strengthening of procurement functions within the LM are to be addressed by the PRP. The procurement processes will be reorganized to follow institutional

    arrangements defined in the new PPL by

    Identifying 9 key spending ministries to be integrated into the Priority Reform & Restructuring (PRR) framework devised by the Civil Service Commission

    (CSC);24

    Assisting identified ministries to prepare applications for obtaining PRR status that will result in increased equipment and higher salaries in those ministries and

    will encourage adherence to the institutional structures foreseen by the new PPL;

    Providing procurement training to staff in key ministries.

    Procurement Policy Unit

    30. The PRP will further support the Procurement Policy Unit (PPU) within the MoF by drafting its rules of procedure, thus enabling the PPU to become a key player in the formulation

    of future policies, legislation and procurement rules and to execute its functions according to

    Article 94 of the PPL. These functions include monitoring procurement proceedings to ascertain

    efficiency and compliance with the law, the collection of data or reports and the review of

    procurement records and files, and proposing improvements in procurement practices. Currently,

    one international advisor (since August 2006) and 4 national staff (since September 2006) are

    running the PPU and consultancy support is expected to be phased out by PACBP credit closing

    (June 30, 2009).

    Special Procurement Commission

    31. The Special Procurement Commission (SPC) within the Office of the President provided for in Article 91 of the PPL grants approvals for all contract awards exceeding the levels of first

    grade award authorities.25

    Its rules for procedure (Transaction of Business Rules for SPC) were

    drafted by the PPU and approved on March 31, 2007. The PRP will provide further assistance to

    the SPC.

    Contract Management Office

    32. According to Article 69 of the PPL, a Contract Management Office (CMO) has been established within the MoF. It serves as the Secretariat to the SPC. According to Article 183 PR

    the CMO has the overall responsibility for planning and executing the work of SPC as well as

    record keeping.

    24

    It was envisaged that the PRP would concentrate on the full capacity development of 6 Line Ministries and 6

    Provincial Offices. However, required linkages with the provincial procurement entities are still missing. Therefore

    the consultant implementing the PRP will undertake capacity development of 9 LMs. 25

    See Annex A to the new PPL for details on thresholds for award authorities.

  • Afghanistan CPA: Consulting Services Main Report page 11 of 37

    Appeal and Complaint Mechanisms

    33. The PPU has finalized the design and implementation of an independent complaints review mechanism and the respective rules of procedure in accordance to Article 86 of the PPL.

    Articles 170 ff PR adequately provide for the administrative review of procurement proceedings

    challenged by a bidding firm. The PRP consultants will be responsible for providing further

    support and for conducting training for committee members.

    Professional Consulting Associations

    34. To date, there are no consulting associations in Afghanistan that could play a role in monitoring professional standards, representing the sector in the public-policy dialogue with the

    GoA, and in promoting the role of independent consultants in the Afghan economy. The capacity

    of the few existing local firms is still too limited. Therefore, steps towards the establishment of a

    consulting association in Afghanistan should be postponed until the local consulting sector has

    developed more capacity.

    Recommendations to Improve the Institutional Framework

    35. It is recommended that results of the PRP and INTs review of all procurement cases on consulting services facilitated by the PC within ARDS be monitored.

    Afghan Procurement Procedures and Practices

    Available Procurement Manuals or Guidelines

    36. There is an immediate need for an interpretative Manual on the Selection of Consultants. While the rules of procedure on procurement cover the general steps of the selection process,

    they lack clear guidance on specific points such as the definition of evaluation criteria, the

    composition of the evaluation committee and the evaluation process. Currently, no

    comprehensive manuals exist on the selection of consultants (such as a Good Procurement

    Manual or Consultant Services Manual). While ARDS has prepared a Quality Manual, it focuses

    only on Bank rules and lacks guidance on many specific issues such as shortlisting, defining

    evaluation criteria, and the evaluation process. Comprehensive application manuals will be

    developed under the PRP.

    Availability of Standard Request for Proposals

    37. The Standard Request for Proposals (RFP) will be developed under the PRP.

    Recommendations to Improve Procedures & Practices

    38. The consulting firm responsible for elaborating manuals and the Standard RFP should rely to the extent possible on the recommendations and advice laid down in the Bank Consulting

    Services Manual (2006). Since the PPL and the rules of procedure on procurement are inspired

    by Bank rules, many practices suggested by the Consulting Services Manual will prove very

    helpful in the Afghan context.

    Bank Procurement Capacity

    39. According to TTLs interviewed the procurement capacity of the Bank has considerably improved since a senior procurement specialist joined the Bank office in Kabul in June 2006.

    26

    26

    The Banks organizational capacity in Afghanistan is considerably higher than in other fragile states (13 IRS and

    59 LRS in Sept. 06 compared to an average of 3 IRS and 15 LRS in other fragile states). See Bank document

  • Afghanistan CPA: Consulting Services Main Report page 12 of 37

    PA Procurement Capacity

    40. There is a widespread recognition that lack of capacity is probably the greatest constraint (apart from security concerns) to achieving results in Afghanistan.

    Procurement Capacity of PC within ARDS

    41. Many TTLs interviewed expressed concern about the capacity of the PC handling procurement for the Bank and the GoA (see ARDS PU, paras. 24 ff). They concede that many

    delays are caused by time-consuming Afghan decision-making processes. However, Bank TTLs

    specifically feel that the PC lacks capacity to ensure the professional evaluation of proposals.

    Therefore, TTLs stress the need to contract in additional capacity for major Bank-funded projects

    and refer to successes gained by outsourcing the procurement services and the project oversight

    to international consultants independent from the PC (as practiced, for example, under the Bank-

    funded National Emergency Employment Program and the Emergency National Solidarity

    Project).

    Previous and Ongoing Capacity Building and Training

    42. Under EPAP I and II the PC undertook training of between 110 and 150 procurement staff from various LM. However, the training was based mostly on Bank procurement rules and

    national legislation that was then superseded by the PPL. Not all stages of the training course

    were completed as planned due to lack of resources and other pressing priorities. Training on the

    provisions of the new PPL is foreseen under the PRP.

    43. Ten Procurement Liaison Officers (PLO) were selected under EPAP II and PACBP for intensive procurement training and attended a course at the Administrative Staff College of India

    in Hyderabad. The training began in January 2004 and the PLOs were intended to provide core

    procurement capacity and to assist the LMs in building their own capacity. The plan was to

    retain the PLOs within ARDS first and to subsequently place them in the procurement units to be

    set up in the LMs pursuant to the new PPL. However, according to the most recent information,

    five of the ten PLOs left ARDS to pursue better paid careers. ARDSs loss will have a negative

    impact on the capacity-building programs within the LMs. Since the PLOs were intended to be

    transferred into at least six to nine key spending LMs specifically supported under the upcoming

    PRP, their loss might delay achievements under the new project.

    44. Further training provided by the PC under PACBP included:

    Staff of three LM (Ministry of Energy and Water, Ministry of Defense and Ministry of Mines) received a one-month training program on the new PPL and

    related procurement procedures;

    Two procurement officers of Ministry of Agriculture and Irrigation are currently receiving on-the-job training; and

    Training for other LM (4 staff members per ministry) commenced at end of November 2006.

    In addition, the GoA decided to transfer responsibility for consultant selection and administration

    to the LMs so that they can develop further capacity through increased involvement in the

    procurement processes.

    SecM2007-0018, Strengthening the World Bank Rapid Response and Long-Term Engagement in Fragile States,

    for details on the three-tiered approach for strengthening the Banks staffing and organizational support.

  • Afghanistan CPA: Consulting Services Main Report page 13 of 37

    Capacity within Line Ministries - Key Constraints and Challenges

    45. Three key issues were identified by the mission consultations and by the PC in its March 07 Progress Report:

    (1) Weak PA capacity:

    Lack of procurement capacity of LM officials;

    Weak capacity of LM procurement consultants;

    Inefficient internal procedures (for example, a requirement to obtain a No Objection (NO) from domestic higher award authorities after having

    obtained NO from donor agency);

    Lack of capacity to conduct evaluations and assess the quality of EoI and proposals (see Efficient Selection of Consultants, para. 49).

    (2) Lack of understanding of procurement principles and rules, lack of compliance and accountability at decision-making level.

    (3) Lack of adequate IT infrastructure within LMs.

    The level of capacity varies, with higher capacity in the few LM that can draw on the assistance

    of PMUs or TSUs, and lower capacity in LMs that do not have access to international advice.

    Concerns about the capacity of local staff dealing with procurement were expressed by all TTLs

    interviewed. Almost constant assistance by expatriate staff is deemed necessary for delegating

    parts of the procurement processes to local counterparts.

    46. In addition, TTLs and international consultants interviewed referred to lack of capacity in the PA for managing and supervising consulting assignments. The PA and consultants often

    seem to disagree on payment terms and on the interpretation of tasks defined in the Service

    Contracts.

    Procurement Capacity in Provinces and Districts

    47. No data on procurement in the provinces and districts was obtained by the mission. However, according to interviews with NGOs implementing the NSP, regional procurement

    entities are facing the same problems as the national authorities.

    Capacity-Building Approach by PACBP and PRP

    48. In addition to training of key procurement staff provided by PACBP mentioned in the previous section, the PRP will build capacity by:

    Developing a nationwide procurement capacity-building strategy for central, provincial and municipal governments;

    Identifying key ministries and provinces to be supported under the new project;

    Planning the transfer of procurement capacity and responsibility to LM according to a set of milestones;

    Organizing workshops for the dissemination of the new PPL;

    Assessing the procurement training needs of the procuring entities (LMs, provinces, districts);

    Developing appropriate selection criteria for trainees;

  • Afghanistan CPA: Consulting Services Main Report page 14 of 37

    Developing methodologies for implementation of a broad training program to train hundreds of trainees of all levels of government;

    Conducting a survey to identify a future procurement training centre for the country.

    Risks within Capacity-building Approach by PACBP and PRP

    Efficient Selection of Consultants

    49. Since it is a priority for reconstruction that the Afghan PA be reestablished, the Bank projects focus on building basic procurement capacity. The PACBP provides training to a limited

    number of key staff while the PRP includes a broad program for hundreds of trainees from all

    levels of government. However, due to PACBPs limited outreach and PRPs broad focus

    training will only concentrate on basic subjects. In particular, PA staff will not receive training

    on consultant selection tasks such as preparing ToR and assessing the quality of proposals. While

    specialized capacity building may be too much to expect at this stage, many parties interviewed

    expressed concerns about the credibility of the selection process given current deficiencies in the

    performance of these tasks. These concerns relate to three stages of consultant selection in

    particular:

    (1) Preparing the ToR and the RFP: According to TTLs interviewed LM staff lack experience in designing projects along with the capacity to deliver and define the

    technical inputs necessary for the preparation of ToRs. Most ToRs are drafted by

    technical advisors funded by donors.

    (2) Compiling shortlists: According to the interviews many Evaluation Committees (EC) lack the capacity to adequately examine EoIs, assess the experience and

    capacities of candidates and compile shortlists.

    (3) Evaluating submitted proposals: International consultants and donor representatives specifically question the capacity of local evaluators to adequately

    evaluate the quality of complex proposals. The stakeholders interviewed also raise

    doubts about the outcome of the evaluations of standard assignments since many

    EC seem to lack specialists in the disciplines of these assignments. The same PA

    officials who have trouble drafting ToR are then later responsible for evaluating

    the proposals.

    50. These concerns are a key challenge to attracting qualified international firms and achieving value for money in the selection of consultants. Combined with concerns about a poor

    command of English and corruption, the lack of trust in the qualifications of evaluators

    discourages qualified consultants from seeking assignments in Afghanistan (see para. 65 for

    participation rates).

    Development of National Consultants

    51. The PRP includes only basic training courses for local firms that which will focus on (1) creating awareness about the new Public Procurement Law; and (2) training on procurement

    procedures for goods, works and consulting services. The Bank program does not provide

    assistance on revising the rules of procedure on procurement although a tailor-made solution is

    needed to address the weakness of the local consulting firms (see paras. 22 no 3 and 83 for

    details and recommendations).

  • Afghanistan CPA: Consulting Services Main Report page 15 of 37

    52. Moreover, neither PA nor donors have adequate information on the available local expertise and are facing difficulty to identify the few available local resources (see paras 82 ff).

    Capacity Building of the PA

    53. According to the interviews the collaboration between expatriates and local procurement personnel often fails and training turns out to be fruitless because of insurmountable

    communication barriers. International consultants frequently reported that international and

    national procurement personnel have serious problems interacting effectively. The work of local

    translators, generally domestic PA staff members who are not fully qualified translators,

    sometimes creates more confusion and misunderstanding instead of facilitating communication.

    In addition, expatriates reported that the level of IT skills of their local counterparts is very low

    and that they are forced to allocate extensive periods of time to simple on-the-job IT training.

    54. Based on the numerous interviews conducted in the course of the mission, four constraints could hamper the current capacity-building strategy and the shift of responsibilities to

    the local counterpart procurement personnel:

    (1) Lack of effective interaction between international and national procurement staff due to language barriers;

    (2) Lack of qualified translators to facilitate effective communication between expatriates and local counterparts;

    (3) Lack of correct translations of procurement documents originally prepared in English; and

    (4) Very weak IT capacity of national procurement staff.

    In addition, the training program could be compromised by the limited availability of local staff

    trainable in complex procurement processes as required by the Bank or the GoA. Experienced

    PA staff is often poached by donor agencies and NGOs and the lack of qualified counterpart

    personnel in the Afghan PA often renders on the job training impossible. When counterpart staff

    is available low motivation due to low pay and limited opportunity for merit based promotion

    undermine the knowledge transfer.

    Recommendations

    55. While most issues are already addressed by the upcoming PRP, the GoA and the Bank may consider the following approaches to address remaining risks within the capacity-building

    approach of the PACBP and PRP.

    (1) Professional evaluations of proposals are fundamental for achieving value for money and attracting qualified international consultants. The GoA (with support

    from the Bank) should therefore consider assigning reputable consulting firms

    with strong procurement expertise in the field of the specific projects to the task

    of conducting proposal evaluations under major Bank-funded projects in close

    cooperation with the PA. The same consultants could also be entrusted with the

    quality and administrative control of the contracts and building capacity. In

    particular, Bank-funded projects that cannot rely on the support of internationally

    staffed Project Management Units (PMUs) or Technical Support Units (TSUs)

    should benefit from this approach.

    (2) For Bank-funded projects that are too small to justify the use of international consulting firms to handle proposal evaluation and contract management, the

  • Afghanistan CPA: Consulting Services Main Report page 16 of 37

    Bank should encourage Bank staff to actively support counterpart agencies at

    defining the technical input for ToR. Bank specialists in the required areas of

    expertise should extensively review and also provide input to draft ToR regarding

    objectives, components, activities, milestones, and evaluation indicators.

    Common weaknesses in TA projects such as the fragmentation into small

    assignments of short duration, inadequate monitoring or the disregard of local

    circumstances should be avoided by better procurement planning and effective

    supervision. Furthermore, consultants with expertise in the required fields should

    be assigned to Evaluation Committees.

    (3) The GoA (with support from the Bank) may wish to consider addressing the lack of qualified translators by designing and implementing a training program at a

    selected training institute for future translators.

    (4) In addition, the GoA may consider developing and implementing training modules for the procurement staff in the area of English, IT and computer skills.

    Recommendations for the development of the local consulting sector are provided in para. 83.

    Corruption and Integrity in Procurement of Consultants

    56. All persons interviewed at international and domestic consulting firms complained about nepotism and corruption. Most of the local consultants interviewed consider it useless to apply

    for GoA-funded projects without having a special relationship with the government officials and

    decision-makers involved. Corruption is especially threatening to international firms or Afghans

    returning from overseas who do not have powerful patrons or fully understand how the local

    system works.

    57. According to the interviewees negative public perceptions of widespread corruption at all levels of GoA have increased,

    27 threa