Country procurement assessment: consulting services

EXECUTIVE SUMMARY

1. 
   Afghanistan is striving to emerge from a prolonged period of military occupation, wars and the Taliban rule. The country’s security situation remains critical, especially outside of Kabul, yet the economy is stable and continues to grow. In the reconstruction process the country is receiving extensive donor support.
   
2. 
   Taking into consideration the World Bank’s country assistance strategy, this report examines whether Afghanistan’s Public Administration (PA) has access to the services it needs from international and national consultants under Bank and Afghan procurement rules. Both, the Bank’s selection procedures and the Government’s (GoA) policy, laws, rules of procedure, and practices are examined to determine whether they (1) lead to efficient consulting contract awards and (2) support the development of local consulting firms. The demand and supply of international and domestic consulting services are assessed. In addition, this assessment identifies the key constraints that hamper the evolution of the domestic consulting sector.
   
3. 
   Suggestions are provided on what the GoA and the Bank could do to create an environment suitable for (1) qualified international consultants; and (2) the development of sustainable local consulting capacity necessary to help Afghanistan to implement its reform programs.
   

SUMMARY OF MAIN FINDINGS

4. 
   Apart from the security situation, the capacity to enforce legislative reforms and the effectiveness of the PA remain critical at all levels of government and also affect the selection and use of consulting services. The key challenges to an efficient selection of consultants are:
   
5. 
   Limited access to qualified consultants: Based on an assessment of Bank-funded assignments from the years 2005 – 2007 the average number of proposals submitted per assignment by international consultants is only about 2.5, of which just 2.1 are awarded a score above the Minimum Qualifying Score (MQS). According to interviews conducted by the mission, international consultants do not have sufficient incentives for seeking assignments in the country. Many firms refrain from participating due to security concerns for their personnel. Lack of trust in the capacity of the PA also discourages their participation. The entry costs required to set up and conduct business in Afghanistan are very high. At present, those firms willing to work in Afghanistan are reluctant to send qualified and experienced staff to Afghanistan. As a consequence, the quality of the services obtained is often questionable.
   
6. 
   A local consulting sector barely exists yet. Only a few local firms have evolved over the past five years. Their main constraints are lack of qualifications and experience and limited familiarity with procurement processes. As a result domestic firms, if they participate at all, frequently fail to meet qualification criteria set by the Bank or the GoA. Lack of trust in the fairness and the transparency of procurement handled by the PA also discourages their participation.
   
7. 
   Weak procurement capacity: Procurement staff has limited familiarity with basic principles of procurement and with the stages of the procurement process. In particular, the executing agencies have difficulty in (1) drafting ToR; (2) organizing and conducting evaluations; and (3) evaluating the quality of Expressions of Interest (EoIs) and proposals. Once the consulting firms are selected, supervision and management of the consultants are weak.
   
8. 
   Weak English and IT skills: The low level or absence of English and IT skills is hindering capacity-building efforts. International and national procurement personnel are facing serious problems in interacting with local staff. The work of local translators sometimes creates confusion instead of facilitating communication.
   
9. 
   GoA legal and regulatory framework: While the new Public Procurement Law (PPL) adopted in October 2005 has considerably improved the legal basis of public procurement, it lacks (1) the necessary foundation of a clearly stated policy on consultants; and (2) a chapter devoted solely to consultants’ selection. In addition, the Procurement Policy Unit drafted Rules of Procedure for Public Procurement in Afghanistan which became effective on April 12, 2007. While these procurement rules provide sound guidance through the process of consultants’ selection and contain appropriate provisions on enforcing transparency, fair competition and the administrative review of procurement proceedings, they still have several shortcomings concerning the procurement of consultants. For example, the rules lack (1) simplified procedures such as the use of Simplified Technical Proposals (STP); (2) provisions on the continuation of assignments subject to satisfactory performance of the incumbent; and (3) necessary details on the selection process such as the weight allocated to price under Quality- And Cost-Based Selection (QCBS) or indicative weights for evaluation criteria. In addition, their complex structure will make it difficult for PA staff to understand and apply the rules of procedure on procurement. Supporting documents such as the Standard RFP and procurement manuals are not yet available.
   

THE BANK’S CUrrent STRATEGY

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

• 
  Subcomponent 1: Technical Assistance on procurement facilitation;
  
• 
  Subcomponent 2: Capacity building of Borrower’s procurement staff; and
  
• 
  Subcomponent 3: Legal and institutional framework development.
  

Under subcomponent 1 the Afghan PA currently draws on advisory services of an international Procurement Consultant (PC) to facilitate and assist international and domestic procurement processes. Further support for capacity building (subcomponent 2) and for the completion of the legal and regulatory framework for procurement (subcomponent 3) is included in the Bank-funded Procurement Reform Program: Procurement Capacity Building and Legal & Institutional Framework Development (PRP) that started on 17 March 2007.

KEY RISKS

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

12. 
    Since it is a priority for reconstruction that the Afghan PA be reestablished, the Bank projects focus on building basic procurement capacity. The PACBP provides training to a limited number of key staff while the PRP includes a broad program for hundreds of trainees from all levels of government. However, due to PACBP’s limited outreach and PRP’s broad focus, training will only concentrate on basic subjects. In particular, PA staff will not receive training on consultant selection tasks, such as preparing ToR and assessing the quality of proposals. While specialized capacity building may be too much to expect at this stage, many parties interviewed expressed concerns about the credibility of the selection process given current deficiencies in the performance of these tasks. The same PA officials who have trouble drafting ToR then later are responsible for evaluating the proposals. Given this critical gap and the reluctance of consultants to seek assignments in Afghanistan, it is reasonable to conclude that the PA needs further support in evaluating proposals.
    

13. 
    The PRP includes basic training courses for local firms which will focus on (1) creating awareness about the new Public Procurement Law; and (2) procurement procedures for goods, works and consulting services. However, the following issues also need to be addressed:
    

1. 
   The GoA and Bank’s procurement procedures do not sufficiently take into account the technical and administrative weakness of the PA and the local consulting firms and apply complex standard procurement methods where simplified ones are needed.
   
2. 
   Neither PA nor donors have adequate information on locally available expertise and are facing difficulty identifying the few available local resources.
   

14. 
    While the PRP provides for a comprehensive capacity-building approach, its effectiveness may face serious challenges since interaction between international and national procurement staff is hindered by language barriers, unfamiliarity of nationals with IT systems and the lack of qualified translators. In addition, the training program could be compromised by the small number of local staff trainable in the complex procurement processes required by Bank or GoA regulations. Experienced PA staff is often poached by donor agencies and NGOs and the lack of qualified counterpart personnel in the Afghan PA often renders on the job training impossible. When counterpart staff is available low motivation due to low pay and limited opportunity for merit based promotion undermine the knowledge transfer.
    

SUMMARY OF MAIN RECOMMENDATIONS

Key Recommendations to the Government of Afghanistan

1. 
   The GoA may consider developing a comprehensive policy paper on professional and expert consultants to meet the specific needs of the PA and to encourage the creation of local consulting firms. The 2005 Public Procurement Law only reflects basic policy principles for selection of consultants while the new ‘Rules of Procedures’ provide the principles and procedures of consulting services in details. The GoA should explore the possibility of improving the pertinent rules of procedures depending on the changes in the country circumstances. Once ministries have clearly defined their mandates and their respective functions, a review of the range of services that local consulting firms could provide to the PA should be performed to decide which functions could be outsourced to local consultants. Drawing on experience with present Bank-funded public administration reform programs and its recommendations on HR planning and management, the policy should also address capacity building of PA staff through training and incentives.
   
2. 
   The GoA should consider reviewing the procurement rules of procedure’s provisions on consultants’ selection in light of the special situation in Afghanistan. Since both the PA and local consulting sector are weak, the use of Simplified Technical Proposals (STP) should be considered for routine assignments designed to attract local attention. The regulation should also provide for the continuation of assignments subject to satisfactory performance and necessary details on the selection process such as the weight allocated to price under Quality- And Cost-Based Selection (QCBS) or indicative weights for evaluation criteria. The consultants implementing the PRP could provide advice on the revision of the procurement rules of procedure.
   
3. 
   The PA is still a long way away from being able to efficiently select consultants. The GoA (with support from the Bank) should therefore consider assigning reputable consulting firms with strong procurement expertise in the field of the specific projects to the task of conducting proposal evaluations under major Bank-funded projects in close cooperation with the PA. The same consultants could also be entrusted with the quality and administrative control of the contracts and with building capacity. In particular, Bank-funded projects that cannot rely on the support of internationally staffed Project Management Units (PMUs) or Technical Support Units (TSUs) should benefit from this approach. For smaller Bank-funded projects, specialized individual consultants should be assigned to Evaluation Committees.
   
4. 
   Since Afghan consultancies can best develop their capacity through associations with international firms, the Requests for Proposals (RFP) and the Terms of Reference (ToR) for internationally competed assignments funded by the GoA should clearly identify, whenever possible and feasible, those components that can be executed by local consultants. In case no competent Afghan consultancies exist, the tender documents should clearly require from international firms to transfer skills and know-how to local individual advisors. Once these individual consultants were involved in internationally executed projects and developed their capacity under the supervision of experienced international consultants, they would be in a position to establish their own consulting companies.
   
5. 
   Since international consultants and PA staff are having difficulty interacting effectively, the GoA (with Bank support) may consider conducting a study on local translator training centers and implementing a training program for translators. It is also recommended to raise the level of English and IT skills of national procurement staff. Therefore, the GoA may consider developing and implementing training modules for procurement staff in the area of English, IT and computer skills.
   

Key Recommendations to the Bank

6. 
   For Bank-funded projects that are too small to justify the use of international consulting firms as under Recommendation 3 (R3), the Bank should encourage Bank staff to more actively support the weakest counterpart agencies. Bank specialists in the required areas should extensively review and also provide input to draft ToR regarding objectives, components, activities, milestones, and evaluation indicators. Common weaknesses in TA projects such as the fragmentation into small assignments of short duration, inadequate monitoring or the disregard of local circumstances should be avoided by better procurement planning, and effective supervision.
   
7. 
   Since continuity is essential for successful capacity building, but international participation is low and entry costs for international firms are very high in Afghanistan, the Bank should consider including a provision for continuation of work by the same consultant under Single-Source Selection (SSS) in the initial RFPs whenever justified by the characteristics and the circumstances of the projects.
   
8. 
   Mirroring Recommendation 4 to the GoA (R4), the Bank should (1) provide incentives for local participation by encouraging international and local firms to form partnerships and associations whenever feasible; and (2) require from international firms to transfer skills and know-how to local individual advisors.
   
9. 
   When drafting ToR, the security situation should be taken into account. Especially when the services are not related to capacity-building activities that need to take place locally, the ToR should provide for international consultants to perform services from outside the country to the greatest extent possible.
   
10. 
    For consultants’ selections under Bank rules and conducted by the PA, the following precautions are recommended: (1) Quality-Based Selection (QBS) and Fixed Budget Selection (FBS) should be applied to standard assignments; (2) QCBS should only apply when clearly justified by the nature of the ToR; and (3) Simplified Technical Proposals (STPs) should be used as much as possible. Information on local consulting firms already made available by other stakeholders such as the NGO Peace Dividend Trust should be disseminated to the Bank’s staff and TTLs. Whenever possible and feasible local firms should be considered for small assignments generally procured under SSS.
    
11. 
    To facilitate the preparation of projects and procurement plans, the Bank should consider requesting the Procurement Consultant to improve the quality of its monthly progress report by including data on the participation of international and national consulting firms such as (1) average number of EoI, size of shortlists, proposals submitted; (2) countries of origin of short-listed, responsive and winning firms and their categories (NGOs, consultancies, government agencies, etc.); (3) average billing rates; (4) number and nature of assignments for which the ToR require the participation of national firms; (5) nature of assignments limited to national participation; and (6) number and nature of assignments in which local firms are associated with international firms. Alternatively, the Procurement Consultant could be requested to prepare an annual report focusing on the points described above and complementing the monthly progress reports.
    
12. 
    Finally, the Bank could also consider cooperating with two stakeholders already providing support and training to local consulting firms. The Bank’s PRP could (1) draw on the experience of the NGO Peace Dividend Trust on training courses in procurement for local companies; and (2) collaborate with the Engineering Capacity Building Project for local consulting engineering companies implemented by the American Society of Civil Engineers (ASCE).