developing the economic cooperation zone project ... · 1 developing the economic cooperation zone...

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Developing the Economic Cooperation Zone Project (RRP MON 51410)

Procurement Risk Assessment

and

Strategic Procurement Planning

Prepared under TA-9679 MON: Preparing Regional Cooperation and Integration Projects November 2019, Ulaanbaatar, Mongolia

http://www.adb.org/Documents/RRPs/?id=51410-001-3


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Contents EXECUTIVE SUMMARY .............................................................................................................................. 3

I. INTRODUCTION ................................................................................................................................... 4

II. PROJECT PROCUREMENT RISK ASSESSMENT ............................................................................. 4

A. Overview ........................................................................................................................................... 4

B. Strengths ........................................................................................................................................... 6

C. Weaknesses ...................................................................................................................................... 6

D. Procurement Risk Assessment and Management Plan (P-RAMP) .................................................. 7

III. PROJECT SPECIFIC PROCUREMENT THRESHOLDS ................................................................... 10

IV. PROCUREMENT PLANS ................................................................................................................... 10

V. CONCLUSION .................................................................................................................................... 10

APPENDIXES I. Completed Procurement Risk Assessment Questionnaire II. Strategic Procurement Planning



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EXECUTIVE SUMMARY

The overall procurement risk for the project is assessed to be medium without mitigation measures. The procurement risk for the executing agency (EA), Office of Deputy Prime Minister (ODPM) under the Cabinet Secretariat of Government of Mongolia (CSGM) is medium. This is due to limited staff capacity and project implementing experience . However, the CSGM has one dedicated fulltime procurement officer who is responsible for procurement activities, as well as contract management and monitoring. As for the two implementing agencies: (i) the procurement risk for the Zamyn-Uud Free Zone Governor’s Office (ZUFZGO), is substantial. ZUFZGO also have no staff capacity and no procurement activity carried out within the last 3 years; while (ii) the procurement risk for the Ministry of Construction and Urban Development (MCUD) is low as it has some procurement capacity and experience implementing ADB and other international financial institution-funded projects. There are no dedicated procurement department/units under any of EA and IAs and none or only one dedicated procurement officer at each organization. Bid evaluation committees (BEC) are established for the procurement activities in accordance with the Public Procurement Law of Mongolia (PPML). However, a main systemic weakness of these arrangements is that the executing agency does not have all the staff and systems in place to ensure that procurement is executed diligently and effectively. The legal and institutional systems in Mongolia are well-established. The Public Procurement Law is compliant with international best practices. Advance contracting was further allowed by an amendment in 2018. Mongolia is also implementing e-procurement system. The new ADB procurement framework has been introduced to the EAs and IAs. Relevant officials who are responsible for procurement activities participated in a 3-day procurement training provided by the Ministry of Finance, passed procurement exams and hold “A3” certificate. Since the procurement capacity for EA and IAs is low to medium, only few packages are for prior review by ADB. A procurement specialist will be hired under the Project Implementation Unit (PIU), who will be responsible for the procurement activities of the project. The Terms of Reference and minimum qualification of the PIU procurement specialist is provided in the PAM.



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I. INTRODUCTION

1. The proposed project concerns financing of $35.76 million, financed from the ADB’s concessional ordinary capital resources. The project will serve as a catalyst for Mongolia’s diversification, integration into regional and global value chains, and creation of employment and economic opportunities, with a focus on Zamyn-Uud soum (district). The Zamyn-Uud soum has the busiest international border port between Mongolia and the People’s Republic of China (PRC) and its population heavily relies on border traffic and trade activities. The project will promote the development of an economic cooperation zone to facilitate stronger participation of Zamyn-Uud soum along the Central Asia Regional Economic Cooperation (CAREC) corridor 4B. 1 The operationalization of the Zamyn-Uud free zone will promote economic and employment activities through: (i) construction and operation of infrastructure and facilities; (ii) promotion of sustainable management and operation; and (iii) establishment of port of entry system in the free zone.

II. PROJECT PROCUREMENT RISK ASSESSMENT

A. Overview

2. The legal and institutional systems in Mongolia are well-established. Laws and regulations are systematically in place. All organizations/institutions under state budget are obliged to strictly carry out the entire procurement procedure in accordance with the policies and regulations of the Ministry of Finance (MOF). Financial audit is carried out by an independent auditor appointed by the Mongolian National Audit Office, a government agency following an ethical code. The system also accommodates applying the foreign donor’s procurement and consultant selection guidelines for the project to be funded by international financial institutions including ADB. 3. The base of the procurement regulation is the Public Procurement Law of Mongolia (PPLM) which became effective in May 2000. The law was amended in 2007, 2009, 2011, 2013, 2015, 2016, 2018 and 2019, respectively. The law was based on the UNCITRAL Model Law on Procurement. It complies with international best procurement practices and shares the common objectives of public procurement systems. By the law amendment of 2018, advance contracting is allowed. 4. The PPLM regulates public procurement of goods, works and services (consultancy and non-consultancy) and covers the majority of public procurement activity. The law defines “procuring entity” as a legal entity with state and local ownership and a legal entity with partial state and local ownership of 50% or more. The law determines one entity as a sole bidder and when several entities submit one tender on the basis of a joint venture contract. 5. The public procurement system in Mongolia is semi-decentralized and most high value procurements are conducted by the Government Procurement Agency (established in 2012), line ministries, and other public institutions. 6. Procuring entities are the key stakeholders using the PPLM and other legislative procedures and actions. By law, procuring entities have the following rights: (i) set up an evaluation committee; (ii) oversee the respective compliance of the evaluation committee’s operations and evaluation reports and take measures to remove violations; (iii) issue a decision authorizing a contract subject to the decision from the evaluation committee; (iv) effectively plan

1 CAREC corridor 4B corridor crosses Mongolia, linking the Russian Federation, to the north, with the PRC, to the south

and east.

http://www.adb.org/Documents/RRPs/?id=XXXXX-XX-X

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and organize the procurement of goods, works or services within the estimated budget; (v) initiate procurement when funds for financing are allocated to goods, works and services; (vi) to review performance against contractual obligations; (vii) immediately initiate the procurement of goods, services or works with specific characteristics and executed in particular seasons such as construction, road, and engineering network following the state budget approval of a given year; and (viii) require establishment of an information board in a visible public area for the duration of works and service guarantee period containing the contractor’s brief introduction in addition to contact details, contract amount, finance schedule, work starting and finishing date, and routine map for road and engineering pipelines. 7. MOF is responsible for overseeing and assessing the procuring entity’s compliance to relevant procurement procedures; providing professional and practical advice to the procuring entity on procurement matters; drafting and adopting policies and procedures, guidelines, instructions, manuals, and standard documents pertaining to procurement; and reporting annually to the government on the implementation of procurement legislation.

i. Organization and Staff Capacity

8. All proposed EA/IAs establishes a procurement committee for each major procurement as required by The Public Procurement Law of Mongolia. The chairman of the committee is usually the relevant Head of Departments who are responsible for investments in the relevant area. It can also be another senior official. The committee is appointed by the First Deputy Chief/State secretary of an agency and will include officers with other technical knowledge and responsibilities, possibly from other government agencies.

9. Cabinet Secretariat of Government of Mongolia (CSGM) has one dedicated fulltime procurement officer who is responsible for procurement activities, as well as contract management and monitoring. ZUFZGO and MCUD have no fulltime procurement professionals. Procurements are usually coordinated by the relevant officers who are responsible for the procurement. All of these officers have participated in a 3-day procurement training provided by the Ministry of Finance, passed procurement exams and hold “A3” certificate. However, they are not procurement professionals and have limited procurement experience.

10. Project implementation unit (PIU) will be established by the EA in accordance with MOF Resolution No. 196 to manage day-to-day activities of the project, including procurement. It is planned that the PIU will be staffed by a project coordinator, financial management specialist/accountant, procurement specialist, civil engineer, and project assistant/translator.

ii. Information Management

11. EA/IAs have good procedures and facilities in place to organize and store documents. Documents are kept in archives for 10 years, which is longer than required for ADB project documents. They also have systems to back up electronic data. However, the procurement committees have not always been diligent, allowing documents that should be kept confidential are left unsecured. Some bidders find out the bidding confidential information revealed before the bidding is announced. Documents must be handled securely and privately to ensure fair and transparent process during all stages of the procurement. Once the bid process is complete, documents must be filed systematically to ensure all records are available to auditors and other parties who may need access to documents.


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iii. Procurement Practices

12. The Public Procurement Law which is generally based on international best practices guides procurement activities. The procurement procedures comply with the law and in general with ADB guidelines and procedures under ADB-financed projects. In case there are discrepancies or uncertainties, the ADB guidelines shall prevail. The PIU procurement specialist will manage procurements, consultant recruitments and administer contracts. The PIU should also have project manager who will participate in procurement processes, assist in developing specifications, and monitoring contract compliance with the support of other consultants as required.

iv. Performance of e-procurement system (or plans to introduce one)

13. Mongolia is implementing e-procurement system. All open competitive bidding are announced on the government website, the results are distributed by the system. Open competitive bidding under national advertisement can be posted on the system.

v. Effectiveness

14. EA/IAs have limited capacity to develop detailed specifications or monitor and control complex contracts. Therefore, inputs from PIU and other consultants are required. Complaints resolution mechanisms are outlined in the Public Procurement Law and should be referenced in contracts. The EA/IAs neither have the sufficient technical expertise to develop detailed TOR and RFPs for consultants nor to evaluate EOIs, technical and financial proposals. They have no fulltime procurement staff professionals, although some staff who are responsible for procurements do have limited procurement experience and training.

vi. Accountability Measures

B. Strengths

15. The Public Procurement Law is consistent with international best practices. Procurements under previous ADB projects have generally been in compliance both with the national law and ADB guidelines. In case of any discrepancy, ADB guidelines will prevail. Harmonized standard bidding documents approved by ADB will be used to prepare bidding documents under the project. The bid evaluation/consultant selection committees for goods, works, and services will be established by the Deputy Prime Minister for all procurement for goods, works, and consulting services as required by the law. EA/IAs have effective procedures in place to establish bid evaluation/consultant selection committees, process contracts and payments. The PIU will be staffed by qualified and experienced professionals and will be supported by international and national consultants, which will bring all the required technical competencies to the project. The PIU procurement specialist will provide the necessary competencies in terms of procurement skills and knowledge. The PIU will be responsible for ensuring effective and efficient procurement processes and contractual compliance. C. Weaknesses

16. EA/IAs staff who conducts procurement are not procurement professionals and have responsibilities other than procurement, although they have trained and involved in procurement. PIU is yet to be established by the EA/IAs. Whereas the law outlines requirements for qualifications of bid evaluators and the composition of the bid evaluation committee, the


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requirements are not always observed. Bid evaluation committees do not always include members with the necessary technical knowledge.

17. There is some weakness in the verification of goods procured as they are only checked by the officer in charge of the procurement. Goods received should also be checked against the invoice/purchase order by a procurement specialist or other professional to reduce the opportunities for collusion. There is no established procedure at the EA/IAs to track warranty and latent defects liability periods. D. Procurement Risk Assessment and Management Plan (P-RAMP)

Risk Area

Risk Assessment

Risk Description

Mitigation Measures or Risk Management

Plan

Organizational and Staff Capacity

Procurement Department/ Unit

Medium The EA/IAs has no procurement department/unit and only one fulltime procurement staff in charge procurement activities of the organizations.

Procurement committees are formed by the State Secretary or equivalent official of the respective ministries or agencies and the committee is led by Head of the Department and consists of officers. These officers have received procurement training and hold their “A3” certificates. However, they are not procurement professionals and have other tasks and responsibilities. The experience and skill of the Project implementation unit (PIU) Procurement specialist is unknown. Procurement is risky if solely reliant on country systems that mainly arise from weak implementation capacity and replacement of government of officials and staff due to the government reshuffling (such as after the 2020 parliamentary election).

PIU shall recruit one experienced and skilled procurement specialist on a full time basis and additional intermittent procurement consultant, as needed. The procurement specialists should have ADB project experience and should be trained in ADB requirements.

Project Implementation Unit

Unknown (still to be hired)

The PIU should include procurement specialist position with necessary skills and experience to procure civil works, goods, and consulting services. Experience in ADB funded or similar projects shall be a priority.

ADB should approve terms of reference (TOR) for the procurement specialist and review the selection and recruitment processes.


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Risk Area

Risk

Assessment

Risk Description


Plan

Information Management

Retention and Filing of Procurement Records and Contract Papers

Low Hard copies of all original documents are filed in the finance or related departments and later moved to archives where they are kept for 10 years.

The PIU must develop an effective document and electronic data storage procedures.

Procurement Practices

Goods and Works

Medium EA/IAs has experience in organizing procurement committees, and managing procurements and follow the requirements of the Public Procurement Law.

Previous and ongoing international donor funded projects have been supported by a procurement specialist hired under the PIU. EA/IAs’ practice in developing Technical Specifications (TS) needs support and technical expertise.

The PIU procurement specialist shall be appointed as secretary of the bid evaluation committee to ensure the procurement is organized according to the law and guidelines.

The ADB will review the procurements and performance of contractors, suppliers, and consultants. Technical Specifications (TS) of goods and civil works shall be developed by consultants to be hired under Output 1 and 3.

Consulting Services

Medium The EA/IAs’s experience in recruiting consultants has been limited to those recruitments under the ADB and other donor-funded projects, which always supported by the PIU procurement specialists.

The EA/IAs staff don’t always have the technical expertise to develop TOR and request for proposals for consultants.

EA/IAs’ practice in developing Terms of References (TOR) needs support and improvement.

The PIU should develop procedures that will ensure compliance with the Public Procurement Law and ADB guidelines. PIU staff with the relevant technical skills and knowledge should be included in consultant selection committees and be involved in the development of specifications/TOR and monitoring of contract compliance.

TOR to be developed by TRTA consultants during project processing.


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Risk Area

Risk

Assessment

Risk Description


Plan

Payments Low Currently all payments at all state budget agencies are processed by State Treasury under MOF and the system has strong internal control. There are issues with contract implementation, such as compliance to claim against bill of quantity for civil works contracts. The financial and contract management processes could be strengthened.

The PIU will develop procedures/internal monitoring to ensure all payments are valid and certified/authorized by technically competent staff or consultant.

The PIU financial management specialist/accountant will control and track all payments as per ADB Disbursement guidelines. ADB project review missions should carry out spot check.

Effectiveness

Monitoring of contractual performance and complaints resolution mechanisms

Low EA/IAs have Monitoring and Evaluation, and Audit Divisions. Procurement Policy Division of MOF handles all complaints made by suppliers and contractors.

Contractual performance will be monitored and controlled by the PIU and will be reported in the quarterly and annual project reports. ADB and PIU will review the performance of civil works contractors, suppliers, and consultants.

Code of ethics, segregation of duties, and documentation

Low The Public Procurement Law outlines ethical standards for all government officials involved in procurement. They should not serve on a procurement committee if there is a conflict of interest.

There have been issues in the past with staff trying to unfairly promote the interests of certain vendors.

EA/IAs and PIU staff will be trained in ADB’s anticorruption and integrity policy.

The ADB will also review potential corruption and integrity issues in the project procurements.

Overall Risk

Medium


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III. PROJECT SPECIFIC PROCUREMENT THRESHOLDS

18. Open competitive bidding (OCB) will be applied to small works and goods contracts. OCB can be advertised internationally and nationally for the goods and small works contracts can be sourced locally. Request for quotations (RFQ) will be used for contracts for works and goods valued up to $100,000. IV. PROCUREMENT PLANS

19. There will be 7 goods and works contracts for the amount of $ 19,992,889 will be procured though open competitive bidding (OCB), while 2 goods contracts for the total amount of $100,000 will be procured through RFQ. It is expected that the proposed project will fund 720 person-months of international and national consulting services (including PIU staff) to provide relevant expertise. All advance contracting will be undertaken in conformity with ADB Procurement Policy: Goods, Works, Non-consulting and Consulting Services (2017, as amended from time to time). The issuance of invitations to bid under advance contracting will be subject to ADB approval. The EA/IAs have been advised that approval of advance contracting does not commit ADB to finance the project. There will be no retroactive financing under the project. V. CONCLUSION

20. The project arrangements with a qualified PIU procurement specialist and other mitigation measures, will be satisfactory. The ADB and EA/IAs will jointly undertake reviews of the project at least once a year. The reviews will assess progress in the project activities, including implementation of the mitigation measures, procurement transactions, performance of contractors, suppliers and consultants, monitoring and reporting of project assets, identify issues and constraints, and determine necessary remedial actions and adjustments.


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Appendix 1

PROJECT PROCUREMENT RISK ASSESSMENT QUESTIONNAIRE

Cabinet Secretariat

Risk Rating High (H) Substantial (S) Moderate (M) Low (L)

QUESTION RESPONSE2 RISK3

A. ORGANIZATIONAL AND STAFF CAPACITY

PROCUREMENT DEPARTMENT/UNIT

A.1 Does the agency or Government have a Procurement Committee that is independent from the head of the agency?

The procurement committees are constituted by the First Deputy Chief of the Cabinet Secretariat of Government of Mongolia (CSGM) for the emerging procurement need of CSGM and the committees report to the First Deputy Chief the on findings and recommendations of the procurement committee. Procurement committees constituted with representatives of different departments with A3 (national procurement) certificate.

L

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?

There is no permanent office that performs the function of a Secretariat for the Procurement Unit. However, there is a secretary of the Bid Evaluation committee, who performs the secretariat for the procurement unit role. There is one fulltime staff/officer of Finance, Investment and Service Division who oversees and responsible for procurement activities.

M

A.3 If yes, what type of procurement does it undertake?

The Finance, Investment and Service Division is entrusted with the responsibility for coordinating the procurement activities for the CSGM and it manages the procurement activities through the procurement committees formed by the First Deputy Chief for each procurement. The division, with the support from the procurement committees, undertakes procurement activities such as goods, small works and consulting services which organized under the Public procurement law of Mongolia (PPLM).

M

2 Responses should include a discussion of the e-procurement component if an e-procurement system is in use or if

is being planned for implementatioin. 3 Questions indicated with * are associated with potentially ‘High’ or ‘Substantial’ risks due to the impact being ‘High’,

therefore the strategy for managing those risks should be addressed in the Project Procurement Risk Analysis (Appendix 3).


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A.4 How many years’ experience does the head of the procurement department/unit have in a direct procurement role?

CSGM does not have a permanent procurement department/unit for managing the procurement activities. However, there is one full-time procurement officer in the Finance, Investment and Service Division. The officer in charge of procurement activities of CSGM has 11 years of work experience with CSGM, practically in public procurement.

L

A.5 How many staff in the procurement department/unit are:

i. full time

ii. part time

iii. seconded

There is one full-time procurement officer in the Finance, Investment and Service Division who responsible for all procurement activities of the CSGM. However, there are a number of staff with A3 certificates, who can be appointed to the procurement evaluation committee.

S

A.6 Do the procurement staff have a high level of English language proficiency (verbal and written)?

English language proficiency is low or mid level for the staff assigned for managing the procurements. The staff directly assigned for procurement activities are face with English barrier if procurement is organized only in English language.

H

A.7 Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project?

As clarified above, there is one full-time procurement officer in charge. The office can participate in the procurement activities of the project but cannot fully responsible the full procurement activities. One dedicated officer was been attended procurement trainings organized by World Bank (WB) and Swiss Agency for Development and Cooperation (SDC).

H

A.8 Does the unit have adequate facilities, such as PCs, internet connection, photocopy facilities, printers etc. to undertake the planned procurement?

As explained above, there is no dedicated team for procurements. However, for the staff usually included in the procurement committees have access to computers, printers, internet access etc. Access to the infrastructure is not seen as a constraint in managing the procurements for CSGM.

L

A.9 Does the agency have, or have ready access to, a procurement training program?

CSGM itself does not have a training program under the procurement, however they participate and attend the procurement training programs conducted by the Government Agency for Policy Coordination On State Property. CSGM currently has a pool of 10 or more A3 Level certified staff who are usually engaged in managing the procurement needs. However, such staff may not have received prior training on procurement rules and guidelines of ADB or other donors.

M


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A.10 At what level does the department/unit report (to the head of agency, deputy etc.)?

Since there is no department/unit. However, the decision of the Bid evaluation committee is presented to First Deputy Chief of the Cabinet Secretariat, for approval of requirements and then of the results of the evaluation and then, signs the contract with selected company.

M

A.11 Do the procurement positions in the agency have job descriptions, which outline specific roles, minimum technical requirements and career routes?

The staff of CSGM with A3 certificates have a right to take part in the procurement and bid evaluation committee, but their job descriptions do not include procurement roles.

L

A.12 Is there a procurement process manual for goods and works?

Yes. Procurement Manual and guidelines exists for procurement of goods and works under the PPLM available in Mongolian language.

L

A.13 If there is a manual, is it up to date and does it cover foreign-assisted projects?

The manuals are updated in accordance with the PPLM. The manual does not cover foreign-assisted projects.

L

A.14 Is there a procurement process manual for consulting services?

Yes. Procurement Manual and guidelines exists for procurement of consulting services under the PPLM available in Mongolian language.

L



L

PROJECT MANAGEMENT UNIT

A.16 Is there a fully (or almost fully) staffed PMU for this project currently in place?

There is no PMU established for the project yet.

H


As mentioned above, there is one full-time procurement officer. The officer in charge is not able to take additional procurement tasks proposed under the project.

H


The staff usually included in the procurement committees have access to computers, printers, internet access etc. Access to the infrastructure is not seen as a constraint in managing the procurements for CSGM.

M

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 are standard procurement documents for procurement of goods and works agreed by MOF and ADB, used by ADB funded projects.

L

A.20 Does the agency follow the national procurement law, procurement processes, and guidelines?

Yes. The CSGM perform procurement activities under the PPLM.

L

A.21 Do ToRs for consulting services follow a standard format such as

Yes. M


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background, tasks, inputs, objectives and outputs?

A.22 Who drafts the procurement specifications?

The technical specifications are prepared by the procurement committees based on the specific inputs received from the end user departments, which initiated the procurement requirement. For e.g. the committees take inputs and support from the ICT division for preparation of specifications for procurement of any ICT infrastructure.

M

A.23 Who approves the procurement specifications?

Approval of the specifications is done by the evaluation committee in consultation with the user department. For each committee, there is the head of the committee (one of the members from the committee).

M

A.24 Who in the PMU has experience in drafting bidding documents?

PMU is not established yet. H

A.25 Are records of the sale of bidding documents immediately available?

Yes. L

A.26 Who identifies the need for consulting services requirements?

Respective user departments in CSGM based on the needs of their departments.

M

A.27 Who drafts the Terms of Reference (ToR)

Refer to the response in A22. M

A.28 Who prepares the request for proposals (RFPs)

The bidding documents are prepared by the committee after technical specifications are finalized in consultation with user departments.

M

B. INFORMATION MANAGEMENT

B.1 Is there a referencing system for procurement files?

The Finance, Investment and Service Division manages the referencing system for the procurement files.

M

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 management functions within the agency?

During the procurement stage, all the procurement documents are managed by the committee with the support from the Procurement Secretariat formed for that procurement. Subsequently, the procurement files are managed by the Finance, Investment and Service Division until the files are transferred to the Archive as per the State Archive Law. For all completed projects, the documents are to be transferred to the Archive before the end of the year.

M

B.3 Does the agency adhere to a document retention policy (i.e. for what period are records kept)?

Refer to the response in B.2 M

B.4 Are copies of bids or proposals retained with the evaluation?



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B.5 Are copies of the original advertisements retained with the pre-contract papers?


B.6 Is there a single contract file with a copy of the contract and all subsequent contractual correspondence?

As per the discussions with the Officer in charge of procurement activities of Finance, Investment and Service Division, it does maintain the contract files containing the document, subsequent amendments including any correspondence on the contract, payment records etc.

M

B.7 Are copies of invoices included with the contract papers?

Refer to the response for B.6. The invoice processing is managed by the accountant in Finance, Investment and Service Division, which receives the invoices and are processed based on the consent provided by the end user department which receives the goods/services. The payments for regular contracts are reviewed and processed by the State Treasury at MOF.

M

B.8 Is the agency’s record keeping function supported by IT?

Yes. The CSGM has its own servers, but no backup servers.

S

C. PROCUREMENT PRACTICES

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.

Smart government project funded by WB under the CSGM has organized such procurement activities, the project has dedicated procurement staff in the PMU.

M

C.2 If the answer is yes, what were the major challenges faced by the agency?

N/A *

C.3 Is there a systematic process to identify procurement requirements (for a period of one year or more)?

The procurement requirements for each year are identified and included in the procurement plan, which is also published on the website of the CSGM and Glass account.

M

C.4 Is there a minimum period for the preparation of bids and if yes, how long?

There is no specific time period for preparation of bids. However, CSGM follow the approved procurement plan. In accordance with PPLM bids must be evaluated and contract awarded within 45 days. Onetime 30-day extension is allowed by law.

M

C.5 Are all queries from bidders replied to in writing?

Yes. In accordance with PPLM, all correspondence with bidder shall be in writing.

L

C.6 Does the bidding document state the date and time of bid opening?

Yes. L


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C.7 Are bids opened in public? Yes. L

C.8 Can late bids be accepted? No. L

C.9 Can bids (except late bids) be rejected at bid opening?

During the bid opening process, only the details of received bids are read out and no evaluation or rejection of the bids is undertaken during the opening stage.

L

C.10 Are minutes of the bid opening taken?

Yes. L

C.11 Are bidders provided a copy of the minutes?

Yes. L

C.12 Are the minutes provided free of charge?

Yes. L

C.13 Who undertakes the evaluation of bids (individual(s), permanent committee, ad-hoc committee)?

Evaluation is undertaken by the procurement committees formed for managing each of the procurements of the CSGM.

L

C.14 What are the qualifications of the evaluators with respect to procurement and the goods and/or works under evaluation?

In accordance with PPLM, all members in the procurement committee shall have A3 certificate (national procurement) and must have two NGO representatives for transiency.

M

C.15 Is the decision of the evaluators final or is the evaluation subject to additional approvals?

Evaluation committee makes an assessment of the received bids. Based on the review of inputs from all the members of the committee, it proposes and recommends the best candidate and the details are sent to the Purchaser (First Deputy Chief), based on the evaluation and recommendation the Purchaser approves the contract award.

M

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?

In accordance with PPLM bids must be evaluated and contract awarded within 45 days. Onetime 30-day extension is allowed by law.

M

C.17 Are there processes in place for the collection and clearance of cargo through ports of entry?

The responsibility for collection and clearance of the goods is completely entrusted to the contractor and the price quoted should be inclusive of all such charges including goods clearance and transportation to the site.

M

C.18 Are there established goods receiving procedures?

Yes, including acceptance procedures for the delivered goods.

L

C.19 Are all goods that are received recorded as assets or inventory in a register?

They have an asset register or inventory register. The asset register is maintained by the finance department.

L

C.20 Is the agency/procurement department familiar with letters of credit?

Yes, but rarely practiced. L


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C.21 Does the procurement department register and track warranty and latent defects liability periods?

Monitoring the warranty and defect liability period is being undertaken by respective end user departments, which initiated the procurement requirement. The role of procurement committee or Finance, Investment and Service Division ends once the procurement procedure is concluded. The Finance, Investment and Service Division undertakes the payment procedures based on the invoices received from the vendors and clearance provided by the end user departments.

L

Consulting Services

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.)

Yes. Consulting services under “Smart Government” project funded by World Bank (WB) and “Decentralization Policy Support” project funded Swiss Agency for Development and Cooperation (SDC).

M

C.23 If the above answer is yes, what were the major challenges?

No major challenges, some language barrier. S

C.24 Are assignments and invitations for expressions of interest (EOIs) advertised?

Yes. L

C.25 Is a consultants’ selection committee formed with appropriate individuals, and what is its composition (if any)?

Evaluation committees are formed in accordance with the PPLM.

M

C.26 What criteria are used to evaluate EOIs?

Criteria is based on what is specified in the TOR.

L

C.27 Historically, what is the most common method used (QCBS, QBS, etc.) to select consultants?

Most common selection used is QCBS. L

C.28 Do firms have to pay for the RFP document?

No. L

C.29 Does the proposal evaluation criteria follow a pre-determined structure and is it detailed in the RFP?

Yes. L

C.30 Are pre-proposal visits and meetings arranged?

If specified in the in RFP. L

C.31 Are minutes prepared and circulated after pre-proposal meetings?

Yes. L

C.32 To whom are the minutes distributed?

Minutes are within the agency is requested. M

C.33 Are all queries from consultants answered/addressed in writing?

Yes, in general for all procurements. L


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C.34 Are the technical and financial proposals required to be in separate envelopes and remain sealed until the technical evaluation is completed?

Yes. L

C.35 Are proposal securities required? Yes. Law on procurement 20.1.

5% for the amount over 100 mln Tug. M

C.36 Are technical proposals opened in public?

Yes. L

C.37 Are minutes of the technical opening distributed?

Yes. L

C.38. Do the financial proposals remain sealed until technical evaluation is completed?

Yes. L

C.39 Who determines the final technical ranking and how?

This task is the responsibility of the Procurement Committee formed for each procurement.

M

C.40 Are the technical scores sent to all firms?

The notification l letter is sent to all participating companies.

M

C.41 Are the financial proposal opened in public?

Yes. L

C.42 Are minutes of the financial opening distributed?

Yes. L

C.43 How is the financial evaluation completed?

In accordance with the consulting services guideline.

M

C.44 Are face to face contract negotiations held?

Yes, if necessary. M

C.45 How long after financial evaluation is negotiation held with the selected firm?

Usually in 5 working days. M

C.46 What is the usual basis for negotiation?

Terms of reference. M

C.47 Are minutes of negotiation taken and signed?

Yes. L

C.48 How long after negotiation is the contract signed, on average?

5 days in accordance with the PPLM. L

C.49 Is there an evaluation system for measuring the outputs of consultants?

No. S

Payments

C.50 Are advance payments made? Advance payments are made only if specified in the RFP, if paid the payment is made in accordance with PPLM.

M


19



C.51 What is the standard period for payment included in contracts?

Within 30 days upon receiving of invoice. M

C.52 On average, how long is it between receiving a firm’s invoice and making payment?

30 days, payments are made be State Treasury of MOF.

M

C.53 When late payment is made, are the beneficiaries paid interest?

0.05% for delayed payments interest according contract.

L

D. EFFECTIVENESS

D.1 Is contractual performance systematically monitored and reported?

Monitoring the contract performance is done by the respective user departments, which initiated the procurement requirements. The officer (procurement) of Finance, Investment and Service Division sees the overall administration of all contracts.

S

D.2 Does the agency monitor and track its contractual payment obligations?

Yes, as per the contract – by the Finance, Investment and Service Division.

M

D.3 Is a complaints resolution mechanism described in national procurement documents?

For any disputes, the complaints are logged with the First Deputy Chief. If not satisfied with resolution, they can file complaint to MoF in accordance with PPLM. If it is not resolved here, vendor can go to court.

S

D.4 Is there a formal non-judicial mechanism for dealing with complaints?

Yes. MOF. M

D.5 Are procurement decisions and disputes supported by written narratives such as minutes of evaluation, minutes of negotiation, notices of default/withheld payment?

Yes. The procurement committee maintains the records and documentation for the entire procurement process. Upon conclusion of the evaluation, the documentation is handed over to procurement officer, which subsequently is transferred to the Archive.

M

E. ACCOUNTABILITY MEASURES

E.1 Is there a standard statement of ethics and are those involved in procurement required to formally commit to it?

No, there is no such standard statement of ethics that procurement staff has to follow or it is not documented or defined. There is a civil service code of ethics and there is code of ethics for civil servants, there is no separate one for procurement officers. Members in procurement evaluation committee sign a no conflict of interest statement.

M

E.2 Are those involved with procurement required to declare any potential conflict of interest and remove themselves from the procurement process?

Yes. L

E.3 Is the commencement of procurement dependent on external

No prior experience in the department in managing the procurement for

L


20



approvals (formal or de-facto) that are outside of the budgeting process?

goods/works/services, which are outside the approved budget.

E.4 Who approves procurement transactions, and do they have procurement experience and qualifications?

Clarified in earlier responses. M

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?

a) Bidding document, invitation to pre-qualify or RFP

Procurement committee. L

b) Advertisement of an invitation for bids, pre-qualification or call for EOIs


c) Evaluation reports Procurement committee. L

d) Notice of award Prepared and finalized by the procurement committee and finalized or approved by the end user departments, which then gets final approval from the First Deputy Chief.

L

e) Invitation to consultants to negotiate


f) Contracts Contract is signed by First Deputy Chief, based on recommendation of the procurement committee.

L

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?

No. While the procurement procedures are managed by the procurement committees, payments are authorized by the end user department and the finance department and the custody of the assets rests with the respective department, which initiated the procurement requirement.

M

E.7 Is there a written auditable trail of procurement decisions attributable to individuals and committees?

Yes. L


21


General Ratings

Criteria Risk

A. Organizational and Staff Capacity M

B. Information Management M

C. Procurement Practices M

D. Effectiveness M

E. Accountability Measures M

OVERALL RISK RATING M


22



Zamyn-Uud Free Zone Governor’s Office (ZUFZGO)






The procurement committees are constituted by the Governor of Zamyn-Uud Free Zone Governor’s Office (ZUFZGO) for the emerging procurement needs. The committees report to the Governor the on findings and recommendations of the procurement committee. Procurement committees constituted with staff acquired A3 (national procurement) certificate.

M


There is no permanent office that performs the function of a Secretariat for the Procurement Unit. However, there is a secretary of the Bid Evaluation Committee (BEC), who performs the secretariat for the procurement unit role if the procurement committee is established.

M


BEC undertakes procurement activities such as goods, small works and consulting services (non-consulting) which organized under the Public procurement law of Mongolia (PPLM), if established.

M


ZUFZGO does not have a permanent procurement department/unit or dedicated staff for managing the procurement related activities.

H


i. full time

ii. part time

iii. seconded

None. H


English language proficiency is low or mid level for the staff assigned for managing the

H





23



procurements activities, if BEC is established.


As clarified above, there is one full-time procurement officer in charge. The office can participate in the procurement activities of the project but cannot fully responsible the full procurement activities.

H


As explained above, there is no dedicated team for procurement. Overall most PCs, internet connection, photocopy facilities, printers of ZUFZGO’s is outdated, most equipment is ove5 to 10 years old. Access to the better equipment is necessary for the for future procurement. .

H


ZUFZGO itself does not have a training program under the procurement. They participate and attend the procurement training programs conducted by the Government Agency for Policy Coordination On State Property if necessary. The agency has 5 staff who acquired A3 certificate.

S


Since there is no department/unit. However, the decision of the BEC is presented to the Governor, for approval of requirements and then of the results of the evaluation and then, signs the contract with selected company.

M


The staff with A3 certificates have a right to take part in the procurement and bid evaluation committee, but their job descriptions do not include procurement roles.

M



L



L


Yes. Procurement Manual and guidelines exists for procurement of consulting services under the PPLM available in Mongolian language.

L



L




H


24




There is no dedicated procurement officer. H


Refer to the response in A8. H



L


Yes. The ZUFZGO perform procurement activities under the PPLM.

L

A.21 Do ToRs for consulting services follow a standard format such as background, tasks, inputs, objectives and outputs?

Yes. ZUFZGO has not prepared procurement related documents such as Terms of Reference, technical specifications and Request for proposals (RFP). They have not organized procurement activity in recent years.

H


The technical specifications are prepared by the procurement committees/BEC based on the specific inputs received from the end user departments.

M


Approval of the specifications is done by the evaluation committee in consultation with the user department. For each committee, there is the head of the committee (one of the members from the committee).

M




Yes. L


Respective user departments based on the needs of their departments.

M




ZUFZGO has not prepared procurement related documents such as Terms of Reference, technical specifications and Request for proposals (RFP). They have not organized procurement activity in recent years.

H


25





There is no procurement filing systems since ZUFZGO has not prepared procurement related documents in recent years or organized procurement activity.

S


Finance related files are kept by the Finance and Accounting Division of the agency. There no procurement related files at this moment since there is no procurement activity.

H


Refer to the response in B.2 S










No. ZUFZGO does not have their own servers.

H


Goods and Works


No. H


N/A *


No. Since ZUFZGO has not prepared procurement related documents in recent years or organized procurement activity.

H


26




There is no specific time period for preparation of bids. In accordance with PPLM bids must be evaluated and contract awarded within 45 days. Onetime 30-day extension is allowed by law.

M



L


N/A H

C.7 Are bids opened in public? N/A H

C.8 Can late bids be accepted? N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


27




N/A H

Consulting Services


No. H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H

C.35 Are proposal securities required? N/A H


N/A H


28




N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H


N/A H

Payments

C.50 Are advance payments made? N/A H


N/A H


N/A H


N/A H

D. EFFECTIVENESS


No procurement activity. H


29




No procurement activity. H


If there are any disputes, it’s resolved accordance with PPLM.

M


Yes. MOF. M


Refer to response in D3. M




M


Yes. L

E.3 Is the commencement of procurement dependent on external approvals (formal or de-facto) that are outside of the budgeting process?

No. L




N/A H

g) Bidding document, invitation to pre-qualify or RFP



30



h) Advertisement of an invitation for bids, pre-qualification or call for EOIs


i) Evaluation reports Procurement committee. L

j) Notice of award Prepared and finalized by the procurement committee and finalized or approved by the end user departments, which then gets final approval from the First Deputy Chief.

L

k) Invitation to consultants to negotiate


l) Contracts Contract is signed by First Deputy Chief, based on recommendation of the procurement committee.

L


No. While the procurement procedures are managed by the procurement committees.

M


N/A H

General Ratings

Criteria Risk

A. Organizational and Staff Capacity H

B. Information Management S

C. Procurement Practices H

D. Effectiveness S

E. Accountability Measures M

OVERALL RISK RATING S


31



Ministry of Construction and Urban Development (MCUD)






The procurement committees are constituted by the State Secretary of Ministry of Construction and Urban Development (MCUD) for the emerging procurement need of MCUD and the committees report to the State Secretary the on findings and recommendations of the procurement committee. Procurement committees constituted with representatives of relevant departments with A3 (national procurement) certificate.

L


There is no unit procurement, however Investment and Production Division of MCUD is in charge of procurement activities under state budget. The division has 3 staff, head of division and two officers. One officer fulltime staff/officer in charge of procurement.

M


The Investment and Production Division is entrusted with the responsibility for coordinating the procurement activities of MCUD and it manages the procurement activities through the procurement committees formed by the State Secretary. The division, with the support from the procurement committees, undertakes procurement activities such as goods, small works and consulting services which organized under the Public procurement law of Mongolia (PPLM).

M


MCUD does not have a permanent procurement department/unit for managing the procurement activities. The head division is working as the head for four years. Has knowledge of public procurement.

L





32




i. full time

ii. part time

iii. seconded

The Investment and Production Division has 3 staff, head of division and two officers. One officer fulltime staff/officer in charge of procurement. There are staff with A3 national procurement certificates who can be appointed to the procurement evaluation committee.

M


English language proficiency is low or mid level for the staff assigned for managing the procurements. The staff directly assigned for procurement activities are face with English barrier if procurement is organized only in English language.

H


The Investment and Production Division has only three fulltime staff, not able to take on additional work of the project procurement activities.

H


Yes. L


A3 national procurement trainings are conducted for staff necessary to be appointed in the procurement committees. ADB new procurement policy needs to be conducted.

M


The decision of the Bid evaluation committee is presented to State Secretary, for approval of requirements and then of the results of the evaluation and then, signs the contract with selected company. The Investment and Production Division is collecting reports and oversees the procurement.

M


The staff with A3 certificates have a right to take part in the procurement and bid evaluation committee, but their job descriptions do not include procurement roles.

M



L



L


Yes. Procurement Manual and guidelines exists for procurement of consulting services

L


33



under the PPLM available in Mongolian language.



L




H


As mentioned above, there is one full-time procurement officer. The division only have total of three staff. Not able to take on additional procurement.

H


The staff usually included in the procurement committees have access to computers, printers, internet access etc.

L



L


Yes. The MCUD perform procurement activities under the PPLM.

L

A.21 Do ToRs for consulting services follow a standard format such as background, tasks, inputs, objectives and outputs?

Yes. M


The technical specifications are prepared by the procurement committees based on the specific inputs received from the policy departments, which initiated the procurement requirement.

M


Approval of the specifications is done by the evaluation committee in consultation with the policy department. For each committee, there is the head of the committee (one of the members from the committee).

M




Yes. L


Respective policy departments in MCUD based on the needs of their departments.

M


34






The bidding documents are prepared by the committee after technical specifications are finalized in consultation with user departments. The Investment and Production Division reviews the RFP if necessary.

M



The Investment and Production Division manages the referencing system for the procurement files.

L


During the procurement stage, all the procurement documents are managed by the committee with the support from the Procurement Secretariat formed for that procurement. Subsequently, the procurement files are managed by procurement committees until the files are transferred to the Archive as per the State Archive Law. For all completed projects, the documents are to be transferred to the Archive before the end of the year.

M








Yes. All files are maintained ,subsequent amendments including any correspondence on the contract, payment records etc.

M


Refer to the response for B.6. The invoice processing is managed by the accountant in Finance, Investment and Service Division, which receives the invoices and are processed based on the consent provided by the end user department which receives the goods/services. The payments for regular contracts are reviewed and processed by the State Treasury at MOF.

M


Yes. The MCUD has its own servers. M


Goods and Works


35




MCUD is currently implementing two ADB funded projects.

More projects funded with Government of Austria, PRC and Poland. As well as experience implementing projects with JAICA, KOICA etc.

L


N/A *


The procurement requirements for each year are identified and included in the procurement plan, which is also published on the website of the CSGM and Glass account.

M


There is no specific time period for preparation of bids. However, CSGM follow the approved procurement plan. In accordance with PPLM bids must be evaluated and contract awarded within 45 days. Onetime 30-day extension is allowed by law.

M



L


Yes. L

C.7 Are bids opened in public? Yes. L

C.8 Can late bids be accepted? No. L


During the bid opening process, only the details of received bids are read out and no evaluation or rejection of the bids is undertaken during the opening stage.

L


Yes. L


Yes. L


Yes. L


Evaluation is undertaken by the procurement committees formed for managing each of the procurements of the CSGM.

L


In accordance with PPLM, all members in the procurement committee shall have A3 certificate (national procurement) and must have two NGO representatives for transiency.

M


36




Evaluation committee makes an assessment of the received bids. Based on the review of inputs from all the members of the committee, it proposes and recommends the best candidate and the details are sent to the Purchaser (First Deputy Chief), based on the evaluation and recommendation the Purchaser approves the contract award.

M


In accordance with PPLM bids must be evaluated and contract awarded within 45 days. Onetime 30-day extension is allowed by law.

M


The responsibility for collection and clearance of the goods is completely entrusted to the contractor and the price quoted should be inclusive of all such charges including goods clearance and transportation to the site.

M


Yes, including acceptance procedures for the delivered goods.

L


They have an asset register or inventory register. The asset register is maintained by the finance department.

L


Yes, but rarely practiced. L


Monitoring the warranty and defect liability period is being undertaken by respective end user departments, which initiated the procurement requirement. The role of procurement committee or Finance, Investment and Service Division ends once the procurement procedure is concluded. The Finance, Investment and Service Division undertakes the payment procedures based on the invoices received from the vendors and clearance provided by the end user departments.

L

Consulting Services


Yes. Consulting services under “Smart Government” project funded by World Bank (WB) and “Decentralization Policy Support” project funded Swiss Agency for Development and Cooperation (SDC).

M


No major challenges, some language barrier. S


37




Yes. L


Evaluation committees are formed in accordance with the PPLM.

M


Criteria is based on what is specified in the TOR.

L


Most common selection used is QCBS. L


No. L


Yes. L


If specified in the in RFP. L


Yes. L


Minutes are within the agency is requested. M


Yes, in general for all procurements. L


Yes. L

C.35 Are proposal securities required? Yes. Law on procurement 20.1.

5% for the amount over 100 mln Tug. M


Yes. L


Yes. L


Yes. L


This task is the responsibility of the Procurement Committee formed for each procurement.

M


The notification l letter is sent to all participating companies.

M


38




Yes. L


Yes. L


In accordance with the consulting services guideline.

M


Yes, if necessary. M


Usually in 5 working days. M


Terms of reference. M


Yes. L


5 days in accordance with the PPLM. L


No. S

Payments

C.50 Are advance payments made? Advance payments are made only if specified in the RFP, if paid the payment is made in accordance with PPLM.

M


Within 30 days upon receiving of invoice. M


30 days, payments are made be State Treasury of MOF.

M


0.05% for delayed payments interest according contract.

L

D. EFFECTIVENESS


Monitoring the contract performance is done by the respective user departments, which initiated the procurement requirements. The officer (procurement) of Finance, Investment and Service Division sees the overall administration of all contracts.

S


Yes, as per the contract – by the Finance, Investment and Service Division.

M


For any disputes, the complaints are logged with the First Deputy Chief. If not satisfied with resolution, they can file complaint to

S


39



MoF in accordance with PPLM. If it is not resolved here, vendor can go to court.


Yes. MOF. M


Yes. The procurement committee maintains the records and documentation for the entire procurement process. Upon conclusion of the evaluation, the documentation is handed over to procurement officer, which subsequently is transferred to the Archive.

M




M


Yes. L

E.3 Is the commencement of procurement dependent on external approvals (formal or de-facto) that are outside of the budgeting process?

No prior experience in the department in managing the procurement for goods/works/services, which are outside the approved budget.

L




m) Bidding document, invitation to pre-qualify or RFP


n) Advertisement of an invitation for bids, pre-qualification or call for EOIs


o) Evaluation reports Procurement committee. L


40



p) Notice of award Prepared and finalized by the procurement committee and finalized or approved by the end user departments, which then gets final approval from the First Deputy Chief.

L

q) Invitation to consultants to negotiate


r) Contracts Contract is signed by First Deputy Chief, based on recommendation of the procurement committee.

L


No. While the procurement procedures are managed by the procurement committees, payments are authorized by the end user department and the finance department and the custody of the assets rests with the respective department, which initiated the procurement requirement.

M


Yes. L

General Ratings

Criteria Risk

A. Organizational and Staff Capacity L

B. Information Management M

C. Procurement Practices L

D. Effectiveness M

E. Accountability Measures L

OVERALL RISK RATING L


41


Appendix 2

Strategic Procurement Planning

I. SECTION 1 – PROJECT CONCEPT

Project Title Developing the Economic Cooperation Zone Project

Country Mongolia

Executing Agency Office of Deputy Prime Minister (ODPM)

Implementing Agency Ministry of Construction and Urban Development (MCUD)

Zamyn-Uud Free Zone Governor’s Office (ZUFZGO)

Project Development Objectives

The project has the following impact: sustainable economic development, diversified domestic production, and greater linkages with global and regional value chains.

The project will have the following outcome: Zamyn-Uud free zone developed and operational.

Project Description The project will support the operationalization of the Zamyn-Uud free zone through: (i) construction of infrastructure and facilities; (ii) sustainable zone management and operation; and (iii) establishment of free zone port of entry system. The project will promote the development of the economic cooperation zone and enhance economic corridor 4B of the Central Asia Regional Economic Cooperation (CAREC) in Mongolia’s Zamyn-Uud soum. The project aims to be a catalyst for Mongolia’s diversification and integration into the global value chains and provide economic opportunities, particularly in the Zamyn-Uud soum (district), whose population heavily relies on border traffic and trade activities.

List of Intended

Packages

Works (Infrastructure) Goods, (IT equipment), Consulting Services,

Summary of Financing Agreement

ADB-US$30.0 million, Government-US$5.76 million

II. SECTION 2 – OPERATING ENVIRONMENT

A. Capacity and Capability Assessment STRENGTHS WEAKNESSES

• Legal and regulatory framework well-established

• Competent contractors with capacity up to US$5 million are locally available.

• Experience with the ongoing projects demonstrates that competent national and international consultants are available

• ODPM and MCUD has experience implementing ADB and IFI funded projects

• Procurement capacity in government is low, mainly because of limited availability of qualified and experienced procurement staff

• ZUFZGO has no experience implementing ADB or IFI funded projects

• The capacity of Project implementation unit (PIU) Procurement specialist is unknown

OPPORTUNITIES THREATS


42


• Focused procurement training will improve performance

• Construction equipment are available within the country

• Source labour locally for construction of works

• Delay in procurement process due low capacity in procurement

• Loose construction season due to delays

• Inability to reach international suppliers of specialized equipment

• Change of Government • Replacement of government of officials

and staff

B. Support Requirements

Procurement Capability &

Capacity

The EA is understaffed, one officer is in charge of procurement activities of the Cabinet Secretariat. ZUFZGO has no procurement experience in recent years, MCUD is has one officer in charge of procurement. Therefore EA/IA cannot provide advice and assistance to PIU. Full-time procurement specialist must be recruited under the PIU, and additional procurement consultant if necessary. The capacity of Project implementation unit (PIU) Procurement specialist is unknown.

Experience in

Implementing Similar Projects ODPM and MCUD are currently implementing similar projects

financed by the World Bank and ADB. ZUFZGO has not

experience implementing IFI funded projects.

Contract Management Experience & capability

The EA/IAs has experience with contract management under national and ADB’s procurement guidelines. Close engagement with ADB will ensure that the PIU (in particular the procurement specialist to be recruited) will be fully conversant with ADB’s new procurement guidelines

Level of Reliance on External Consultants

The implementation arrangements rely on extensive national and international consultancy support

Existence and Description of Complaints Management System

Complaints resolution mechanisms are outlined in the Public Procurement Law and must be referred to in contracts.

C. Key Procurement Conclusions

21. Overall, procurement risk for the project is assessed to be medium without mitigation measures.

22. The procurement capacity of executing agency (EA) Office of Deputy Prime Minister (ODPM) is assessed medium, implementing agency (IA) of the project, the Zamyn-Uud Free Zone Governor’s Office (ZUFZGO) is assessed low, implementing agency (IA) of the project, the Ministry of Construction and Urban Development (MCUD) is assessed high.

23. The overall risk assessment was assessed as medium due to lack of staff capacity and project implementing experiences at the executing agency (EA) Office of Deputy Prime Minister (ODPM) under the Cabinet Secretariat of Government of Mongolia (CSGM) and implementing agencies (IA) of the project, the Zamyn-Uud Free Zone Governor’s Office (ZUFZGO) and Ministry of Construction and Urban Development (MCUD). There are none or only one dedicated procurement officer at each organization. The risk of ZUFZGO assessed high due to low staff capacity and not procurement activity within the organization at least last 3 years. There are no


43


dedicated procurement department/units under any of EA/IAs. Bid evaluation committees (BEC) are established for the procurement activities in accordance with the Public Procurement Law of Mongolia (PPML).

24. A main systemic weakness of these arrangements is that the executing agency does not have all the staff and systems in place to ensure that procurement is executed diligently and effectively.

25. Since the procurement capacity at EA/IA’s is low to medium due to lack of staff, the new ADB procurement framework shall be introduced and procurement documents for some packages for prior review by ADB. Once the Project Implementation Unit (PIU) staff is recruited and fully operational, the review arrangements will be revisited during implementation and may be adjusted as necessary.

D. External Influence Analysis

Governance Mongolia has a well-established legal and regulatory framework for

procurement. Procurement risks, if solely reliant on country systems,

arise from weak implementation capacity and replacement of government

of officials and staff.

Economic Mongolia is on its way to restore macroeconomic stability and to ensure

social stability, in collaboration with the International Monetary Fund (IMF)

and the international community at large. In the longer term, it needs to

develop a more resilient and diversified economy that can consistently

deliver rapid, inclusive, and sustainable growth. Growth rate for 2020 is

expected to be 6.3% (down from 6.7% in 2019). The annual inflation rate

in Mongolia is 9.03 percent in 2019. The exchange rate of USD is MNT is

increasing USD 1 = MNT 2720.52 (6 December, 2019, Mongol Bank).

The construction season of Mongolia starts from 1st of April to 30th of

November of each year.

Sustainability Mongolia's rapid economic growth driven by natural resource extraction, poses challenges to the environment. Strong environmental management is required to mitigate against land degradation, water and air pollution, loss of biodiversity, in addition to overexploitation of forests and pasture.

Technology Over the past 10 years, Mongolia has drastically changed technologically,

in particular in terms of ICT.

E. Key Procurement Conclusions

26. A comprehensive Master Plan of Zamyn-Uud Free-zone was prepared and approved

by Government of Mongolia in 2011. This is an ambitious document envisioning a substantial

new futuristic city of some 60,000 people. The Plan was prepared with the intent that this

would be one big development and included no strategy for phased implementation. The

2011 Master Plan was also prepared as a Mongolia only economic zone prior to

consideration of an economic cooperation zone.


44


F. Stakeholder Analysis and Communication Plan

High

Low High Interest in the Project

G. Stakeholder Communication Plan

Stakeholder name and role Office of Deputy Prime Minister (ODPM)

Interest in the project Borrower’s representative / EA

Support and influence level Key supporter, key decision maker

Objectives, drivers, needs and levers ODPM needs a well-designed and effectively implemented project, to support the Government’s efforts to strengthen free-zone development.

Action The project is fully supported by MOF as both the borrower’s representative and Executing Agency.

Responsible, Accountable, Consulted or Informed

Fully responsible

Communicate what, when and how All decisions in hard-copy, email, reports and formal meetings.

Stakeholder name and role Zamyn-Uud Free Zone Governor’s Office (ZUFZGO)

Interest in the project ZUFZGO, as a direct beneficiary and implementing agency, also needs a well-designed and effectively implemented project.

Support and influence level Key supporter, with substantial influence

Objectives, drivers, needs and levers The project is fully supported by ZUFZGO as both the project’s IA and key beneficiary

Po

wer

an

d In

flu

ence

ove

r th

e P

roje

ct

ZUFZGO, ADB


45


Stakeholder name and role Ministry of Construction and Urban Development (MCUD)

Interest in the project MCUD, as a direct beneficiary and implementing agency, also needs a well-designed and effectively implemented project.

Support and influence level Key supporter, with substantial influence

Objectives, drivers, needs and levers The project is fully supported by MCUD as both the project’s IA and key beneficiary

Action IA is fully involved in the preparation and implementation of the project


Substantially responsible

Communicate what, when and how All decisions and implementation status on a regular and/or if/when required basis.

Stakeholder name and role Asian Development Bank

Interest in the project Financing agency

Support and influence level Key supporter with substantial influence

Objectives, drivers, needs and levers Requires advanced level of project preparedness, continuation of well-functioning PIU and wider implementation arrangements, efficient procurement (value for money) and overall smooth implementation

Action Closely monitoring and supporting procurement under the new procurement guidelines


Responsible and accountable, to be consulted at all stages of project preparation and implementation

Communicate what, when and how Reporting at regular and agreed intervals

Stakeholder name and role Lot investors

Interest in the project Beneficiaries

Support and influence level Full support, limited influence

Objectives, drivers, needs and levers Lowering the transaction costs currently associated with the infrastructure and administrative aspects of border crossing

Action Increased involvement in cross-border trade


Consulted (focus group discussions)

Communicate what, when and how Awareness focused - if and when required.

Action IA is fully involved in the preparation and implementation of the project


Substantially responsible

Communicate what, when and how All decisions and implementation status on a regular and/or if/when required basis.


46


Port entry system

equipment

H. Key Procurement Conclusions

27. Project procurement will require significant interaction between ADB, ODPM, ZUFZGO,

MCUD and PIU as well as prospective bidders and consultants. Wide publication of business

opportunities, procurement plans and contract award details on appropriate websites,

newspapers and bulletins to industry associations is essential.

III. SECTION 3 – MARKET ANALYSIS

A. SUPPLY POSITIONING

IV. HIGH

Low High

Spending

V.

B. Key Procurement Conclusions

28. Required civil works contractors are locally available, the payers are well-known and procurement will be straight forward. Although the needed specialized equipment (e.g., x-rays, scanners, laboratory equipment) is not available in the domestic market, it is widely available internationally. Good value for money is expected both from domestic and international OCB.

Risk


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VI. SECTION 4 – RISK MANAGEMENT

Risk Description Likelihood (L) (1-5)

Impact (I) (1-5)

Risk Score (L x I)

Proposed Mitigation Risk Owner

Insufficient procurement staff in EA and IA

3 2 6 One procurement specialist and one procurement consultant with the necessary skills and experience should be recruited to the PIU. The specialists should have ADB project experience and should be provided with training in ADB requirements.

EA/IA

Limited experience with the procurement of Works, Goods and/or consulting services under ADB’s new Procurement Guidelines

5 2 10 The procurement specialist of the PIU remains appointed as Secretary of the BEC to ensure the procurement is organized according to the law and ADB’s new procurement guidelines.

The PIU will (i) engage ADB to provide guidance to the EA/IAs on the new procurement framework; and (ii) submit all procurement packages for prior review by ADB

Occasional lapses in the monitoring of contractual performance and complaints resolution mechanisms

2 4 8 Contractual performance will be strictly monitored and controlled by the PIU and will be reported in the quarterly and annual project reports. ADB will review the performance of civil works contractors, suppliers, and consultants.

Replacement of government officials and staff

4 3 12 Overall implementation of the project documents must be well organized and updated frequently to maintain the institutional memory of the project by the PIU staff. Project coordinator shall oversee above activity.


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VII. SECTION 5 – OPTIONS ANALYSIS

Strategic Options Description

Feasibility (1-10)

Suitability (1-10)

Acceptability (1-10)

Overall (3-30)

Advance contracting is recommended for the selection of the PIU 6 staff (6).

10 10 10 30

Advance contracting is recommended for the selection of the Detailed Engineering and Design firm following QCBS (80-20).

The advertisement should be issued in Quarter 3 of 2020, preferably contracted by Quarter 4 of 2020.

10 9 9 28

Advance contracting is recommended for the selection of the Management Advisory consulting firm following QCBS (80-20).

The advertisement should be issued in Quarter 2 of 2020, preferably contracted by Quarter 3 of 2020.

10 8 8 26

Vehicles (8 nos.)-RFQ with

advertisement is recommended

10 10 10 30


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Section 6 – Procurement Strategy Summary

A. Procurement Packaging, Method and Scheduling 29. The project includes five civil works packages (totaling $16.39 million), all which one package will be advertised under OCB through international advertisement, and four packages will be advertised under OCB through national advertisement. There are two goods packages (totaling $2.27 million), both packages which will be advertised under OCB through national advertisement. There are two packages to organized under RFQ method, which will be inviting local suppliers. 30. Finally, there will be eight consultancy services packages (totaling $ 3.43 million), covering firm selection under QCBS method, as well as some individual consultant selection (ICS). The PIU staff is to be recruited under the Ministry of Finance, 196 regulation. The total of 23 packages are planned. 31. All civil works and goods packages will be advertised during the off-construction season, which is quarter one and four of each year. The consultancy services will be advertised as planned in the procurement plan.

B. Procurement method 32. All civil works packages may be procured following International and National OCB.

Furnishing can be consolidated in one or two packages and the vehicles can be purchased

locally by adopting National RFQ with advertisement. The consulting contracts should be

processed following QCBS (80-20) and CQS and ICS. The construction season is short, the

advertisement prepared off-season.

C. Prequalification 33. Prequalification is not recommended because all procurement packages are simple.

D. Bidding Procedures 34. All packages are simple in design, hence single-stage: one-envelope bidding procedure shall be adopted for procurement of works and goods.

E. Specifications 35. The detailed specifications for the civil works components will be based on the conceptual and detailed technical design prepared by the consulting firm and to be approved by the State expertise. As a general principle, the Gateway building will have separation of cargo and people access and exit points, and universal care facilities to cater to the needs of women, elderly and disabled.

F. Review Requirements 36. Some civil works and goods packages will be subject to prior review. The prior review to be revisited during review missions, when procurement plan is updated.


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G. Standstill Period 37. Suitable provisions shall be indicated in the Bid Data Sheet if applicable. Decision shall

be made by the EA in consultation with MOF.

H. Standard Bidding Documents and Contract Forms 38. OCB International advertisement shall use ADB Standard Bidding Documents. OCB National advertisement shall use Standard Bidding Documents agreed by ADB and MOF. ADB’s RFQ document will be used to procure the PIU vehicle and equipment.

I. Pricing and Costing Method

39. The civil works will be based on admeasurement, whereas the equipment and goods will

be lump-sum price based. The annual inflation rate in Mongolia is 9.03 percent in 2019. The

exchange rate of USD is MNT is increasing USD 1 = MNT 2720.52 (6 December, 2019, Mongol

Bank). The construction season of Mongolia starts from 1st of April to 30th of November of each

year.

J. Key Performance Indicators 40. As part of the contract management strategy, the EA/IAs will identify key performance indicators (KPIs) for each contract to monitor the contractor’s performance during contract implementation. Some of the KPIs for the projects rather simple civil works contracts are suggested below (indicative only):

• Submission of work program within 28 days from issue of notice to commence: 5%

• Mobilize required equipment and personnel: 10%

• Takeover of site and prepare building layout: 5%

• Establish facilities like testing laboratory, safety and health measures: 2%

• Submit contract management plan: 2%

• Comply with legal regulations including necessary insurance policies: 2%

• Construction achievement in phases: 74%

K. Evaluation Method 41. All procurement packages civil/goods will be evaluated based on the lowest evaluated price and contracts will be awarded to the lowest evaluated substantially responsive bidder. Consulting services on emphasis of quality (80:20) ratio.

L. Contract Management Approach 42. Contract management will be on collaborative basis. Contract management plans shall be prepared for each contract or group of contracts. This should include risks and risk management plan, identifying resources, communication management, contract administration procedures, quality management, managing payments, records management, managing changes, claims and disputes and finally contract closure procedures and requirements. EA/IAs will seek ADB’s approval of the contract management plan and provide timely reports to ADB.
