Project Procurement Risk Assessment and Management Plan (P ... · adopted “Kazakhstan-2050”...

Central Asia Regional Economic Cooperation Corridors 1 and 6 Connector Road (Aktobe–Kandyagash)

Reconstruction Project (RRP KAZ 52286)

Project Procurement Risk Assessment and

Management Plan (P-RAMP)

Country: Kazakhstan

Project: CAREC Corridors 1 and 6 Connector Road (Aktobe–

Kandyagash) Reconstruction Project Project Number: 52286-001

Sector: Transport

Source of Funding: TA 9134-KAZ

Date: October 2018

http://www.adb.org/Documents/RRPs/?id=52286-001-3

http://www.adb.org/Documents/RRPs/?id=52286-001-3

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Contents

Abbreviations and Acronyms ....................................................................................................................................... 3

I. Executive Summary ......................................................................................................................................... 4

II. Introduction ..................................................................................................................................................... 6

III. Project Procurement Risk Assessment ...................................................................................................... 11

A. Overview ........................................................................................................................................................ 11

B. Strengths ........................................................................................................................................................ 16

C. Weaknesses ................................................................................................................................................... 16

D. Procurement Risk Assessment and Management Plan (P-RAMP) ................................................................ 17

IV. Project Specific Procurement Thresholds .................................................................................................. 31

V. Procurement Plan .......................................................................................................................................... 31

VI. Conclusion .................................................................................................................................................. 31

Annex 1 – Procurement Questionnaire ..................................................................................................................... 32

Annex 2 – Draft Procurement Plan ............................................................................................................................ 45

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Abbreviations and Acronyms

ADB ............................................................................ (Asian Development Bank)

Agency ....................................................................... (KazAvtoZhol)

CE ............................................................................... (Cost Estimate)

CS ............................................................................... (Consultancy Services)

CSPRA ......................................................................... (Country and Sector/Agency Procurement Risk Assessment)

CW .............................................................................. (Civil Works)

EA ............................................................................... (Executing Agency)

EBRD .......................................................................... (European Bank for Reconstruction and Development)

GRM ........................................................................... (Grievance Redress Mechanism)

PMU ........................................................................... (Project Management Unit)

PP ............................................................................... (Procurement Plan)

PPL ............................................................................. (Public Procurement Law)

P-RAMP ...................................................................... (Project Procurement Risk Assessment and Management Plan)

ToR ............................................................................. (Terms of Reference)

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I. Executive Summary

1. Overall Assessment of Project Procurement Risk

ADB requires that project and agency procurement risks be assessed and mitigated at

the project level as part of project preparation. The project/agency procurement risk

assessment is intended to (i) identify risks in agency procurement systems and/or

practices that could result in sub-optimal use of national and/or ADB resources; (ii)

assess the severity of the risk; and (iii) develop a practical risk management plan to

address high or significant procurement risks at the project level which could adversely

impact project implementation and/or achievement of project outcomes.

A project procurement risk assessment was conducted based on the following

assumptions:

• Standard bidding documents to be used under the main CW Contract(s) will be

based on ADB SBDs – Large works, 1 Stage 2 Envelope;

• The role of Executing Agency will be taken by government Joint Stock

Company KazAvtoZhol;

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• ADB procurement policy1 and ADB regulation2 will be applied to the proposed

project.

To identify and mitigate possible risks, the present Project Procurement Risk

assessment was launched in December 2017 and finalized in September 2018. It aims

at scrutinizing in detail current procurement practices and capacity of the EA,

determining its capability in handling the upcoming challenges and proposing capacity

building activities.

As a result of this study, the overall procurement risk of the project was identified as

“Extreme” on the scale of Extreme, High, Medium and Low. A summary of main

weaknesses of the EA are described in the following paragraph.

2. Summary of Weaknesses and Risks Identified at Project Level

I. Low level of English proficiency in the procurement unit, as well as the agency

overall;

II. Overcommitted procurement staff not having enough capacity to undertake

procurement under proposed project;

III. Limited knowledge, experience and trainings in IFI procurement rules –

absence of knowledge, experience and trainings in ADB procurement rules and

procedures;

IV. Lack of knowledge, experience and trainings in FIDIC contract modality;

V. Absence of PMU for the proposed project;

VI. No complaints resolution / grievance redress mechanism in the agency or in the

Contracts signed under agency’s proprietary procurement rules;

Above is the summary of main procurement risks identified during the assessment and the

detailed list of all risks is provided in main body of the report.

3. Summary of Recommendations and Proposed Mitigation Measures

I. The EA must be supported by a Procurement Consultant to assist them in

development of the procurement documents and in the evaluation procedures,

to guide them up to the point of signing the Contract(s);

II. It is recommended that the ruling language for bidding documents be English,

while the IA may issue unofficial Russian translations in order to facilitate

preparation of bids by local bidders. In addition, requesting the bidders to

submit bids in English accompanied with Russian Translation will also support

the evaluation process, as the members of tender committee do not speak

English, but in any case English should remain as a ruling language throughout

the procurement process.

1 ABD Procurement Policy – Goods, Works, Nonconsulting and Consulting Services (2017, as amended from

time to time) 2 Procurement Regulations for ADB Borrowers - Goods, Works, Nonconsulting and Consulting Services (2017,

as amended from time to time)

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III. It is recommended to compose two groups from the key staff of EA to undergo

capacity building trainings. Group 1 – (Procurement) composed of at least head

of procurement unit and at least one specialist – to undergo preferably 2 weeks

training in ADB procurement guidelines; Group 2 – (Contract Management)

composed of at least 1 person from procurement unit, 1 from legal unit, 1 from

financial unit and preferably 2 persons from road maintenance unit – to undergo

preferably 10 days / 2 weeks training in FIDIC Contract management.

IV. It is a strong recommendation that ADB procurement regulations and standard

procurement documents be applied to all procurement transactions under the

proposed project through relevant indications in the Loan/Financing

Agreement. ADB procurement rules must obtain legal force and prevailing

power over local legislation, in order to avoid any cases of conflicting

regulations. Such approach is necessary because (together with all other

reasons) the project is targeting international bidders as well as local and if the

project will employ EA’s procurement rules, there is a very high risk that

international bidders will not be able/interested to prepare bids under such

procurement rules which may result in very low or no competition at all.

V. It is recommended that ADB provides increased oversight on all procurement

activities under the proposed project and also on the contract management part

at least in the first years (as it is also required by the new procurement

regulations for ADB borrowers (2017)).

The detailed list of risks and respective mitigation measures is provided in the P-RAMP, in the

main body of the report.

II. Introduction

1. Methodology of Procurement Risk Assessment

Current assessment under PPTA (Project Preparatory Technical Assistance) TA-9134

KAZ was prepared in accordance with the ADB (Asian Development Bank) Guide on

Assessing Procurement Risks and Determining Project Procurement Classification

dated August 2015.

The CSPRA (Country and Sector/Agency Procurement Risk Assessment) was

undertaken from December 4 to December 8 (inclusive) 2017. Preparation activities

included reviewing documents, ADB’s ongoing procurement experience, and

interviews with counterpart and discussions with stakeholders.

2. Background and Objectives: ADB requires that project and agency procurement risks

be assessed and mitigated at the project level as part of project preparation. The

project/agency procurement risk assessment is intended to (i) identify risks in agency

procurement systems and/or practices that could result in sub-optimal use of national

and/or ADB resources; (ii) assess the severity of the risk; and (iii) develop a practical

risk management plan to address high or significant procurement risks at the project

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level which could adversely impact project implementation and/or achievement of

project outcomes.

Key objective is to improve procurement performance, reduce procurement time,

increase administrative efficiency, improve procurement harmonization in the country

with financing from different IFIs and improve project delivery while maintaining

sound fiduciary oversight.

3. Scope of the task3: The scope includes the following tasks: a) Carry out an assessment

of the EA (Executing Agency) to conduct procurement of Goods, Works and Services

in terms of staffing capacity, equipment, existing procurement operations, procedures,

oversight and control; b) Undertake project procurement risk assessment and prepare

P-RAMP (Project Procurement Risk Assessment and Management Plan) for the

proposed loan; c) based on P-RAMP, suggest a suitable capacity building program to

strengthen institution’s capacity, mitigate weaknesses and address constraints; d)

prepare a draft PP (Procurement Plan) with appropriate procurement methods and

bidding procedures assigned to each package under the proposed loan.

4. Overall Country Context and Governance Environment4: In 2012, Kazakhstan has

adopted “Kazakhstan-2050” Strategy: new political course of the established state”

which was announced by President of Kazakhstan in his annual Address to the People

of Kazakhstan, endorsed by Presidential Decree No. 449 dated 18 December 2012. This

strategy inter alia focusses on need for investment in infrastructure including in road

and energy sectors.

Country Partnership Strategy (CPS) (2012-2016) of August 2012 built on ADB’s

experience to support rehabilitation and development of infrastructure and utilities,

with a focus on transport, energy and municipal services sectors. A new CPS (2017-

2021) of September 2017 identifies future priorities in development partnership

between ADB and Government of Kazakhstan, where transport sector represents 28%

of the resource package (out of 6 sectors).

5. Brief description of the proposed project: The proposed project consists of the

Reconstruction of Aktobe–Kandyagash Road. The total length of the Aktobe–

Kandyagash Road is 150 km to be divided to three lots. The lot 3 with a length of 60

km will be financed by the government, and the procurement is ongoing aiming at

starting construction in late 2018. The remaining two lots are proposed to be financed

by ADB.

The project starts from 11 km south of the City Aktobe, and it aims at reconstructing

and upgrading about 93 km of a deteriorated section from Aktobe to Kandyagash from

the existing Category II or III to Category I (dualizing the existing 2-lane to 4-lane).

6. Project Rationale and Linkage to Country/Regional Strategy5: Kazakhstan is a

landlocked country with predominant dependence on roads for trade and movement.

Recognizing this, the Government of Kazakhstan adopted several strategic policies and

plans identifying strong transportation services as one of the key elements for

promoting national security, political stability, economic growth and diversification,

3 ToR (Terms of Reference) TA-9134 KAZ: Procurement Specialist (International) (48399-003) 4 Kazakhstan: COUNTRY/Sector PROCUREMENT RISK ASSESSMENT REPORT (2017) (September 2017) 5 Kazakhstan: Road Maintenance Sustainability Project – Project Data Sheet (https://www.adb.org/projects/48399-003/main#project-pds)

https://www.adb.org/projects/48399-003/main#project-pds

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and social development. In November 2014, the President of Kazakhstan introduced a

new economic policy, Nurly Zhol, which includes development of the transport

infrastructure as one of the first priorities for the government. Subsequently, the

government adopted a Strategic Plan 2014-2018, which identifies maintenance

backlog, high capital cost of road rehabilitation, and other shortfalls amongst the main

bottlenecks to be addressed in the road maintenance sector. The State Program for the

Transport Infrastructure Development of Kazakhstan 2020, which has been prepared

based on the Strategy Kazakhstan 2050, necessitates introduction of performance-based

and defect-free road maintenance contracting arrangements in the road maintenance

sector by 2017. The Government of Kazakhstan is strongly committed to the

development of the road transportation services through a combination of institutional

and regulatory reforms and further liberalization of the sector.

In February 2013, the government established a national road operator, Joint Stock

Company KazAvtoZhol, which is responsible for the procurement and supervision of

mid-term and capital repair works funded by the government. Republican State

Enterprise Kazakhavtodor is responsible for routine maintenance. In 2014, the Ministry

of Investment and Development (MoID) was created as the successor of the Ministry

of Transport and Communications. Under the MID, the road sector is managed by the

Committee of Roads (CoR). Both KazAvtoZhol and Kazakhavtodor report to the CoR.

The proposed Reconstruction of Aktobe–Kandyagash Road Project and Atyrau–

Astrakhan Road Project were initially intended to be financed by the Islamic

Development Bank (IsDB). Due to disagreement between the government and IsDB on

the lending terms, the government informed IsDB of its decision to withdraw request

on the two loans from IsDB. ADB received a letter from CoR on 20 July 2018 declaring

that the government is working on defining a funding source for both projects and that

ADB is being considered as one of candidate financiers for the projects, the final

decision being to be made during the Coordination Council meeting conducted under

the Partnership Framework Agreements (PFA) signed by Government with ADB,

EBRD, IsDB and World Bank for joint implementation of priority projects. The letter

also suggested ADB to start preparation work in advance and define the scope of

required due diligence.

The project will connect the CAREC corridors 1b and 6a, as well as administrative

centers of the oil- and mineral-rich provinces of Aktobe and Atyrau. The project will

help establish efficient transport links by reducing transport time and costs. It will (i)

improve in-country transport services, particularly linking Astana and Aktobe with the

major oil city of Atyrau and the country’s only international port of Aktau; (ii) facilitate

regional trade and link the growing markets of the East Asia countries with Caspian

Sea countries further to Europe; and (iii) open new trade and business opportunities and

support poverty reduction by raising the living standard of the local population.

The existing 2-lane highway has been badly deteriorated with high safety risk. Most of

pavement was damaged with various distress and defects. The initial pavement design

was envisaged with design axle load 6 tons but has now been redesigned with the axle

load of 12 tons to respond to an increasing traffic volume of about 12,000 vehicles per

day and high percentage of heavy trucks. There are significant potential safety hazards,

most due to unsafe overtaking. About 40% of traffic accidents in the region incurred in

this road, according to officials from KazAvtoZhol Aktobe Oblast branch.

7. Financing Strategy of the Project: The government proposes that KazAvtoZhol, a

state-owned joint stock company, will be the borrower and executing agency, with

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sovereign guarantee by the Ministry of Finance taking into account (i) the government's

sovereign debt constraints; (ii) loan agreement will not require ratification by the

Parliament for effectiveness, which will expedite beginning of project implementation;

and (iii) EBRD had succeeded two sovereign guarantee road projects with

KazAvtoZhol. The repayment of loan will be made by KazAvtoZhol from the state

budget allocation.

8. Executing Agency6: KazAvtoZhol will be executing agency (EA) for these proposed

projects. ADB has conducted a due diligence of KazAvtoZhol in previous projects, and

is generally satisfied to its capacity to deliver the projects as an EA, although there are

some areas to be strengthened, such as procurement, social safeguards, financial

management, and project management. The project implementation will be conducted

by a separate department of KazAvtoZhol called Road Construction Directorate, after

procurement is concluded. The Directorate is headed by a director with total 30 staff in

its headquarters in Astana including a deputy director, a chief engineer, 10 executive

engineers, and 2 environment and social specialists. The remaining staff about 60 are

posted in 5 project offices in different regions.

The Road Construction Directorate was established in 2017 with the mandate to

manage implementation of IFI funded projects as representative of the Employer. It has

been engaged in five projects financed by China Exim Bank and EBRD and as a project

management consultant for one ADB funded project. The staff obtained some project

management experience such as FIDIC contract management skills. The Directorate

will establish office on both project sites, Aktobe and Atyrau Oblasts respectively, with

a team of road engineers, bridge engineer, quantity surveyor, materials engineer,

environment and social specialist, and contract management specialist. The number of

staff in each office will depend on the length and cost of the project road. The Mission

suggests adding a project management support component in the project to further

strengthen the capacity of the Road Directorate. The details will be discussed during

the fact-finding mission scheduled in early September 2018.

9. Market assessment: In line with recommendations set out in ADB Guidance Notes

(GN) on Procurement Risk Framework (PRF) and Strategic Procurement Planning

(SPP), and in order to bring current paper in line with the New Procurement Framework

(NPF), a brief market assessment has been carried out. The information provided in this

topic is based on consultations and interviews with the procurement staff of

KazAvtoZhol, “REVIEW OF THE ROAD CONSTRUCTION SECTOR IN

KAZAKHSTAN - ADB Consultants’ Report (dated 31 May 2018)” and Consultant’s

general knowledge and understanding of the local conditions.

The main scope of subject project is Reconstruction of Aktobe–Kandyagash (Two lots:

Lot 1 – km11-52 & Lot 2 – km 52-100). The type of contract will be FIDIC MDB

Harmonized 2010 edition (the Pink Book) which is relatively standard and well known

to both local and international contractors operating on the local market. Therefore,

there are no major risks expected with regard to innovative approaches of the project.

Generally, of 1,921 construction-related companies registered in Kazakhstan, 94

companies specialized in road-related construction work (4.8% of the total) were

analyzed as a sample for this assessment. After taking into account the established

6 ADB Aide Memoire Jul-Aug 2018

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activities of companies in the construction sector, about 26% or 500 companies can still

be considered active.7

Average annual turnover according to the size of the company: The average annual

turnover is biggest among large companies (11 companies) with USD 12.2 Million,

followed by medium sized companies (31 companies) with USD 9.9 million, and small

enterprises (52 companies) 2.5 million.8

The above figures demonstrate, that there is a relatively low capacity in the local road

construction industry, since the minimum average annual construction turnover requirement

was estimated as approximately $90mln for Lot 1 and $50mln for Lot 2 (based on estimates

dated September, 2018).

According to information received from procurement staff of KazAvtoZhol, there are several

local companies which can be considered as potential bidders for the subject project, based on

their size, experience and current contract commitments. These are (the list is indicative and

not exhaustive):

1. LLP Kazakhdorstroy;

2. JSC K-Dorstroy;

3. Todini Costruzioni Generali S.p.A.9

4. SINE MIDAS STORY

7 REVIEW OF THE ROAD CONSTRUCTION SECTOR IN KAZAKHSTAN - ADB Consultants’ Report (dated 31 May 2018) 8 REVIEW OF THE ROAD CONSTRUCTION SECTOR IN KAZAKHSTAN - ADB Consultants’ Report (dated 31 May 2018) 9 Milan, 2016 January 15th - Salini Impregilo (MTA: SAL) announces the signing of the contract for the disposal of Todini Costruzioni Generali S.p.A. (“TCG”) to Prime System Kz Ltd., a company incorporated and organized under the laws of Kazakhstan - https://www.salini-impregilo.com/en/press/press-releases/salini-impregilo-disposal-of-todini-costruzioni-generali.html

12.2

9.2

2.5

0

2

4

6

8

10

12

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Large Medium Small

Figure 1. Average Annual Turnover in USD Million

https://www.salini-impregilo.com/en/press/press-releases/salini-impregilo-disposal-of-todini-costruzioni-generali.html

https://www.salini-impregilo.com/en/press/press-releases/salini-impregilo-disposal-of-todini-costruzioni-generali.html

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Generally, according to the information received from KazAvtoZhol, for procurements of road

construction/reconstruction with approximately $50mln cost estimate, there are usually around

10 bidders participating in the process. Apart from local companies, the main players on local

road construction market are Chinese and Turkish construction companies.

Finding: Taking the abovementioned into consideration, it can be deduced that subject project

will be equally attractive for local and international contractors, (more so for lot 2). Therefore,

the procurement should target both of these groups of contractors equally. What this means

from the procurement point of view is that attention should be given to advertisement of

bidding locally, as it generally serves the Client’s goals better if the works are executed by

local companies (provided that they are qualified) since the costs are usually on the low side

and it helps in development of local contracting industry which is further useful for overall

development of local economy.

III. Project Procurement Risk Assessment

A. Overview i. Organization and Staff Capacity:

The Ministry of Investments and Development (MoID) is responsible for the management of

the state (main) roads. The Committee for Roads (CoR) reports to the MoID and is responsible

for policy formulation and management and implementation of national policy for the road

sector and the interface with the public. At the implementation level, Kazakhavtodor has a

monopoly in carrying out routine maintenance works in the ten oblasts of the country. The

government is in process to restructure Kazakhavtodor to make it autonomous. Once

restructuring is completed, Kazakhavtodor and its subsidiaries will be able to compete with

other private contractors for road construction projects.

From organizational point of view, KazAvtoZhol is organized in a traditional vertical

structure.

Chairman is the ultimate decision maker, supported by 4 deputy chairmen, 2 advisors, and a

main engineer (except of support staff such as assistants and secretaries).

Such structure is not very efficient in terms of decision making, since it inevitably leads to

delays in decision-making process, since most important decisions must go up all the way

through the vertical, but on the other hand such arrangement, if organized properly, can

minimize the number of mistakes, since important documents require review/approvals from

several persons.

Procurement: From procurement point of view, the assessment reviewed legal aspects, staff

capacity and minimal required office equipment.

Legal aspects: According to information received from Managing Director on Procurement

Issues, KazAvtoZhol is implementing procurement using three different legal systems as

described below:

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▪ PPL (Public Procurement Law) is used in case where procurement is financed from

State Budget Funds, but PPL is only used for procurement of works and services

required to ensure functioning and implementation of State functions. It however

excludes national holdings or national companies, SOEs (approximately 75% of public

procurement expenditure is executed outside of PPL framework due to these

exemptions);

▪ Rules of procurement of goods, works and services – is the “internal” set of

procurement rules and procedures of JSC KazAvtoZhol approved by the decision of the

Board of Directors of April 26, 2017 No. 36/17. Most procurement, including the ones

financed its own funds, undertaken by KazAvtoZhol follows these set of rules and

procedures;

▪ Procurement rules of IFIs – are employed in case where the procurement is conducted

for the purposes of a project financed by IFI, in accordance with the relevant

Loan/Financing Agreement.

It should be noted here that within last 36 months the agency has implemented one

project funded by EBRD (European Bank for Reconstruction and Development) with

4 different procurement transactions, 2 CW (Civil Works), 1 CS (Consultancy Services)

and 1 CS (ongoing). In addition, the Road Construction Directorate of KazAvtoZhol

has been engaged in five projects financed by China Exim Bank and EBRD and as a

project management consultant for one ADB funded project.

Staffing: KazAvtoZhol has a dedicated department called “Office of Coordination and

Monitoring of Procurement” (hereinafter, the “Procurement Unit”) which is staffed by 5

persons and led by Managing Director on Procurement Issues. Since most procurement that is

conducted by the agency is falling under their own procurement rules and procedures, the staff

of procurement unit is well acquainted and proficient with these rules, but they do not have

qualifications in procurement procedures of IFIs. In addition, all procurement in KazAvtoZhol

is conducted in Russian language and these specialists have very little knowledge of English

language.

One more challenge is that due to increasing number of internal projects, the procurement

specialists are already overcommitted and there is no capacity left within this unit to tackle

challenges associated with the proposed project.

The office facilities of procurement unit are sufficient and in good order.

Project Management Unit: There is no separate PMU (Project Management Unit) within the

Agency (KazAvtoZhol), but rather each contract is managed by the respective department who

was initiator of the procurement (discussed below in “iii. Procurement Practices”). Although

most contracts are managed by the branch offices in the regions.

In addition, there is a division under KazAvtoZhol called Road Construction Directorate, who

is responsible for contract management of IFI funded projects, but its staff is split among

Astana office and several branch offices in the regions. Contract management responsibility

for each specific contract is assigned to the relevant branch office based on geographical

location of the project site.

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ii. Information Management:

Information Management system can be divided in two periods, prior to January 2017 and

after January 2017. Prior to January 2017, the procurement was paper-based, and all

procurement related documents are currently stored in the archive of KazAvtoZhol, but

according to information received from the interviewees, there are some issues with

systematization of the archive, making it challenging to find relatively old documents.

There was a significant change as from after January 2017 when this problem has mostly been

solved by adoption of the e-procurement system, under which the whole procurement process

is conducted electronically, and the e-procurement portal creates its archive saving all

procurement related documents. Only the winning bidder is requested to submit their bid in

original/hardcopy format which is then stored in the archive.

There is a specific document retention policy in place, according to which all bids are stored

for 5 years, bids of winning bidders are stored for 10 years and protocols of results (minutes of

tender committee) are stored with indefinite time of storage.

Agency’s record keeping function is not yet supported by IT systems (except of e-

procurement), and therefore all other files, letters etc. are still circulated and saved in the

hardcopy format.

iii. Procurement Practices:

Currently the Agency conducts most of its procurement activities in accordance with its own

procurement rules and procedures. These rules encompass procurement of Works, Goods and

Consultancy Services all under the same arrangements. Basically, there is only one set of rules,

one manual, one set of standard bidding documents (templates) which is applied for all kinds

of procurement activities.

The Agency’s own procurement rules dated April 26, 2017 envisages following methods of

procurement:

1. Tender (Open, Closed, Two-Stage);

2. Request for price quotations;

3. On organized electronic trading;

4. Through commodity exchanges;

5. Single source;

6. Guaranteed order;

In accordance with the explanations received during the interview, the general outline of

procurement steps under the agency’s own rules, in case of open electronic tender, is the

following:

1. Any of agency’s units, who has a need of a specific contract, prepares technical

documents (i.e. technical specifications, ToR etc.) and addresses the procurement unit

and sends them these documents. This first unit therefore acts as an “initiator” of the

procurement;

2. The procurement unit, based on technical documents received from the initiator,

prepares specific biding documents (based on existing template where they need to

introduce only very minor changes, such as date, time etc.);

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3. The procurement is advertised giving bidders 20 calendar days for submission of bids

(this period is fixed for every type of procurement and there is not option for its

extension);

4. An ad-hoc tender committee (bid evaluation group) is formed by an internal decree,

normally comprised from 5 persons – at least one person from procurement unit, at least

one lawyer, specialists of the field from the “initiator” unit;

5. Bids are submitted electronically, but technical bid is separate from the financial bid

(although both are submitted simultaneously);

6. The tender committee reviews technical bids, and prepares a list of defects/non-

compliances of each bid. After this process is finished, each bidder is given a clear

instruction on what needs to be improved in their bid to make it compliant with

requirements, and the bidders have 3 business days to improve their bids;

7. After expiration of this period the tender committee starts detailed evaluation of bids.

They have 10 business days for evaluation and this period is also fixed, disregarding

the number of bids received;

8. After the evaluation is finished the price bids of compliant bidders are opened by e-

procurement system automatically awards the contract to the lowest bidder.

It also must be noted, that the decision of tender committee (bid evaluation group) is final and

is not subject to any further approvals. This decision is based on majority of voices, but in case

if any member does not agree with the majority he has the right to write a dissenting

opinion/minority report.

IFI funded procurement: the interviewees stated that during last 36 months they were two

IFI funded projects funding - Kurty-Buribaytal Road Project, both financed by EBRD.

Currently there are two more ongoing projects under EBRD funding:

1. Kapshagai-Kurty 0-67 km bid opening 22 October;

2. Atyrau-Astrakhan 217 km General procurement notice issued;

The project covers full reconstruction of roads within the transport corridor connecting Astana

and Almaty (“Center-South Corridor”) is part of the Kazakhstan Strategic Plan 2020. The

Kazakh Government is very close to completing the implementation of this strategic plan, with

the major part or roads within the Center-South Corridor already having been rehabilitated.

The remaining 228 km long section between the villages Kurty and Buribaytal (the “Road”),

which remains in poor condition, restrains the transit of goods and passengers between the two

main cities of Kazakhstan.

Up to the date of interview 3 procurement transactions have already been conducted, 2 CW

and 1 CS (Supervision), and 1 procurement of CS (institutional strengthening component) is

ongoing.

In terms of main challenges faced, the interviewees declared that the procurement process itself

was difficult for them because of big differences in the procedures/rules between procurement

guide of EBRD and the agency’s own procurement rules (which is normally used). Difficulties

were caused during evaluation of Consultancy Services, because the evaluation criteria and

methodology were not very clear and allowed some flexibility which was challenging.

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One case of procurement of Consulting Services (CS) under the same loan needed to be

cancelled and re-advertised, because of lack of interest/competition, most probably caused by

the relatively low budget of the assignment as the representatives of KazAvtoZhol have stated.

iv. Performance of e-procurement system:

Current assessment does not focus on performance of e-procurement system since it will not

be applicable under the proposed project.

v. Effectiveness:

The effectiveness must be described in the light of a) contractual performance monitoring

system; b) payment track record; and c) complaints resolution mechanism.

a) Contractual performance monitoring system: does not exist as such. Since most

contracts signed by the agency are connected to the Civil Works to be undertaken in

the regions of the country, the Contract management itself is also done by the regional

branch offices of KazAvtoZhol. Although the procurement is centralized, there is no

central system which would track and monitor contract implementation under a pre-

defined system. Such approach may lead to inconsistencies in decisions and

approaches, but this will be further discussed in the strengths and weaknesses chapter

below;

b) Payment track record: based on information received from the interviewees, all

Contracts signed by Agency under their own procurement rules provide for 30 days for

payment purposes and there are no issues with factual payments in this regard, since

the agency’s main performance indicators are tied to disbursements;

c) Complaints resolution mechanism: there is no complaints review/resolution

mechanism set-up within the agency. Legally, the only way for the Contractors to

resolve the complaints are through applying to court. De-facto, most of the complaints

are first addressed to KazAvtoZhol in a form of a standard letter, which is then reviewed

by the legal department with assistance of respective specialists, mostly from the

“initiator” department. The response is communicated to the complainant through a

letter. If the issue is not resolved at this stage, the case may only be referred to the

national court.

vi. Accountability measures:

Ethics and Conflict of Interest: There is no statement of ethics provided in the Agency’s own

procurement rules, but it has a provision regarding conflict of interest, according to which, in

case if any member of the tender committee finds out that he/she has a conflict of interest,

meaning that his/her personal interests might influence their decision, he/she should

immediately declare about this condition to the head of the tender committee. After such

declaration, person having a conflict of interest will be substituted and he/she will not

participate in decision making regarding that procurement process anymore.

16

Internal and external approvals: In terms of approvals, according to information received

from the representatives of the KazAvtoZhol, there are no external (out of the organization)

approvals required for any step of their activity, except of the allocation of annual budget.

In terms of procurement related issues, the decisions of tender committee are final and are not

subject to any approvals, even internal. Also, the key decisions such as i) procurement related

(authorizing procurement transactions, evaluation and contract awards); ii) authorizing

payments and iii) custody of assets are well segregated and all three fall under responsibilities

of different officials within the organization, thus reducing the risk of biased decisions.

B. Strengths

I. Fully staffed procurement unit with an experienced Head of Procurement unit (5

persons plus head);

II. Adequate office facilities for procurement unit;

III. Adequately organized internal structure;

IV. 14 regional branches which can assist in on-site supervision and solving of minor issues

on the field;

V. Since 2017, the agency started using e-procurement system which should drastically

increase transparency and improve overall quality of the process;

VI. Good record producing practices (i.e. minutes of bid opening, decisions of tender

evaluation committee etc.) which are generally mostly in line with ADB’s practices;

VII. Tender committee (bid evaluation group) is independent and their decision is final (not

subject to further approvals);

VIII. There is a written auditable trail of procurement decisions attributable to individuals

and committees, thus lowering the risk of questionable decisions being made;

C. Weaknesses

I. Low level of English proficiency in the procurement unit, as well as the agency overall;

II. Overcommitted procurement staff not having enough capacity to undertake

procurement under proposed project;

III. Very limited knowledge, experience and trainings in IFI procurement rules – absence

of knowledge, experience and trainings in ADB procurement rules and procedures;

IV. Agency mainly employs its own procurement rules which do not cover and do not

correspond to ADB procurement rules;

V. Lack of standard procurement practices and standard documents which would either fit

or correspond to ADB procurement rules;

VI. Absence of PMU for the proposed project;

VII. ToRs and Technical Specifications are prepared by different units of the agency ad-

hoc, without following a standard format/template, thus increasing the risk of producing

documents of varying quality;

17

VIII. One set of bidding documents is being used for procurement of Civil Works, Goods

and Consultancy Services;

IX. Weak archiving system without IT support might create problems when trying to

review relatively old documents for audit purposes;

X. There is no single contract file which would hold all related documents, but rather these

documents might be spread among different units of the agency, and in some cases even

among different regional branches of the agency;

XI. Timeframes allowed for bid submission, evaluation etc. are very strict and rigid, not

allowing flexibility to accommodate different conditions (i.e. complexity of the

procurement, number of bids received etc.);

XII. Practically non-existent procedures for selection of consultants that would be at least

partially similar to ADB’s methodology – rather agency uses one set of procurement

rules and documents for all types of procurement activities;

XIII. Financial evaluation is always completed based on lowest submitted price, even in case

of selection of consultants;

XIV. There is no system for tracking and monitoring of contractual performance, but rather

contract management activities are spread among the central office of agency and its

14 regional branches (based on geographical location of the work site);

XV. There is no complaints management / grievance redress mechanism in the agency (or

in the Contracts signed under agency’s proprietary procurement rules), but rather all

claims need to be resolved only through national court procedures;

XVI. There is no standard statement on ethics in the agency’s own procurement rules (which

is the most common set of rules used by the agency);

D. Procurement Risk Assessment and Management Plan (P-RAMP)

Based on the information gathered from the interview, as well as some external sources and

legal documents, the following procurement risks were identified when analyzing

KazAvtoZhol’s capacity to implement the proposed project as an EA. The mitigation measures

are also presented in the rightmost column of the chart below.

The chart analyzes those risks, which were assessed as “Extreme” or “High” in the project

procurement risk assessment questionnaire, and they are grouped into four distinct sections,

namely: a) Organizational and Staff Capacity; b) Information Management; c) Procurement

Practices; and d) Effectiveness.

The overall risks are rated as:

o Extreme;

o High;

o Medium;

o Low;

based on the following risk rating matrix as provided in Table A1.3 below:

18

Note: Many of the risks identified below are in varying degrees caused by the fact that the

agency uses proprietary procurement rules which are not in line with ADB’s procurement

guidelines, and therefore many of the described risks will be mitigated by simply applying

ADB’s procurement regulations to the procurements under the proposed project.

19

Table 1 – Risk Matrix

No

.

Risk Consequence Likelihood Overall

A. ORGANIZATIONAL AND STAFF CAPACITY

1

The procurement unit staff’s

level of English does not let

them to work in English

language

Severe Almost Certain Extreme

Comment

In order to develop the

procurement

documents and conduct

evaluation procedures

knowledge of the

English language is

essential. Lack of

language skills will

make the process

impossible and

jeopardize the project

implementation.

Unless International

Consultant is hired to

assist the staff in

procurement issues or

capacity of the staff is

increased, the risk is

in place.

N/A

2

Number and qualifications of

the staff are insufficient to

undertake the additional

procurement that will be

required under the proposed

project because due to

increasing number of internal

projects, the procurement unit

is already overcommitted,

and they do not have enough

free capacity to undertake

additional procurement under

the proposed project.

In addition, the staff does not

possess sufficient

qualifications for the

procurement in subject,

which is reflected in the lack

knowledge, experience and

trainings both in ADB

procurement rules and in

Performance Based

Contracting modality.

Major Likely High

20

Comment

Without sufficient

number and

qualification of the

staff the procurement

process will not be

undertaken on a level

acceptable to ADB.

Unless International

Consultant is hired to

assist the staff in

procurement issues or

capacity of the

existing staff is

increased by means

of the trainings, the

risk is likely to occur.

N/A

3

The agency does not have

(neither has access to) a

procurement training

program in ADB

procurement guidelines

Major Almost Certain Extreme

Comment

Without a procurement

training program in

ADB procurement

regulations, it is likely

that the procurement

proces will have

substantial

shortcomings.

Without a


program in ADB

procurement

regulations, it is

likely that the

procurement process

will have substantial

shortcomings. The

risk is currently in

place.

N/A

4

Agency has its own

procurement process rules

and a respective manual, but

it does not cover foreign-

assisted projects.


Comment

Agency procurement

rules are not in line

with ADB procurement

regulations and best

international practices,

therefore application of

IA's proprietary

procurement rules will

lead to reduced

competition.

Unless the

procurement

regulations are

specified as

applicable

procurement rules in

the relevant

loan/financing

agreement, the risk is

in place.

N/A

5

There is no separate

procurement process manual

for Consultancy Services, but

rather one set of rules and

standard documents is used

for procurement of CW,

Goods, and CS.


21

Comment

Agency procurement

rules are not in line

with ADB procurement

regulations and best

international practices,

therefore application of

IA's proprietary

procurement rules will

lead to reduced

competition.

Unless the

procurement

regulations are

specified as

applicable

procurement rules in

the relevant

loan/financing

agreement, the risk is

in place.

N/A

6

There is no PMU in place for

the proposed project Major Likely High

Comment

PMU in charge of the

project implementation

process is essential.

The process must be

handled by a dedicated

unit in charge in order

to organize and manage

the process in an

acceptable manner.

Absence of such unit

implies risks for the

procurement process.

Unless a specific unit

will not be assigned as

a responsible focal

point, the risk is in

place.

N/A

7

There is only one set of

standard procurement

documents which are used by

the agency for procurement

of CW, Goods and CS, but

they are not in line with

ADB procurement

guidelines.

Severe Unlikely High

Comment

Unless the ADB

procurement

regulations are applied

to the proposed project

the procurement

procedure will not be

conducted in a way

acceptable for ADB,

since the local

procurement legislation

is not in line with ADB

procurement policy.

According to the most

recent Aide Memoire,

it was agreed that

ADB 2017

procurement policy

and regulations will

apply to the project.

N/A

D. EFFECTIVENESS

22

8

Procurement specifications

and ToRs are drafted ad-hoc

by different units of the

agency without following

any standard template or

rules, thus increasing the risk

of inconsistency and low

quality of the output.

Moderate Likely High

Comment

Without using standard

templates for

specifications and

ToRs and adhering to

the rules the risk of low

quality output and

inconsistencies is

substantial. It is

important that IA is

supported by

Consultants for drafting

of the Technical

Specifications and

TOR(s)

Unless the IA receives

support from the

Consultants in

drafting TORs and

Technical

Specifications, the

risk is likely to occur.

N/A

9

The need for consulting

services can be identified by

any unit of the agency and

each of them can act as an

“initiator” of a specific

procurement.

Major Likely High

Comment

Since there is no single

unit responsible for

initiating selection of

Consultants, there is a

risk that this process

will not be managed

properly. Therefore,

there is high risk of

delay in the process

that would impact the

commencement date of

CW contracts.

Risk is currently in

place, until a single

unit/focal point will

not be determined

who will take

responsibility over

the management of

proposed project.

N/A

B. INFORMATION MANAGEMENT

10

There were no Substantial or High risks identified in terms of information management. The

archiving system is relatively weak, but not enough so to trigger a substantial risk factor. Since

2017 the agency has switched to e-procurement system that should drastically improve their

information management system. The first results can already be seen by the fact that procurement

documents of recent tenders are saved in the e-procurement system.

C. PROCUREMENT PRACTICES

11 The agency has very limited

experience in Major Almost Certain Extreme

23

implementation of IFI

funded projects.

Comment

The lack of experience

in IFI project

procurement and

implementation is a

substantial risk to the

proposed project as it

can jeopardize the

whole implementation

process and lead to

substantial delays in the

process.

Unless the capacity

of the agency is

increased, the risk is

likely to take place.

N/A

12

Agency representatives

stated that IFI rules are

relatively difficult and very

different from their own

procurement rules. This has

caused some challenges

during evaluation of

Consultants’ proposals,

because the criteria were not

very well defined

(experience from previous

project).

Severe Likely Extreme

Comment

In case of the lack of

understanding of the

IFI procurement rules

the evaluation will not

be done in an

acceptable manner that

can cause serious

delays and mistakes in

the process.

Risk is likely to take

place unless some

capacity

strengthening

exercises are

implemented.

N/A

13

The agency is not familiar

with and does not use Letters

of Credit as a standard

practice.

Major Almost Certain Extreme

Comment

Letters of Credit are

approved and standard

international practice of

conducting business

when purchaser and

seller are in located in

different countries and

don't know/trust each

other. Therefore,

absence of this tool in

the project will have

Risk is almost certain

to take place unless

capacity

strengthening

exercises are

implemented and

procurement

consultant's support is

provided during the

procurement process.

N/A

24

high impact on the

procurement process

and might render it

impossible altogether.

14

Agency representatives

stated that they had one case

of failed procurement (that

caused re-advertisement) of

consultancy services,

because their original budget

was very low and did not

attract enough competition.

This risk can be extended to

CW also, since the CEs (cost

estimate) are being prepared

based on state standards,

which usually are lower than

international standards. As a

result, the cost estimates are

in some cases unrealistic

(low). Although in ADB

procurement bidders can

propose price above the cost

estimate, the evaluation

criteria are developed based

on the CE and therefore

having unrealistically low

estimate will lead to having

artificially lower

qualification criteria that

might lead to awarding a

contract to an unqualified

contractor.

Severe Likely Extreme

Comment

Unrealistically low CE

leads to weak

qualification criteria,

which can cause

awarding of Contract to

unqualified Contractor

who might not be

capable to perform.

Thus this risk can have

very high impact on the

project.

Risk is very likely to

materialize since

government agencies

usually are against

changing their

standard practices.

N/A

25

D. EFFECTIVENESS

15

There is no system of

monitoring and reporting of

contractual performance, but

rather most of the contracts

are managed by the regional

branches of the agency

depending on the

geographical location of

work site.

Major Likely High

Comment

Contract management

is a key step in project

implementation which

should be handled by

qualified personnel.

Poor contract

management could

potentially lead to

contractual claims,

delays and budget

overruns.

Risk is likely to

materialize, since the

decision on persons

responsible for

contract management

is based on work sites

geographical

location, where

relevant regional

branches might not

have enough

capacity.

N/A

16

There is no complaints

management mechanism in

the agency.

Major Unlikely Medium

Comment

Due to absence of

complaints resolution

mechanism, the only

possible way for the

bidders/contractors is to

apply to the local court,

in which case the

process might be

delayed for unidentified

period of time.

Taking into

consideration

previous experience

of the agency, as well

as Contractual

mechanisms in place,

it is unlikely that a

dispute will not be

resolved at the project

level, thus forcing the

complainant to

address local Court.

N/A

E. ACCOUNTABILITY MEASURES

17

There were no Substantial or High risks identified in terms of accountability

measures. The detailed Q&A is provided in Annex 1 – Procurement

Questionnaire. N/A

Table 2 – Risk Management Chart

No. Risk Description Risk

Assessment

Mitigation Measures or Risk

Management Plan


26

1 The procurement unit

staff’s level of English does

not let them to work in

English language.

Extreme There are two proposed mitigation

measures to tackle this risk:

1. The EA must be supported by

a Procurement Consultant to

assist them in development of

the procurement documents

and in the evaluation

procedures;

2. It is recommended that the

ruling language for bidding

documents be English, while

the IA may issue unofficial

Russian translations in order

to facilitate preparation of bids

by local bidders. In addition,

requesting the bidders to

submit bids in English

accompanied with Russian

Translation will also support

the evaluation process, as the

members of tender committee

do not speak English, but in

any case English should

remain as a ruling language

throughout the procurement

process.

2 Number and qualifications

of the staff are insufficient

to undertake the additional

procurement that will be

required under the proposed

project because due to

increasing number of

internal projects, the

procurement unit is already

overcommitted, and they do

not have enough free

capacity to undertake

additional procurement

under the proposed project.

In addition, the staff does

not possess sufficient

qualifications for the

procurement in subject,

which is reflected in the

lack knowledge, experience

and trainings both in ADB


FIDIC standard contract

conditions.

High The same mitigation measure as item

#1 above.

In addition, since the KazAvtoZhol

will have to handle contract

management after the procurement

stage, it is recommended that a group

of key persons (1 from procurement

unit, 1 from legal unit, 1 from

financial unit, 1 or 2 from road

maintenance unit) be identified and a

training program be developed for

them to increase their contract

management capacity.

27

3 The agency does not have

(neither has access to) a


program in ADB

procurement guidelines.

Extreme It is recommended that Head of

procurement unit and at least 1 or 2

specialists undergo a training course

(at least 10 days or 2 weeks) covering

all aspects of ADB procurement

guidelines.

Best approach would be to conduct

such training before the deadline for

submission of bids from PBM or EOIs

for Supervision of PBM under the

proposed project.

4 Agency has its own

procurement process rules

and a respective manual,

but it does not cover

foreign-assisted projects.

Extreme ADB procurement guidelines must be

applied to the proposed project,

through relevant indication in the

Loan/Financing Agreement which

should afterwards obtain a legal force

to avoid any possible conflict with

local legislation.

5 There is no separate

procurement process

manual for Consultancy

Services, but rather one set

of rules and standard

documents is used for

procurement of CW,

Goods, and CS.

Extreme ADB procurement guidelines

together with standard procurement

documents must be used for the

proposed project.

6 There is no PMU in place

for the proposed project.

High The procurement related risks of the

project are mitigated through actions

listed in items 1 to 5 (inclusive) listed

above.

As for the contract management there

are several recommendations below:

1. Group of key persons must

undergo a training in FIDIC

contract management (as

described in item #2 above);

2. A provision must be made in

the Terms of Reference of the

international Supervision

Consultant to conduct on-the-

job training and knowledge-

transfer of management of

FIDIC Contracts; The training

of Employer’s/Client’s staff is

crucial for successful project

implementation, therefore it is

suggested to allocate a small

portion of the technical score

to this component, by

28

evaluating the proposed

methodology and work plan

for such training activities in

the Technical Proposals of the

Consultants;

3. ADB must increase the level

of oversight on the contract

management at least in the

first years of the contract

implementation;

7 There is only one set of

standard procurement

documents which are used

by the agency for

procurement of CW, Goods

and CS, but they are not in

line with ADB procurement

guidelines.

High ADB procurement guidelines

together with standard procurement

documents must be used for the

proposed project.

8 Procurement specifications

and ToRs are drafted ad-

hoc by different units of the

agency without following

any standard template or

rules, thus increasing the

risk of inconsistency and

low quality of the output.

High This risk is already mitigated by ADB

through hiring PPTA Consultants

who are responsible for drafting of the

Technical Specifications and TOR(s).

9 The need for consulting

services can be identified

by any unit of the agency

and each of them can act as

an “initiator” of a specific

procurement.

High This risk is mitigated under the

proposed project, since the draft

Procurement Plan includes only one

CS assignment (Supervision) the start

of selection of which should be

initiated couple months earlier before

advertisement of works’ tenders,

since the process of selection of

consultants (under QCBS) normally

takes longer than procurement of CW

.


10 There were no Substantial or High risks identified in terms of information

management. The archiving system is relatively weak, but not enough so to trigger a

substantial risk factor. Since 2017 the agency has switched to e-procurement system

that should drastically improve their information management system. The first

results can already be seen by the fact that procurement documents of recent tenders

are saved in the e-procurement system.


11 The agency has very small

experience in

implementation of IFI

funded projects.

Extreme The lack of experience in IFI project

procurement and implementation is a

substantial risk to the proposed

project, but it will be mitigated

through:

29

• Procurement Stage:

involvement of a procurement

consultant to assist EA in

tender procedures;

• Implementation Stage:

involvement of experienced

international Construction

Supervision Consultant who

will share FIDIC contract

management experience and

conduct on-job trainings for

the EA staff;

12 Agency representatives

stated that Bank rules are

relatively difficult and very

different from their own

procurement rules. This has

caused some challenges

during evaluation of

Consultants’ proposals,

because the criteria were

not very well defined.

Extreme This risk underlines relative lack of

understanding of ADB procurement

guidelines by the staff of the Agency,

but it can be effectively mitigated

through trainings as proposed in item

#3 above.

13 The agency is not familiar

with and does not use

Letters of Credit as a

standard practice.

Extreme Risk is likely to take place unless

capacity strengthening exercises are

implemented and procurement

consultant's support is provided

during the procurement process

14 Agency representatives

stated that they had one case

of failed procurement (that

caused re-advertisement) of

consultancy services,

because their original

budget was very low and

did not attract enough

competition.

This risk can be extended to

CW also, since the CE (cost

estimate) are being

prepared based on state

standards, which normally

are much lower than

international standards. As

a result, the cost estimate is

in some cases unrealistic

(low). Although in ADB

procurement bidders can

propose price above the

cost estimate, the

evaluation criteria are

Extreme It is recommended that ADB provides

increased oversight regarding

development of Cost Estimates to

ensure that they correspond to

international (and not local)

standards, since the procurement

targets international contractors.

30

developed based on the CE

and therefore having

unrealistically low estimate

with artificially lower

qualification criteria that

might lead to procurement

of a weak/unqualified

contractor.

D. EFFECTIVENESS

15 There is no system of

monitoring and reporting of

contractual performance

set-up, but rather most of

the contracts are managed

by the regional branches of

the agency depending on

the geographical location of

work site.

High This is relatively easy to mitigate in

case of proposed project, since a)

there will be an international

Construction Supervision Consultant

hired who will be responsible for

management of the Contracts;

In addition to the above, it is crucial to

provide capacity building activities as

part of the proposed project.

16 There is no complaints

management mechanism in

the agency.

Medium The risk of contractual

claims/complaints will be mitigated

by the FIDIC contract itself, since it

mandatorily requires that a DB

(Dispute Board) be employed.

As for the social/environmental

complaints, in case when the project’s

safeguard category will be changed,

the Agency will have to set-up a GRM

(Grievance Redress Mechanism)

which will be the first step for

complaints’ review and resolution.


17 There were no Substantial or High risks identified in terms of accountability

measures. The detailed Q&A is provided in Annex 1 – Procurement Questionnaire.

31

IV. Project Specific Procurement Thresholds

There is no need for setting up project specific procurement thresholds, since all CW contracts

fall under OCB and the CS falls under QCBS.

V. Procurement Plan

Draft procurement plan is developed and is attached as Annex 2 – draft Procurement Plan.

VI. Conclusion

Based on the overall project procurement risk assessment based on assumption that JSC

KazAvtoZhol will act as an EA, the project procurement risk is rated as “Extreme” (on the

scale of Extreme, High, Medium, and Low).

Summary of main recommended actions are given below, while the details of these are

available in P-RAMP tables in other sections of the report.

Key Recommended Actions: As based on current assessment, taking into consideration weak

procurement capacity of the EA with regard to necessary procurement under proposed project,

these key recommended actions relate to: measures for improving ADB project preparation

and implementation as well as measures to improve EA’s capacity and understanding of a)

ADB procurement guidelines, b) FIDIC Pink Book Contracting modality in order to increase

the sustainability of proposed project.

Immediate measures to support preparation and implementation of proposed project:

1. Increased procurement oversight with prior review for all procurement, regardless of

methods;

2. Use of ADB procurement regulations and standard procurement documents for all

procurement under the project;

3. Provision of procurement consultant’s support to the EA in preparation of procurement

documents and subsequent tendering process;

4. Using English as the ruling language for bidding, while allowing the IA to issue

unofficial Russian translations in order to facilitate preparation of bids by local bidders;

5. Training of a) EA’s procurement staff on ADB procurement guidelines before the date

of bid opening; b) EA’s key persons (who will be involved in contract management) in

FIDIC Contracting modality;

6. More intense involvement of ADB procurement staff in early project design and later

in contracts management stage as also required by ADB’s new Procurement Policy;

32

Annex 1 – Procurement Questionnaire

PROJECT PROCUREMENT RISK ASSESSMENT QUESTIONNAIRE

QUESTION RESPONSE10 RISK11


PROCUREMENT DEPARTMENT/UNIT

A.1 Does the agency or

Government have a

Procurement Committee that is

independent from the head of

the agency?

No, there is a procurement unit

which is under the head of the

agency.

Low

A.2 Does the agency have a

procurement department/unit,

including a permanent office

that performs the function of a

Secretariat of the Procurement

Committee?

Yes

A.3 If yes, what type of

procurement does it undertake?

It undertakes all types of

procurement of the Agency,

including Gov. budget funded

and IFI funded.

A.4 How many years’ experience

does the head of the

procurement department/unit

have in a direct procurement

role?

N/A

A.5 How many staff in the

procurement department/unit

are:

i. full time

ii. part time

iii. seconded

i. 5

ii. N/A

iii. N/A

A.6 Do the procurement staff have

a high level of English

language proficiency (verbal

and written)?

No, their level of English does

not let them to work in English

language.

*Extreme

A.7 Are the number and

qualifications of the staff

sufficient to undertake the

No, due to increasing number of

internal projects, the procurement

unit is already overcommitted,

*Extreme

11 Questions indicated with * are associated with potentially “Extreme” or “High” risks due to the consequence being “Major” or “Severe”, therefore the strategy for managing those risks should be addressed in the Project Procurement Risk Analysis (Appendix 3).

33


additional procurement that

will be required under the

proposed project?

and they do not have enough free

capacity to undertake additional

procurement under the proposed

project. In addition, they do not

possess sufficient qualifications

to do so, due to lack of

knowledge, experience and

trainings both in ADB


Performance Based Contracting

modality.

A.8 Does the unit have adequate

facilities, such as PCs, internet

connection, photocopy

facilities, printers etc. to

undertake the planned

procurement?

There is no risk in terms of office

facilities required for

procurement activities.

A.9 Does the agency have, or have

ready access to, a procurement

training program?

There are trainings for Agency’s

own procurement rules and

sometimes for PPL procurement.

Also, there are sometimes

trainings for donor projects, but

only 2 out of 5 persons have

undergone such trainings. There

is no training program which

would plan such activities in the

nearest future.

*Extreme

A.10 At what level does the

department/unit report (to the

head of agency, deputy etc.)?

Once a week (sort of progress

reports) and/or after every step of

procurement

Low

A.11 Do the procurement

positions in the agency have

job descriptions, which outline

specific roles, minimum

technical requirements and

career routes?

Yes, there are specific job

descriptions for each position

which outline specific roles and

minimum technical requirements,

but it does not mention anything

about career routes.

Low

A.12 Is there a procurement

process manual for goods and

works?

Yes, there are two separate

manuals for agency, one for own

procurement rules and for e-

procurement, but agency mainly

uses its own procurement rules.

There is one manual for these

rules which encompasses CW,

Goods and CS. The same

procurement rules and

procedures apply to all three

above.

34


A.13 If there is a manual, is it up

to date and does it cover

foreign-assisted projects?

Manual does not cover foreign-

assisted projects. Extreme

A.14 Is there a procurement

process manual for consulting

services?

No, the same rules applied for

CW, Goods and CS Extreme

A.15 If there is a manual, is it up

to date and does it cover

foreign-assisted projects?

There is no separate manual for

CS, but rather one set of rules

which covers CW, Goods and

CS.

Extreme

PROJECT MANAGEMENT UNIT

A.16 Is there a fully (or almost

fully) staffed PMU for this

project currently in place?

No, there are separate full-time

departments in the organization

each responsible for their field

(i.e. construction, maintenance

etc.). In case if any of them

requires new procurement to be

undertaken, they act in the role of

“initiator” of this procurement,

subsequently the procurement

unit does the

procedural/procurement part and

after signing of the contract it is

passed back to the “initiator” for

project/contract management.

*High

A.17 Are the number and

qualifications of the staff

sufficient to undertake the

additional procurement that

will be required under the

proposed project?

No, since there is no designated

PMU. *Extreme

A.18 Does the unit have adequate

facilities, such as PCs, internet

connection, photocopy

facilities, printers etc. to

undertake the planned

procurement?

Yes, because all

units/departments in the agency

have sufficient office facilities

available to them.

Low

A.19 Are there standard

documents in use, such as

Standard Procurement

Documents/Forms, and have

they been approved for use on

ADB funded projects?

Yes, there is one set of standard

documents which are used for

procurement of CW, Goods and

CS, but they are not in line with

ADB procurement guide.

*Extreme

A.20 Does the agency follow the

national procurement law,

Yes mostly, except cases when

projects are funded by IFIs in

which case procurement rules in

35


procurement processes, and

guidelines?

accordance with Loan Agreement

apply.

A.21 Do ToRs for consulting

services follow a standard

format such as background,

tasks, inputs, objectives and

outputs?

No, each “initiator” drafts their

own ToRs without a standard

template/format.

Medium

A.22 Who drafts the procurement

specifications?

Respective department of the

agency who acts as a

“procurement initiator” in each

specific case.

High

A.23 Who approves the

procurement specifications?

Deputy Chairman (curator) Low

A.24 Who in the PMU has

experience in drafting bidding

documents?

There is one set of bidding

documents and it does not change

among different procurement

(one typical format for CW,

Goods and CS)

*Extreme

A.25 Are records of the sale of

bidding documents

immediately available?

Yes, they are published on the

web-page of the agency which is

free of charge and public

*Low

A.26 Who identifies the need for

consulting services

requirements?

Respective department who acts

as an “initiator” of each specific

procurement.

High

A.27 Who drafts the Terms of

Reference (ToR)

Respective department who acts

as an “initiator” of each specific

procurement.

High

A.28 Who prepares the request for

proposals (RFPs)

There is no such thing as RFP in

the procurement rules of

Kazavtozhol.

Extreme


B.1 Is there a referencing system

for procurement files?

Secretary of the committee has

this obligation.

Only winning bidder submits

original hardcopy documents,

and bids of other bidders are

saved only electronically in the

system of e-procurement

Low

B.2 Are there adequate resources

allocated to record keeping

infrastructure, which includes

the record keeping system,

space, equipment and

personnel to administer the

procurement records

There is an issue of

systematization of archive

documents, but all procurement

documents are saved in Archive.

Relatively new procurements

(since 2017) are all undertaken

electronically and are

*Medium

36


management functions within

the agency?

automatically saved in e-

procurement portal.

B.3 Does the agency adhere to a

document retention policy (i.e.

for what period are records

kept)?

5 years – bids, winner’s bid 10 –

years, protocols of results –

stored forever.

*Low

B.4 Are copies of bids or proposals

retained with the evaluation?

5 years – bids, winner’s bid 10 –

years, protocols of results – saved

forever.

There is no such thing as

proposals, everything is called

bids under agency’s own

procurement rules.

Medium

B.5 Are copies of the original

advertisements retained with

the pre-contract papers?

Everything is saved – whole

cycle of procurement either in e-

procurement portal or in files of

procurement office.

Low

B.6 Is there a single contract file

with a copy of the contract and

all subsequent contractual

correspondence?

Contracts are given under special

act to accountant who saves them,

and subsequent letters and

invoices are saved in the branch

offices in the regions who

manages the contract on a day to

day basis.

Medium

B.7 Are copies of invoices

included with the contract

papers?

Copies of invoices are saved in

the accounting department of the

agency.

Medium

B.8 Is the agency’s record keeping

function supported by IT?

No, everything is saved in a

hardcopy yet, except for new

procurement documents

(procurement after 2017) which

is conducted electronically, and

all documents are saved

electronically.

Medium


Goods and Works

C.1 Has the agency undertaken

procurement of goods or works

related to foreign assistance

recently (last 12 months or last

36 months)? If yes, indicate

the names of the development

partner/s and project/s.

Last 12 months - EBRD –

reconstruction of Kurty-

Buribaytal.

CW 2

CS 2

Last 36 months – nothing else.

*High

37


C.2 If the answer is yes, what were

the major challenges faced by

the agency?

Agency representatives stated

that Bank rules are relatively

difficult and very different from

their own rules. Additional

challenge was cause by the fact

that there are no specific

evaluation criteria in CS in Bank

procurement rules.

*Extreme

C.3 Is there a systematic process to

identify procurement

requirements (for a period of

one year or more)?

No (there is procurement plan for

1 year only which is tied to the

allocated budget). Budget is

allocated annually without any

longer-term plan on the Agency’s

level.

Medium

C.4 Is there a minimum period for

the preparation of bids and if

yes, how long?

20 calendar days *High

C.5 Are all queries from bidders

replied to in writing?

Yes, all questions and answers

are public (everybody can see

who asked the questions and what

was the answer)

*Medium

C.6 Does the bidding document

state the date and time of bid

opening?

Yes *Low

C.7 Are bids opened in public? Yes – electronically (after bid

opening 3 business days and clear

instructions are given to the

bidders to improve every possible

defect with the bid (including

improvement of bids)).

Afterwards, price bids of those

bidders who improved their bids

are opened.

*Extreme

C.8 Can late bids be accepted? No *Low

C.9 Can bids (except late bids) be

rejected at bid opening?

No *Low

C.10 Are minutes of the bid

opening taken?

Yes *Low

C.11 Are bidders provided a copy

of the minutes?

Yes *Low

C.12 Are the minutes provided

free of charge?

Yes *Low

38


C.13 Who undertakes the

evaluation of bids

(individual(s), permanent

committee, ad-hoc

committee)?

Ad-hoc tender committee for

each tender (mandatory members

– lawyers, procurement

specialists, initiators of

procurement) not less than 5

(normally 5)

Medium

C.14 What are the qualifications

of the evaluators with respect

to procurement and the goods

and/or works under

evaluation?

It is impossible to say because the

evaluation group is always

different, but it always includes at

least one procurement specialist

from the procurement department

who has adequate qualifications

in the agency’s own procurement

rules

*Medium

C.15 Is the decision of the

evaluators final or is the

evaluation subject to additional

approvals?

The decision is final *Low

C.16 Using the three ‘worst-case’

examples in the last year, how

long from the issuance of the

invitation for bids can the

contract be awarded?

20 calendar days for

advertisement 10 business days

for evaluation 3 business for bid

improvement 10 business days

for evaluation. These periods are

fixed.

High

C.17 Are there processes in place

for the collection and clearance

of cargo through ports of

entry?

No – since agency always uses

Incoterms DDP method.

Low

C.18 Are there established goods

receiving procedures?

Yes Low

C.19 Are all goods that are

received recorded as assets or

inventory in a register?

Yes, except of consumables,

such as office paper, printer

cartridges etc.

Low

C.20 Is the agency/procurement

department familiar with

letters of credit?

No, Letter of Credit is not

practiced

High

C.21 Does the procurement

department register and track

warranty and latent defects

liability periods?

Yes, except of consumables. Low

Consulting Services

39


C.22 Has the agency undertaken

foreign- assisted procurement

of consulting services recently

(last 12 months, or last 36

months)? (If yes, please

indicate the names of the

development partner/s and the

Project/s.)

Last 12 months - EBRD –

reconstruction of Kurty-

Buribaytal.

CS 2 Supervision

CS 1 – Institutional strengthening

component (procurement

ongoing)

Last 36 months – nothing else.

*High

C.23 If the above answer is yes,

what were the major

challenges?

Except of answer C.2, another

major challenge was that there

was a limited number of

interested consultants - only 5

expressed interest out of which 1

was qualified but at the stage of

RFP it refused to submit

proposal because of lack of

budget. The budget was

reviewed, and assignment re-

advertised. Currently the

procurement is ongoing.

*High

C.24 Are assignments and

invitations for expressions of

interest (EOIs) advertised?

Yes *Low

C.25 Is a consultants’ selection

committee formed with

appropriate individuals, and

what is its composition (if

any)?

Ad-hoc tender committee for

each tender (mandatory members

– lawyers, procurement

specialists, initiators of

procurement) not less than 5

(normally 5)

Medium

C.26 What criteria are used to

evaluate EOIs?

There is only one set of rules /

standard bidding document for

all kinds of procurement under

agency’s own rules. The same

approach and methodology is

used for CW, Goods and CS.

Extreme

C.27 Historically, what is the most

common method used (QCBS,

QBS, etc.) to select

consultants?

There is no such notion as

QCBS, QBS etc. There is only

one set of rules / standard

bidding document for all kinds

of procurement under agency’s

own rules. The same approach

and methodology is used for

CW, Goods and CS.

*Extreme

40


(Except of one recent project

funded by EBRD, where

selection of consultants was

undertaken under QCBS).

C.28 Do firms have to pay for the

RFP document?

No, bidding documents (used

also for CS) are free of charge.

*Low

C.29 Does the proposal evaluation

criteria follow a pre-

determined structure and is it

detailed in the RFP?

The bid/proposal evaluation

criteria are pre-determined and

written in bidding documents.

*Medium

C.30 Are pre-proposal visits and

meetings arranged?

No Low

C.31 Are minutes prepared and

circulated after pre-proposal

meetings?

N/A *

C.32 To whom are the minutes

distributed?

N/A *

C.33 Are all queries from

consultants

answered/addressed in

writing?

Yes *Low

C.34 Are the technical and

financial proposals required to

be in separate envelopes and

remain sealed until the

technical evaluation is

completed?

Yes, first the technical bids are

opened, evaluated, then bidders

are given set of instructions on

what to improve in their bids

(what is non-compliant) and 3

business days to do so. After

expiration of this period the

price bids of those bidders who

manage to improve their bids are

opened.

*High

C.35 Are proposal securities

required?

Yes *Low

C.36 Are technical proposals

opened in public?

N/A *

C.37 Are minutes of the technical

opening distributed?

N/A *

C.39 Who determines the final

technical ranking and how?

The e-procurement system

automatically determines the

lowest price bidder as a winner.

*Low

C.40 Are the technical scores sent

to all firms?

N/A *

41


C.41 Are the financial proposal

opened in public?

Yes - electronically *Low

C.42 Are minutes of the financial

opening distributed?

Yes - electronically *

C.43 How is the financial

evaluation completed?

Based on the lowest price *High

C.44 Are face to face contract

negotiations held?

No *Medium

C.45 How long after financial

evaluation is negotiation held

with the selected firm?






fixed.

C.46 What is the usual basis for

negotiation?

N/A

C.47 Are minutes of negotiation

taken and signed?

N/A *

C.48 How long after negotiation is

the contract signed, on

average?






fixed.

C.49 Is there an evaluation system

for measuring the outputs of

consultants?

No Medium

Payments

C.50 Are advance payments

made?

Yes, usually within the range of

10-30%

Low

C.51 What is the standard period

for payment included in

contracts?

1 month Low

C.52 On average, how long is it

between receiving a firm’s

invoice and making payment?

Within the 1-month period Low

C.53 When late payment is made,

are the beneficiaries paid

interest?

No interest is paid on late

payments

Medium

D. EFFECTIVENESS

42


D.1 Is contractual performance

systematically monitored and

reported?

No – most contracts are

managed by branch offices of

the agency in the regions

High

D.2 Does the agency monitor and

track its contractual payment

obligations?

Yes – the accounting department Low

D.3 Is a complaints resolution

mechanism described in

national procurement

documents?

No, the complaints are received

in a form of a simple letter. Then

it is reviewed (as any other

letter) by the Legal department

together with necessary technical

specialists and a reply is

prepared. If the complainant is

unsatisfied with the reply he can

address the national court.

High

D.4 Is there a formal non-judicial

mechanism for dealing with

complaints?

No High

D.5 Are procurement decisions and

disputes supported by written

narratives such as minutes of

evaluation, minutes of

negotiation, notices of

default/withheld payment?

No *High


E.1 Is there a standard statement of

ethics and are those involved

in procurement required to

formally commit to it?

No *Medium

E.2 Are those involved with

procurement required to

declare any potential conflict

of interest and remove

themselves from the

procurement process?

Yes *Low

E.3 Is the commencement of

procurement dependent on

external approvals (formal or

de-facto) that are outside of the

budgeting process?

No Low

E.4 Who approves procurement

transactions, and do they have

Procurement transactions are

approved by Managing Director

on Procurement Issues who is

*Low

43


procurement experience and

qualifications?

well experienced in

procurement.

E.5 Which of the following actions

require approvals outside the

procurement unit or the

evaluation committee, as the

case may be, and who grants

the approval?

The procurement process is

initiated by the respective

department who needs this

contract. Afterwards this

initiative is given as an

instruction to the procurement

unit who prepared respective

bidding documents based on pre-

determined templates where they

introduce only minor changes,

since there is only one template

used for every kind of

procurement.

a) Bidding document,

invitation to pre-qualify or

RFP

No

b) Advertisement of an

invitation for bids, pre-

qualification or call for

EOIs

No

c) Evaluation reports Tender Committee *Low

d) Notice of award N/A *

e) Invitation to consultants to

negotiate

N/A

f) Contracts No *Low

E.6 Is the same official responsible

for: (i) authorizing

procurement transactions,

procurement invitations,

documents, evaluations and

contracts; (ii) authorizing

payments; (iii) recording

procurement transactions and

events; and (iv) the custody of

assets?

Payment is authorized by branch

offices responsible for contract

management.

Procurement decisions made by

tender committee are final.

Procurement transactions are

recorded mostly by the e-

procurement system.

Custody of assets is

responsibility of a separate

division which does not interfere

with procurement/payment

procedures.

*Low

E.7 Is there a written auditable trail

of procurement decisions

Yes – there is a separate protocol

prepared for each procurement

*Low

44


attributable to individuals and

committees?

stage and it is signed by the

involved individuals.

Interviewees:

Mr. Pirmetov Kurbanali Habibulaevich - Director of Procurement Unit (KazAvtoZhol)

Ms. Ermukhanova Aizhan Umarovna - Director of Procurement Administration

(KazAvtoZhol)

45

Annex 2 – Draft Procurement Plan

PROCUREMENT PLAN

Basic Data

Project Name: CAREC Corridors 1 and 6 Connector Road (Aktobe–Kandyagash) Reconstruction Project Project Number: 52286-001 Approval Number: XXXX Country: Kazakhstan Executing Agency: JSC “NC” KazAvtoZhol Project Financing Amount: US$ 200,300,000 ADB Financing: US$ 176,300,000 Cofinancing (ADB Administered): Non-ADB Financing: US$ 24,000,000

Implementing Agency: N/A

Project Closing Date: 30 December 2025 Date of First Procurement Plan: 18 October 2018 Date of this Procurement Plan: 18 October 2018

A. Methods, Thresholds, Review and 18-Month Procurement Plan 1. Procurement and Consulting Methods and Thresholds Except as the Asian Development Bank (ADB) may otherwise agree, the following process shall apply to procurement of works, goods and consulting service.

Procurement of Goods and Works

Method Comments Open Competitive Bidding for Goods Prior review Open Competitive Bidding for Works Prior review

Consulting Services Method Comments

Quality- and Cost-Based Selection for Consulting Firm 90:10 Quality:Cost ratio – Prior review Individual Consultants Selection (ICS) for individual consultant Prior review

2. Goods and Works Contracts Estimated to Cost $1 Million or More

The following table lists goods and works contracts for which the procurement activity is either ongoing or expected to commence within the next 18 months.

Package Number

General Description

Estimated Value

Procurement Method

Review (Prior/ Post)

Bidding Procedure

Advertisement

Date (quarter/year)

Comments

Civil Works – AKRP/CW/OCB-01

Reconstruction of Aktobe–Kandyagash (Two lots: Lot 1 – km11-52 Lot 2 – km 52-100)

192,000,000.00 OCB Prior 1S2E Q4/2018 Prequalification of Bidders: N Domestic Preference Applicable: N Advance Contracting: Y Bidding Document: Large Works

Equipment AKRP/G/OCB-01

Road maintenance

2,230,000.00 OCB Prior 1S2E Q2/2019 Prequalification of Bidders: N Domestic Preference Applicable: N Advance Contracting: Y Bidding Document: Goods

3. Consulting Services Contracts Estimated to Cost $100,000 or More

46

The following table lists consulting services contracts for which the recruitment activity is either ongoing or expected to commence within the next 18 months.

Package Number General Description Estimated

Value Recruitment

Method Review (Prior/ Post)

Advertisement Date

(quarter/year) Type of

Proposal Comments

CSC – AKRP/CS/QCBS-01

Construction Supervision

5,218,000.00 QCBS Prior Q1/2019 FTP Assignment: International

Quality-Cost Ratio: 90:10 Advance Contracting: Y Comments: International

CS – AKRP/IC-01

Technical advisor 320,000.00 ICS Prior Q1/2019 BTP Assignment: International

Advance Contracting: Y

CS – AKRP/IC-02

Financial Management Specialist

240,000.00 ICS Prior Q1/2019 BTP Assignment: International

Advance Contracting: Y

4. Goods and Works Contracts Estimated to Cost Less than $1 Million and

Consulting Services Contracts Less than $100,000 (Smaller Value Contracts)

The following table lists smaller-value goods, works and consulting services contracts for which the activity is either ongoing or expected to commence within the next 18 months.

Goods and Works

Package Number

General Description

Estimated Value

Number of Contracts

Procurement Method


Bidding Procedure

Advertisement Date (quarter/year) Comments

None

Consulting Services

Package Number

General Description

Estimated Value

Number of Contracts

Recruitment Method


Advertisement Date

(quarter/year) Type of

Proposal Comments

CS – AKRP/IC-03

Financial Management Specialist

108,000.00 ICS Prior Q1/2019 BTP Assignment: national

Advance

Contracting: Y

B. Indicative List of Packages Required Under the Project The following table provides an indicative list of goods, works and consulting services contracts over the life of the project, other than those mentioned in previous sections (i.e., those expected beyond the current period).

Goods and Works

Package Number

General Description

Estimated Value (cumulative)

Estimated Number of Contracts

Procurement Method

Review (Prior/Post)

Bidding Procedure Comments

None

47

Consulting Services

Package Number

General Description

Estimated Value (cumulative)

Estimated Number of Contracts

Recruitment Method

Review (Prior/Post)

Type of Proposal Comments

None C. List of Awarded and On-going, and Completed Contracts The following tables list the awarded and on-going contracts and completed contracts. 1. Awarded and Ongoing Contracts

Goods and Works

Package Number

General Description

Estimated Value

Awarded Contract

Value Procurement

Method Advertisement

Date (quarter/year)

Date of ADB Approval of

Contract Award

Comments

Consulting Services

Package Number

General Description

Estimated Value

Awarded Contract

Value Recruitment

Method Advertisement

Date (quarter/year)

Date of ADB Approval of

Contract Award

Comments

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