Patricia Baquero, Sr. Procurement Specialist February 27, 2008 Designing and Implementing an Output-Based Aid (OBA) Project in the Bank: Understanding the Procurement Process Patricia Baquero, Sr. Procurement Specialist February 27, 2008

Guidance Note for Procurement Staff on Procurement Issues in OBA Projects Financed by the World Bank Developed jointly by GPOBA, FEU & OPCPR Incorporates lessons learned from procurement assessments conducted under OBA pilot regional operations & peer reviewer comments Provides guidance to PS/PAS on how to ensure compliance with the Procurement Guidelines Also provides checklist for procurement capacity assessment of incumbent service providers Includes flowchart showing different scenarios and actions required by PS/PAS

Key Issues in Guidance Note 1/3 OBA subsidy levels determined through Competitive process to select a service provider (SP), or Establishment of standard costs or agreement on a unit cost schedule (verified by independent consultants) Usual award criteria for competitive selection of SP Least subsidy required per pre-determined output, Greatest coverage per fixed offered subsidy, Least connection cost per fixed offered subsidy, or Combinations of the above Payment of the OBA Subsidy On output delivery - upon independent verification of pre-defined output(s) In pre-agreed amount for the specified service – regardless of actual cost

Key Issues in Guidance Note 2/3 Types of operations with Bank-financed OBA components Projects where there is no existing service provider [Para. 3.13 (a) of Procurement Guidelines] SP to be selected under “an ICB process acceptable to the Bank” (meeting procurement principles; not necessarily Bank ICB process and may include NCB if conditions grant it) SP so selected is free to use own procedures to procure inputs (goods, works & services) required to produce the outputs on which basis the OBA disbursement will be made Projects where there is already an existing (incumbent) service provider [Para. 3.13 (b) of Procurement Guidelines]

Key Issues in Guidance Note 3/3 Projects where there is already an existing (incumbent) service provider If SP selected under an ICB process acceptable to the Bank, SP free to use own procedures to procure inputs required to produce outputs If SP not selected under an ICB process acceptable to the Bank, SP shall procure inputs using Bank ICB procedures If SP not selected under an ICB process acceptable to the Bank but Incumbent SP is privately- or independent government-owned, Incumbent SP is engaged in expansion of an existing system, and Upon assessment, SP procurement systems & capacity are deemed acceptable and adequate, then Incumbent SP free to use its own procedures to procure inputs required to produce outputs, and Bank may conduct post-reviews to ensure assessed conditions remain unchanged (per OPCS OM of Nov. 7, 2005)