SCANNED

Document ofThe World Bank

TANZANIA

COUNTRY PROCUREMENT

ASSESSMENT REPORT. ~~~~~~~~~~~~~~~.

Africa Technical OperationsSupport Unit 1Africa RegionSeptember 1996

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TANZANIA

Country Procurement Assessment Report

Table of Contents

Section Topic Para.

1. General Information and Summary .................................... 1

2. Procurement Laws and Regulations .................................... 2

3. Public Sector Procurement ..................................... ;.3Organization ................................... 3.1Procurement of Goods and Works ................................... 3.2Employment of Consultants ................................... 3.3

4. Private Sector Procurement .................................... 4

5. Procurement-Related Technical Assistance ..................................... 5Previous and Ongoing Technical Assistance .................................... 5.1Technical Assistance Strategy in Procurement ................................... 5.2

DRAFTSeptember 1996

TANZANIA

Country Procurement Assessment Report

1. General Information and Summary

1.1 Date of Report: September, 1996

1.2 Basis of Report:

(a) IDA Mission, June/July 1996:Messrs. Kranz, Westring and Dhingra (Public Procurement and SupplyManagement Study [PPSMS];

(b) PPMS Inception and Draft Completion Report by Crown Agents and subsequentdrafts;

(c) Tanzania Co\untry Portfolio Performance Review, May 1996;

(d) IDA Mission/Procurement in the Private Sector, March 1996;Messrs. Kranz and Beckers (Consultant); and

(e) persons Interviewed by Mission (Attachment 1).

1.3 Acceptability of CouMttry's Procurement System:

As detailed in the mission's Terms of Reference, the Tanzanian public procurementsystem is recognized as being seriously flawed and in urgent need of reform. Reform efforts havebeen underway since 1992 through the Integrated Roads Project (IRP) but have not yet resulted inany concrete action by Government. IRP has funded the Public Procurement and SupplyManagement Study (PPSMS) which has to date produced a number of key draft documents for arevamped national procurement system. Tne PPSMIS has been carried out by Crown Agentsunder a contract with Government. Several months prior to the CPAR mission, IDA providedextensive comments on the documents produced by Crown Agents, particularly the proposedPublic Procurement Act and the Procurement Regulations. These PPSMS draft documents weretaken as the starting point of the CPAR mission. However, in the course of reviewing all aspectsof public and private sector procurement in the field, the mission discovered additional facts and

also gained a better understanding of the problems described in the PPSMS. The missiontherefore decided to reconsider some of the concepts proposed by Crown Agents in the draftdocuments. Para. 3.1 of this report contains these additional findings and is intended as amodification of IDA's earlier comments on the PPSMS draft documents.

In a technical note presented to its Tanzanian counterparts, the mission put specialemphasis on the issue of implementing the reforms proposed in the PPSMS. Crown Agentsproposed and Government endorsed implementation through an Act of Parliament. The missionvoiced its concerns regarding this choice of legislative instrument. At present, Tanzanianprocurement regulations form part of Financial Orders issued by the Minister of Finance under theExchequer and Audit Ordinance. The fact that procurement is regulated by a legislativeinstrument of this relatively low order should not in itself diminish the respect for the regulations.After all, the Financial Orders are considered to be a sufficiently strong prescription for otheraspects of public expenditure management. It is rather more the archaic nature and insufficientcoverage of the present regulations which provides the rationale for a thorough overhaul.

The mission searched the Crown Agents' report for motives in favour of raising thestatus of the regulations from the present ministerial level to that of an act of Parliament andfound no convincing arguments in favor of doing so. Neither was the mission impressed with therecommendation that the act containing the procurement regulations would need to besupplemented by Government regulations and ministerial guidelines. Several risks anddisadvantages with such a multi-tiered structure can be foreseen in this case, as compared with asimple Government regulation, supported by standard documents. Among these risks are thelikelihood that:

it would take more time to bring these new regulations into effect through an Actof Parliament;

- it would politicize an executive function such as public procurement;

- it would unnecessarily create the problem of deciding which aspects of publicprocurement are of such a high dignity as to be spelled out in the Act and which aspects may berelegated to the lower level of governmental (or ministerial) decree; and

- the existence of a regulatory hierarchy, topped by an Act of Parliament, couldresult in contradictions, or at least confusion, among instructions emanating from differentsources.

The mission would have recognised a need to elevate the procurement regulations tothe status of an act of Parliament had the substance been such as to involve the right of individualsor the relations between govermnent and other public sector bodies. The immediate problem,however, is to bring order and discipline to Government procurement.

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1.4 Action(s) Required.

Actions required are indicated in the relevant sections throughout this report and inparticular, in para. 3.1 and the attached report on Procurement in the Private Sector. They can besummarized in capsule form as follows:

(a) the immediate need for reforn, according to the Crown Agents study and toeverybody interviewed by the mission, lies in bringing order to Governmentprocurement. In the mission's opinion, that should be achieved throughurgent promulgation of a revised and comprehensive set of Governmentregulations, supported by adequate standard documents and active trainingschemes;

(b) the CTB should become an advisory body which monitors the overallfunctioning of the national procurement system, collects and disseminatesinformation, produces standard documents, sponsors training programs andinterprets the Regulations, i.e., the role ascribed to the proposed ProcurementAdvisory and Management Service in the PPSMS;

(c) procurement responsibility and approval authority should be squarely placedon the entity to which public funds are allocated and which requires thegoods, works and services to be procured, in order to implement its workprogram. In most cases, this entity would be the line ministries;

(d) all ministries and the CTB will require short-term technical assistance, aswell as a long-term strategy to implement these procurement reforms. Themost critical technical assistance is procurement and supply managementtraining for the first cadre of civil service staff who show potential to beselected for this opportunity. This cadre would not only improveimplementation in the shortest possible time but could eventually form thecore of future trainers. Concurrently, a long-term strategy for civil servicetraining in procurement and supply management will need the fullcommitment of Government, especially, resources and performanceincentives;

(e) the Office of the Controller and Auditor General and the Tanzania AuditCorporation should be provided with technical assistance, in order tostrengthen the capabilities that are essential to auditing public procurement;and

(f) IDA and other donors should support these reforns through technicalassistance and funds, while agreeing with Government on a timetable andprogress indicators.

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1.5 Earlier Actions Taken (as per attachments):

Country Portfolio Performance Review, May 21-22, 1996, Attachment 6CPAR Mission Dealing with Procurement in the Private Sector, March 1996,Attachment 5CIR Follow-up Report, June 13, 1995, Attachment 8Recommendations for A Revised Public Procurement System, PPSMS, CrownAgents, February 1995, Attachment 4.

1.6 List of Staff Members who are particularly familiar with procurement in thecountry, by sector.

Charles Griffin HEALTH & NUTRITIONNancy Mcinemey-Lacombe P&P ENTERPRISEYitzhak Kamhi IRPYasuyo Abe CAS/CPPRJames Coates AGRICULTURERonald Brigish RESIDENT REPRESENTATIVETony Thompson RIM OPERATIONSSubhash C. Dhingra PPMS/CROWN AGENTSPaul Vandenheede DISBURSEMENTSFred Kranz CPAR

1.7 Next Procurement Assessment Mission: One year after the start of procurementreforms or during calendar year 1998, whichever comes first.

2. Procurement Laws and Regulations

2.1 Applicable laws and regulations:

-The Exchequer and Audit Ordinance 1961;-Financial Orders, Part III, Stores Regulation 1965 (with subsequent amendments);-Financial Orders, Part I (concerning building construction, maintenance andtransport services); and

-for information on import trade regime, see separate report, "Procurement in thePrivate Sector", March 1996.

2.2 Applicability of Laws and Regulations: The regulations are applicable countrywide. Theyapply to government entities at central, regional and district levels (Tanzania has 20 regions and117 districts). However, Parastatals are not bound by government regulations; they followprocedures defined by their own boards.

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3. Public Sector Procurement

3.1 Organization

The overall environment for public procurement

It is expected, according to the recent budget speech by the Minister for Finance,that total Government expenditure for the fiscal year ending June 1996 will reach Tanzaniashillings TSH 521.437 billion equivalent to approximately US$ 1.1 billion, of which about 80%for recurrent expenditure and 20% for development. This is less than originally estimated,probably due to a shortfall in aid receipts. In turn, this shortfall in aid receipts is due to poorproject implementation, as exemplified in the slowdown of IDA disbursements. For fiscal 1997,the Minister of Finance expects the Government to spend TSH 758.896 billion, of which631.906 billion for recurrent expenditure and 126.990 billion for development. External loansand grants at the level of TSH 187.537 billion, and some bank borrowing, are expected to helpfinance these expenditures. The Minister also admitted in his speech that real expenditurerequirements will be "much higher" than those included in the budget but refrained fromformulating a strategy to deal with the funding of that additional deficit. To put it succinctly, thecountry is in deep financial trouble and procurement is among the affected areas.

Procurement Volume

According to Crown Agents' estimates, about 55% of Government expenditures isused for procurement of goods and services, representing an approximate value of US$600m-illion in fiscal 1996.

Impact of economic crisis on public procurement

Tanzania is and remains highly dependent on foreign aid. The majority of publicprocurement is exempted from national regulations through provisions in aid agreements withdonors; some aid is granted in kldnd. Some urgently needed items such vehicles, officeequipment and similar items are procured through IAPSO, UNICEF and other UN agencies.

Being in deep financial trouble and failing to make contractual payments asrequired, The Government of Tanzania has also lost the confidence of many domestic andinternational suppliers, contractors and consultants. According to some reports, Governnentowed TSH 600 million to suppliers at one point during the past year. Several sources reportedthat domestic and international suppliers are refusing to deal with Government procurement,unless offered 100% payment on order, i.e. before delivery. One agency reported "proudly" thatit had been able to reduce this advance to 50% before delivery (the norm is 10%). Worse yet,bank guarantees for advance payments to suppliers were not commonly required. This practice,in evident contradiction of Government regulations, was reported by the Controller and AuditorGeneral in his report for 1993/94. According to this report, TSH 474.9 million had been paid in

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that year for goods which were n=Z delivered. On closer inspection, this practice of "paymentagainst proforma" is usually linked to non-competitive procurement. It is also suspected, that insome cases goods were never delivered and that "buyer" and "seller" were instead colluding todefraud the country.

Another striking example of Government's poor creditworthiness even with localbanks was discovered in discussions about the terms under which letters of credit are issued inconnection with IDA credits. The procuring entity, even though it holds an account in the localbank into which payments under the IDA credit are also made, is still required by the same localbank to deposit 120% cover in local currency at the time the letter of credit is opened.

Confused status of public procurement regime

The Crown Agents' Study describes -and the mission witnessed- the confused stateof public procurement in Tanzania: the regulations are outmoded; their origin is in stores manage-ment rather than competitive procurement and their applicability to procurement of works andservices is highly questionable; in fact, the regulations are commonly disregarded in the case ofconsulting services; they do not contain a full and proper description of procurement methods andthe circumstances in which different procedures are to be used; the authority of the CTB is erodedby ad hoc arrangements in different sectors (e.g. works, health and education); contract valuethresholds above which CTB scrutiny and approval is required by regulations have been renderedtotally inappropriate by inflation.

The CTB - present composition. secretariat and working modalities

The CTB is cQmposed of a chairman, presently a Deputy Principal Secretary in theMinistry of Finance, together with representatives of the Ministries of Agriculture, Works, Waterand Energy, Industry and Trade, Bank of Tanzania, Government Stores, and the Treasury.Representation on behalf of the various Ministries is normally delegated to medium level staff.The secretary to the Tender Board is also a member of the Board. Members attend meetingsregularly and are regarded as experienced in public procurement.

Confidential Tender Board papers are provided to members 34 days in advance ofmeetings. Items on the agenda deal almost exclusively with matters of contract award. Thedocumentation consists of a copy of the procuring entity's evaluation report, which is sometimesaccompanied by comments from the secretariat. Representatives of the procuring entity are notnormally called upon to be present. The typical agenda will list some 10 items per meeting. Inrecent years, there has been a decline in the number of matters submitted for CTB scrutiny. Thisis directly related to the reduction in Government procurement due to the country's fmancialtroubles.

Minutes are kept of CTB meetings. Generally, they portray a picture of activeinvolvement by the CTB in bid evaluation. Many evaluation reports are returned to the procuringentities with a request for explanations which may range from procurement issues to the need forthe items to be procured. For each award decision by the CTB, the minutes record the amountand other relevant details of the winning bid.6

Prior to the publication of the invitation to tender, the CTB secretariat examinesthe procuring entity's draft invitation to tender, along with the bidding documents. The CTB inthis initial stage is active also by:

- checking the specifications, estimated value of the contract, and availability offunds;

- placing the advertisement for tenders in newspapers;- selling the tender documents to interested firms (and forwarding receipts to the

Treasury), and- receiving bids by the indicated deadlines and organizing the public bid opening.

The CTB secretariat consists of the Board secretary and 1-3 assistants. Relativelylittle information is available about the assistant level staff, as they have been reassigned ratherfrequently.

Official exceptions to the requirement to submit procurement documents andaward recommendations to CTB scrutiny have been made for the Ministry of Works and theMinistry of Education. In the case of the Works Ministry, the National Tender Committee (with4 members representing the Treasury, and the Ministries of Justice and Planning in the PrimeMinister's Office) scrutinizes award proposals in the range of US$ 1-5 million. Contracts overUS$5 million are still subject to CTB review. In the case of the Ministry of Education, aministerial tender board has assumed the CTB's review function; the same applies to theprocurement of pharmaceutiqals in the Ministry of Health. It could not be confirmed that allother ministries fully comply with the requirement for CTB review in all cases. The attachedlistings of CTB Tender Awards in 1994 and 1995 leave the impression that a considerablevolume of procurement takes places without CTB review, contrary to prevailing regulations.Crown Agents also refer to this situation in PPSMS.

Asked about procurement in the case of contracts not submitted for CTB review,the secretary to the CTB inforned that the CTB has no powers to call for information aboutongoing procurement within a particular procuring entity and to question particular proceduresbeing followed. As a result, there is no information available in the CTB about the frequent useof sole source procurement, based on proforma invoices, as indicated above from the report of theController and Auditor General.

Lack of standard documents and proper guidance

The procuring entities lack proper guidance from those in Government who shouldbe most capable of providing such guidance -say, the Treasury- which is the watchdog over theFinancial Orders, or the CTB. However, the interviewed procuring entities reported that theofficials in these bodies are unable to answer inquiries because of the obscure status of the law.National Standard procurement documents are largely unavailable, as further described insubparagraph 3.2. 1.

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Behavior of procuring entities vis-a-vis CTB and donors

Procuring entities such as line ministries and parastatals have a need to prove theireffectiveness within the Government apparatus by minimizing process and maximizing results.Approving authorities, especially the Central Tender Board, exist primarily to ensure that theprocess is not curtailed and complies with established regulations. Donor organizations insist onadherence to previously agreed project implementation plans and guidelines which, by beingincorporated into and made a part of development credit agreements, become contractualobligations. These conflicting pressures affect the behavior patterns of the individuals whoconstitute the procuring entities.

The most egregious example of these behavior patterns is the widespread practiceof procuring entities to substitute IDA's requirement for prior review and 'no objection' notice forthe mandatory endorsement of their proposed contract awards by the responsible nationalapproving entity, i.e., the Central Tender Board and/or the ministerial tender board.

It has been proven that packaging the procurement of similar goods and the scopeof civil works to take advantage of economies of scale and increase competitive appeal can resultin significant savings to the country. However, under present conditions in Tanzania, the esti-mated value of any procurement package also determines the procurement method mandated bythe agreement with the donor and the jurisdiction of the existing tender boards, or even, thepossibility of avoiding the scrutiny of any approving authority. There is a discernible pattern ofcircumvention among Government units which manifests itself in the uneconomical practice ofsubdividing rather than aggregating procurement packages, in order to minimize the approvalrequirements. According to some reports, several unauthorized and closely spaced purchases ofvery small quantities of certain goods have been substituted for the competitive procurement ofthe same goods in more reasonable quantities, according to procedures. The cumulative loss ofpotential savings for Tanzania due to such wasteful practices could be significant.

Discussion points about a future relationship between procuring entities and the

In discussions with the chairman and the secretary of the CTB, there was mutualagreement that (a) CTB review levels should be raised considerably, that (b) the focus of CTBreview should be on the regularity of the procedure followed, rather than commercial andtechnical aspects and that (c) the CTB should concentrate on its guidance role.

The mission, noting the continuing lack of clarity in the relative roles of procuringversus approving entities, felt the need to raise the question of going one step further and placingthe CTB in the role of a purely advisory body, having the sort of functions ascribed to theProcurement Advisory and Management Service in the Crown Agent's draft report: a body whichmonitors the overall functioning of the country's procurement system, collects and disseminatesinformation about implementation of the regulations, produces standard documents, andsponsors training and staff development programmes, etc. This would also meet a need thatmany ministerial staff had expressed in the interviews.8

This proposed redefinition of the CTB's roles would serve the purpose of squarelyplacing the responsibility for procurement where it belongs, i.e. with the procuring entity, whichreceives and is held accountable for the public funds and is the ultimate owner/client of thegoods, works and services procured. As the illustration of the internal process inside theMinistry Works shows (Attachment 3), there are already numerous internal checks and balancesin a procuring entity.

As far as the CTB is concerned, a purely advisory role would also address criticismsraised in interviews with various procuring entities about the relatively little value added by theCTB to the evaluation work of the procuring entity compared to the high cost of the delayscaused by the CTB review in the procurement process. It would also leave the CTB able toinvestigate complaints by dissatisfied bidders about the manner in which procuring entities applythe regulations which is a course of action that is not currently available to bidders. If CTB onthe other hand, takes part in the procurement process by reviewing bid evaluations (and at times,overruling the procuring entity) and approving contract award recommendations, it becomes aparty to the process and is thus excluded from any role in investigating complaints concerningthat same process.

3.2 Procurement of Goods and Works: ICB and Other Methods of Procurement

3.2.1 Standard Bidding Documents for Works and Goods:.

Tanzania uses th; Bank's Standard Bidding Documents (SBD) in ICB procurement.The preparation of bidding documents has improved with the introduction of Bid and ContractData Sheets in the Bank's SBD.

In connection with the Integrated Roads Project (IRP), model documents for use inNCB works procurement have been developed. Model requests for quotations have also beenprepared in connection with IRP but have not yet been used. The East Africa Standard BuildingContract has been used on projects which are not funded by the Bank. However, by and large,the Bank's SBDs are used for ICB as well as NCB procurement; in the latter case withappropriate modifications.

3.2.2 Advertisement of bids: Advertisements are placed in national papers which arepublished daily. For ICB and NCB, the time allowed for the preparation of bids is generally 45days. Large consultancy assignments are sometimes advertised locally and in internationalpublications. Advertisements in "Development Business" are placed in compliance with IDA'sProcurement Guidelines.

3.2.3 Prequalification: Prequalification is rarely used in NCB. In ICB, the Bank's standarddocuments and procedures are used. The verification of prequalification information has been adifficult task and the cause for rejecting requests for IDA's "no objection" notice.

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3.2.4 Bid opening, review, and evaluation: See detailed description of issues causingdelays under para 3.1. In addition, many procuring entities also complain of delays caused byIDA in reviewing bid evaluation reports for the purpose of issuing the "no objection" notice. Fora description of delays according to one complaining entity, see data on health sector project,Attachment 2. Internal procedures can also be cumbersome within a procuring entity, see outlineof process inside the Ministry of Works in Attachment 3. Most ICB bidding documents requirea bid validity period of 120 days, but even this relatively long time period is often insufficient tocomplete the bid evaluation and contract award process, due to delays in obtaining clearancesfrom all approving entities. The excessively long bid validity periods in Tanzania tend toincrease costs, particularly in civil works contracts, as contractors use inflated costs as a hedgeagainst expected delays in awarding contracts.

3.2.5 Bid andperformance security: Bid and performance securities and mobilizationadvances against a bank payment guarantee are always required in ICB and NCB. However,poorly managed local banks create difficult conditions for local contractors wanting to complywith these bidding requirements.

3.2.6 Contract award and ratification procedures: See detailed description under para 3.1.

3.2.7 Contract payments: Letters of credit are used in ICB, but not in NCB. Otherwise,payment provisions follow Bank Guidelines and common commercial practice. However, theopening of a letter of credit in favor of a foreign supplier requires a cash deposit in foreigncurrency of at least 40 percent of the amount of the letter of credit.

3.2.8 Price Indexing: The existing system is not sufficiently reliable to be applied in theprice adjustment formula of IDA's standard documents.

3.2.9 Settlement of contractual disputes: In ICB, as per standard bidding documents,including international arbitration.

In NCB, disputes are referred to an administrative review at a higher level inthe procuring entity in the first place.

No formal complaints mechanism exists within the country, except for thecourts of law to which complainants rarely resort. In ICB, most complaints are raised throughWorld Bank Headquarters or the Resident Mission.

3.2.10 Eligibility requirement for firms to bid: Eligibility requirements are spelled out on acase-by-case basis in bidding documents. No foreign firm are excluded, except on the basis ofdocumented poor performance in the past.

In NCB, contractors must meet the requirements of the National Board of Architects,Quantity Surveyors and Building Contractors, in order to be eligible to bid.

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3.2.11 Capacity and competitiveness of the local private manufacturing and constructionindustries in sectors for which Bankfinancing may be involved; domestic policy on joint venturesbetween foreign and local.firms.

See report "Procurement in the Private Sector", Chapter 4.

3.2.12 Parastatals: A major program of privatization of parastatals is underway. However,background documents in the Public and Private Sector Reform Project reveal that Governnentwants to retain a significant stake in major public utilities, such as the Petroleum RefineryCorporation (TIPER), the National Urban Water Authority (NUWA), the Tanzania PetroleumDevelopment Corporation (TPDC), the Tanzania Railways Corporation (TRC), the TanzaniaHarbours Authority (THA), Tanzania Electricity Supply Corporation (TANESCO) and somesocial sector public institutions such as universities and hospitals. Most of these parastatalsdepend heavily on government subsidies for their funding. Therefore, a considerable percentageof Government funds is applied to procurement by parastatals. The issue which has not beenaddressed at all by Government is whether a reform of the public procurement system inTanzania should also include the parastatals. Current figures on procurement by parastatals usingGovernment funds obtained through subsidies are not available.

The Crown Agents propose in their Public Procurement and Supply ManagementStudy that parastatals be obliged to obtain CTB clearance for procurement funded withgovernment subsidies, above certain thresholds. However, the proposal would not subject theparastatals to the substantive parts of the proposed regulations. Given the fact that parastatals areobligated to adhere to rules set by their own board of directors, it seems incongruent to subjectthem to CTB reviews. Managers of the parastatals who were interviewed confirmed thatprocurement financed by IDA follows IDA Guidelines and is overseen solely by their own boardof directors.

3.2.13 Thresholds Related to Procurement Methods:

(a) thresholds for Review by the Central Tender Board (CTB)According t6 the existing regulations, any procurement in excess ofUS$ 1,000 (one thousand) must be submitted to the CTB. Furthermore, thisextremely low threshold is often confused with the spending authority of theprocuring entity which may be much higher. Spending authority rests inprinciple, with the Accounting Officer, who is the Principal Secretary in anyMinistry and who in turn may delegate spending authority to subordinatelevels;

(b) threshold for Review by Ministerial Tender Boards (MTB)Theoretically, all procurement would be subject to CTB review because ofthe US$1,000 threshold. However, a considerable volune of procurement isapproved by MTBs only, at thresholds which vary among ministries; and

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(c) thresholds for IDA's Prior Review

The following examples taken from current Development Credit Agreementsdemonstrate the use of thresholds in IDA funded projects.

PRIOR REVIEW THRESHOLDS (USD '000)

PROJECT GOODS WORKS SERVICES

ASMP All ICB N/a 100

ROADS II 500 1,000 100

EDUCATION PLANNING 250 250 250

MINERAL SECTOR 100 100 100

3.3 Employment of Consultants:

General policy: Hiring of consultants is not regarded as an activity falling underTanzanian public procurement regulations and no such contracts go to the Central Tender Boardfor review. Consulting services are mostly funded by donors; the procedures for selectionconsequently follow donor regulations.

Selection and contracting procedures: In Bank-funded projects, procedures arethose agreed with the Bank, and Bank task managers play a major role in defining the terms ofreference and monitoring the process in each case.

Policy regarding the use and eligibility of foreign firms; experience of foreignfirms: There are no formal restrictions as to the ability of foreign firms to provide consultingservices in Tanzania. According to privileged information from Nordic consulting firms, manysuch firms have established branches in Tanzania in order to show good will and to receive moreinvitations to bid. Since most business is aid financed, however, the bulk of contract paymentsgoes to head offices in foreign countries via aid budgets. One Swedish company, as an example,explored in 1990, via an intemational accounting firm, the prospects of establishing a localcompany in Tanzania; the result of the exploration was negative. Nevertheless, the firm decidedto establish a branch in 1995 and achieved better access to the market.

Selection procedures and documentation: The selection procedures described inthe Bank's Guidelines for the Use of Consultants by Borrowers (August 1981) and such standarddocuments as the letter of invitation and the Form of Contract for Consultancy Services (June1995) are almost universally followed for all donor-funded projects, IDA has also providedsimplified contract documents for short-term and relatively small consultancy assignments. Ad-hoc evaluation committees in the procuring entities requiring consultancy services carry out theselection process.

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Local consultants - areas of expertise and levels of remuneration: QualifiedTanzanian consultants exist in such fields as management, architecture, civil engineering andcertain specialised sectors such as agriculture and mining. One example of the last kind arefirms used in the Mineral Sector Development TA Project. A Tanzanian firm, Tandiscovery,was selected in competition with other local firms for a base line survey of the small scale miningsector. The negotiatied fees came to about USD 600/day, compared to price levels of USD 900-1200/day charged by foreign firms. In the same project, local management consultants performinstitutional capacity building and training services for about USD 6,000/month under a contractfor some 20 m/m total. The emergence of viable local consulting firms seems to have causedsome foreign firms to lower their fees, in order to stay competitive. The aforementionedSwedish firm, e.g., has directed its Tanzanian branch to limit charges for accounting services toUSD 7,000/month. The development of local consulting firms could undoubtedly be acceleratedthrough technical assistance in proposal preparation and overall management.

According to identical information from all interviewees, procurement of consultingservices is always donor funded, follows donor procedures and escapes CTB review.

4. Private Sector Procurement

See separate Report on Private Sector.

5. Procurement-Related Technical Assistance

5.1 Previous and Ongoing Technical Assistance:

The Public Procurement and Supply Management Study conducted by the CrownAgents under the Integrated Roads Project is, in itself, a major technical assistance effort. Itaddresses not only legislative needs to improve procurement and supply management but alsoapproaches to human resource development in these areas. Chapter VI of the PPSMS draftcompletion report is devoted to the development of capacity in procurement and could form thebasis for developing a long-term strategy and estimate of required resources.

Tanzania also benefits from various training programs organized by the Bank orAfrican training institutes supported by the Bank, such as ESAMI in Arusha and GIMPA inAccra. Several IDA project staff have participated in these training programs.

The Bank has conducted one-week training seminars in procurement anddisbursement, as well as several project launch workshops.

One of the shortcomings of the Bank's technical assistance in procurement is the lackof a procurement specialist at the Resident Mission in Dar-es-Salaam who could be a localsource of information for IDA funded projects and provide routine assistance in reviews. Atpresent, the Resident Mission in Nairobi fulfills this function on a limited basis.

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5.2 TechnicalAssistance Strategy in Procurement:

Staff assigned to procurement duties in ministries and parastatals include so-calledSupplies Officers at various civil service grade levels as well as other professionals in variousdisciplines who, over a number of years, have acquired some proficiency in procurement whilemanaging donor-funded projects. However, fully trained and experienced procurementspecialists are a rarity in Government and parastatals and were found by the mission only inAgriculture and Water, Energy and Mineral Resources and even then, not as regular civilservants.

The typical training of Supplies Officers may be sufficient for handling normalpurchases of common user items through Government requisitions and requests for quotationsfrom local sources but is grossly insufficient for the known duties of a procurement officer ondonor-funded projects. Many such projects require intemational competitive bidding for a widerange of goods and works, complex bid evaluations and dealings with sophisticated suppliers andcontractors. It is equally doubtful that a person with such limited training would have therequisite professional preparation to grasp and apply the procurement guidelines and standarddocuments on which intemational donors insist as a condition of disbursing credit funds.

Professionals in other disciplines who have acquired proficiency in procurementthrough training courses and daily practice seem to fare much better and are often referred to asthe unit's resident procurement experts. An example would be certain civil engineers in theMinistry of Works whose services are also sought by other ministries. However, procurementmay not be their primary professional career interest and other job duties plus procurement mayin fact, result in divided attention to both.

Statistics on the number of civil servants who are considered to be assigned toprocurement duties in various ministries are therefore, unlikely to convey a complete picture ofthe country's human resources in this important aspect of project implementation; nor can short-term training courses offered by various international organizations serve as a substitute for thetype of dedicated training and apprenticeship under the guidance of experts that are provided inindustrialized countries and if implemented, would ultimately provide Tanzania with a cadre ofseasoned procurement specialists. This cadre would not only improve performance inprocurement but also form the core of future trainers.

Since training in any field such as procurement takes financial and humanresources, besides time and tenacity, both short-term and long-term training strategies wouldseem to be the most sensible interventions in response to these observations. The short-termstrategy should continue to consist of stop-gap technical assistance to Government units in whichprocurement deficiencies have been identified as the cause of delays and cost overruns; however,a more systematic approach may be necessary. The long-term training strategy should (1) haveas its main objective, practices that benefit the country by virtue of greater economy andefficiency in procurement, rather than mere compliance with donor requirements, (2) guaranteefrom year-to-year the necessary resources from Government and donors to sustain this training

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strategy and (3) identify and establish transparent performance incentives for civil service staffwho show the potential, ambition and personal commitment to this profession.

Attachments to CPAR

1. List of persons contacted during mission2. Ministry of Health, Examples of Delays3. Ministry of Works, Example of Procurement Process from Bid Documents to Contract

Award4. Recommendations for A Revised Public Procurement System, Public Procurement and

Supply Management Study, Crown Agents, February 19955. Tanzania - Procurement in the Private Sector, March 19966. Country Portfolio Performance Review7. Tanzania - CPAR Summary Checklist of Acceptability of Procurement Procedures for

Competitive Bidding8. Follow-up of Tanzania CIR (November 1993) with Project Coordinators, June 13, 1995

15

ATTACHMENT 1

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

List of Persons Contacted During Mission

Attachment 1

COUNTRY PROCUREMENT ASSESSMENT REPORT

List of Persons Contacted During Mission

Mr. P. L. LuhanjoDeputy Principal SecretaryMinistry of Finance

Mr. A. J. MalyiSecretaryCentral Tender BoardMinistry of Finance

Mr. W.A. LyatuuProject CoordinatorIntegrated Roads ProjectMinistry of Works

Mr. J. BagendaProject CoordinatorMinistry of Education

Mr. S. NdunguruCoordinator, Education Planning & Rehabilitation ProjectPrime Minister's Office

Dr. F.N. NjauCoordinator, Health & Nutrition ProjectMinistry of Health

Ms. C.M. MdundoCoordinator, FILMIUP ProjectAttorney General's Chambers

Mr.B. A. KyamaController and Auditor General

Ms. S. E. Kaduma, Project Coordinator

2

Mr. M.K. Sarin, Project AccountantAgricultural Sector Management ProjectMinistry of Agriculture

Mr. B.A. ShamshudinManager, FinanceTanzania Electric Supply Co. (TANESCO)

Mr. D.K. Jairo, Project CoordinatorMr. G.B. Bukori, Project AccountantMineral Sector Development ProjectMinistry of Energy and Minerals

Mr. P.S. MalembekaPrincipal Financial AnalystTanzania Telecommunications Co

Mr. S. WilliamsCrown Agents

Mr. C.P. TeshaRegistrarNational Board for Materials Management

ATTACHMENT 2

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Examples of DelaysMinistry of Health (MOH)

Elapsed Time From Bid Advertisementto Request for "No Objection"

to Contract Award

Attachment 2 to CPA.=Page 1 of 2

EXAMPLES OF DELAYSMINISTRY OF HEALTH (MOH)

ELAPSED TIME FROM BID ADVERTISEMENT TO REQUEST FOR "NO OBJECTION" TO CONTRACT AWARD

Date on Date on Date onwhichl which Date on Date on which

request CTB wh ich which clearancewas issued bids bids were of Status as of

sent to Tender were received Date on whiicih Evaluation contract Date on whichi the award was set to July 1996Tender No. CTB to Notice opcned from CTB Rcport was submiitted to CTB award WB for no objection

issue for by CTB for for award received ElapsedlTender adverti evaluation from time toNotice sement CTB date

39 of 1994/95 Record 6th 27th 2nd Nov. - On 15th Dec. 1995, the 14th - On 30th March 1996, MOH "NoFOR THE is not Sept. Oct. 1995 Evaluation Report was submitted March submitted request for "no objection" to objection"

SUPPLY OF avail- 1995 1995 to CTB; 1996 WB; is still beingTRAINING able awaited

BOOKS - on 16 Jan. 1996, CTB responded - on 6th May 1996, WB responded by from WB.by asking MOH for more asking MOII to furnish additionalclarifications on the evaluation documents which were required forsubmitted; and "no objection";

Elapsed- on 19th Jan. 1996, MOH! - on 13th May 1996, MOH sent Time:responded by submitting the reminder letter to WB requesting "no 300 daysrequired clarification to the CTB. objection"; and

- on 25th June 1996, MOH respondedto the WB by submitting thedocuments as requested.

38 OF 1994/95 28th 20th 8th 9th March - On 6th May 1996, tihe C1TB Will be sent after obtaining clearance - Unre-FOR THE Nov. Dec. March 1996 evaluation report was submitted clearance of award from CTB. solvedSUPPLY 1995 1995 1996 to CTB; is being

OF awaited.COMPUTERS - on 2nd July 1996, CTB wrote to

AND MOFI asking to submit views onACCESSORIES some issues raised by the CTB

regarding the evaluation report;and Elapsed

Time:-on 4th July 1996, MOH 210 days

.______________ .___.___ _ . responded & submitted views to

Attachmcnt 2 of CPtAtCPage 2 of 2

____._ CTB.I OF 1995/96 28th 19th 29th 10th April - On 28th May 1996, Evaluation CTB Will be sent after obtaining clearance Unresolved

FOR THE Nov. Dec. March 1996 Report was submitted to CTB; clearan-ce from CTBSUPPLY OF 1995 1995 1996 is being

OFFICE - on 2nd July 1996, CTB wrote to awaitedEQUIPMENT MOH asking to submit views

raised by CTB regarding theevaluaton report; and

Elapsed- on 4th July 1996, MOH Time:responded and submitted views to 210 daysCTB.

c~~~~~~~

ATTACHMENT 3

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

ExampleMiniistry of Works (MOW)

Procurement Process from Bid Documentsto Contract Award

Attachment 3 to CPAR

EXAMIPLEMINISTRY OF WORKS (blOW)

PROCUREMENT PROCESS FROiM BID DOCUME;NTS TO CONTRACT AWARDPMPLEMENTOR=OPERATIONAL UNHI

[CODAP-DONSOR ASSISTANCE COORDINATOR]

Forns ad hoc bidevaluation committee and

INPLEMENTOR evaluates bids; sends bid DIRECTOR OF ROADS

evaluation reportForwards bids Checks and approvesto Implementor bid evaluation report

with assistance of panel

CCU CCUr Receives bids,opens bids and Assembles documentsforwards them to CCU and forwards to Permanent

Secretary (PS)

c,rB PSr Purchase bidding documents, Endorses documents and7

prepare and submit bids submits for clearanceALT I ALT 2

BIDDERS

Less than S5m More than $5mAdvertises bid invitation NATIONAL TENDER CENTRAL

COMMlTTEE TENDERBOARDLIB CLEARS (CTB)

CLEARS

Sends draft advertisement

Contracts Control Unit (CCU){ Provides notification to proceed CODAP

CODAPforwards bid evaluation report-,

X Reviews and gives 'no objection' & awards recommendation toIDA for 'no objection'

IDA EDA

t Forwards for bidding documents Gives 'no objection' to awardreview by ID.A, if required

CODA? CODAPForwards NOB to

Drafts bidding documents and submits to IMPLEMENTORIMPLEMENTOR Finalizes contract &

submits toSuccessful Contractor DIRECTOR OF ROADSct

START Signs conSu Contract ntract, PS signs contraFINISH ' I

ATTACHMENT 4

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Recommendations for A RevisedPublic Procurement System,

Public Procurement and Supply Management StudyCrown AgentsFebruary 1995

RECOMMENDATIONS FOR A REVISED PUBLIC PROCUREMENT SYSTEUM

1. Introduction

The recommendations for a new system of procurement for the Government of Tanzania,made in our Final Inception Report in March 1994, were revised in November 1994. Inparticular, we responded to the comments made at the Launch Workshop, held at Arusha inSeptember 1994. We have now up-dated the proposals, making clearer the operational stepsenvisaged at Ministry and Regional levels, and the specific provisions for procurement of civilworks, construction and consultancy services.

A significant factor affecting our proposals is the decision by the Government to"commercialise" the Government Stores. This paper has been written on the understandingthat the Stores are to become fully self-financing on 30 June 1995, i.e., all their operatingcosts will have to be met either from the profit margin on sales of goods (which is notcurrently allowed by the Treasury), or from peripheral revenue-earning activities, such asleasing warehouse space or sub-contract transport operations; any uneconomic activities willeither have to be subsidised or cease altogether. However, as we pointed out in our discussionpaper, "The Commercialisation of Government Stores", prepared for the MNinistry of Works,Communications and Transport (MWCT) in October 1994, questions remain as to theparameters within which the Stores will be expected to operate, and the future status of thestaff.

The system described in this paper is intended to be applicable to all procurement byGovernment at headquarters and regional levels, whether of goods, civil works, construction,consultancy or other services. Procurement by urban councils and district authorities will bethe subject of a separate paper.

Parastatal bodies operating under their own legislation are outside the scope of this Study,except that provision has been made for the Central Tender Board (CTB) to examine theirmajor tenders in cases where the procurement is being funded by central Government fromtheir own or donor's funds.

2. Current Situation

Most headquarters ministries handle much, if not all, of their own procurement in practice,even when this is contrary to the current Stores Regulations (Financial Orders Part III). Theseregulations are inadequate and outdated in key areas, and do not provide for effectiveprocedures. Procurement of civil works and construction, and associated consultancy services,are barely mentioned in Financial Orders at all.

The decision-making process is often far too protracted, which can seriously upset the inter-dependent elements of a project. The time taken for tendering and evaluation of civil worksin particular has been found to be far too slow in several cases, although the MWCT is verymuch aware of the problem.

3.2 Supplies

Supplies Officers should be responsible to the Accounting Officer for maintaining such stocksof supplies as are necessary for the smooth conduct of the Ministry's or Region's operations.Accounting Officers should be answerable for any stockholdings in excess of prudent needs,and for the disposal of any redundant or dorrmant stocks in such a manner as to recover, asfar as is practicable, the realistic value of the surplus goods.

There are neither funds nor justification for the purchase, by Government Stores or any otherdepartment, of unallocated stocks of items for which there is no properly pre-determined need.

3.3 Government Stores and Regional Supplies Officers

As the Government Stores are being "commercialised" as a Government agency, werecommend that the requirement for ministries and departments to approach the Stores shouldbe retained, but onlv for items that are listed in their catalogue, and are readily available ata price that is competitive with the buyer's local sources. The Stores will therefore now onlybe one source, if a preferred source, of supply. If the requir2d goods are not amongst thosewhich the Stores can justify stocking (i.e., those with a acceptably rapid turnover),departments will probably have to look elsewhere. The Stores will only obtain "one-off'requirements if the mark-up is sufficient to warrant the effort, and they are still able tocompete with trade sources.

At present, the Supplies Officer in charge of a Regional Stores advises the RDD onprocurement matters and acts as the Secretary of the Regional Tender Board (RTB).However, with the full c6mmercialisation of the Stores, that Supplies Officer will become theManager of the Stores; he or she may be under terms of employment appropriate to the newagency, and is unlikely to be available to fulfil these tasks unless the Stores is to berecompensed for the time spent on such duties.

Each RDD will therefore need his own Regional Procurement/Supplies Officer, at asufficiently senior grade, to handle the administration's purchasing (which may be either fromGovernmnent Stores or from local or more distant trade sources) and to run the RTBSecretariat.

4. Proposals for the Revised System

4.1 Ministries, Headquarters Departments and Regional Administrations

Accounting Officers (who in most cases are Principal Secretaries and RDDs) and theirnominated Supervising Officers or Supplies Officers, will continue to initiate procurement,as now. It is the responsibility of each Accounting Officer to determine

(i) the justification for the requirement

(ii) that sufficient funds are available in the appropriate Vote

- receive bids and conduct public or internal tender openings;

- examine and approve the Ministry's tender evaluations, and authorise awards.

If establishment of an MTB is not thought to be justified, procurement that is estimated to beabove the Purchasing Committee's level of authority should continue to be routed directly tothe CTB.

MTBs should include at least two members from outside the ministry, so they should only beset up where the volume of relevant procurement justifies the time spent by senior civilservants on tender board meetings.

Under these arrangements, the Elimu and Military Tender Boards would continue, except thattheir composition and levels of authority would conform with that of any other MTB. (TheMedical Tender Board is established under the provisions of the Medical Stores DepartmentAct, with a different composition).

4.3 Regional Tender Boards

We envisage that the structure and membership of the RTB's will remain as before, i.e., withthe RDD as Chairman, the Regional Engineer as member and the RegionalProcurement/Supplies Officer as Secretary, subject to suitable arrangements being made foralternate members and for quora to be established to prevent undue delays in the absence ofthe "statutory" members. As with the CTB (see 4.4), those members whose departments'tenders are under consideration should defend the evaluation, but not take part in the decisionon the award.

The special arrangements for the Regional IRP Tender Boards should be absorbed into thenew system. The raised level of authority for the RTB should be the same for IRP tendersas for other procurement. (Because of evidence of limited local capacity for tenderevaluation, we do not believe that the revised limit should be as high as the US$ 1 millionat present allowed for IRP Tender Boards). The Regional Engineer may still present therecommendations from each IRP tender evaluation, but should not take part in the finaldecision.

The duties of an RTB will be the same as those described for an MTB at 4.2.

Above the limit of authority of the RTB, tender evaluations will continue to be referred to theCTB for cndorsement of the award. Where the estimated value of the goods, constructionworks or services is more than 25% above the RTB's level of authority, the tender documentsshould be referred to the CTB before advertising or issue. At its discretion, the CTB mayeither advertise and issue the tender itself, for bids to be returned to them for public openingin Dar es Salaam, or allow the RTB to proceed with tendering subject to CTB's endorseemntof the award.

We also feel that it is important that the CTB follows up, firstly the award of the contract (wehave found cases of significant delays between approval of awards by the CTB for civil worksand construction, and actual contract signature), and the implementation and eventualcompletion of the contract. (It is not acceptable for the CTB to be unaware of instances inwhich a contractor takes the advance but fails to complete, or even to start, the work).

The composition of the CTB should be re-structured to consist of independent members, whoare likely to be in, or recently retired, from the Public Service. They should not be appointedto represent the interests of any specific ministry, except Finance and Justice.

The ministries whose tenders are being considered may send representatives to Board meetingsin order to present their evaluations and discuss technical and commercial aspects, but theyshould not take part in the eventual decision.

The CTB Secretariat will need to be strengthened with further professional procurement andcontracts staff.

4.5 The Procurement Advisory and Monitoring Service

The structure described at 4.1 to 4.4 is intended to provide for proper tendering, considerationof bids and award of contracts at the appropriate level of authority for the value of theprocurement. There is still a need for an organisation to provide back-up advice and supportto Accounting Officers, and in particular to their Supplies Officers where the procurement ofgoods are concerned. This body should also monitor Governrment procurement so as to guideand, if necessary, warn, if good practice is not followed or Regulations are being breached.

We propose that a Procurement Advisorv and Monitoring Service (PAMS) be established inthe Treasury, either as an independent unit or as part of an expanded Secretariat to the CTB.Its functions would be as follows:

(i) to provide advice and assistance to ministries, departments and regions on allprocurement matters, including evaluation of tenders;

(ii) to draw up guidelines and procedures, and to set and help implement standardsof good practice in procurement and supply;

(iii) to set up and maintain management information systems, so as to provide forproper accountability and to build up a data-base of information onspecifications, sources of supply, prices and usage of goods;

(iv) to advise the CTB and RTB's on items that may be considered as "common-user", and assist the tender boards in drafting national or regional call-offcontracts;

(v) in conjunction with the Civil Service Department, the Ministry of Works,Communications and Transport and other technical departments, to advise onstandardisation of stores, vehicles and equipment;

4.7 Management Information and Accountability

A most important feature of the new system must be the capture and recording of contract andpurchase order data.

Firstly, it is most important that commitments are recorded immediately, not only to keepVote books up to date, but to ensure that sufficient funds are always available for paymentto suppliers. Frequent delay in payment seems to be the biggest single-reason for contractors'and suppliers' lack of confidence, and this in turn leads to high prices and poor paymentterms (often cash in advance).

Secondly, it is essential to provide timely financial management information, both to link withthe Treasury's centralised payments system through Regional Sub-treasuries, and to enforceaccountability.

Thirdly, purchase order information will be needed by PAlMS for the supplies informationdata-base, for monitoring purposes and for advice to the Stock Verification Division.

Manual systems are practicable, but as soon as possible the information should-be recordedand analysed by computer. Information can be exchanged simply by hand transfer ofdiskettes, which could be sent by courier or by Expedited Mail Service (EMS) to PAiMS inDar es Salaam.

J. Implementation

The first step is for Government to discuss these proposals. When they have been modifiedas necessary and finally agreed, legislation has to be enacted and regulations made to replacethe inadequate Financial Orders Part III and provide a sound basis for public procurement inthe future.

In order to get this system established and running, the-first essential is practical training forthe people who are to run it. Computers can come later; if manual systems do not work,automated systems will not w7ork either.

Pilot schemes in one or two ministries and regions are proposed as the best way to proceed.

Within ministries and Headquarters departments, the change in the status of the GovernmentStores will have little immediate effect, as in most cases they are already used to doing theirown purchasing. In the regions, however, there is a greater reliance on the Stores, andsubstantial changes in operating practice will be involved.

The following steps are envisaged; they are set out in approximate sequence, although somemay be made simultaneously and some activities will be protracted:

1. Acceptance by Cabinet of these proposals and the draft bill for a new PublicProcurement Act (first draft submitted to Ministry of Finance, December 1994).

* ready access to procurement advice and sourcing information

* better procurement performance and value for money

* use of scarce resources to best advantage

* improved accountability and control of funds

* expansion of trade by encouraging a move away from the "cash culture" andtowards the growth of credit facilities.

The new system is intended to be flexible, and we look forward particularly to receivingconstructive comments and suggestions from those most closely involved.

Crown AgentsPublic Procurement and Supply Management StudyDar es Salaamn, February 1995

Annex A

PROPOSED THRESHOLD POINTS AND LEVELS OF AUTHORITY

Headquarters Procurement: TSh

Supervising Officer, Ministry Supplies/Procurement Officer: 500,000

Accounting Officer, acting alone: 2,000,000

Ministry Purchasing Committee:

Goods and Services: 10,000,000Works and Construction: 50,000,000

Ministry Tender Board (where applicable):

Goods and Services: 50,000,000Works and Construction: 250,000,000

Central Tender Board:

Goods and Services: above 50,000,000Works and Construction: above 250,000,000

2. Regional Procurement:

District Officer 200,000

Regional Engineer, Supplies/Procurement Officer,Supervising Officer: 500,000

District Tender Board: 2,000,000

Regional Development Director, acting alone: 2,000,000

Regional Administration Purchasing Committee: 10,000,000

Annex B

STRUCTURE OF PROPOSED PROCUREMENT SYSTEiM

Level ofAuthority

F. Central Tender Board

I _ _ _ _ _ _ _ _ _ _ _ T --_IE. Ministry Tender Board Regional Tender Board

I ~ ~ ~ r __

D. Ministry Purchasing c Regional PurchasingCommittee Committee

C. Accounting Officer RDD (Accounting Officer) District Tender(acting alone) (acting alone) Board

B. Supervising Officer! Regional SupervisingSupplies Officer Officer/Supplies Officer

A. District Officer

N.B. The Accounting Officer (or an officer nominated by him in writing) will chair thePurchasing Committee, and-will be the signatory for all procurement approved by theCommittee, as recorded in the minutes of the Committee's meetings.

Not every ministry need have a tender board; many do not do enough procurement to justfysetting it up. In these cases, procurement above the financial powers of the PurchasingCommittee will go straight to the CTB.

ATTACHMENT 5

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Procurement in the Private SectorSeptember 1996

Document ofThe World Bank

TANZANIA

PROCUREMENT IN THE PRIVATE SECTOR

ATTACHMENT 5 OF COUNTRY PROCUREMENT ASSESSMENT REPORT

September 1996

Africa Technical OperationsSupport Unit 1Africa Region

CURRENCY EQUIVALENTS

US$1.00 = 615.49 Tanzanian Shillings

ABBREVIATIONS AND ACRONYMS

COMESA - East-South African CommunityCRF - Clean Report of FindingsHS - Harmonized System Custom CodingIDE - Inport Duty EntryIDF - Import Declaration FormIPC - Investment Promotion CenterNASACO - The National Shipping Agency ControlNBC - National Bank of CommercePEHCOL - Plant and Equipment Hiring CompanyTAN - Tax Assessment NoticeTCFB - The Tanzania Control Freight BureauTHA - Tanzania Harbor AuthorityTPDC - Tanzanian Petrol Development Corporation

- ii-

TABLE OF CONTENTS

PREFACE . iv

SUMMARY...1

3 - IMPORT DUTIES - RESTRICTIONS AND PREFERENCES .. 23.2.15 - Range of Import Duties on Goods .............................................. 23.2.16 - Customs Duties on Industrial Supplies and Equipment . . 2

Types of ExemptionsA. Discretionary Exemptions ..................................................... 2B. Statutory Exemptions ........................................................ 3C. The Investment Promotion Center (IPC) ..................................... 3D. Favored Nations ........................................................ 3E. The Zanzibar/Pemba Islands - A Special Case ............................. 3

3.2.17 - Import Restrictions ........................................................ 43.2.18 - Practice of Domestic Preference ................................................. 53.2.19 - Preferences Granted to members of the Regional Trade Groups .......... 53.2.20 - Import Trade Verification - Effectiveness of the Country's

Customs Services.5 ........................................................ 53.2.21 - Pre-shipment Inspection - Import Trade Verification Program ............ 7

4 - REGARDING PRIVATE SECTOR PROCUREMENT .. 94.1.1 - a - Established Commercial Practices ............................................ 9

A. The Private Sector Situation - The Asian Community ....................... 9B. Banks and Credit Facilities ........................................................ 9C. The Newly Establishea Foreign Banks ......................................... 10OD. The Informal Sector ........................................................ 10E. Tax Exemption Abuse ........................................................ 11

4.1. 1 - b - The Private Sector - World Bank Project Issues .......... ................. 11A. Serious Implementation Delays ................................................. 1 1B. One-sided Contracts ........................................................ 11C. Lack of Transparency - The Consultant Issue . . 11D. The Selection Process for Consultants ......................................... 12E. Delays in Payment ........................................................ 13F. Award of Public Works Contracts to the Private Sector ................... 13G. The Borrower's Constraints ..................................................... 13H. Award of Contracts for Procurement of Goods to the Private Sector .... 15

- ii -

RECOMMENDATIONS

3.2.21 - Regarding Import Trade Verification .................................. 151. Customs and Pre-shipment Companies .................................. 152. Abolishment of the Freight Bureau (TCFB) ............................ 163. Privatization of the Shipping (NASACO) and Stevedoring (THA)

Parastatals ............................. 164 - Regarding Private Sector Procurement

A. Rebuilding of the Private Sector ................................ 16

ANNEXESAnnex A - Importation procedures in the Tanzania Mainland

List of AbbreviationsAnnex B - Storage Charges in the PortsAnnex C - Decisions Steps - Ministry of Public WorksAnnex D - Procurement Time in Days Between Tender

and Contract SignatureConsultants' Contracts Full-time sequence fromTender until Final Implementation

Annex E - Newspaper Extract over Bribery During Clearing OperationsAnnex F - List of People Met

- iv-

PREFACE

This report is the result of an eight-day mission to Tanzania. Duringthis visit, the mission team' interviewed five to six people per day. Some people wereinterviewed twice to obtain more accurate information, particularly in the case of theIntegrated Roads Project (IRP) of the Ministry of Works.

Within such a short time frame, it is difficult to address all the pendingissues and hidden constraints which could cause delay in project implementation. Themission team attempted to gather as much data as possible but also found that severalpeople, mostly nationals, were reluctant to divulge information for fear of retaliationfrom their superiors. These people insisted on keeping their assertions strictlyconfidential.

In spite of this, we hope that this report will clarify the main issuesfacing the private sector in lTanzania.

The mission was conducted in March 1996 and was led by Mr. Frederick Kranz, Senior ProcurementOfficer, World Bank, and Mr. Rend Beckers, Consultant.

SUMMTIARY

Twenty years of socialist lethargy have damaged the Tanzanian private sectorand have had a major impact on procurement. The mode of operation of the formersocialist administration still prevails, and underpaid officials take advantage of theirpositions and opportunities for graft.

Because of its financial situation, the Government cannot increase wages. Highimport taxes and low wage levels encourage corruption on a growing scale. Lawsagainst tax evasion cannot be implemented effectively under such conditions.

The rebuilding of the private sector is a major, long-term issue. Due to thedeficiencies of the private sector, local competition does not exist except between theAsian community and foreign companies. Special incentives are not granted to thelocal private sector.

For Bank-financed projects, efficient procedures should be set in place to reducedelays during project implementation. The loss of interest of potential bidders onBank-financed contracts goes against the World Bank's goal of developing the privatesector.

Government has shown no commitment to put effective, independent controlagencies in place to verify the delivery of goods and completion of work under Bank-fmanced projects.

- 2 -

3 - IMPORT DUTIES - RESTRICTIONS AND PREFERENCES

3.2.15 - Range of Import Duties on Goods

According to the Tanzanian authorities, taxes and customs duties onimported commodities account for about 85 percent of the Government's revenue.There are three main kinds of taxes and duties on imported goods:

(a) customs duties, with four percentage levels - 5, 10, 30 and 40 percent;

(b) sales tax, with three percentage levels - 5, 25, and 30 percent;

(c) excise duties, at 30 percent (levied mainly on beer, liquor, andcigarettes), or a fixed amount per metric ton, (e.g., as for sugar,cement).

On basic food items such as sugar, cooking oil and wheat flour, importduties plus sales tax reach a total of 40 percent; on rice - 30 percent, and milk powder -70 percent, with a reduced rate of 45 percent for infants' milk.

3.2.16 - Customs Duties on Industrial Supplies and Equipment

Import duties on industrial supplies such as cement, corrugated ironsheets and concrete iron bars are 30 percent. There is no sales tax, but an excise dutyof 125 Tanzanian shillings per metric ton of cement is imposed. Import duties andsales tax on industrial equipment total 20 percent.

Types of Exemptions

A. Discretionary Exemptions

For projects of national interest, the Minister of Finance can grantexemptions. This concerns industrial, agricultural, or fishing projects, as well as to theimport of basic commodities. This privileg, is also extended to the president of theZanzibar/Pemba islands for areas under his control.

Frequent abuse of privilege, on imported basic commodities aretolerated. Savings from tax exemptions are not passed on to consumers, and/or feedfraud from Zanzibar to mainland Tanzania (see para. E on Zanzibar).

- 3-

B. Statutory Exemptions

The customs tariff act is a law which grants duty exemptions tointernational welfare organizations, embassies, youth associations, commonwealthorganizations, military aircraft operations, and imported goods for governmentsupplies, etc..

C. The Investment Promotion Center (IPC)

Up until June 1995, full exemptions were given by the IPC forinvestment projects. Since July 1995, a 10 percent import duty and a 10 percent salestax is levied on investment projects. Equipment imported on a temporary basis withinthe framework of a tax exonerated project is also subject to a five percent tax on theCIF value during the first year, a period which can be extended as needed.

D. Favored Nation

The East and South African countries (members of the COMESA) are apart of a trade agreement whose goal is to attain zero level for customs duties. So far,however, implementation is slow and very few commodities actually benefit frompreferential treatment.

Since 1989, a 10 percent preferential rate has been granted to Kenyanimported beer and a six percent special rate is applied to corrugated iron sheetsimported from COMESA's neighboring countries.

No other country has been granted preferential treatment except underthe framework of a specific project financed by that country.

E. The Zanzibar/Pemba Islands - a Special Case

Unlike mainland Tanzania, the Zanzibar/Pemba Islands which areintegrated into the state of Tanzania benefit from more favorable tax treatment.Customs duties are the same but the sales tax and most of the excise duties are at alower level (20 percent sales versus 30 percent). Furthermore, no preshipmentinspection or Freight Bureau controls are required. This special status makes itattractive for free traders as evidenced by the congestion at the local port. The amountof discretionary exemptions granted by the President of Zanzibar on importedfoodstuffs is high compared to those granted on the mainland. This situation indirectlyfavors smuggling to the mainland. According to customs authorities, Zanzibar importsmore goods than is needed by its population. (accurate figures could not be provided.)

-4 -

3.2.17 - Import Restrictions

There are no special import restrictions, except for petroleum productswhich are imported by a state monopoly. The Tanzanian Petrol DevelopmentCorporation (TPDC), 100 percent Government-owned, has the monopoly over crudeand refined oil. Oil by-products such as lubricants are exclusively imported by AGIPunder Government control. TPDC regularly launches international bids for both crudeand refined oil despite the existence of a local refinery owned by the Government (60percent) and AGIP (40 percent). On average, 32,000 tons of crude oil and 26,000 tonsof kerosene, jet premium and gasoil, are imported each month. The refinery's capacitydoes not meet all of the country's requirements. TPDC sets the sale prices andtransport costs for the whole country. There are four main distributors sharing thelocal market, one of which is local, Tanzanian-owned company (GAPOIL). All importsof oil by-products are under Government control except for brake fluids, which areimported duty free.

Along with the state monopoly, AGIP has the exclusive right to importall lubricants as well as the base and blended oils. AGIP sets the sale price of thesegoods. Additives, however, can be imported directly, through their head offices, byCaltex (Tanzanian-owned company. GAPOIL), Total, and B.P.

This situation reduces competition. However, private companies can beauthorized to import on their own, but the importer has to pay a margin to TPDC andto a Rehabilitation Fund. All handling costs are invoiced according to TPDC's officialrates since TPDC owns all petroleum product terminals and distribution points. Thesmall profit margin left to the importer is a discouraging factor.

In Zanzibar, there is a no competition since the oil sector is undercomplete control of the local government. Except for the lubricants that areexclusively delivered by AGIP, Tanzania has subcontracted all oil supplies toECO/TEH, London. The distribution is managed by a local parastatal.

Other Import Restrictions

Officially, no import restrictions and import licenses are requiredanymore. Several commodities are prohibited from being imported (weapons, drugs,pornography, etc.), including a list of 38 dangerous chemical products, medicines, andfoodstuffs with a validity date of less than six months' from the time they are importedinto the country.

- 5 -

3.2.18 - Practice of Domestic Preferences

In general, the 15 percent preference for goods and 7.5 percentpreference for all domestic civil works is respected. Procedures are applied accordingto Bank guidelines.

3.2.19 - Preferences Granted to Members of the Regional Trade Groups

No special preference (prices, exemptions) are granted to foreigncompanies from member countries of COMESA. Normally, all projects financed bythe Bank (like those financed by other donors), obtain IPC exemptions.

I1PORT TRADE VERIFICATION

3.2.20 - Effectiveness of the Country's Customs Services

The customs authorities of Tanzania have set up a bureaucratic, outdatedand constraining organization for the clearance of goods, which hinders the localeconomy. Also, SGS (Geneva) and Inchcape (London), who are granted contracts bythe Ministry of Finance for pre-shipment inspection systems, are seen by the customsofficials as "foreign agents" and not qualified to excercise any real control over theimport of goods.

Every step is taken to thwart the inspecting agencies' actions bysystematically disputing their decisions (customs duties, tax levels, price evaluations,etc.). Unnecessary controls are added in an effort to demonstrate customs' superiorefficiency and skills. This has a detrimental effect on the clearing process for theimported commodities: customs inspectors arbitrarily set the amount of duties,contradicting the inspecting agencies and providing opportunities for bribes.

A heavy customs administration seems to justify its existence bypracticing double and triple controls where a single control would suffice (see AnnexA, the detailed import procedures on the Tanzania mainland, and Annex E, newspaperextract).

Not less that 15 checkpoints have to be passed by the clearing agents inthe customs "long room" before a customs declaration is finally cleared. Then, theclearing agent faces warehouse controls and another 10 checkpoints before the goodcan be delivered. These checkpoints include the THA, the government-ownedstevedoring enterprise and the NASACO govermment shipping enterprise, each of

2which collect various charges .

2 All stevedoring (port handling operations) and shipping activities in the Tanzanian ports aregovenmnent managed entities.

-6 -

Compulsory pre-shipment inspection formnalities, for commodities overUS$5,000 value, further complicate and lengthen the process. As a result, the clearingof a cargo takes at least two to three weeks provided all documents conform to therequirements set by the Tanzanian administration.

Port storage and container demurrage charges are automatically invoicedto the receivers for days exceeding the free of charge period (7-15 days). Thesecharges further increase the cost of imports. Incentives are therefore strong to bribethe customs agents to seek a quick release of goods3.

Several Asian importers are in a position to clear their cormmodities quickly bybribing customs and THA agents at all levels. Even so, the process still takes six toseven working days.

The Tanzanian Harbour Authority (THA)

The THA has the monopoly for port handling operations. Therefore,the loading of trucks with containers and general cargoes in the port area depends onthe goodwill of THA agents, providing opportunities for bribes. The stevedoring(handling operations) on board is also the exclusive responsibility of the THA.

The National Shipping Agencv Control (NASACO)

NASACO, the Government shipping entity, collects all port fees in cash(wharfage dues, stevedoring, tallying overtime work, port taxes, etc.) prior to anydelivery. NASACO also has the monopoly for shipping agency operations inTanzanian ports. NASACO invoices the shipping lines in foreign currency for servicesrendered.

The Tanzania Cpntrol Freight Bureau (TCFB)

All freight bookings for in and out cargoes are supposed to be handledby this Government entity. Thus, for any imported or exported cargo, the receiver orthe exporter should apply for a seafreight rate to TCFB to obtain a freight reservationon a designated vessel. The seafreight granted includes a commission for the TCFB.Even if the importer ends up getting a better seafreight rate than the one obtainedthrough TCFB, the latter still collects a booking commnission based on the submittedrate. This additional conmmission acts therefore as a tax on all incorning and outboundsea freight.

3 This is particularly noticeable on containers which are subject to double chargers, storage anddemurrage (US$24.0/per day/20' container). See Annex B storage rates.

-7-

The customs authorities have attempted to reduce fraud, especially oncommodities which are supposed to transit through the country and which never reachthe border. Abuses through Zanzibar and through the mainland have led customs toclose down several customs-bonded warehouses. This closing has had negative impacton the local economy, since importers are then expected to pay up front the customsduties and taxes. Given the high financing cost, the traders compensate by importingsmaller quantities, resulting in a shortage of basic commodities and price increases.

3.2.21 - Pre-shipment Inspection - Import Trade Verification Program

Since April 1, 1994, Tanzania has required a preshipment inspection(PSI) in the country of supply as well as an import trade verification program. At thetime, this increase was expected to stem illegal transfers through over-invoicing. Sincethe liberalization of the Tanzanian shilling, however, the PSI mostly checks for under-invoicing, as importers seek to avoid import duties and taxes.

Two foreign inspection companies, SGS (Geneva) and Inschcape(London) share the market with SGS handling 65 percent of the imports, and Inchcape,the balance. Both companies are under contract with the Ministry of Finance throughthe Central Bank of Tanzania. Controls are for commodities in excess of US$5,000FOB value.

A limited number of commodities are not subject to pre-inspection (e.g.,weapons, explosives, pyrottchnic products, ammunitions, art objects, precious stonesand metals, scrap metal, live animals, vegetables, fish, meat and eggs, householdeffects, diplomatic and government goods).

Once a trader has arranged to import from an overseas supplier, he mustapply to his commnercial bank for an import declaration form (IDF), which requirespayment of an up front fee of 1.2 percent on the FOB value 4. The commercial bankprovides the IDF and the proforma invoice to the agreed inspection company of theexporting country. This must be done in a timely manner to avoid further delays.

The seller then remits a final invoice and the shipping documents (bill oflading and airway bill) to the inspection company. The inspection covers quality andquantity. The inspecting agency of the exporting country then issues a clean report offindings (CRF) detailing the IDF number, details of the transaction and the inspectingbody's decision as to the most appropriate harmonized system custom coding (HS) forthe goods. They also assess the dutiable value for customs purposes. Upon receipt ofthis report in Dar Es Salaam, the inspection company prepares the tax assessmentnotice (TAN) based on the CRF sent by the executing office. Upon arrival of thegoods, the TAN must be collected by the importer. The importer submits the TAN tohis bank and pays duties according to the inspecting company's assessment.

4 Of this fee, 0.95 percent goes to the inspection company and 0.25 percent to the Central Bank.

- 8 -

In order to import commodities in excess of US$5,000 FOB value onmainland Tanzania, ten documents are required: the original TAN, the "paid customsship", the original invoice, the original bill of lading, the compulsory local insurancecertificate, the IDF, the CRF, an income tax document providing evidence that theimporter is in good standing vis-a-vis tax authorities, the ocean freight bookingobtained through the TCBF, and the THA shore handling paid bill.

Unlike the Tanzanian mainland, Zanzibar requires only the fourfollowing documents: the original bill of landing, the original invoice, the import dutyentry (IDE), and the shore handling paid bill. The clearing and delivery operations inZanzibar only takes 4 to 5 days.

Disputes Between the Inspection Companies and the Tanzanian Customs.

The Tanzanian Customs Authority frequently questions the assessment ofdutiable values, errors made in the classification of goods, the misinterpretation offacts, invoices, non-collection of sales tax and excise duties, undervaluation of the CIFvalue, under-declaration of quantities, and omissions of items. According to theCustoms Authority's head office, identifying these errors has resulted in an additionalrecovery of 2.3 billion shillings for the Treasury from June 1994 to January 1996. Theinspecting companies argue, on the other hand, that the customs inspectors resort toany excuse to contest the companies' decision; these continual conflicts openopportunities for bribes fromn importers.

In response, the inspection companies have recommended that asimplified declaration be issued by the Minister of Finance. This one document wouldreplace the two documents used presently (CRF and TAN), could not be disputed bycustoms officers and should, therefore, accelerate the delivery of commodities.

For containers, a similar single document would be requested. Allcontainers would be sealed by the inspection company prior to shipment. Therefore,no dispute should arise from customs officers upon arrival of the goods. Theserecommendations have not yet been implemented by the Ministry of Finance.

In Dar Es Salaam, the trader conununity divides their main imnport invoice intoseveral smaller invoices in amounts below USS5,000 to avoid the pre-inspectionrequirements. Here again, customs laws impose no financial penalty.

Several importers have also complained about the poor reporting in theexporting country via the CRF. As a matter of fact, many inspections include checksin port warehouses and factories, rather than of container contents. This situationleaves room for false declarations, damages, and shortages.

- 9 -

4. REGARDING PRIVATE SECTOR PROCUREMENT

4.1.1. - a - Established Commercial Practices

There is no state import monopoly except for petroleum products. Theeconomy has been deregulated for two years and import licenses are no longerrequired. The Tanzanian shilling is convertible and there is no compulsory control oncurrency transfers. However, the poor state of the economy and drastic lack offinancial capacity limit the wholesale import trade to a limited number of operators.The inflation fluctuates between 26 and 30 percent and the commercial banks' interestrates reach peaks of 36 to 40 percent.

A. The Private Sector Situation - The Asian Community

After 20 years of socialism, Tanzania does not have a substantial privatesector except for a vibrant Asian business community, based on traditional traderelations with India, Pakistan, and the Middle East (mainly Dubai). Asian traders workin close cooperation with purchasing offices managed by relatives or very close friendsin London, Dubai, New Delhi, or Karachi.

The Asian community provides financing to Asian traders on betterterms than local Tanzanian companies can secure, making it harder for these localfirms to compete. Local bankers estimate that Asians traders account for at least 70percent of the wholesale business.

B. Banks and Credit Facilities

For 20 years, the poorly managed state commercial bank, the NationalBank of Commerce (NBC) granted loans to nationals, often without guarantees. Therecovery percentage for this portfolio is low and the financing capacity of NBC isweak.

According to private bankers debts of Tanzanian state to the privatesector are high and the liquidities on the local market are low. Furthermore, local firmscannot obtain credit lines exceeding more than 25 percent of the corporate capital.However, in case of World Bank-financed projects, bank consortia with a designatedleader have provided more credit (each bank provided separate credit line of 25 percentof the corporate capital.) Obtaiincg special authorization from the Central Bank forhigher credit lines is very complicated and time-consuming.

According to Central Bank regulations, the opening of a letter of creditin favor of a foreign supplier requires a cash deposit in foreign currency of at least 40percent of the amount of the letter of credit.

- 10 -

Another major constraint is the requirement for cash deposits coveringthe total amount of the bid and performance securities. This poses an additional burdenfor local firms since the projects' implementation is often considerably delayed and therelease of the securities deferred. As a result of all these regulations, Bank-financedtenders are often beyond the reach of the local private sector.

C. The Newly Established Foreign Banks

The newly established, foreign banks carefully scrutinize and evaluatethe projects financed by international donors before giving any support. Only selectedborrowers get financing from foreign banks, for serious and well-designed projects notexceeding two to three years. Foreign banks finance projects within the limits ofconfirmed letters of credit. Foreign banks are also active in the export trade throughletters of credit.

Foreign bankers complain about the lack of professionalism of theTanzanian local firms. Lack of accurate and current records, and work which is belowstandard, reduce the banks' willingness to open credit facilities for local firms.

These financial constraints and the presence of a substantial Asiancommunity leave little room for the indigenous private sector. These firms cannotseriously compete for the supply of goods for projects over two million dollars.Similarly, in civil works, the range of project costs for which local firms can competedoes not exceed this threshold. The only possibility remaining for indigenous localcontractors is to enter into joint ventures or into association with foreign companies.

Aside from the well-organized Asian community, local traders import ona small scale and do not have the assistance of a procurement bureau abroad. Theyusually contact a limited number of dealers that are previous acquaintances. They donot have the know-how to handle letters of credit, and are therefore, limited in theircapacity to tackle important business opportunities. Consequently, the competition ismainly between Asian wholesale traders and several foreign firms.

D. The Informal Sector

Despite Government's collection efforts, the high level of duties on basicgoods, provides strong incentives for smuggling. Several sensitive sectors of theeconomy such as the textile industry. and the import of new cars and spare parts, areaffected by smuggling and informal trade.

Several textile mills are closing down due to a large volume of unofficialimports of second hand clothing. Second hand cars are massively imported andunderdeclared, setting their value below the US$5,000 limit which requires a pre-shipment inspection. This has considerably hurt the formal import of new cars andspare parts. Furthermore, the low level of wages (between US$20 to US$50 per

month) and high unemployment result in migration to cities, indirectly encouraging thedevelopment of informal smuggling. Although important, the smuggling has notseriously damaged most parts of the economy, except for the textile sector.

E. Tax Exemption Abuse

Business lobbyists, mainly Asians, in partnership with local politicans,try to obtain from the Finance Minister tax exemptions for inports of commodities of"national interest." Unfortunately, the price reductions awarded through taxexemptions are not always passed on to the consumer. Traders take advantage of theexemption to considerably increase their profit margins.

4.1.1 - b - The Private Sector - World Bank Project Issues

A. Serious Implementation Delays

Most of the private sector firms responding to bid invitations of Bank-fmanced projects bitterly complain about long delays between bidding andimplementation. The financial consequences can be devastating as a result of inflationand financing charges. Many reliable firms are no longer interested in bidding onBank-financed projects due to these unpredictable conditions.

The pervasive lack of familiarity and experience with World Bankguidelines has also contributed to delays. According to the Ministry of Public Works,deferred responses or rejections of requests to the Bank for no-objection to contractamendments are a frequent cause of substantial delays that in turn, affect cash flow tolocal contractors.

B. One-Sided Contracts

Bidders complain that contract provisions which safeguard theborrowers' and the Bank's interests do not sufficiently consider the bidders' interests.The bidders are forced to accept amendments to avoid disqualification. Bidders areappealing for fair treatment. Bidders believe that they should be fairly compensated fordelays caused by Government's non-performnance.

C. Lack of Transparency - The Consultant Issue

Local consultants complain about a lack of transparency. According tothe local consultants' association, locals are not given a fair chance to compete. Thecriteria guiding the consultants' selection are vague. There are no published results ofa consultant selection after tenders. The selection is often made on the basis ofpersonal relations rather than on an evaluation of technical abilities. This lack oftransparency opens the way to corruption.

- 12 -

Bank guidelines for consultant selection do not require selection of thelowest offer, leaving room for arbitrary decisions. Local consultants point to Bankpolicy to "encourage and foster the development and domestic consulting firms" andtherefore request better opportunities for participation in consultant selections andgreater transparency.

Often, small contracts are awarded to foreign consulting firms withoutcompetition. The borrowers' representatives contend that local consultants, suffer fromthe following:

lack of experience even if they are up to the required technical standard;lack of financial means; andlack of basic equipment to perform efficiently (e.g. computers andsoftware).

An example of malpractice

A Government parastatal intended to fully computerize one department. Threeconsulting firms were asked to bid. One of the consulting firms was finally selectedon the condition that a bribe for the director and his assistant be included in theprice. As this enterprise refused to comply, another firm was appointed with a teamwhich included unqualified personnel claiming fictitious credentials. There was noofficial tender or advertisement for this contract.

D. The Selection Process for Consultants

The selection process for consultants takes far too much time. In oneexample, proposals were submitted in February 1994 to the Ministry of Public Works;selection only took place in November 1994; contract negotiations started in February1995 and ended in April 1995, when a draft contract was sent to the Bank. The "noobjection" was given by the Bank in May 1995. Seven versions of the contract werediscussed and the contract was finally signed in October 1995, 20 months after theinitial proposal submission. This two-year contract stipulates that the consultants'services should be paid as a fixed, lump sum, without any price adjustment provision.Another example of a Bank financed project shows the following record of the selectionprocess:

October 1994 - invitation offering 10 packages of road surveysMay 1995 - evaluation report sent to Bank for "no objection"March 1996 - only one of the 10 packages awarded at a fixed contract rate.

The other nine packages are still under negotiation, two yearsafter the invitation for proposals was issued.

- 13J -

E. Delavs in Payment

A consulting firm working for the Ministry of Public Works complainedthat US$400,000 of consultant fees have been outstanding since September 1994 forservices rendered. There is no disagreement that the fees are due. The delays aremainly due to the approval process for an amendment to the contract. Delayedpayments are a matter of great concern for small local consulting firms which cannotafford to pay the high financing charges. Consultants are not entitled to financingcharges in case of delayed payments. International consulting firms can usually toleratedelayed payments much more readily and therefore, have an inherent advantage incompeting with local firms.

F. Award of Public Works Contracts to the Private Sector

In general, indigenous local construction companies find it difficult tosatisfy the bid requirements for public works. The local private sector is quite new anddoes not have the experience of international companies, or of Asian-owned localcompanies which have been established in the country for many years.

Government sources contend that local companies often provide poordocumentation and do not have the required skills to prepare bids. They often fail tomeet financial requirements. For Bank-financed projects, many bid requirementsfollow Bank procurement guidelines for International Competitive Bidding (ICB),putting local contractors at a further disadvantage.

With regard to equipment rental, a Government parastatal, PEHCOL,was created to help local contractors secure road building equipment. Unfortunately,PEHCOL does not have the right equipment for rent and when available, thisequipment is not properly maintained. Local contractors can also sublet equipmentfrom foreigners at international prices, raising considerably the costs beyond what theycan bear.

Local contractors survive by joint-venturing which foreign firms (e.g.,Mecco with the German company Strabag). From past experience, it seems that twomillion dollars in construction costs is the top limit for local participation in bidding;beyond this limit, bidding is in the hands of foreign companies and joint ventures.

G. The Borrower's Constraints

Project management know-how in the Ministry of Public Works isdeficient. This has caused substantial delays in projects, created hardships for localcontractors and discouraged local and some foreign contractors from bidding on publicworks projects.

- 16 -

officers should not be used as tax collectors for all departments of theMinistry of Finance.

2. Abolishment of the Freight Bureau (TCFB)

This bureau is an anachronism. It is incapable of identifying the best seafreight rates for local traders. Its abolishment would reduce the formalities and reducethe costs of transport. Its mission is contrary to official liberalization policies.

3. Privatization of the Shipping (NASACO) and Stevedoring THA)Parastatals

A major source of foreign exchange, these parastatals are likely toremain Government-owned in the near future. Yet, allowing three or four privateoperations to compete in the port of Dar-Es-Salaam would reduce the costs ofstevedoring and shipping, while enhancing service. Such competition would reducecorruption, shorten clearing time, thus diminishing storage and demurrage costs. Theport authorities would continue to own the warehouses, while an equipment rentalconsortium would be set up under private management. Warehouses would be assignedby tender to operators on the basis of traffic volumes. Tanzanian and foreign firmsshould be allowed to compete in this privatization operation.

4. Regarding Private Sector Procurement

A. Rebuildihg of the Private Sector

The local private sector should be rebuilt and strengthened to be moreviable in competition for contract awards through:

a considerably more effective system for informing the local privatesector concerning bidding opportunities;

ministries should not implement projects, unless they have adequateinstitutional capacity to manage them;

development incentives, such as tax exemptions on projects, creditlines and help with bid and performance securities;

PEHCOL should be privatized to improve its management andfinances, thus helping local contractors find adequate equipment atacceptable rental rates;

NBC should be capitalized with private and public funds, whileenforcing strict control over its lending. The bank would then be in abetter position to promote small and medium size contractors bygranting them loans on favorable terms.

- 17-

* foreign banks, with Tanzanian offices, should become involved inpromoting the local private sector through Government incentives;

* the Central Bank of Tanzania should allow credit lines ranging from25 to 50 percent of the corporate capital for local enterprises winningbids under Bank-financed projects.

cash deposits for bank guarantees should not be compulsory underordinary circumstances;

* procedures for decision making in procurement in the Ministry ofPublic Works should be considerably simplified in order to reducethis delay factor in its dealings with private contractors;

* a Bank engineer in Tanzania should approve amendments up to 15percent of the project value to shorten IDA's no objection' process;

* the Principal Secretary of the Ministry of Works should delegate hisdecision-making power for contract awards when he is away from hisduty station;

* when payments are delayed as a result of complicated amendments,payment on-account should be provided to contractors before finalsettlement;

contract provisions should consider the contractors' interests andprovide fair compensation in case of delayed performance by theGovernment;

c contractors should not be forced to accept amendments underfinancial duress;

* terms and -conditions of contracts should not be changed inmidstream;

* for local consultants, participation in projects should be simplifiedand adapted to local circumstances; and

* an independent verification system is needed to assure that goodsmatch the specifications of contracts, in terms of quality andquantity, when they are actually delivered to their final destination.

Kranz:siA:\TANZ.DOCSeptember 17, 1996 11:20AM

AŽNNEX A

Importation Procedures in Tanzania (vainlandL

1. Documentation - You have to ffi so many forms and th.ere is so marnysteps to foUow.

a) 1)D FORM - With attachnent of 4 copies of Proforma.- Process with the bank to pay 1.2% PSIE carges on

FOB price.- SGS forPre Lnspection Report (CRF)

b) rnen applicaticn for TAN enclosing the B1L, CRE & Final Invoice.

c) TXLN has to be accompanied with B/L, DF, Final Invoice, Ewome Taxpapers, D & DO, CRE, TCFM etc.Process in Longroom-

I Receivinga . ImnorL License3. Income Tax 4. ValuationC. Decl aration 6. P. C.

H. D. 0. 8. Numbering9. Recording IO. AuditingIl. EB. S. 12. Manifest13. Quay 14. TCFBi). CDOThen to PC Whar.

AT THE WHARF1. CUSTOMS

A) Receiving B) RecordingC) P. C. D) ControllerE) Shed concerned - customs to verifty. F) Health & AgricuIture

2. THA) Receiving 2) LodIag 3) Rotation

4) Manifest 5) Recording 6) Compturer room7) Cashier 8) Distmion 9) CDO10) ZONE 11 SHED.

Rates are very high for wharfage & handling.

TARIFF

Rates are exorbitant and unstable and subject to change every 3 months.Commissioner can change the valuation of goods at will.

NASACOCharges tallying & Agency fees for stevedoring

ANNEX B (see report page 9)STORAGE RATES in Tanzanian ports

1 - As in every port ,there is a free period of gratuity

A - For port storage (T.H.A.)- 7 days ,if local consumption (as from vessel's arrival date)- 15 days ,if for transit .

B - For demurrage charges levied on containers by the shipping lines- 7 to 15 days ,if for local consumption.- 28 to 45 days,if for transit.

2 - Storage charges ,charged by T.H.A.

For break bulk cargoes :(mostly general cargoes not containerized)- next 30 days after free period: 1 USD /Mt /Day- After these 30 days: 1,50 USD /Mt/Day

For containers:- next 15 days after free period: USD 20 /CT 20' /Day

USD 40 / CT 40'/Day- after these 15 days : USD 27/ CT 20' /Day

USD 54/CT 40'/Day

3 - Demurrage charges invoiced by Shipping lines through Nasaco

For container:- Ist week after free period: USD 4 /CT 20' /Day

: USD 8/ CT 40' /Day- 2nd week after free period: USD 10/CT 20' /Day

USD 20/CT 40'/Day- After 2 weeks : USD 14/CT 20' /Day

USD 28/CT 40'/Day

4 - The minimum period to clear the goods is 5 days ,meaning that in the largemajority of the imports, the importer will have to pay storage and demurragecharges.

Ministry of Public Works of Tanzania - Decision STEPS - ANNEX C

Pal SecretaryMin. of Works

. r~~RP - CODAP,c

IContract Control Uni

jDirector(Departnent ROADS

T Iun Road I Min___c Po

i Senir Eng.Construction1

roject en ers

]Road Project Supervisn n

CONTRACTO~R

ANNEX D (see page 23 of the rejort)

This annex includes two parts:

1 - An e:- tract of the paper written by Mr.N.S.D Kinga ,ChiefEnginccr ofh-'eControl ' ontract Unit of t'he Ministry of Works.This paper was presented internati i aal meeting with donors held in Arusha last year.These 12 pages oftables ar: rczording the procurement times in days from date of Tendersubmiss.on until contract signature for the 62 contracts presently in forcefrom 18 ,'arious international donors.Please see on top the contract numbers-The 3 next pages mention the namncs of

the various contracts and their nature.with the contract numbers.

2 - The econd part concerns the (< Mbeya road peTiodic maintenance (< wi.th thesupervision of two consultancy supervision contracts oIsangati - Shi-amba

road >» a id the >uMakongolosi Trunk road > with the procurement times.

A ('A A TIN~T S>fg 08 T1 Z ZL T IC SZ:;1 96f SO/OZ

I* EI JA M d IC Off UWA o Ap4

HII W t ,E1W ICTIia #a uj r Ok,,IF^

lUble 3 pyowamre LimK, ih do%

.. , ( § 1 ~~~to of rfi,de RWmisn 1(29.19 ..1fl Q .991 I2.2.1M 9 s.0991 29.6.1"3 29.6.19t .613

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4.2.1M~~~~~~~~~~~

I0. b b dkf 1 7311.(J11..13 12.11.1M nS.tS s .1N 1n.,1 9J.1

^~~~~~~~~~W Ldi of t* mA1.1 IdmiS, | 3.61 1-.9 .. M 181.9 1. Wp W .6.1

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Proa,ieunt AcLivilt I _!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~f _ 1 ! 1, 13 i t IS J6

jZ 1. a3t0 g dtqif Sor M khissJon 17.1.1992 20.1.1991 28.6199 18.12.1991 21.1.1992 28.6.191 2n.3.1 29.10.993I X

2. Dbte of suission of ,ard iacrealions toras*octiva Board for adjndiaLioni 27.4.1992 22.11.19tI 17.2.1997 9.6.1992 fl.1J.199J 5.1.1 9

3. Date Bourd AdMdiceted t 4.1992 16.6.1992 13-42.199) 9.3.1992 24.11.19? 4.12.1"99 19.7.J19 4.2.194

4. Ute alof Rrd's IetUer of 4prToal n2.6.1992 t.12.1991 11.3.1992 10.3 19J3 6.12.1991 11.2.19W

S. Dtt of murd racomiLlons to Dour 29.7.1M9 11.11.1991 4.8 .199 29.7.193 I.MIAI 74.7.1JU Irch 199

OD

Q 6. Os of(bo~r .ircal of awrd 6.1993 ?6.J.199? 15.11.1991 26.8.199 15.11.19.91 58.191A 9.6.19

1l. gets of tatvf d Aaw e 5.7.1993 J5..119 13.3.19?2 8.1.199 19.4.1994 7.1.199 249.15 9. 1.1 t .1'I1. DOt. of caitit Sig T IS 99.194 8.4.1994 94.3.19m 10.2.1993 27.594 3.1499 4.10.199 IS .199412. Coade PorinJ - ms J2 1S 10 )1 II 10 3

13. TepAr xc&,a role, IS: II - 736 2735 2:15 12J 2__ __

J1. Ioul days tfro tec&r rikissidi ta cotrect 761 810 260 421 . 058 t Ity

tO. sib1 . .

4. ' .. ...~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,,.:p

I',.

j0I . I . } . I, ! I ! : ' . I | I I I, ^ I ! :.1 I 1 I I I I . I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P

Arwlsrt (F fum, rlarrMK A rwrT

Table 3 Promrngent lioz. in vaf.

.. > | 1. DI jle of render SuhissiDn 1?..J3 1.p 2d. 1. 99 4.3.1t99 1U.S.1? 30.r2.19M M..1991 71.JI.991

=. | ?~~~~~. Dete of gibission of merd recom4timins l

PC i ~~~~~~~restive Mu d let adjWjcul.o.n i.9. 1 91.

O~~ ~~~~~ . Doie smrd AjdWiuted 6.13

| . bte of Bord's lette of apo1 20.9.l99.

Mt of lzs e rd ractomaitim to Dam . . .k

n g. ~~~~~~~~outh of D"ow tAYi) of Drift CattirAt .. 9t.

! I la. DF~~~bts of le-t)& oJ A l..S .99 Z].N eJ!s o..S 4.ll V1.199 lsi -19

N ; ~~~~~IJ. Ails Of Coare SijWtf S.3.19 111g 113 .19 25.1.19" ?7.J.Inl 7.12.19?Y 11 .I.I) 19.7.1tv

. . i J?~~~~1. tclbe PHiod, st 6 1? 6 Is to,

to IJ~~~~~1. rimr edu6p riti, MIti tShs AV9 :n; 25?D%C

; | - !$ 1 | sIpEtilfF > * * - | )9 | 51t | 111 | lit l l | | *0 M X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Y4

cml~~~~~~~~e o ymtidranmt'/ s " m7 v

g ~~~~~~~~~~~~~~INISTRY IF i, malf^rt AW nvX XrX~~~~~~~~~~~~~O S cow frr

| 3 Promme timr. in dat

O Prourrehmt AaLivily 7~~~~~~~~~~5 27 28 29 3: n i3

$) 1. DJee of rerr SL&;SS;OC 3D~~~~.J} I.l 29 .1D .1993 4 .S .19? . .2n 11.9.1m9 I S.B.199J 10.1 .19 ID.6 .19 ;

d 2. Lt ~Dif olsbisiiDn of sourd rooo odai to

. e respetive 8aard for adjdicidionl5J w 9.9.119 22.3.11 23.3.0

~~ _ 3~~~~. eit Lewrd AjdWicaled 1.2.19JN 2 .1.m9 J3.12.1911 9.9.9"J MD.I.IJ0 26,.IM1

X X ~~~~~1. Date of goard's lelter o! *pproval 117.1.9Q4 10.9.1994 i;.5.19 255.11

i?S S. ati of mrd X8ta' dliDllS to Dmr

6. Dis of kwe imme d al ud 331.10 272.i.1993

_ l11Ge 101| +1

n 10. btF ol l r of ic4bs 291.f9 iW.2.19s 65.1921 2.J.992 XA.1991 I.lt.l9N 73.31 IJJ.199J . ,

Ap ~~~~~~11. of) t Orttoo Slpaurs 291.1990 S0.2.1§25 A9J.199i 2.1.1992 7l.j.99t 13.10.19S 221.S 17.1 99N

12. rct Puriod - ea"s 2J JS1 21 7 6 It

N J3. if "BP Ti~ rts, flu r rshm 23 lal 27D

L ~~~~~~~Ji- lotJi &)si frot tmo*r sutlr*: ......... to oitet ... .U 7 J 9681 3}152 0 6U

to ip^r,| ;1) ' ' ' ' ~~~~~~~~~~~~~~~ ":C-' r ''- '-.? - *. * r/, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~h'.

-l- i ] s X s- -Zbw w Mt a a a s s m - - .

1JF (I1M M IC (F TAWIANIHINNSR F ItS, rMNIaN hID 1AA"M

avw.rs MM7R ua able J PAranw nt Limes, in dave

flwr .Procureeent ktivi.y

__ 3_ 3it 35 36 V 3f JI9 0

z4 j. Data of Tend&r Sob,ission 1d.9.190 29.6.191:1. 2.1992 10.12.1991 10.1.1992 101 I1t13 77.7.1M 19.J.J99

D4 a 2. Date of sXiBi&ion of Aurd rec dmJioms toreseclive &bard lr rd,rdicftijo 22.3.199. 22.1.l93 6.7Aj9" f9..199A

X g O. tt hrd AdSicoud 20.0.1993 20.A.19jM 9.1.199 9.9.194

1. tat.. of Ids lter of apre3rv3 6 .5.m 7..193 10.9.19l 11.919"9

I- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ AIL'LI' ~~~~~~~~~~~1.1N 2J.m 1691 23 14 t23

9I Otis of foav 4piwaIl of Drift Cotrxct

d6. Date of LOW DI Att ES 2.7191 1.6.19W i.i B.l.t IS 3.1q1411IJ. Osta of roijAtl Sig*iura 21.1 .1991 9. 9.399 8.1199 25.1.1m3 Not yet lb. 3 .111 J MbL ye bl ypt1?. f i oa- 1 _ _ to _ 9 _IB

4 14. fdi1&F frti rnMssimtea nrt 3V ji.iijeiil .

* * I ; ~ ~~I I' . !! I .iI :I I. i

la ... m. ummma0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

knrvYF blrEn3 r W ff reD(M; i

blE B7 Proxma'f Lit, in *

_ ~~~~Pro.urmnt kut! 1J Jl . 4 11

1. Oat.o of le-, &bssiftn 27J..1993 27.7.19 271.1091 273..1994 28.0.199 1.12.J 18.12.1993

2. Date of sukaissioD of awrd reown4)io toirQ ive Board for adiWidaion 29.8.1991 6£.1 994 9..1.99 5.9.1994 5.9.J"O 28.12.199 27.5.193

E 1. Date Board Adjidiuled 9.9.1991 9.9.1994 9.9.1"4 2.3.M99 22.12.199 73..199 18.4.1993

w4| . D.Dli of Saurd's letter of epprova) 11.9.1994 10.9.199 1.9.14 11.9.19 7.3.1995 22.12.1994 79.A.1.

5. Dali of awd rrdO&uLiTo to D ir 15.9.1994

OD$ t t ii, .; t wi. i, of DM,i touie" O -*.;* A'-.4~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~VN ' - . *. tW 8b # Dft clric to &W ..

9. ite of Oow. Awov of Drifl Co.trad

10. Alte of [aLtar o[stiff ktq11. Dte of Conihct SJgMture ML ye1 naL yet Aol yet ot yot MoL At 1.(1995J2. tuttrct Period, va%mAtA 9 9 9 9 19 _ _;

. la.. aan rA^ sta . __ __ .. . ..

'4 JJ. ToaiA"tMa4 tr .JWOuo _. rh',

CD; ~~~~~igmwv

..

-+

I . I I I I I @ > ~ ~ ~~~~ ~ ~ ~~~I ., I. I I I I

00

TIE IffD f(f M C It TAiliWIA.!NlfsRY ! MS1, mWWA4IWC 4N 1

colxl BZi CA725 Ciii' IAIble 3 Prowran Liv:, in dr

-I~ ~ ~ ~~~~~~c

FrocurmdL Actiuily . . I _.o ,n V]S Si 54 Ss 55!H6

1. Daleof IOeM e&ijSbo 19 *'I' Iq.2 9q) I 9 -. 9 3

'-4 1. 2. D1te of saMision of mid recrndatiois torespeclive &,srd for adjudication 6.9.1992 6.91993 6.9.0993 2.12.1993 tl.1J99J V2.1.194 21.1.19U

Ln |. Date eo.rd Adiraltd IA9.199 6.9.1991 1011.1993 IO.0.1993 ?9.d.1994 253.199W 21.191

w | 4. atLa of oard's loLler of .proval 20.9.1993 6.9.1993 11.12.12 11.81.199 2.S.1993 2.5.0994 7.5.J9?l

5. DAeL of wurd ramiatioi Lo Oomr

,49~,, ~ j~, ,M*dk prrowl fewrd

.~ ^> *.+ ;;al l>i°-J I r.+:_. 11 , S' ' 11 '; i'^-7 A Al A'

< 9.~~~~~~Dt Dof Am )W p 8ro of rAn todrctLo

>~~~~~~~6 Jaj h IIOUJ oflX f kwum ZJ-1293 1Z.q9q}LZ3 11. Dole of C*rbct SipPtvre 7- -94 4 L. Mt ye Mt M o Lt Miet VA.12. C*rjct PtrirJd k . . 16 12 11? I

N J~~~~~3. Yl&r acr&sp rite, IUSt: Shs

. . J4~~I. MU) dipst ffi td sMjo& tA airFL 33 B3z.* .5tur

, III . !II III

11f h/#.'!F RFb 1C 2F 1tJ71?AtlNSRY IF LES, (19 IA Y iHJ i Mf 1ItWGM'

rnKacr a r

7atu 3 Prvrwal1 lios, in divs,, ~ ~ ~ ~ ~ ~ _ _ ,__ .W~C __,_,,__,_,__

PrixuremnLktivitY I2 *9 I 60Si1 ~ ~ ~ rou~n ift 57f 60 dl 6? ._____ _ __ ____

I. Data ol Ieatder&rlhjsshin 2O.S,?' 30*894 1.'l2 14.1.1992 29.21.199) 29.11J99J

2. Date of aiission of murd retwe rAtiors toii*ractive aird for dJidiction

3. Wit Board 4.2.t199 4.2.1 W .J 4. Bata of Berd'i lettur ol aprowJ

S. ALt of wdr ma1sinm .. m m

2' ,W 0. ji. , 11*I h { Z i;I*b K | -;1/.igi> +5i -. &

^ | 1. | Detet O^r w01 tf LtfL JviL *-l l . *4 I'jL l . .-

" I~~~~~~~~~~~~~F.. Doatsof w r4D/oveldDrdift to#ii

.1 Ob letter of ktqpte~A 7..19 9.).199 8.,.1m 0.1.1m9

o It. bIt of Cutrt sigDlur. Ml yet nt yet 4.(.199 251.19 10.2.1993 1JO.2J91U2. I.a&act krl1d .

Mi. raer &ax ,sp rite, a11t: - .. .3 s __ t __.

1I. ToWl Ir tuik ,Mshw to I ;rIcit Ln ;m (a

N U Si M L ^ Z ZSf f

7ali: t..6t Itl.es/), rr.<................. .=:lnc- f..ile ir. riRy'.¢- .....

kctivit _ ContrAcL Nu.

Tim Irc lenderuilissio tlo 1lele 128 Ss 5L 9 148evolu ieport .. ___ 141 14 8 ° 0

-. hh lusLiolpOrt In 16 5i 21 toU) PC'appWl ___ _ _ - - - - _ 215 15 4 _

Z DcrAr lo& l /_ -_- 97 97 97 91 28 _ -

, k*r r iar& t o to 315,tMtiof Uhtnt 8 . 273 1%6 M 7 1 _ Izo 120o

0 .. t~ J .*7 109 a 8 _ su - 6 58 .6 791 5i4 928 .d 11

o . .89 ,1iid a a t 3 a ," m di a a d I Rio m - ;Co .'r .IdI s--g F 4I2 __IO I I4O

^~~~Erdi - _ - j j 15__

0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

totTatt ~ PI 10 Is 3 4 6- * r 4 { < 12 is 15 |I l i° 3 1 8|.

co. .

I(D

Ina

I iI 1 I ' I .I I IJ I. je

I 'S6JII 0~~ '2(llrn'renl Pr"CCSiR4 ti*t tn !Jys

hAMivity Cantradt N.

la 19 20 21 22 23 2t 25 2- 27 28 a T 30O 3f1 Sij 34tjne frok Tender 69 !&Whssion tD clYpleLe 2> 4: gX,.evaluation repor

f eluation Rort to OM g ~~~~Bond's Ipprrsl _ _. 6> _

Danor Agency proval I_

Q g [ lirir ards *ptmj lo t_2 III9 20 3 }

JttJr Of I"l to is t9oo O M IIS 3 N 1 29 255 2811 17

o ...

~ ,fwaM'

OD

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r L

Si td, v M6 in I1 an7 290 In U) M W7 1 1

C W1ctprI , 3 I? 28 IC 24- 1s le 2 7 -

V

C1to

Ita

J I . '. I .

or2It u a * . - -~

I8bIP 4 [tcU1PeD' 1(OCes)hnJ t)ko Iin y

Ak LivitlI_ _ _ _ _ _ _ __ _ _ _ _ Coodrscl Mu. _ _ _ _ _ _ _ _ _

135 6 37 || 4 ' 4IT 1 S4 I -

ri ¢ 1e* m }2 3d 7~~~~S IVU|1 6

sa fission lo ad5eke 41 ll 3. 23 23 2.oo

M . . IsIUatjoftiepCrt -_- - -_- _-_ _ _ -.

Sub|iison ol 4S AS 66 U 11 61 67 1II8 2

AS zz lfVsIaLroA Ll rttrIto to toII I 0 4 $ 11w ~z

Z Dow APrq )"royal -.

j35_37W is-

1~~~~~~~~~1~~~3/ ~ ~ ~ ________ - -:^- -. -.

:~ .. 1. 1. j. tcrw wiod-

CAD

co

I, I5 . ..

If)~ j J|

0~~~~~~, )!i

'.5.~~~~~~'

lable 4 Prowcrenl Procesino time in diyn

ktivily LontrecL fl.

.52 5S" U 4 |5 l 5s | 57 sr 5C, 5t bx l 6? W -|- llilrntle- __ _6? _

Jiis fr m plederhIiIOto cWBepiLe aIustion report ._. _. .-

., 4 Evaluilion Report toi S Bo _p- wI __ _____

X ~~ § rr gem~q rroni - __ __ _

bv, h q0") tO.

~~~b d Ib { &L.1! - -iXI6

- 24S. i6 124 124

9~~~~ " .i T_iZ 42. -"aaswr 2 zo 3+I -h

L ,Id, , . . _____-

.4C

*1. ) I I I 1 ..I

-I~~~~ f

I d I it' . Pnr:tet s a ria Iis

i X IS {'t Name of Road a alure of Contra. t

IiayAtm3y3 -Xiim t oraT Q .Periodic Maintenance

_-S .FHiwO-MOShi-AriJ sha ~.: Rethabi1.itjt.ioin

,ibeya Urban Lo oXp Road Reseaiing

i_S ~itwbaSnubawanga -- P.tnda Periodicainteance

_5 ; ^'Kilindoni - Nd,@goni Periodic haintei ance

8 Nda9oni - Jiimbo Periodic Mtainteniance

3 / ;t .Jiabt.o -8a.en.i PNriodic kiaintermance

i.eni - Pasflkwabi - Periodic Mainte-sance

I q v. tlagole - Turian.i Periodic Maintenance

fL . h |)ti.i - HMim.3ajiro etc * Periodic t1aintaeance

... I . iNe-a WBagaaoyo Road (N) feergency Repaajr

t_ 1-7 h'Kifart - Kivis,ini Periodic Aaintnryance

1 balid) - I Osinya i Periodic Hhiintflnance

I3 | | Khilwa Road FDergency RepAir

Il S 13. a.) d Bagaewnci. - Rc_ad Emergency RepA ir

rh 1, 1'S 1tijr - ti.3aa9: River Upgrading to paued

5. l &bwanqa - Hp.3nda Periodic dAintenance

1.3. Ka r - Ngorsrgoro 0,7tte Periodic Mainfenance

Ki it.i - Ul ee Periodic faintenance

i | ;/C I indi - L indiA2oast Brd Periodic haIn)'enance

=andua t _ = Periodic tfaintenance

,l w~~~~~~~~~~~~~~~~~~~~~~~Z!-u,

Ji3 ~ ~ ~ - - ,---- -~.

T^l e. 5 projecl S anRlysed

f .0.9; Mature of Contract

2J. niknu.; - Ks'it ongs Re/habi IItation

.1p.9akni road .fergency Repair

"12at mfysauage - tiAThoro : Periodic haintenance

nsty - Chalfizr:r"gŽ.- J. ns/f - g:haI inre E ~Rehabilita 1101?

r,;ago River - Shy 8rd Upgrading to paued

z ;t. t~yak *ABri dge R feconst ruct ion

J1 ,49 Shekilango Road F aergency Repair

n 2i. Package.AsiAnza region CRRRP

,, 0L). m9oda RridgeB Racnstructi11

U .t K.itahi - Ut ithi . Period.ic MAJi/nnArc&

3-}.1X'b*Y7 K.i,gi Period.ic tlaint &flafaCe

Package 7, Shinyanga RRRP

24. SKilindoni - Uitende Periodic JlainrenariCe

.A ^?S. USxlei.- a&bwO Kenya etc Periodic Ha.ini enace

SaLde - Sanga.lala Periodic /ain'eneance

; 3.2. Jlb,3AbaSay - i itUhi Periodic ffain ernance

30 d lHang.3sba - Kitaya Periodic tlairt. enance

39. TdbOra - .rpo)e Periodic laJizrtenCNDC

40. Kidaha,e - Uv.irz .; Periodic Paila tenOnce

j41. nuandiga - llai,yoW4u Periodic faiu:.enanfce

_ ~~~~d;' K s-Singida Rr, Pkg Periodic HRinfe"JnCe

- a ? h i~~~~~xgua 9IA94f" $F. jeft..:r.X Pahdlc SX mJj e"Ce

dJ ~~~~~~~~K-igwtd S.ingida Bar, P*s. PeriodSic Jfaineeftanie

>~ ~~~~~~~~kiw SJSgil Br _ Period.ic: aintenancie

A ,.}I --.-b-*

0 f Rd Nature of'Contract

oiAiAiini - kidAtu, Upgradir;g%1o paved

'I' Jnfirbo - Lii-shoto , Pkg I Pes Ii

L.i S.,,,. - 1Joroharol-x, ,-' R,^z,rAye1JJr

J9. A3.^1-.s5,P e Jtl - Tring.9 CRRRP -

S.i. Pariage i - r,-inga CRRRP

~ (.Y - Trin93 CRRRP

i'. ff iao .fet - f1 Ii.i.i/7I Rehabiui tfton

i.7 yI.s,;m i - rtetewa Pkg IA PPr.iodf J.AJntenAnci

TtUleih. - rkasi Pkg 18 Pariodicxinfenance5.J.

5k 0?gvo. - Ru voma c.IRRRP -i

52.* -t P,ackQ9ge fl3 -. -> C.1£R X...

i K;j ak:eh, i.;.i -If itb.i Perihi

Periodic .ifntenance

htj a s - 11.2 kar1 qo ps i - Periodiic.N - Ait tanance

a...ii fIi- L-hag.wba Perifodl ntiefJenance

p

_ ; __.__. ___~~~~~~~~~~~~~~~~~~~~~

ANNEX D

MBEYA ROAD PERIODIC MAINTENANCE

LO Supervision of two contracts:

(i' Isangari - Shigamba Rural Road(ii) Makongolosi Trunk Road.

2.0 Isangati - Shigamba

2.1 Tender submitted to Regional Tender Board 29th November 1991.

2.2 Lettcr of Intent from Regional Engineer 7th September 1992.

2.3 Letter of Acceptance from Ministry of Works 8th January 1993.

2.4 Contract signed 10th February 1993.

2.5 Commencement date (on appoiatment of Consultant) 7th June 1993.

2.6 Contract period 8 months. Completion date 6th February 1994.

2.7 Substantial completion 6th Febniary 1994.

2.8 Addendum signed in November/DEcember 1996

3.0 vrIbeya - Makougolosi

3.1 sender submitted to Regional Tender Board 29th November 1991.

3.2 _etter of Intent from Regional Engineer 7th September 1992.

3.3 Letter of Acceptance froLm Ministry of Works 8th January 1993.

3.4 Contract signed 10th February 1993

3.5 Commencement date 1st July 1993.

3.6 Contract Period 10 months

3.7 Contract ongoing as at today (8th March 1996)

3.8 Addendum signed on 8th November 1995.

9--\ _' * -j u a4 UJU

ANNEX D

4.0 CcDnsultancy Agreement

4.1 Proposal submitted to Regional Engineer 9th October 1992.

4.2 Effective start date 1st June 1993.

4.3 Letter of Acceptance 19th June 1993.

4.4 Agreement signed 27th September 1993.

4.5 ConLract Period 11 mondts. Completion 30th March 1994

4.6 Addendum submitted 14th June 1994. As at today, 8th March 1996, this is un. igned.

4.7 Supervision ongoing whilst Mheya - Makongolosi is incompletc.

L19~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

.4

N Ao~~~~~~~~~~~~~~~~~~~~~~~

.. *ib 'ID't"';;'' ,e'is,el, . . .*, '.

D BriBrbes s$till hinde# importsclearance' By Charles 1;~ Kaoa IrnAoitedgoodtasanotepo 'ImpoYt costs whIch Is not 4sy i .lut8 .ps:te , eLoEiCt4iioi motdtd"other p1ob impo..xstswhichisnot n e~ ansI.ou 8S per (ent of |ho lMc ceatng prqces: thesCf4n ed, 1 am sure this.- |r , atthle port. th; -- the current sys2em.".he-uG-. Zanzlbur qovernent's .r .61ude -rN Sh<L,'C.AS wa agilnstl tow .e,so .sHe said%linp6rters' preete - icjted. He'said thei 'cu4tomn iZie8r, Ewal,."fe 'Jefic.iBw6it Frei h (i ] ig ; *fFW`j 'a 't!

tI' gains mobrni,,Irn` m ortor,'irl n - ba "tWrelttake4!Ies6 departmne shouldmra(lntok3ar' a ccridor obe vl 0r; 0 i`ep r 1 ai roedgains." rnam" oahts, arid artmft .3* o~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~pparudie frCot-'. the dty cdpbirin of g,tt aid ' 1. d uptodate computerlsed Lhdex by cuis!ni's officlal6 which rnay deh, and Ihe binks am ruptioh; for some transacttarhjInhfficlencyin deaning IrnporW d A Dar, es Salaam biased of world -marIet prl¢e$ of the dcIy'the- pveI ninntr vievIue .8 atherho,s,,a,iti sapr,majthro4ughjh.kgoods by'tho Custnmo de part- e oItoflh; Chiles Ratizit. al- _ o.l Rted th'I: .. so, tkiepl&r. l9 rpent and Tanonila'HarIbours lepod fat cuistoms otffla Iai4 ' ,!hoijig there hd;4rqls'Ioin . cy, 1 rafftarld i)raucr c? prr Iqm.tl Uns'cr ulous .dEi ,Ir.:au j;tW ed X', tjioit , ,; : . Qnot'.'well Informed on the>puu- ' 0rad-is,IhesSld jtlire tx .io 'Feo'sonis. whyI, IniMers ae1ie mof wer n t , WeImporters Inteel"wd r-, chasing prlcks of lInpoeted;. eioslol is weucagr`ged by" r "a ,stop Is!n1g port It, the pr6fts byingevn'hclk vybe , r, (qaittd',coD ilng5uriuiiysayan eleflntys-: ioods;:.thus hejrV9aLiiutl'b is cUrnstances wIch empt 1iim- ii,on gotnnmen ls n:,#n* e.nts:,; .i . saJd hisdrtmt -taem-t woid tak&lism than 21 ar'itigi. ': us '.s,,.' . .*,pot,ts,to, se@k1 underhand 'Qs-;enough In tackikIng'r !.':The. AMng Commin san ue,,d; ,d,o,, make.sii, thatd.. pt to oleaf,gqds bit rloiy it. 'Te sAJge's l th t.t- -- icis- .,a ns \f'r gettin g ods lems.-tlislikietocause.lackof of-Customs, Z.: E Nsoh*. joilit- fYere a6do°j¢ikehI k"y aic an i orte' thaee'-toms iepa tmiet lhoud have. ctearoe;.2.>, gull . , cjuaence:n riporrsI:afi la te4eaerlngof impaObtithW0U1fechin opefmark0lO mofltbefoiehiissbiepment eas n9tIPtCi*orral;oI ohi Ihe : MohredYu.ust,;diretor;sloy happerhgno ."'i . 'a (ot :.tme; Reduclqtheo o.cI&ared. .~ .' markqt ve ofcaods which . of foleign'exehange.ahd Inter- '-. A i!TantaniatartwoLmrs Au- iii6hberd piayets 9Vas & the eQg

' iWe belle thatsoneprob- should be rhide pbI6oto9oi naUdnaliriattonslot.theZanzk thoriN:,oMclal ieJectidCalliga. s UVn euor t fth v' ' Ho i lemritEepodtelnfaqarfig- rbitriirc'harging ofdW SiaBvonenliZa.a -6niothait'ini6Mclencyantd'oiaftIcl ,ead: r 14pfw dUsaid ' e iah er ' lohen oh i npartir enlers p6ft ia,tfasoir thi,iDais $a; dererrpantatt^'op'-r h I-aying" ' "IW Idu i VT'' kOI 'siSo^,ces ro, !.''s1 In tinWe'jower' cadre 'Iiustdit ofIes he st;uld* aam b@oaalse ' Wde eanlen.y tsrDWhigle han 'ol '.o'bou'. hadi'IIo er.' hs4a 'ar"nrI'.*lg~~~~gIng eLf ~~~~ shlpn'ierjts th .Uhdeic~~~~~~~~roof pa~~~~qi irNigh liaftidei-iii cf oIni* ', tafg ~iII dIeiiSand'~4Th! ipslore kniwbbwmnuc-kidonay-hwii sni,1, ,t efiky,leriy'had im, ' e"erLi e- l}j2 1. " *! : g h', dr ,(, t isr.(p ::e oi 1u'.jWnertAhd Wlr.services-o,bcUi- P;rt Oh.-Thl* way,,o08.W'°4. ipti*ed.- ' ; 'gboodi triay be6¢"u4eo by he.. qUrq nuot)^ocu eahs P."o^,Li.:,td,,! rI~9f+.,H 40 ro qeith.att .t.Yt;-b"%at 4r, ;, AlIhe iii |m tduty ,'pr di"iceof too y,ir ' ftS ' dSUdho t' t. . . 8 o . 1 i ~~, ,; ., *| *.;_ . | __ _ A.1._.___'

List of People met

Consultants

M.Konsult: Mr.Meghji - Managing DirectorHoward Humprheys : Mr.J.B.C.Cameron - Director in Nairobi

Mr. Mike Agius Regional Director TanzaniaCrown Agents : Mr.Simon N.D.Williams Pal Adviser ProcurementTanzania Association of Consultants : Mr.Aloyce P.Mushi ,ChairmanOptimum System: Mr.Wyman

Construction Companies

Noremco : Mr.Knut Riise - Managing Director Dar Es SalaamUnico: Mr.George Efstathiou - DirectorC.G.Jensen : Mr.Mr.Johannes Hooge Pedersen - Contract Manager

Traders

Mohamed Enterprises Ltd: Mr.Gulam Dewji - Managing DirectorKarimjee Jivanjee Ltd : Mr.Hatim Karimjee - Managing DirectorS.S.Bakheresa and Co : Mr.S. Bakhresa -Managing Director Dar Es S

Mr.Said Salim Bakhresa - Managing DirectorZanzibar

Suma Ltd Zanzibar: Mr.Mohamed Hussein Suma -Chairman

Banks

Standard Chartered Bank: Mr.Phil Powell -Excecutive Directoroperations.

Euro African Bank: Mrs Hafsa Ole Naiko Marketing OfficerMr.O.K.Nkomolla - Assit.Mgr.Marketing

Stanbic Bank: Mr.Iddy Lujina - Marketing Manager.

Customs Dar es Salaam : Mr.Yalinde Katunzi Assistant------------------------------ Commissioner Operations

S.G.S Dar Es S.

Mr.Didier Raymond - Managing DirectorMr.Marc Miller - Contract manager.

Freightforwarder

A.M.I.: Mr. Benoit Lebrun - Assistant Managing Director

Central Tender Board (C.T.B.)

Mr.A.J.Malyi

Gapoil Tanzania Ltd: Mr.Deepak Gupta - Commercial manager

T.Z.Railways: Mr.Edwin E.Sinyinza - Supplies Manager

Ministry of Works - (I.R.P.)

Mr.W.A.Lyatuu - Project CoordinatorMr.S.N Materu - Coordination EngineerMr.S.D. Kinga - Chief engineer

National Construction Council

Mr.Kesogukewele Mim Msita - Executive SecretaryMr.Muhegi -Assistant Executive Secretary

Presidential Parastlatal Sector Reform Commission

Mr.N.N.P.Shimwela - Coordinator

The World Bank Resident Mission Tanzania

Mr.Peter Morris - EngineerMr.Tony Thomson - Operation Officer

ATTACHMENT 6

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Country Portfolio Performance ReviewThe Government of Tanzania and The World Bank

May 21-21, 1996

Page 1 of 15

Tanzania Country Portfolio Performance ReviewThe Government of Tanzania and The World Bank

May 21-22, 1996

Objectives and Purpose

It has become general practice for the World Bank and its borrowers to carry out periodicCountry Portfolio Perforrnance Reviews (CPPRs) to strengthen performance under our projectsindividually and collectively. These usually are arranged every 12 to 18 months. CPPRs assist usto (a) learn from implementation experience to improve both the implementation of the existingportfolio and the quality of projects entering the portfolio; (b) reinforce borrower ownership ofBank-financed projects; (c) develop the design of the Bank's Country Assistance Strategy whosepreparation is expected to become increasingly participatory, and (d) ensure the continuedrelevance of projects in the portfolio for sector strategies. The CPPR also gives Borrowers theopportunity to carry out its own assessment of the portfolio and to raise any problems it has withthe Bank.

With the recent change in Government in Tanzania, the intention of the CPPR exercise isto inform the decision-makers who oversee the portfolio of IDA-financed investments, to identify,discuss and agree on key policy issues, to outline priorities for future Bank support and agree onactions to improve project implementation including any immediate restructuring.

Four main items have been chosen for the agenda. They are:--

- the impact of the portfolio on poverty reduction,* the compatibility of the portfolio with the Government budget,- accounting and audit compliance, and* project staffing and management issues.

Overview of the Portfolio

The Tanzanian portfolio consists of 21 projects of which IDA finances US$ 1.09 billionout of total project costs of US$ 2.88 billion. Approximately 90% of the difference is co-financedby other donors with about 10% contributed by the Government of Tanzania.

Investments in Energy and Infrastructure make up the largest share of the portfolio,representing 67% of the total, or US$ 723 million. 14% (UTS$ 153 million) is invested in thePublic and Private Enterprise Sectors, 11% (USS 125 mnillion) is invested in the Agricultural andEnvironrnent sectors, and 8% (TJSS 86 mnillion) is invested in Population and Human Resources.

The portfolio is relatively mature. Out of 21 projects, 13 projects have been underimplementation for more than six years, five projects are between three and four years, and onlythree projects are less than three years old.

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The problem projects are the two Integrated Roads projects, the A2ricuItural ExporrRehabilitation project, and the Parastatal and Public Sector Reform project. The Educationproject has just been upgraded.

Cancellation of Funds

Out of 21 projects in the IDA-financed portfolio, 12 will close within the next two years.Mvfainly because these 12 projects hold relatively a relatively large share of the undisbursed D)Afunds, USS 231 million amounting to 31% of undisbursed funds, disbursements are expected to beweak for these projects. It is useful to estimate the amount of each credit that will remainunutilized so that the funds can either be canceled or utilized for altemative purposes.

Progress since the Previous CPPR in November 1993

In November 1993 representatives of the Government of Tanzania, agencies whichirnplement IDA-financed projects and the World Bank met for two days to reviewed and discussgeneric issues pertaining to implementation of IDA-financed projects in Tanzania. Four mainareas were discussed:--

- Accounting and Auditing- Pace of Disbursements* Procurement* Project Coordination and Counterpart Funding

A total of 25 specific riecommendations were made during the two day meeting. In Apriland May 1995, the World Bank Resident Mission organized two follow-up meetings with ProjectCoordinators to review progress on the recommendations and to make further recommendationsas appropriate.

The encouraging message coming out of those meetings was that many of therecomrnmendations were successfully implemented and that project implementation his improved asa result. In a few cases, the recommendations were not implemented as they were no longerjudged to be appropriate. iMany of the new recommendations made during the follow-up havesince been implemented through the regular meetings of project coordinators which are heldapproximately once every two months.

Two areas remain as serious problems even after the follow-up. These are procurementand counterpart funding. On procurement many of the problems have been addressed throughenhanced training and sub-contracting. However, significant problems remain with therelationship between projects and the Central Tender Board. The Bank is planning to carry out aCountry Procurement Assessment Review (CPAR) in June 1996 which will use a country-widereview of procurement carried out under th-e-Ttegrarud-f Pojct as the basis for itsdiscussions with Government. It is intended that this review will be the vehicle for tacklingremaining problems with procurement. Therefore it will not be dealt with specifically under thecurrent CPPR.

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* Policy reforms and innovations should be sequenced appropriateiy and introducedgradually over a realistic period, with a clear indication of the changes expected when,how and by whom;

* Performance of projects should be monitored annually. Next year's program be basedon current implementation progress and every care should be taken to ensure thatrequisite skills are available;

* Technical Assistance support should be monitored and coordinated against previouslydefined benchmarks, it should focus on training and capacity development and shouldnot be diverted to operational functions as has often been the case for Tanzaniaprojects.

Impact of the IDA-Financed Portfolio on Poverty Reduction

The major objective of the Bank's lending program in Tanzania is poverty reduction.Currently about half the population is estimated to be living at very low levels of welfare. Povertyin Tanzania is primarily a rural phenomenon, though urban poverty is a growing concern. Welfaredifferences between men and women are not as striking as elsewhere in Africa. However, womenperceive themselves as being more vulnerable because they have less access. to productiveresources such as land, and they have less education.

There are two ways to improve the impact on poverty reduction through the IDA-financedportfolio. First, the poverty focus can be increased by optimizing the allocation of investmentbetween different sectors (e.g. what should be the relative size of investments in Health vs.Energy, or Rural vs. Urban). Second, specific poverty-reducing strategies could be incorporatedin the design and implementation of new and ongoing projects (e.g. using labor based contractingmethods and by targeting more resources to the rural poor to the most disadvantaged regions). Inparticular, for those projects which are closing in a few years with a large amount of undisbursedfiunds, it would be important, if the project is to be restructured, that the unutilized funds beredirected to poverty-reduction purposes. If there is little scope for using the unutilized resourcesfor poverty reduction within the project framework, the undisbursed credits would need to becanceled.

A survey by NGOs of the World Bank's Work Program in Tanzania came up with acritical assessment of its impact on gender. The report states "Government and donor-assistedprojects and programs tend to reproduce the gender discrimination [in society at large] ... themajority of projects are gender built -- that is, no specific attention is given to gender issues, andthe evidence suggests that (1) women and girls may be discr;iminated against by employment andtraining patterns within the project, both directly or indirectly; and (2) some projects may havenegative impacts on girls and women. For examole. manv projects center on institution and |capacity building and down sizing, with no attention to sex or gender. "Last hired, first fireqprinciples may ensure that women will be over-represented among retrenchees, as a result. Amajor assumption of this report is that failure to take gender issues into account has had anegative impact on achievement of project objectives. The impact will vary, depending on thesector and specific project in question. For example, agriculture projects w'rich are gender built

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Box I"Tanzania. The Challenge of Reforms: Growth, Incomes and Welfare"

The Government of Tanzania and The World Bank

This report, prepared by a joint team of Government of Tanzania and World Bank-staff, suggests a number of actions thatcould be taken in several areas to firther the cause of poverty reduction. Potentially many of these recommendations could beimplemented by restructunring current projects, e.g. under the Education Project, the National Education Trust Fund could targetmore resources towards disadvantaged areas (see below "B. Human Resources Development.") The recommendations can besummarized as follows:-

A. Broad-Based Economic Growth

Rural and Agricultural Development. emphasize smallholder agriculture, especially cash and export crop production;. address rural infrastructure and human resources consultant, especially road transport, water resources and social services;. adopt labor intensive methods in constructing suitable rural road projects;. continue actions to remove price controls, deregulate the marketing of agricultural inputs and eradicate supply constraints;. encourage the evolving private sector provision of agricultural inputs and extension services.

Land Policy Reform. develop administrative capacity to implement the National Land Policy,. redistribute parastatal land to smallholders, including women.

Commercial and Private Sector Development. continue the process of divestiture and liquidation of parastatals;* improve financial services;. expand electricity supply, -

. improve the administration and monqtoring of investment incentives;. promote partnership between domestic and foreign private investors;. cooperate with neighbors to facilitate intra-regional trade;. enhance and enforce environmental regulations;* leverage public investment in infrastructure through commercialization and private sector investment.

B. Human Resource Development

Social Sectors. increase budget allocations for the sociaLsectors as revenues improve;* emphasize basic education and health care;* target expenditures on the lowest income groups, including women and girls and provide greater budget allocations to

support non-wage recurrent costs;. decentralize authority for social service delivery and give more responsibility for planning, budgeting and managing

programs to the local level;. promote private participation in the provision of social services.

C. Employment and Targeted Programs

. make a-single institution responsible for informal sector activities;

. invest targeted labor-intensive infrastructure, construction and improvement of rural roads, irrigation projects and watersupply projects;

. provide targeted support to girls qualified to enter secondary education;. investigate cost-effective ways to support the increasing number of orphans.

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Considering how serious the debt overhang is, Tanzania may want to take every means toreduce its burden from external: borrowing. The World Bank waives certain interest charges on MBRDloans as long as a borrower services all its loans within 30 days of the due dates during the precedingsix months. Tanzania benefited in the past from such interest waivers. However, due to failure to meet30-day deadlines in recent months, Tanzania has foregone waivers of US$ 250,705.00 in FY95 andUSS 123,480.06 in the first half of FY96. The Government, therefore, is encouraged to make everyeffort to meet debt service payment deadlines in order to take advantage of these valuable waivers.

Table 3: IDA & IBRD Portfolio Summary(US$ million in current prices)

Categorv FY93 FY94 FY95Number of Projects 24 23 21Total Commitment Investment & Adjustment 1062 1157 1026Annual Commitrnent Investment 329 195 23

Adjustment 11 0 0

Annual Disbursement Investment 72 92 119Adjustnent 89 125 2

Undisbursed Balance Investment 766 938 906Adjustment 135 2 0

GDP in market price 3727 3378 3393

Government Capital Expenditures 190 155 244

Ratio of annual project disbursements to capital 38% 59% 49%expenditure

Ratio of IBRD/IDA debt service to public debt 30% 35% 21%service

Ratio of IBRD/IDA debt service to total exports 11% 8% 7%

Source: World BankMISARRPPortfolio Data FY93-95, TMFTanzania Bureau of Statistics publications and stafestimates.

Expected Outputs

The CPPR is expected to achieve three things in regard to budget compatibility. These are as follows:-

* the identification and cancellation of any projects or project components which are nolonger considered top priority to the Government's development effort,

* a Government commitment to fund fully all remaining activities, and /* the establishment of a Government Task Force to review and revise procedures necessary to

ensure timely payment of IBRD/IDA debt service.

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ensure that the Terms of Reference for the project audits requires a "management letter"along with the audit opinion.

Remedies for NVon-Compliance with Audit Requirements

Where the project does not submit audited accounts on time and in an acceptable manner, theGovernment officers responsible should have a clearly defined set of remedies available to ensurecompliance as soon as-.possible. Submission of audited account is also always a legal obligation underany BDA-financed project. Where a project does not meet its legal obligations in this regard, the Bankcan take action in response. These actions include the following:--

i immediately audited accounts are outstanding, the Bank will not approve follow-up projectsand extensions of closing dates,

* where the audit of the Statement of Expenditures (SOE) is overdue by four months, theBank will suspend disbursements against expenditures eligible for the use of SOEprocedures and will not allow Withdrawal Applications to be used for expenditures normallyeligible to be paid under the SOE procedure,

i where any audited accounts are not received within 12 months of the due date, the Bank willsuspend disbursements for the whole credit.

Issues for Discussion q

* should the payment of project staff be tied to timely subrnission of audited accounts?* are the remedies for poor financial management, both on the Government side and on the

World Bank side adequate?* how should qualified accounts be handled?* are there problems with the quality of project staff responsible for accounting and audits?* should the Project Coordinator be required to have skills in basic financial management?* what follow-up is made on overdue audits, and is this action sucient?* should there be a greater role for private sector au ir2.

what are the actions Government will put in place to ensure appropriate record keeping,proper financial management,-timely audits and adequate follow-up of the ManagementLetter?Across DA projects, the staff can be, and should be, hired and paid by a known consistentrule. Given that it will take a time for the Government to complete a comprehensive civilservice reform or to reach an internal agreement on hiring practice of MA project staffshould IDA be responsible, in the interim, to draw up guidelines to correct for inconsistencyacross projects? (Such guidelines can be subsequently modified when the Government'sposition on the issues is clarified.)

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Expected Outputs

The CPPR will develop a set of recommendations for improving the financial management ofprojects and accountability of funds used. It will appoint a task force made up of Government andWorld Bank staff to develop those recommnendations into specific actions to be taken within individualprojects and across the portfolio. The goal is to have zero overdue audits-by the end of this financialyear and onwards, and to have comprehensive action plans in place in response to any shortcomingsidentified in audit Management Letters.

Project Management: Issues in Management Design and Staffng

An IDA-financed project is often, though not always, operated by a Project Management Unit(PMU) or Project Implementation Unit (PIU), which is established outside the existing govemrnmentstructure. With or without a PMU/PrU, the Govemment assigns staff intemally or recruits outsiders toadminister the DA- projects. These personnel may or may not be compensated according to the civilservice pay scale. More often than not they receive higher salaries and benefits than other civil servantsat the equivalent levels.

In the past, the establishment of PMU/PIUs was justified on the ground that the existing civilservice structure was not suited or did not have the capacity to deal with logistics required for IDA-financed operations. Special treatment of project staff over other civil servants was justified in order toattract qualified persons, given the very low level of pays in the public sector. However, these presentlycommon practices need to be ret-examined for at least two reasons.

First, as the ongoing Civil Service Reform addresses the strengthening of the administrativecapacity and the introduction of a new pay structure, the environment in which the prevailingimplementation arrangements are based is changing. In particular, pay reform should soon allowcapable civil servants to be paid competitive salaries, thus removing the need to pay extra benefits andwages to the staff of IDA-financed project. Similarly, increased administrative capacity should removethe need for special implementation arrangements such as PMU/PHUs, which often weaken long-runproject sustainability because of their incompatibility with existing civil service structures. Thisfundamental shift means that the use of special implementation units or special treatments of the projectstaff should be re-considered.

Secondly, there is a lack of consistency and transparency across the board with regard tostaffing and remuneration decisions. The criteria used to select project staff are often unclear, and opencompetitive recruitment is unusual for either intemal or external hiring of local staff. The levels ofsalaries and benefits of the project staff also vary widely between ministries as well as within a givenministry. For example, while a typical Project Coordinator is currently being paid about USS 1,000 amonth,;some Project Coordinators are paid over US$ 5,000 a month while still others receive no specialpayment beyond their regular salaries as civil servants. In addition, performance of project staff is notclearly linked to wage levels, annual increments of salaries and benefits, renewing of contracts and soforth. This leads to perception of unfairness which, in turn, undermines incentives for goodperformance. Given the encrmous Size of DA-financed .- vestments, it is in the national interest to

Page 15 of 15

a minimum background in accounting and auditing in addition to particular sectoral skillsrequired for a given project?

* What criteria should be used to determine annual increments of salaries and benefits andcontract renewals?

* Should project management costs be included in DA credits or not?* What is the impact of the current arrangements on project sustainability, the civil service and

national capacity building efforts?* What are the implications of Treasury's proposal to tax all IDA-financed salaries?

Expected Outcome

The CPPR will formulate an agreed set of principles covering the selection and recruitment ofproject staff. A joint Government/ World Bank Task Force will be appointed to develop theseprinciples into an agreed set of guidelines for use in projects by October 31, 1996.

Joint Action Plan for FY97

The objective of the CPPR exercise is to develop specific recommendations for implementationin the coming financial year. To this end, the recommendations coming out of the discussions witl beput into a matrix format for implementations as follows:--

Table 5: Matrix Format for Implementation

Subject Reconmuendation Specific Action(s) Responsible Party Date forComplete

ImplementationPovertv ReductionBudget CompatibilitvAccountn andAudits IProject StaffingOthers .

The Resident Mission will liaise with the relevant Government agencies during the course of theyear to assist with implementation of the recommendations where necessary. Achievements will bereviewed at the nexct CPPR meeting. These discussion will also be used as one of the primary inputsinto the formulation of the World Bank's Country Assistance Strategy for Tanzania in 1997.

April 29, 1996

TANZANIA CPPR - MAY 1996 Attachment 1Status of Country Portfollo as of April 1996

Project Porforrnance IndicatorsCredit Amount (USSS millions) Disbursements (USS millions) D. 0. I. P.

Age Years to Total Project AnnualClosing

ID No. Name of Project (Years) Data Undisbursed Disbursed (SAR) Costs Lag-Lead Average FY95 FY96 FY95 FY96 FY95 FY96AF2AE2747 Agr. Exports Rehab. l 7.9 0.25 11.9 19.4 30.0 40.0 -9.0 2.4 S U S U2749 Nat. Agric & Livestock 7.0 1.00 3.2 4.3 8.3 25.0 -6.0 0.6 1.9 1.3 S S S S2772 Agriculture Extension 6.9 1.00 2.6 14.5 18.4 30.0 3.0 2.0 2.5 2.3 S S S S2779 Tree Crops 6.7 0.25 9.2 16.8 % 25.1 42.4 -3.0 2.5 2.7 1.8 S S S S2785 Forest Resources Mgt. 4.0 2.00 10.8 5.8 18.3 20.9 -2.0 1.5 4.2 2.8 S S S S2801 ASMP 2.6 3.00 16.7 6.8 24.5 27.2 8.0 2.6 4.3 2.0 S S S SSub-total 54.4 67.6 124.6 185.5 11.6 15.6 10.2

AF2EI2756 Power VI 2.8 4.00 141.0 70.0 200.0 384.0 2.0 30.0 16.0 54.0 HS HS S S2757 Railways Restruc. 4.7 3.751 61.0 13.0 76.0 275.0 -9.0 2.7 4.4 9.0 S S S S2770 Roads II 1.9 4.50 167.0 15.0 170.0 650.0 -2.0 6.5 12.3 2.9 S S U U2783 Roads I 5.8 2.25 70.3 110.0 180.0 871.0 -3.0 19.0 35.6 21.1 S S S U2784 Ports Modernization 6.0 1.25 17.7 22.4 37.0 122.0 -9.0 3.7 6.7 2.2 S S S S2786 Petrol Rehab. 5.1 1.75 45.6 2.0 44.0 74.0 -15.0 0.4 0.4 2.2 S S S S2808 Urban Sector Eng. 4.6 0.75 2.3 8.4 11.2 15.5 5.0 1.8 3.1 1.8 HS HS S S2811 Engineering Credit 4.1 0.25 0.9 8.8 10.0 11.6 17.0 2.0 1.7 1.4 S S S SSub-Total 505.8 249.6 728.2 2403.1 66.1 80.2 94.6

AF2PE2780 Telecom III 2.8 3.25 67.4 8.2 74.4 74.4 -4.0 3.0 3.5 3.5 HS HS S S2788 Priv. Pub. Sect. 2.7 2.75 23.4 7.7 34.9 34.9 2.0 2.8 3.3 6.1 S S S U2812 MineralSector 1.6 3.75 11.3 1.3 12.5 11.7 1.0 0.8 1.3 0.6 S S HS HS2817 Financial & Legal Mgt. 3.6 2.50 12.7 7.2 20.0 20.0 0.0 2.0 3.8 1.5 S S S S36520 Financial Inst. Dev. 0.6 3.75 11.0 0.0 10.9 10.9 0.0 S SSub-Total 125.8 24.4 152.7 151.9 8.6 11.9 11.7

AF2PH2774 Health & Nutrition 6.0 0.25 32.4 16.7 47.6 70.0 -14.0 2.8 4.3 3.8 S S S S2790 Education Planning & Rehab. 5.8 0.75 24.4 18.0 38.3 69.5 -7.0 2.3 3.8 4.5 U U U SSub-Total 56.8 34.7 85.9 139.5 5.1 8.1 8.3

Total 742.8 376.3 1091.4 2880.0 91.4 115.8 124.8

C:\STATUS.XLS4129/96

Attachment 2Page 1 of 6

THE WORLD BANK/IFC/M.I.G.A.

-WrFICE MEMORANDUMOATE: June 13, 1995

TO: Surendra K. Agarwal, Operations Advisor, AF2DR

FROM: Tony Thompson, Operations Officer, AF2TA 5

CTENSION: 34'42

SUBJECT: Follow-up of Tanzania CIR (November 1993) with Project Coordinators

Following the postponement of the CPPR planned for April 1995; the Resident Mission didits own low-key follow-up of the November 1993 CIR with the Project Coordinators. Wemet with them on two separate occasions at the Resident Mission (April 12 and May 18)where we reviewed progress made since November 1993 and developed fiurtherrecornmendations. These are set out in the attached matrix.

Summarv. The encouraging message coming out of these meetings is that many of therecommendations have been successfully implemented and project implementation hasirnproved as a result. In a few cases the recommendations were not implemented as they,were no longer judged to be appropriate. Many of the new recommendations require littleinstitutional effort on the part of the Bank as they can be implemented. through the'regularmonthly meetings of Project Coordinators. However there are two areas where seriousproblems remain and three recommendations which will require special effort on the part ofthe Bank to implement.

Problem Areas. The two areas with serious problems are procurement and counterpartfunding. On procurement we have addressed most of the problems for which the Bank hasbeen responsible through enhanced training and sub-contracting. However significantproblems remain with the Central Tender Board. A Country Procurement Assessment isplanned for FY96. We hope that this can be a vehicle for tackling the remaining problems(in addition to the initiatives recommended in the matrix). On counterpart fuinding thesituation has deteriorated and is unlikely to improve in the near future given the currentmacroeconomic constraints. Our strategy here is improve the information flow betweenPlanning Commission and the Ministry of Finance on the one hand, and the SectoralMinistries and the Projects on the other so that projects can plan for the resource shortfall inan informed manner. However the impact of this on the larger problem is expected to bemarginal

Recommendations. The three recommendations that will require special effort on the partof the Bank are as follows:-

C'444

tJW) tuha n

cd va Clll ISSUEzS AND RECOMMENDATIONS - CURRENT STATUS AND NEW RECOMMENDATIONS

I Incm Issucs Actio ltesponsibilily liime Frame Currecnt Status New v ccomilicil(laliolnsIkccomlmelndations

A. Accoiitiilig A 1. I.a k ol projecl opnpage cxpert(s) to teview project - World tiaik initIale by lmmcndiale New guidelines issued imndarid AudiiiFg nccoullluinig giui("Iidlcs accouiling systcms. eslabllish stalus prcparing TORIs. circulate(l lo nil projeck.of project nccoinis 1nd( prepare - M()l imiiplcmb:tlIguidelincs. - CAG, TAC and M1jAA

participate.

A2. Inadequate quatiftcd Develop and prepare syslematic - Project Coordinators Immediale. Not yet happened. Project Coordinatorsproject accbunting staff. Iraining progran for project initiate. . enco::naged to incorporateaccountants. - MOF implemcnt. trainiing intlo AWl s.- NIJAA participate. RM to inform projects of

training opportunities.A3. Delays in su'hlitiiitig Idcnl;fy problem projects and - World lVapk RM sti.nut Imnmediate. Done, wilh regular follow-upprojccl accounis For audit. rccolmcend coirse of nction. list of problcm projects hy IhCe lM.to CACD, m'C thirouighMOF.

A4. Lack of Atiditing Ilrepare au(lit sclediles for each - 1'rojcct Coordinalors. Immcdiate. RM forwarded delails to RM to follow-tip wilh WI]Scbcdules. ptoject. - MOF coordinalc (Worhl MOP (W11 Desk Officcf). Desk Officer at MOF.llank Desk Office). Limiled impiclmetiation

A5. LIack of suilliciciit 1'rovidic lor tIsc of private audiitors. - Projct Coordi::ators Imm1ediniatc. Not done. 1 here is an issue Wi) to follow-up onfiunds for CA(; to contuct prepare proposal. . of paymcnl to CAG. mmoalitics of paymcnt rorproicctl udilts.

- CAG give ciearance for audit sctvicesprivatc autlitors.

It. Iace of 1)1. I ligh ralin Or f Worl lldank RM assist in clickiog - World Hlank lRcsi(dent limlcdliale. D)one. Vcry successful.I)isbursemcent disburseenicit pilplicalions fir compliance and administrative Mission Rnot fuirilling accuracy before disbursementndministrative aipiplications are sent lo WDrequirements. I leadquartcrs.

102. Inadequale Provide for adequate preparations - World flank . As necd arises. Done for the three new Morc effort ncedcd. Identifyprepuation at laIuncih before project ncgoliationis and - Government (providIc projects. the key people wVcll instage. effcctivencss of ncw proiccts. giline(ilics) advance.- Designated

__implcmcnting ngencies)113. Delays in processing lleview administrative sleps and( - World flank and( MOF Immediate. Greal improvement indisbursement applications. explore legal provisions for implement implementation of

redcucing steps and( provi(ding accCss disbursement procedures hyof project coordiination units to MOI and project staff.Special Accounts. .Irocessitig is nimichi fasicl.

. Or has agrecd to prtjccisreceiving SA bank stalciiients

.______________________________________________________________________ ._____________ dircctly.

CJ)a.) 0~

ji bO a

|Ilhcie Issics Action Responsibilily Time l'rnic Currc,it Stantis New RecommendationsRecommendations1M3. lnadeqiinlc capacily Conduct aniial cnpacily building - 1'roject Coordinators nimiiedinie. llnve not taken place A process or continuousbhilding for projcc workshops. initiale. assimilation is preferable.insliuit inlflizlion niil - Implemeniing agency Integrate project activitiessustainability. . Implement. into the organizational

siructure of regular agencyactivitiesD)4t. Ifl(lc(liiatic icectiives - Ikxplore possibility of improving - Implementing Agency lInmnediatc. No incrcmentnl actions. WDI and Govt. to developto molivate projccl slaff. remuneration package for projcct initiate and implcment. jointly a comprehensive andstnff witihin existing salary consistent personnel policystructures. for stamng of projects.* Engage project staff on term

contracts.1)5. Lack of adequate - World [lank consider increasing - Implementing agencies lmmcditie D)one.coutilcrpart frinCIs. share orreimbursablc local fnin(s in iniliile.

projects where its policy - World Ran k RM ann(requiremenis pemit. MOF particijatnc.

- World BRank I IQimplemnent.

- Rolling IPlan anI Forward - Platining Comnmission. As soon ns Situation has deterioratc(. Invite the Director of Budget,llanninhg Budget (Rl PFB) - Impiemetiniig Agencics. IU'F13 is P lanning Commission,insitrment being developed by operational. Assistant Commissioner forP lanning Commission is expccted rPublic Investment and WBto improve discipline in budgeting Desk Oflcer MOF lo addressfor counterpart fuuids. july meetihg of ProjectCoordinators.- Implementingogencies

- Review performance of Iprojects initiate and implemnent. Immediate. No progress. Plan more carefully for.andl give btudget ailocation priorily coo nierpart funding at designlo high performing projects singe.

a Ncir.doctllompsonJ1n"l.,95

3

Attachment 3

TANZANIA CPPR - MAY 1996Assessment on Completed Projects - FY 94 To FY 96

Assessment IndicatorsCredit No. Narne of Project Repdrt Date Project Outcome Sustainability371 Fourth Education Jun-95 Satisfactory Likely607 Fifth Education Jun-95 Unsatisfactory Unlikely1015 Grain Storage Feb-93 Unsatisfactory Unlikely1056 Seventh Education Jun-95 Satisfactory Likely1536 Ports Rehab. Dec-94 Marginally Satisfactory Unlikely1688 Sixth Highway Rehabilitatlion Jun-95 Satisfactory Likely2116 Agricultural Sector Adjustment Dec-94 Satisfactory Likely2308 Financial Sector Adjustment Aug-95 Unsatisfactory Uncertain

C:VCR.XLS4/29/96

ATTACHMENT 6

TANZANIA

COUNTRY PROCU,REMENT ASSESSMENT REPORT

Country Portfolio Performance ReviewThe Government of Tanzania and The World Bank

May 21-21, 1996

Page I of 15

Tanzania Country Portfolio Performance ReviewThe Government of Tanzania and The World Bank

May 21-22, 1996

Objectives and Purpose

It has become general practice for the World Bank and its borrowers to carry out periodicCountry Portfolio Perfornance Reviews (CPPRs) to strengthen perforrnance under our projectsindi-vidually and collectively. These usually are arranged every 12 to 18 months. CPPRs assist usto (a) learn from implementation experience to improve both the implementation of the existingportfolio and the quality of projects entering the portfolio; (b) reinforce borrower ownership ofBank-financed projects; (c) develop the design of the Bank's Country Assistance Strategy whosepreparation is expected to become increasingly participatory, and (d) ensure the continuedrelevance of projects in the portfolio for sector strategies. The CPPR also gives Borrowers theopportunity to carry out its own assessment of the portfolio and to raLse any problems it has withthe Bank.

With the recent change in Government in Tanzania, the intention of the CPPR exercise isto inforrn the decision-makers who oversee the portfolio of IDA-financed investments, to identify,discuss and agree on key policy issues, to outline priorities for future Bank support and agree onactions to improve project imnplementation including any immediate restructuring.

Four main items have been chosen for the agenda. They are:--

* the impact of the portfolio on poverty reduction,* the compatibility of the portfolio with the Government budget,* accounting and audit compliance, and* project staffing and management issues.

Overview of the Portfolio

The Tanzanian portfolio consists of 21 projects of which IDA finances US$ 1.09 billionout of total project costs of USS 2.88 billion. Approximately 90% of the difference is co-financedby other donors with about 10% contributed by the Government of Tanzania.

Investments in Energy and Infrastructure make up the largest share of the portfolio,representing 67% of the total, or USS 723 million. 14% (IJSS 153 million) is invested in thePublic and Private Enterprise Sectors, 11% (USS 125 million) is invested in the Agricultural andEnvironment sectors, and 8% (USS 86 million) is invested in Population and Human Resources.

The portfolio is relatively mature. Out of 21 projects, 13 projects have been underimplementation for more than six years, five projects are between three and four years, and onlythree projects are less than three years old.

Page 3 of 15

The problem projects are the two Integrated Roads projects, the AQricultural ExpnorRehabilitation project, and the Parastatal and Public Sector Reform project. The Educationproject has just been upgraded.

Cancellation of Funds

Out of 21 projects in the IDA-financed portfolio, 12 will close within the next two years.MNIainly because these 12 projects hold relatively a relatively large share of the undisbursed DDAfinds, USS 231 million amounting to 31% of undisbursed funds, disbursements are expected to beweak for these projects. It is useful to estimate the amount of each credit that will remainunutilized so that the funds can either be canceled or utilized for alternative purposes.

Progress since the Previous CPPR in November 1993

In November 1993 representatives of the Government of Tanzania, agencies whichimplement DA-financed projects and the World Bank met for two days to reviewed and discussgeneric issues pertaining to implementation of IDA-financed projects in Tanzania. Four mainareas were discussed:--

3 Accounting and Auditing- Pace of Disbursements* Procurement* Project Coordination and Counterpart Funding

A total of 25 specific recommendations were made during the two day meeting. In Apriland May 1995, the World Bank Resident Mission organized two follow-up meetings with ProjectCoordinators to review progress on the recommendations and to make further recommendationsas appropriate.

The encouraging message coming out of those meetings was that many of therecommendations were successfully implemented and that project implementation.his improved asa result. In a few cases, the recommendations were not implemented as they were no longerjudged to be appropriate. Many of the new recommendations made during the follow-up havesince been implemented through the regular meetings of project coordinators which are heldapproximately once every two months.

Two areas remain as serious problems even after the follow-up. These are procurementand counterpart funding. On procurement many of the problems have been addressed throughenhanced training and sub-contracting. However, significant problems remain with therelationship between projects and the Central Tender Board. The Bank is planning to carry out aCountry Procurement Assessment Review (CPAR) in June 1996 which will use a country-widereview of procurement carried out under th-e-nttgraLet-t Poct as the basis for itsdiscussions with Government. It is intended that this review will be the vehicle for tacklingremaining problems with procurement. Therefore it will not be dealt with specifically under thecurrent CPPR.

Page 5 of 15

* Policy reforms and innovations should be sequenced appropriately and introducedgradually over a realistic period, with a clear indication of the changes expected when,how and by whom;

* Performance of projects should be monitored annually Next year's program be basedon current implementation progress and every care should be taken to ensure thatrequisite skills are available;

* Technical Assistance support should be mcnitored and coordinated against previouslydefined benchmarks, it should focus on training and capacity development and shouldnot be diverted to operational functions as has often been the case for Tanzaniaprojects.

Impact of the IDA-Financed Portfolio on Poverty Reduction

The major objective of the Bank's lending program in Tanzania is poverty reduction.Currently about half the population is estimated to be living at very low levels of welfare. Povertyin Tanzania is primarily a rural phenomenon, though urban poverty is a growing concern. Welfaredifferences between men and women are not as striking as elsewhere in Africa. However, womenperceive themselves as being more vulnerable because they have less access. to productiveresources such as land, and they have less education.

There are two ways to improve the impact on poverty reduction through the IDA-financedportfolio First, the poverty focus can be increased by optimizing the allocation of investmentbetween different sectors (e.g. what should be the relative size of investments in Health vs.Energy, or Rural vs. Urban). Second, specific poverty-reducing strategies could be incorporatedin the design and implementation of new and ongoing projects (e.g. using labor based contractingmethods and by targeting more resources to the rural poor to the most disadvantaged regions). Inparticular, for those projects which are closing in a few years with a large amount of undisbursedfunds, it would be important, if the project is to be restructured, that the unutilized funds beredirected to poverty-reduction purposes. If there is little scope for using the unutiiized resourcesfor povertv reduction within the project framework, the undisbursed credits would need to becanceled.

A survey by NGOs of the World Bank's Work Program in Tanzania came up with acritical assessment of its impact on gender. Tne report states "Government and donor-assistedprojects and programs tend to reproduce the gender discrimination [in society at large] ... themajority of projects are gender built -- that is, no specific attention is given to gender issues, andthe evidence suggests that (1) women and girls may be discriminated against by employment andtraining patterns within the project, both directly or indirectly; and (2) some projects may havenegative impacts on girls and women. For example, many projects center on institution andcapacity building and down sizing, with no attention to sex or gender. "Last hired, first fireprinciples may ensure that women will be over-represented among retrenchees, as a result.major assumption of this report is that failure to take gender issues into account has had anegative impact on achievement of project objectives. The impact will vary, depending on thesector and specific project in 2vestion. For example, agriculture projects which are gender built

Page 7 of 15

Box I"Tanzania The Challenge of Reformns: Growth, Incomes and Welfare"

The Govermment of Tanzania and The World Bank

This report. prepared bv a joint team of Government of fanzania and World Bank staff, suggests a number of actions thatcould be aken in several areas to further the cause of poverty reduction. Potentially many of these recommendations could beimplemented bv restructuring current projects, e.g. under the Educanon Project, the National Education Trust Fund could targetmore resources towards disadvantaged areas (see below "B. Human Resources Development.") The recommendations can ,besummarized as follows:-

A. Broad-Based Economic Growth

Rural and Agricultural Development. emphasize smallholder agriculture, especially cash and export crop production;. address rural infrastructure and human resouuces consultant, especially road transport, water resources and social services;• adopt labor intensive methods in constructing suitable rural road projects;. contnue actions to remove price controls, deregulate the marketing of agricultural inputs and eradicate supply constraints;. encourage the evolving private sector provision of agricultural inputs and extension services.

Land Policy Reform. develop administrative capacity to implement the National Land Policy,. redistribute parastatal land to smnalholders, including women.

Cormercial and Private Sector Development. continue the process of divestiture and liquidation of parastatals;• improve financial services;. expand electricity supply,;. improve the administration and monrtoring of investment incentives;. promote partnership between domestic and foreign private investors;. cooperate with neighbors to facilitate intra-regional trade;. enhance and enforce environmental regulations;. leverage public investment in infrastructure through commercialization and private sector investment.

B. Human Resource Development

Social Sectors. increase budget allocations for the social sectors as revenues im?prove;. emohasize basic education and health care;* target expenditures on the lowest income groups, including women and girls and provide greater budget allocations to

support non-wage recurrent costs;. decentralize authority for social service delivery and give more responsibility for planning, budgeting and ranaging

programs to the local level;. promote private participation in the provision of social services.

C. Employment and Targeted Programs

• make a-single institution responsible for informal sector activities;* invest targeted labor-intensive infrastructure, construction and improvement of rural roads, irrigation projects and water

supply projects;-. provide targeted support to girls qualified to enter secondary education;. ;nvestigate cost-effective ways to supoort the increasing number of orphans.

Page 9 of 15

Considering how serious the debt overhang is, Tanzania may want to take every means toreduce its burden from external: borrowing. The World Bank waives certain interest charges on EBRDloans as long as a borrower services all its loans within 30 days of the due dates during the precedingsix months. Tanzania benefited in the past from such interest waivers. However, due to failure to meet30-day deadlines in recent months, Tanzania has foregone waivers of USS 250,705.00 in FY95 andUSS 123,480.06 in the first half of FY96. The Government, therefore, is encouraged to make everyeffort to meet debt service pavment deadlines in order to take advantage of these valuable waivers.

Table 3: IDA & IBRD Portfolio Summary(USS million in current prices)

Care2orv FY93 FY94 FY95Number of Projects 24 23 21Total Commitrment Investment & Adjustnent 1062 1157 1026Annual Comrrutnient Investnent 329 195 23

Adjustment 11 0 0

Annual Disbursement Investment 72 92 119Adjustnent 89 125 2

Undisbursed Balance Investment 766 938 906Adjustment 135 2 0

GDP in market price 3727 3378 3393

Government Capital Expendirures 190 155 244

Ratio of annual project disbursements to capital 38% 59% 49%expenditure

Rario of IBRD/TDA debt service to public debt 30% 35% 21%service

Ratio of IBRD/IDA debt service to total exports 11% 8% 7%Source: World BankMI'SARRP Portfolio Data FY93-95, IMF Tanzania Bureau of Statstics publications and stafyestimates.

Expected Outputs

The CPPR is expected to achieve three things in regard to budget compatibility. These are as follows:--

* the identification and cancellation of any projects or project components which are nolonger considered top priority to the Covernmnent's development effort,

* a Government comrnitment to fund fully all remaining activities, and* the establishment of a Government Task Force to review and revise procedures necessary to

ensure timely payne- of IBRD/IDA debt service.

Page II of 15

* ensure that the Terms of Reference for the project -audits requires a "management letter"along with the audit opinion.

Remediesfor Non-Compliance with Audit Requirements

Where the project does not submit audited accounts on time and in an acceptable manner, theGovern.rnent officers responsible should have a clearly defined set of remedies available to ensurecompliance as soon as-possible. Submission of audited account is also always a legal obligation underany IDA-financed project. Where a project does not meet its legal obligations in this regard, the Bankcan take action in response. These actions include the following:-

r immediately audited accounts are outstanding, the Bank will not approve follow-up projectsand extensions of closing dates,

* where the audit of the Statement of Expenditures (SOE) is overdue by four months, theBank will suspend disbursements against expenditures eligible for the use of SOEprocedures and will not allow Withdrawal Applications to be used for expenditures normallyeligible to be paid under the SOE procedure,

* where any audited accounts are not received within 12 months of the due date, the Bank willsuspend disbursements for the whole credit.

Issues for Discussion q

* should the payment of project staff be tied to timely submission of audited accounts?* are the remedies for poorbfinancial management, both on the Government side and on the

World Bank side adequate?* how should qualified accounts be handled?* are there problems with the quality of project staff responsible for accounting and audits?* should the Project Coordinator be required to have skills in basic financial management?* what follow-up is made on overdue audits, and is this action suficient?* should there be a greater role for private sector audiS 9e u/* what are the actions Government will put in place to ensure appropriate record keeping,

proper financial management,' timely audits and adequate follow-up of the ManagementLetter?

* Across IDA projects, the staff can be, and should be, hired and paid by a known consistentrule. Given that it will take a time for the Government to complete a comprehensive civilservice reform or to reach an internal agreement on hiring practice of DDA project staff,should IDA be responsible, in the interim, to draw up guidelines to correct for inconsistencyacross projects? (Such guidelines can be subsequently modified when the Government'sposition on the issues is clarified.)

Page 13 of 15

Expected Outputs

The CPPR will develop a set of recommendations for improving the financial management ofprojects and accountability of funds used. It will appoint a task force made up of Government andWorld Bank staff to develop those recommendations iLnto specific actions to be taken within individualprojects and across the portfolio. The goal is to have zero overdue audits-by the eId of this financialyear and onwards, and to have comprehensive action plans in place in response to any shortcomingsidentified in audit Management Letters.

Project Management: Issues in Management Design and Staffing

An IDA-financed project is often, though not always, operated by a Project Management Unit(P.M) or Project Implementation Unit (PIID, which is established outside the existing governmentstructure. With or without a PfEr/PrU, the Government assigns staff internally or recruits outsiders toadminister the DA- projects. These personnel may or may not be compensated according to the civilservice pay scale. More often than not they receive higher salaries and benefits than 6ther civil servantsat the equivalent levels.

In the past, the establishment of PMU/PrUs was justified on the ground that the existing civilservice structure was not suited or did not have the capacity to deal with logistics required for D)A-financed operations. Special treatment of project staff over other civil servants was justified in order toattract qualified persons, given the very low level of pays in the public sector. However, these presentlycommon practices need to be re-examined for at least two reasons.

First, as the ongoing Civil Service Reform addresses the strengthening of the administrativecapacity and the introduction of a new pay structure, the environment in which the prevailingimplementation arrangements are based is changing. In particular, pay reform should soon allowcapable civil servants to be paid competitive salaries, thus removing the need to pay extra benefits andwages to the staff of IDA-financed project. Similarly, increased administrative capacitv should removethe need for special implementation arrangements such as P.MfU/PIUs, which often weaken long-runproject sustainability because of th&r incompatibility with existing civil service structures. Thisfundamental shift means that the use of special implementation units or special treatments of the projectstaff should be re-considered.

Secondly, there is a lack of consistency and transparency across the board with regard tostafing and remuneration decisions. The criteria used to select project staff are often unclear, and opencompetitive recruitment is unusual for either intemal or external hiring of local staff. The levels ofsalaries and benefits of the project staff also vary widely between ministries as well as within a givenministry. For example, while a typical Project Coordinator is currently being paid about USS 1,000 amonth,-some Project Coordinators are paid over USS 5,000 a month while still others receive no specialpavment beyond their regular salaries as civil servants. In addition, performance of project staff is notclearly linked to wage levels, annual increments of salaries and benefits, renewing of contracts and soforth. This leads to perception of unfairness which, in turn, undermines incentives for goodperiormance. Given the encrrnLous size of DDA-financed investments, it is in the national interest to

Page 15 of 15

a rninimurm background in accounting and auditing in addition to particular sectoral skillsrequired for a given project?

* What criteria should be used to determnine annual increments of salaries and benefits andcontract renewals?

* Should project management costs be included in DDA credits or not?* What is the impact of the current arrangements on project sustainability, the civil service and

national capacitv building efforts?• What are the implications of Treasury's proposal to tax all DDA-financed salaries?

Expected Outcome

The CPPR will formuiate an agreed set of principles cQvering the selection and recruitment ofproject staff. A joint Government/ World Bank Task Force will be appointed to develop theseprinciples into an agreed set of guidelines for use in projects by October 31, 1996.

Joint Action Plan for FY97

The objective of the CPPR exercise is to develop specific recommendations for implementationin the coming financial year. To this end, the recommendations coming out of the discussions will beput into a matrix format for implementations as follows:--

Table 5: Matrix Format for Implementation

Subject Recommendation Specific Action(s) Responsible Party Date forComplete

I___ ____ ____ ____ __ __ ImplementationPoverrv Reduction I IBudget Compatbilitv_ Accounting andAudits IProject Stafling I | _Others _ _ l

The Resident Mission will liaise with the relevant Governnent agencies during the course of theyear to assist with implementation of the recommendations where necessary. Achievements will bereviewed at the next CPPR meeting. These discussion will also be used as one of the primary inputsinto the formulation of the World Bank's Country Assistance Strategy for Tanzania in 1997.

April 29, 1996

TANZANIA CPPI AY 1998 A.ltachi I 1Status of Country PortftilD as of April 1996

Project Perfomiance IndicatorsCredit Amount (USS millions) Disbursements (USS millions) DO. I.P.

Age Years to Total Project AnnualClosing

ID No. Name of Project (Years) Date Undisbursed Disbursed (SARB Costs Lag-Lead Average FY95 FY96 FY95 FY 96 FY95 FY 96AF2AE

2747 Agr. Exports Rehab. l 7.9 0 25 11.9 19.4 30.0 40.0 -9 0 2.4 S U S U2749 Nat. Agric & Livestock 7.0 1.00 3.2 4.3 8.3 25.0 -6.0 0.6 1.9 1.3 S S S S2772 Agriculture Extension 6.9 1.00 2.6 14.5 18.4 30.0 3 0 2.0 2.5 2.3 S S S S2779 Tree Crops 6.7 0.25 9.2 16.8 25.1 42.4 -3 0 2.5 2.7 1.8 S S S S2785 Forest Resources Mgt. 4.0 2.00 10.8 5.8 18.3 20.9 -2.0 1.5 4.2 2.8 S s s s2801 ASMP 2.6 3.00 16.7 6.8 24.5 27.2 8.0 2.6 4.3 2.0 S S S S

Sub-total 54.4 67.6 124.6 185.5 11.6 15.6 10.2

AF2EI it2756 Power VI 2.8 4.00 141.0 70.0 200.0 384.0 2.0 30.0 16.0 54.0 -S HS S S2757 Railways Restruc. 4.7 375 61.0 13.0 76.0 275.0 -9.0 2.7 4.4 9.0 S S S S2770 Roads II 1.9 4.50 167.0 15.0 170.0 650.0 -2.0 6.5 12.3 2.9 S S U U2783 Roads 1 5.8 2.25 70 3 110.0 180.0 871.0 -3.0 19.0 35.6 21.1 S S S U2784 Ports Modernization 6 0 1.25 17.7 22.4 37.0 122.0 -9.0 3.7 6.7 2.2 S S S S2786 Petrol Rehab. 5.1 1.75 45.6 2.0 44.0 74.0 -15.0 0.4 0.4 2.2 S S S S2808 Urban Sector Eng. 4.6 0.75 2.3 8.4 11.2 15.5 5.0 1.8 3.1 1.8 HS HS S S2811 Engineering Credit 4.1 0.25 0.9 8.8 10.0 11.6 17.0 2.0 1.7 1.4 S S S S

Sub-Total 505 8 249.6 728.2 2403.1 66.1 80.2 94.6

AF2PE2780 Telecom III 2.8 3.25 67.4 8.2 74.4 74.4 -4.0 3.0 3.5 3.5 HS HS S S2788 Priv. Pub. Sect. 2.7 2.75 23.4 7.7 34.9 34.9 2.0 2 8 3.3 6.1 S S S U2812 MineralSector 1.6 3.75 11.3 1.3 12.5 11.7 1.0 0.8 1.3 0.6 S S HS HS2817 Financial & Legal Mgt. 3.6 2.50 12.7 7.2 20.0 20.0 0.0 2.0 3.8 1.5 S S S S36520 Financial Inst. Dev. 0.6 3.75 11.0 0.0 10.9 10.9 0.0 S S

Sub-Total 125.8 24.4 152.7 151.9 8.6 11.9 11.7

AF2PH2774 Health & Nutrition 6.0 0.25 32.4 16.7 47.6 70.0 -14.0 2.8 4.3 3.8 S S S S2790 Educaton Planning & Rehab. 5.8 0.75 24.4 18.0 38.3 69.5 -7.0 2.3 3.8 4.5 U U U S

Sub-Total 56.8 34.7 85.9 139.5 5.1 8.1 8.3

Total 742.8 376.3 1091.4 2880.0 91.4 115.8 124.8

C:\STATUS.XL.S4/29/96

Aetachment 2Page 1 of 6

: WORLO 3ANK/IFCiM.l.G.A.

OFFICE MEMORANDUMDATE: June 13, 1995

TO: Surendra K. Agarwal, Operations Advisor, AF2DR

FROM: Tony Tnompson, Operations Officer, AF_T A

XTENSION: 34542

SU&JECT: Follow-up of Tanzania CIR (November 1993) with Project Coordinators

Following the postponement of the CPPR planned for April 1995; the Resident Mission didits own low-key follow-up of the November 1993 CIR with the Project Coordinators. Wemet with them on two separate occasions at the Resident Mission (April 12 and May. 18)where we reviewed progress made since November 1993 and developed ftrtherrecornmendations. These are set out in the attached matrix.

Summary. The encouraging message corning out of these meetings is that many of therecommendations have been successfully implemented and project implementation hasimproved as a result. In a few cases the recommendations were not implemented as they'were no longer judged to be appropriate. Many of the new recomnmendations require littliinstitutional effort on the part of the Bank as they can be implemented through the regularmonthly meetings of Project Coordinators. However there are two areas where seriousproblems remain and three recommendations which will require special effort on the part ofthe Bank to implement.

Problem Areas. The two areas with serious problems are procurement and counterpartfunding. On pr e we have addressed most of the problems for which the Bank hasbeen responsible through enhancedqraining and sub-contracting. However sinifiicantproblems remain with the Central Tender Board. A Country Procurement Assessment isplanned for FY96. We hope that this can be a vehicle for tackling the remaining problems(in addition to the initiatives recornmended in the matrix). On counterpamt fdina thesituation has deteriorated'and is unlikely to improve in the near future given the currentmacroeconomic const-aints. Our strategy here is improve the information flow betweenPlanning Commission and the Ministry of Finance on the one hand, and the SectoralMvfinistries and the Projects on the other so that projects can pian for the resource shortfall inan informed manner. However the impact of this on the larger problem is expected to bemargina&

Recommendations. The three rcomnmendations that will require special effort on the partof the Bank are as follows:-

%D

0)04(L o

"' CIR ISSUES ANI) RECOMMENDATIONS - CURRENT Sj ATUS AND NEW RECOMMENDATIONSI hee Isirs Aclion Itespolisibi lily I ime lrFane Cli reoil Slalus New ReconmioendatimolisRccoelnmenldations

A AcCouIIIting A 1. Lak Of l Ject( EnLogage expert(s) to review prnjcct - Worid ldiak initiale lIy lmmcndiatc New guii(elines issuedl nndoancd Aditling nccouiling guidclincs aceoumiciing systemsn establisih sialcis preparing TOlls. circulaled to all projects.of project accounits n01(1 prlpIrC - MOIip ipllcrliltguidelines. CAO, TAC amdi t'(AA

pailicipate.

A2. Inadeqate quialified D)evelop and prepare systematic - Irojccl Coordinators Immediale. Not yel hiappcnlc(l. 1roject Coordinatorsproject accbunling staffE training program for project initiate. encoiraged to incorporateaccoutilanis. MOF implenient. training into AWl's.. Nl)AA particiliate. RM to inform projects oftraining opporitinities.A3, Delays in submjlitting ldentlfy problem projects and - World llalik RM submil Illili te.lile 1)oize willh regular follow-upprojecl accouints for audit. recommeini course or nction. list of prob!cim projects by l;IC RM.

to CAG.T AC tIr(oghMOI:.A4. Lack of Aud(lilinlg prepare au,dit sclhcdulcs for each - 'roject Coor(lidialors. limniediate. RM foirwarded dCetails to RM lo follow-tip wilh WI)

Schieduiles, project. MOP coordtinjtc (Woil(d MOIP (W) D)esk OlTiccr). Desk Officer at N1)F.Itank Desk Ofice). L imited implemenitalini.A5. Lack of sulhicicil Provi(dc ror misc of privatc auiliors. - Projcct Coordiniitors 11311licliatc. Not (lone. iThere is an issue WI) to follow-up onfiunds fir CA(; to coiniuct preparc proposal. of payment to CAG. iuiodalilies of paymeiit forproject aiu(lils. CAG give clearance frir

ad(lit scrvices,private audilors.It. Iace of 111ll. igi ralio of World Blank IRM assist in checkinig - World l)ank llesident lmriediatc. D)one. Very successful.D)isburscnient disbursement applicalinis for comipliance am ndidlinlistiralive Missionnot fulfilling accuracy before (lisbursementadministrative applicationis nre sentl to WI)requirements. I leadquarters.B2. Inadequale Provide for adequate preparalions - Worid llank As need arises. Done for the three new More efforl necdc(l. Identifypreparation a launclih before project negoliations nml - (;overimtenil (providle projecis. Ile key people well intstage. cffcclivcncss of ncw projects. guidelilies)

advalce.- Designaledimplemenling _gencies)113. Delays in processing lReview adminisirative steps an(i - World Ilank and MOP Imnne(lialt. Greal improvement indisbursement applications, explore legal provisions for implement implemilentalion ofredtucing sleps and provi(ling access

disbursement proccdurr.s byof project coordination units to MOF nand project saIfT.Special Accotmits. 'rocessillg is miltil faster.

HOT has agree(l to projecisreceiving SA bank statcimicins

I(lirecily. ___

t)

&J

| Iheme ~~~issues Aclioii Rcsponsibiiiiy Time Ftamne Curreilt Statues Ncw l(cconmnendationsRecomnmcndations

D)J. fiadcqloniec Capacity Conduilct miiiiial cnpacily bulilding - 1'roject Coordinatlors InImetdial.C llave not lakeii lilace A process of conlinmintishni iinIig lor projeci workslholis. Initiatc. assimilation is preferabic.inslifuilionmliii.lion nitl - Implemenling 'agcncy Integrate project activitiessustalinablilily. . mplegmenl. into "IC organizatlionals1tucture of iegulaf agcncy

. ~~~~~~~~~~~~~~~~~~~~aeliviliesD_i4. hindeueitle incenlivcs - I.xplorc possihilily of iiiiprolvitig - Implemaenting agency lInmmuliale. Non incerenentnl nctions. WB anid Govt. to devclopto miolivale projcct staff. remuneration package for pro)jclt initiate and implement. jointly a comprchcnsive andsntaffwitlhin exisling salary .consislenl personnel policy. ~~~~sttuclurcs. .. for slaWing of projccts.E ngttge project staff on term.eonlraecs. ...

D5}. I.ack of adequiale - World [lank conisider incrcasinig - linpicnenling agencics nInmediale I)one.couindcrpart ftinmis. sharc or reimnbursabic local fiim(ls in iniliiale.

projects whecrc its policy - World 13ank IRM andIrcquiitcnents permil. MOI: participate.

- World llank I IQ-implcnicnl.

- Rolling I'lan and Forwvard - Planning Comnmission. As soon a-s Situation h.ts decleri(porlcd. Invile (Ihe Director of B1udget.I lainninig lltidgel (RIl:ll) - Imipleeitilling Agcncies. RPl:B} is I'laminiig (Commission,insirmtmenl being (levelope(l by .operational. Assistant Comnmissioncr forIPlanning Commiission is expccicd .Pnoblic Invc.su-eril and WliIn impilrovc dliscipliiic inl l't'i(glii'lg .DI)sk Officer MOF lo add(ressfor couinterpart ftinl(ls. Jujly iIlCCiiig (if 1'rojccl('oordiinalors

- Implcencnling agenicics- Review performance of lprojects initiate anid ihnplennenl. Immediate. No progress. Plan more careftilly ror. ~~~~~~~~~~~~~~~anml givc lbudget allicalion priorily . cominterport tilnditig at designin Ihigh perfortming projecis. : sage.

a \cir dotc

nihompsonJunes 95

Attacliment 3

TANZANIA CPPR - MAY 1996Assessment on Completed Projects - FY 94 To FY 96

Assessment Indicatois

Credit No. Name of Project Report Date Project Outcome Sustainability

371 Fourth Education Jun-95 Satisfactory

Likely607 Fifth Education

Jun-95 Unsatisfactory Unlikely

1015 Grain Storage Feb-93 Unsatisfactory

Unlikely1056 Seventh Education

Jun-95 Satisfactory Likely

1536 Ports Rehab. Dec-94 Marginally Satisfactory Unlikely

1688 Sixth Highway Rehabilitation e Jun-95 Satisfactory

Likely2116 Agricultural Sector Adjusiment Dec-94 Salisfactory

Likely2308 Financial Seclor Adjustment

Aug-95 Unsatisfactory Uncertain

C-UCR.XLS4/29/96

ATTACHMENT 7

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Summary Checklist of Acceptabilityof Procurement Procedures

for Competitive Bidding

TANZANIACOUNTRY PROCUREMENT ASSESSMENT REPORT

Summary Checklist of Acceptability of Procurement Procedures for Competitive Bidding

Common Issues Guidelines International Nationalin Procurement Procedures Reference Paragraplh Competitive Bidding (ICB): Competitive Bidding (NCB)

Acceptability/Comment Acceptability/Comment1. Eligibility 1.6-1.8 All qualified bidders from IBRD - member countries. As for ICB.

Subject to restriction for boycott, prior projectinvaJvement as a consultant, and conflict of interest.

2. Language 2.15 All documents must be in English. As for ICB.3. Advertising 2.7-2.8 National newspapers & Development Business. National newspapers.

3.1 General Procurement Notice 2.7 Development Business. Not required.3.1.1. Insertion in "Development 2.7 Investment operations requiring ICB. Also, Not required.

Business" prequalification advertisements.3.2 Specific Procurement Notice 2.8 In addition to national newspapers, international Local advertisements placed by CTB.

(SPN) publications for large procurements.3.2.1 Insertion in local press with 2.8 Required. As for ICB.

national circulation3.2.2 Insertion in "Development 2.8 Required for all contracts over US$ 10.0 million value. Not required.

Business" and/or specializedtechnical journals

3.2.3. Notification of IBRD members' 2.8 Recommended. Not required.embassies and traderepresentatives

3.2.4 Notification to those who 2.8 Required but not practiced consistently due to division Not applicable.responded to GPN of responsibilities - CTB vs. procuring entity.

3.3 Time period for bid submission 2.43 Normally not less than 6 weeks. Normally not less than 4 weeks.from date of availability of biddingdocuments

4. Pre-and Postqualification4.1 Prequalification 2.9-2.10 Used for large works. Used infrequently where eligibility,

.________________________________ . _________________________ __________________________________________capacity and experience of bidders

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _m ayma y b nin qq u e stio n4.2 Basis for evaluation 1.7-2.9 Experience, capacity, and financial status; additional As for ICB.

criteria are accepted, provided they can be definedclearly and are relevant to the evaluation; use of BankStandard Prequalification Document, if appropriate.

4.3 Metliod of prequalification 2.10 Specific advertisement for each procurement. As for ICB.4.4 Joint ventures between foreign and 1.10 Not mandatory; final agreements not required at time of As for ICB.

local finns prequalification; intent of parties and their contributionindicated; joint and several responsibilities of firrnsrequired.

4.5 Number to be accepted under 1.7 No limit to number; rejections decided by committee No limitation.prequalification and subject to IDA "no objection".

4.6 Postqualification 5 2.57 Required in absence of prequalification but sometimes As for ICB.used subjectively to disqualify bidders.

5. Bidding5.1 Standard Bidding Documents 2.12 Bank's Standard Bidding Documents used consistently Bank SBD used.

since 1995.5.2 Mandatory prior registration of 1.7 Not acceptable. Local construction contractors are

bidders with local authorities, classified according to capabilities.institutions, etc.

5.3 Local agent/intermediary required 1.7 Not acceptable. Not acceptable.5.4 Bid security 2.14 Throtigh local or foreign bank; difficult to obtain from As for ICB.

local banks.5.5 Restrictions on means of 2.43 Not acceptable; post office boxes may not be used as As for ICB.

delivering bids (e.g., "by hand addresses.only")

5.6 Bid validity extension 2.56 Acceptable only if justified by exceptional As for ICB.circumstances; for fixed price contracts, priceadjustment for second and further extensions required.

5.7 Currency of bid 2.29,2.30 Expected local expenditures in local currency; expected local currency only; exceptions madeforeign requirements in up to three currencies of any for specialized imported equipmentIBRD member country as chosen by bidders.

5.8 Currency of payment 2.32 As for item 5.7 above. Local with no obligation to convert.5.9 Domestic preferences 2.54, 2.55 Applicable to all ICB procurement. Not applicable.

5.10 Bank: Goods App. 2 15 percent or import duty, whichever is lower, on Not applicable.CIF/CIP prices of imports.

5.10.1 Bank: Works App. 2 7 1/2 percent for qualifying domestic firms. Not applicable.5.10.2 Trade preferences 2.50 Not acceptable. Acceptable according to tradetreaties.5.10.3 Other borrower preferences 2.51 Not acceptable. Not acceptable.5.11 Restriction on source:s of 2.27 Acceptable, but costs cannot be financed from credit. As for ICB.transportation and insurance

5.12 Restriction on sources of labor and 2.23 Not acceptable. As for ICB.material5.13 Public bid opening 2.44 Mandatory. Mandatory.5.14 Standards 2.19 Internationally accepted standards required where No national standards available.

applicable. Bid documents state equivalent standards As for ICB.also acceptable.

5.15 Specifications 2.20 Use of brand names discouraged. "Or equivalent" As for ICB.added after each reference.

5.16 "Two envelope" bid opening (i.e., 2.6 Not acceptable. Not acceptable.all technical envelopes opened firstand, after review, price envelopesof all or only qualified/responsivebid opened in the second round).

5.17 "Two stage" procedure (i.e., 2.6 Used infrequently for high-technology equipment, large As for ICB.unpriced technical proposals complex plants or works where complete specificationsreceived, clarified, and adjusted are not available.first, followed by subinission ofprice bids.

5.18 Automatic rebidding if less than 2.59 Not acceptable; single bid accepted if all evaluation As for ICB.prescribed minimum number of factors are satisfactory and process was competitive.responses.5.19 Rejecting bids outside a range or 2.58 Not acceptable; apparent lowest evaluated bidder As for ICB.bracket of bid values. submitting extremely low price is given special

scrutinity and verification in post-qualification process,before contract award.

5.20 Award to lowest evaliated cost 2.58 Mandatory. Mandatory.

bidder which is qualified andresponsive.

5.21 Negotiations affecting price or of 2.58 Used infrequently and only with prior approval of IDA. As for ICB.bid prior to contract.5.22 Bid evaluation and award 2.53, App. I Bank's Standard Bid Evaluation Form used since 1996. As for ICB.6. Contract Implementation6.1 Performance security for goods 2.39 Usually 10% of contract price; reduced after delivery to As for ICB; difficult to obtain from

cover warranty obligations. local banks.6.2 Performance security for works in 2.38 Usually 10% of contract price for bank guaranitee and As for ICB; difficult to obtainform of bond or bank guarantee 30% for performance bond. f rom local banks.6.3 Price adjustment provisions 2.24 Required normally for contracts extending over 18 As for ICB.months: indices linked to sources of contract inputs arelargely unavailable. Controversial issue requiringresolution.

6.4 Liquidated damages. 2.40 Required. Required.6.5 Settlement of disputes 2.42 International commercial arbritation for disputes Local arbritration.involving foreign supplies/contractors (ICC,UNCITRAL). .-6.6 Alternative disputes resolution 2.40 Required adjudication for works contracts. As for ICB.procedures.

6.7 Material modifications of contract App. I Requires IDA's prior approval if contract price to As for ICB.during implementation increase by more than 15 percent.6.8 Procurement Scheduling App. I IDA informed of changes to procurement and contract As for ICB.

schedules.

ATTACHMENT 8

TANZANIA

COUNTRY PROCUREMENT ASSESSMENT REPORT

Follow-up of Tanzania CIR(November 1993)

with Project CoordinatorsJune 13, 1995

THE WORLD BANK/IFC/M.I.G.A. C ,

aFFICE MEMORANDUM 3

DATE: June 13, 1995 g* 1 at / C) S 5 4L

TO: Surendra K. Agarwal, Operations Advisor, AF2DR w- K ', A , T

FROM: Tony Thompson, Operations Officer, AF2TA ~ A- L -v-

EXTENSION: 34542

SUBJECT: Follow-up of Tanzania CIR (November 1993) with Project Coordinators 7 1 1 s-

Following the postponement of the CPPR planned for April 1995, the Resident Mission didits own low-key follow-up of the November 1993 CIR with the Project Coordinators. Wemet with them on two separate occasions at the Resident Mission (April 12 and May 18)where we reviewed progress made since November 1993 and developed furtherrecommendations. These are set out in the attached matrix.

Summary. The encouraging message coming out of these meetings is that many of therecommendations have been successfully implemented and project implementation hasimproved as a result. In a few cases the recommendations were not implemented as theywere no longer judged to be appropriate. Many of the new recommendations require littleinstitutional effort on the part of the Bank as they can be implemented through the regularmonthly meetings of Project Coordinators. However there are two areas where seriousproblems remain and three recommendations which will require special effort on the part ofthe Bank to implement.

Problem Areas. The two areas with serious problems are procurement and counterpartfunding. On pirocurement we have addressed most of the problems for which the Bank hasbeen responsible through enhanced training and sub-contracting. However significantproblems remain with the Central Tender Board. A Country Procurement Assessment isplanned for FY96. We hope that this can be a vehicle for tackling the remaining problems ' G -

(in addition to the initiatives recommended in the matrix). On counterpart fundinQ thesituation has deteriorated and is unlikely to improve in the near future given the currentmacroeconomic constraints. Our strategy here is improve the information flow betweenPlanning Commission and the Ministry of Finance on the one hand, and the SectoralMinistries and the Projects on the other so that projects can plan for the resource shortfall inan informed manner. However the impact of this on the larger problem is expected to bemarginal.

Recommendations. The three recommendations that will require special effort on the partof the Bank are as follows:-

Surendra K. Agarwal -2- June 13, 1995

1. Lack of sufficient funds for CAG to conduct audits. Recomnnendation: theBank to follow-up on modalities of payment for audit services. The problemhere is that private firms can be paid for carrying out audits while CAGcannot. It says that if it could be paid for doing this work, it would have theresources available to do the work and so there would not be any need tocontract out. While this remains in dispute it does not want to authorizecontracting out.

2. Development of simplified, standardized procurement documents andprocedures. At present we are at an impasse with the Central Tender Board.To move forward will require special action on the part of the Bank which,hopefully, will be part of the Country Procurement Assessment.

3. Inadequate incentives to motivate project staff. Recommendation: the Bankand Government to develop jointly a comprehensive and consistent personnelpolicy for staffing of all projects. The Resident Mission and the CountryTeam have begun collecting data on the current situation. It would be helpfulto have direction and support from management on this issue.

CPPR. Havinz completed this review and bearing in mind the current situation inTanzania, there do not appear to be sufficient issues to warrant a Country PortfolioPerformance Review at Principal Secretary level before November. This position shouldbe reviewed once the electionW are over and the new Resident Representative is in place.

Attach.

Distrib: Meesrs./Mmes. Coates, Dejene, Luhman (AF2AE); Abe, Agbonyitor, Ahmed,Lee, Shaw, Spano (AF2CO); Kamata, Karlsson, Maweni, Nayak, Rasmussen,Tschannerl (AF2EI); Borin, Byam, Knapp, McInerney-Lacombe, Morin(AF2PE); Griffin, Levine, Noor (AF2PH); Kampen, Kumar, Matmor(AF2EA); Gulstone (AFTPS); Vandenheeede (LOAAF); Adu (LEGAF);Konishi, Hadler, Makoye, Malangalila, Rwechungura, Sabai, Sakaya,Sungusia (AF2TA).

a:cirmerno.doctthompsonJune 13,95

CIII ISSUES ANI) IIECOMMENI)ATIONS - CURRENT STATUS ANI) NEW RECOMMENDATIONS

I licine [ Issues Action jResponsibility I'limne Frame Current Slatus New RecommendationsRecommnendat ionIs

A. Accountilg A l. I ack of project Engage experl(s) to review project - Worhl Banlk initiale by liunediale New guidelines issued andand Auditinig accounting guidelines accountilng systems, establisih status preparing TORs. circulated to all projects.of project accounts and prepare - MOP implementguidelines. - CAG, TAC and NBAA

participate.

A2. Inadeq(tiate qualified Develop and prepare systemiiatic - Project Coordiinators Immediate. Not yet happened. Project Coordinatorsproject accoutiniiig stalt trainiing program folr project iniliate. cncouraged to incorporateaccountanits. - MOF impicilicint. traininig into AWI's.- NIIAA participate. RM to infirim projects of

I_training opportunities.A3. Delays in subimiilting Idcntify problitm projects and - World B1ank RM submit Imimiediate. Done, witli regular follow-upproject accounts for audit. recommend course of action. list of problem projects by the RM.to CAG, TAC throtigiMOI .I

Al. Lack of Auiditing Prepare audit schiediules for each - Project Coordinalors. Immediale. RM forwarded details to RM to follow-up with WBScheduiles. project. - MOP coordinate (Worl(d MOF (W13 Desk Officer). Desk Oflicer at MOF.B_ank Desk Ollice). I.imited impleimcinalion.

A5. I .iick ol slificient Provide lir use of ptivale auidilors. - Iprtoject Coordinatlors lituxnclialle. Not done. 'I'licre is an issuc WI) to follow-tip on|Indits lor (-A(; to conduct prepare proptosal. of payment to CA(. modalilics of payment forplrojctl alilils. - CAU give clearance For audit services.private auditors.

B. Pace of 1Il. I ligh ratio of World Bank RM assist in chiecking - World Bank Residenti Imimiediate. Done. Very successful.Disbursemilenit disbursement applications for compliance and administrative Missionnot fuilfilling accuracy before disbursementa(lministrative applicationis are sent to W13re(uireni)cnts. I Ieadquartcrs.132. Inadequate P'rovide for adeqluate preparations - World Bank As neced arises. D)one for th(e tIree new More effort neededl. Identifypreparation at lauticih before project negotiationis and - Governimenit (provide projecis. thle key people well instage. effeclivenless of lnew pr(ojects. gtiidelines) advance.

- D)esignatcdilllplelnlenltilng agencies)

113. Delays in processing Review administrative steps and - World 13anik antd MOI Imimiediaite. Grena improvement tildisbursement applications. explore legal provisions for implement implementation ofreducing steps and providing access disbursement procedtires byof project coordination units to MOP and project staff.Special Accounts. Processing is much faster.

BOT lhas agreed to projectsreceiving SA bank statements_directly.

'I'lilwmc |[sies Actioni | RspuInsil)ilily I'iic l'railc | Currciii Sialis New RcommedionsRecommenlldatilulNionus

C. IProcuireiiieit. Cl. Lack of Slandair(d Review, simllify and standardize - cri3 initiale amd Immediate. No improvement. CTB did Wl nee(Is lo lake Ihisproceduires/guidelinles and procuremilenit documients, implemielit. not accept documentation seriously with CTB. IProjectcomplicated procurement procedures/gtuidelines for works, - World Bank participate. provided by WB. staff to provide specificdocumilents. services and goods based on IlR'. examples.C2. Procurement delays. Prepare procurement planis as parl - Project Coordinator Submit to CTB Need feedback from CTB.of aniniual project implementation and WB byplanning. March 1994.

C3. Lack of adcquate - Train staff involved in - P'roject Coordina;ltor Immediate. Training provided in most World Bank will informexpertise. procureimicit, incliding project initiate. projects. projects of trainlingcoordinators. - Implemcntinig agency opporiunities as they areimplemncll. announced.

- Subcontract specialized - Project Coordinators As need arises. Subcontracting recognized asprocurement activities (e.g. bid iniialte. an option whiich is utilized onspecifications anid bi(l evaluations.) - Cl'i, implementiniig a case-by-case basis.

-IgCIICiCS imlemenllCIt.Cl. ClIi's capacily is - Strenigtihemi advisory capacity of - Cli'i lo iniliale and Consullant study CTII representative not Invite cril representative tooverstretched. CB'l' as planned Llider IRI'. implement. ready by March available. the monthly meetings of- Decentralize procurement function 1994. Project Coordinators.

to impiemiienting agencies. Recommend delegation of- Restrtciture procurement system,. autllority within C'13.

Request Crown Agents topresent tIheir study findings

to one of Ihe monthly._______________i meeting.D. Project DI. Inadeqtuate Involve key actors iicitiding - Implementing agencies. As need arises. Implemicented and is useful.Coordination involvement of key designated staff at all stages of

and Counterpart projectors at project project design and implementation.IFuinis. design and Use workshops al)proach whiere

i mplemecn t ation. feasible. | _1)2. Unclear reporting and - Clarify mandates and facilitation - Implemenliig ageilcies. Imiimediale. Workshops for this purposeaccountability roles of project coordination units should be incorporated intorelationships. and coacb staff to perform the AWPs.appropriate roles and functions.

- Define 'rORs and structural -ImplIementing agencies. As need arises.relationships of l'CU at projectinception.

- Project Coordinators.- Improve dialogue and As need arises.communicalioni between PCUs andlead technical departments using in-houise project workshops. _

2

llcuic Is.sues lResponsibilily i 'ihnc Fr.ame iCurreint S!;lals New ttatuslilillliolIsR CCt)lnlIIlClid at ionlS JI

1)3. Inadeqtuawte capacity Conitlict annual capacity buildlinig - Project Coordinators latimediate. I lave not taken place A process of continuousbuilding Ior project workshops. initiate, assimilation is preferable.instituitionalization and - Inplementing agency Integrate project activitiessustainability. implement. into the organizationalstrutiure of regtlar agencyactivitiesD14. Inadeqtuate incenitives - Explore possibility of improving - Impleientinig agency Imimlediate. No inicrmenital actions. WB and Govt. to developto motivate project slaft: remunerationi package Ior project initiate and ihiplemenit. jointly a comprehensive andstaff within existing salary consistent personnel policystrucitures. for staffinig of projects.

- Engage project staff on tenocontracts.

D5. Lack of adequiate - World Bank consider increasing - Im,pleiientinig agencies Imimiediate Done.cointerpart funids. sliare of reimbursable local IXinids in initiate.

projects whleretits policy - World Bank RM andre(lLtireinenits permit. MOF participate.

- World Banik I IQimp)lement.

- Rolling l'lan and Forward - Planning Commission. As soon as Situation has deteriorated. Invite the Director of Budget,Plannllini Budget (RtPFB) - Implemniciniiiig Agencies. RlI11 is I'lanning Commission,instrument beinig developed by operational. Assistant Commissioner forPlanninig CoiimninissioII is expecteid IPublic Investment and WBto improve discipline in budgeting Desk Officer MOF to addressfor counterpart uinds. July meeting of Project

Coordinators.- Implemeniing agencies

- Review performanice of [projects initiate and implemeiet. Immediale. No progress. P'lan more carefully forand give budget allocationi priorily counterpart fiunidinig at designto highi performing projects. [sage.

a:\cir.docIthompsonJune8,95

3

Attendance at Monthly Meetings for Project Coordinators

Name Project Agency Attended Attended______ ______ ____ ___ ___April 12 M ay 18

G. Kamanyile AERP I CRDB _

G. Sempeho NALRP MOA / I

G. Ndamagi NALRP MOAJaganathan NALERP | MOA /Michael V. Tweve NALERP 1 MOA V 7P. M. D. Kabonge Treecrops MOA

P. K. Mtandu Ports II THAI V/Dr. F. N. Njau Health & Nutrition MOH | _

Dr. J. K. M. Chuwa Health & Nutrition MOH V/J. Mutayoba Health & Nutrition MOH VP. P. Siwingua EPRP MOE _ __

S. Ndunguru EPRP J MOE _ __

Issa M. Mushi EPRP N NETF T V V/B. S. Msuya IRP| Min. of Works | VP. Fynn Petrol Reh. MWEM I VA. W. Mosille Petrol Rehab. | TIB VF. Chumpi USEP -PMO j V/M. W. F. Maganga USEP PMO j V

J. W. A. Musokwa 1 FRMP, |MTNRE j vW. L. H. Kajagi FRMP IMLH-UD f VE. S. Msemwa FILMUP NBAA jCaroline Mduda FILMUP AG Chambers VMrs. A. Mpatwa Telecoms III TTCL 1.P. S. Malembeka Telecoms III | TTCL I VMartin Mokiwa PPRP MOF V VM. G. Tengia PPRP . - PSRC VA. W. Mosille PPRP PSRCS. E. Kaduma ASMP MOADavid K. Jairo Mineral Sector MWEM VC. A. Msalangi Mineral Sector MWEMP. Sangvi IFAD SHERFS MOA - Mbeya

E. J. Mwasumbi IFAD SHERFS MOA - MbeyaA. M. Lufingo IFAD SHERFS MOA - Mbeya _

Suleiman J. Omar IFAD Zanzibar MOA - Zanzibar V/W. Mutayoba River Basins MWEME. H. Masija River Basins MOA V I

S. B. Mbwana LVEMP MTNRE VVainess Goodwill LVEMP MT-NRE V/

aApcanend.doctthompsonJune 13,95