Participation rates of international consultants are low. Based on an assessment of 10 Bank-funded assignments from 2005 to 2007 the average number of international proposals submitted per assignment was only 2.5. On average just 2.1 proposals scored above the Minimum Qualifying Score (MQS). These outcomes are summarized in the table below, with details in Annex 4.
Participation Rates
EoI
Received
Size of
Shortlist
Proposals
Submitted
Proposals
Above MQS
Average
8.4
4.5
2.5
2.1
According to the international consultants interviewed the reasons for low participation are:
The security situation;
Low PA capacity to evaluate consultants’ qualifications and lacking transparency of selection processes; and
Low PA capacity to adequately supervise and to pay international consultants fairly and timely.
In addition, international consultants stressed the high costs required to set up and conduct business in Afghanistan (security, electricity, safe housing for employees, identifying reliable local partners or suppliers, etc.). The entry costs are considered to be extremely high. Once established, firms tend to apply for other opportunities again. However, according to the interviews the willingness of firms to operate in Afghanistan is mainly linked to the availability of bilateral contracts and not to Bank-funded assignments which are merely seen as an addition to the core business. International consultants interviewed point out that the incentives for seeking Bank-funded assignments are missing. Excessive demands from the PA, its lacking appreciation of consulting services, and delayed payments are among the many issues that discourage qualified consultants.
Performance on Consulting Service Contracts
PA and donor officials generally consider the performance of international consulting firms as merely satisfactory under the present circumstances and have observed that firms generally refrain from sending experienced and qualified staff to Afghanistan. Assignments focusing on capacity building implemented by international firms are generally rates as less than satisfactory. However, officials admit that contract durations of 2 to 3 years make it difficult to carry out comprehensive capacity-building contracts. In addition, the lack of trainable local staff challenges any training program.
Remuneration Levels
Based on a sample of 12 Bank-funded contracts international firms from Part 1 countries demand a median fee of $23,000 for key team members for operating in Afghanistan as outlined in the following table, with details in Annex 5 on the 12 assessed contracts.
Since continuity is deemed essential for successful capacity building, but international participation is low and entry costs for international firms are very high, the Bank should consider including a provision for continuation of work by the same consultant under SSS in the initial RFPs whenever feasible.
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.
Domestic Supply of Consulting Services
The Local Consulting Sector
While contractors and suppliers of varying capacity seem to provide a sound local source for implementing smaller contracts, the situation appears much less advanced in the area of consulting firms. However, a full assessment is hindered by lack of information. While various LMs have registered local firms, this information mainly serves to disseminate procurement opportunities to potential local consulting service providers. It does not provide indications on the actual expertise available or the previous performance of firms. The same problem applies to the company registration scheme run by the Afghan Investment Support Agency (AISA).
ARDS is registering firms and requires them to provide information about their main areas of interest. However, no information from ARDS could be obtained during the mission.
While it is far from being exhaustive, an immediately available source of information on the local consulting sector is the Afghanistan Procurement Directory (www. procurementdirectory.af) launched by the Canadian NGO Peace Dividend Trust (PDT) in September 2006. This directory currently lists 14 local consulting firms, of which 6 have previous experience with donors and 10 can rely on either permanent or temporary international staff.
Based on site visits to a number of local companies’ offices and information provided by PDT, the local consulting sector can be further divided into three categories:
Kabul-based consulting firms owned and managed by foreigners with a proven track record of professional experience in the country (mainly studies and research), drawing on international and local staff and relying on a strong clientele from the Afghan private sector (e.g. the national telecoms); approx. 2 out of 14 companies listed under the Afghanistan Procurement Directory are in this category.
Domestic firms owned and run by local professionals mainly educated in Pakistan and fluent in English with a limited number of international staff (mainly temporary) on their payroll that occasionally have won small donor-funded consulting contracts.
Purely domestic consulting firms, with a limited number of local staff and no international staff, that have no experience in providing consultancy services to public sector clients.
Firms belonging to categories 2 and 3 are generally involved in many areas of business other than consulting. According to interviews these types of firms are currently trying to win consultancy contracts funded by the GoA or the international donor community, but mainly must engage in construction and supply activities (e.g. the import of cars).
Main Areas of Expertise
According to the information gained during interviews at local companies and through the assessment of firms’ webpages and data provided by the local consulting companies under the Afghanistan Procurement Directory the main areas of local expertise are:
Areas of Expertise of Afghan Consulting Companies Listed under the
Afghanistan Procurement Directory
This table should be seen as mere indication of the range of services domestic consulting firms could provide to the Afghan PA. It is not uncommon that webpages, company flyers or brochures list vast areas of expertise while it turned out in interviews that the companies had yet to provide consultancy services to a public client.
Performance on Public Contracts and Remuneration Levels
No data was available on the quality of local consultancy services provided to the Afghan PA or donors.
According to the assessment of Bank-funded contracts for Afghan consultants nominated by international firms, a median monthly billing rate of about US$2,900 applies (see Remuneration Levels, para. 68). According to TTLs interviewed the fees of individual local freelance consultants are generally higher (about $3,500 to 4,500) since the Bank has to compete with other donors for the few experts available.
Capacity Assessment of Afghan Consultancies
The capacity of local consulting firms remains very weak. The few profitable domestic firms operating from Kabul are developing skills by on-the-job training, in-house courses held by international consultants and twinning (i.e. one international and one local staff are implementing the same task). One of the biggest challenges is availability of qualified local professionals since the private sector can rely neither on functioning advanced education systems nor on institutions where experience can be gained.
NGOs implementing nationwide projects on behalf of the donor community are contributing to the development of local capacity by in-house training courses in English language and IT skills and by delegating project components to be implemented in the provinces to local personnel.
According to the interviews conducted the major key constraints faced by the domestic consulting firms are:
Lack of qualified local staff due to the new nature of assignments, higher quality standards, and the weak and poorly funded Afghan tertiary education system;
Weak management, English and IT skills;
Competition for experts with donors and international consultants implementing projects in Afghanistan;
Limited public demand and scarce financial resources;
Lack of developed banking system; many local consultants face serious difficulty to obtain bank guarantees.
These problems are reflected in the poor track record of local consultants in winning contracts from donors or the GoA. Other specific reasons for lack of success in public procurement opportunities are:
Limited familiarity with public procurement, procurement procedures and documents, partly due to lack of English skills;
Failure to meet qualification requirements for proposed staff (for example, the post requires a postgraduate degree despite the fact that there are no post-graduate programs in Afghanistan, or qualified but young experts have too few years to meet the requirement on minimum professional experience); and
Lack of trust in the fairness and transparency of procurement processes handled by the GoA and therefore limited participation.
Once local firms were awarded contracts they face further problems since they lack experience in project implementation under GoA or Bank rules (firms may switch key staff without being aware that this requires a No Objection and have trouble preparing invoices according to required standards).
Developing Capacity of the Domestic Consulting Sector
While most of the constraints faced by the consulting sector can only be addressed in the long-term, the exclusion of domestic consultancies from the development process can be addressed, at least in part for simple assignments, through training courses or workshops. The upcoming PRP will include basic procurement training for local firms, conducting seminars (at least twice a year) on the new PPL and structured training programs (four times a year) on procurement procedures for contracts funded by the GoA and the donor community. However, workshops and training courses do not focusing solely on consulting firms, but will also address contractors and suppliers. In addition, the current lack of procurement manuals will hinder the preparation and implementation of training materials and programs.
Therefore, the consultant responsible for the PRP could benefit from the experience of two ongoing local training programs. The NGO Peace Dividend Trust (PDT) procurement training courses focus on the major weaknesses of local firms in following procurement procedures.32 While PDT has only offered a first training session for the construction sector in May 2006, it plans to conduct a series of workshops on procurement for consulting services. The American Society of Civil Engineers (ASCE) is about to start the Engineering Capacity Building Project for local consulting engineering companies.33 Training will cover a broad range of topics such as management, project management, and procurement. A collaboration between the PRP and the ASCE project could achieve synergies.
Overcoming the Information Gap on Consultants
The monthly Progress Reports submitted by the Procurement Consultant to the Bank do not enable a reviewer to extract information necessary to assess the quality of the selection process. In particular, it lacks information on the nature of assignments and the extent of international and national participation (average billing rates, participation rates from international and national firms, and nature of assignments attracting national firms). Precise data would enable TTLs and PA staff to better plan assignments and selection parameters.
Moreover, many representatives of the PA or the donor community interviewed are unaware that at least some capable local firms exist in Afghanistan. Only a few persons representing the public sector were able to name or recommend one local consultancy. As a result, local firms are generally not taken into account when firms are selected under SSS for special or urgent assignments.34 Information tools like the Afghanistan Procurement Directory could help to minimize the information gap (see para. 71).
Recommendations
Since Afghan consultancies can best develop their capacities through associations with international firms, the Requests for Proposals (RFP) and the Terms of Reference (ToR) for internationally competed assignments funded by the GoA and the Bank 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.
For routine assignments limited to national consultants, the Bank and the GoA should consider the use of Simplified Technical Proposals (STP). Quality-Based Selection (QBS) and Fixed-Budget Selection (FBS) should apply to standard assignments and Quality- and Cost-based Selection (QCBS) only when clearly justified by the nature of the ToR. This should encourage local consultants to seek participation. Information gained should be disseminated to the Bank’s TTLs (for example, concerning the research tool Afghanistan Procurement Directory). Whenever possible and feasible local firms should be considered for small assignments generally procured under SSS.
To facilitate the preparation of projects and procurement plans, the Bank should consider requesting the PC to improve its monthly progress report. It should include 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 shortlisted, responsive and winning firms and their categories (NGOs, consultancies, government agencies); (3) average billing rates; (4) number and nature of assignments for which the ToRs 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.
The Bank could also consider cooperating with two stakeholders currently 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 on 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).
