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  • CONTENTS

    Page

    EXECUTIVE SUMMARY Error! Bookmark not defined.

    I. OVERVIEW Error! Bookmark not defined.

    II. RESULTS Error! Bookmark not defined.

    III. ACKNOWLEDGEMENTS Error! Bookmark not defined.

    APPENDICES 1 List of Contracts Reviewed

    2 Details of Implemented Recommendations

    3 Details of Partially Implemented Recommendations

    4 Details of Not Implemented Recommendations

    Proactive Integrity Review

    Grants 0167-AFG and 0170-AFG: Water Resources Development Investment Program - Project 1

    Office of Anticorruption and Integrity

    May 2020

    This is a redacted version of the document, which excludes information that is subject to exceptions to disclosure set forth in ADB’s Access to Information Policy.

    ASIAN DEVELOPMENT BANK

  • CURRENCY EQUIVALENTS (as of 7 October 2019, the review cut-off date)

    Currency unit

    AFN1.00 ̶

    = Afghanistan Afghani (AFN) $0.01278

    $1.00 = AFN78.244

    NOTES

    In this report, “$” refers to United States dollars.

    ABBREVIATIONS

    AISA – Afghanistan Investment Services Agency ADB – Asian Development Bank AFRM – Afghanistan Resident Mission AFS – audited financial statements ANDS – Afghanistan National Development Strategy BEC – bid evaluation committee BER – bid evaluation report BOQ – bill of quantities COL – concessional ordinary capital resources lending DSC – design and supervision consultant ICB – international competitive bidding JV – joint venture MAIL – Ministry of Agriculture, Irrigation, and Livestock MOF – Afghanistan’s Ministry of Finance NWARA – National Water Affairs Regulation Authority (formerly

    known as Ministry of Energy and Water) NCB – national competitive bidding OAI – Office of Anticorruption and Integrity PMO – project management office PIR – proactive integrity review POA – power of attorney PPFD – Procurement, Portfolio, and Financial Management

    Department

  • Proactive Integrity Reviews

    Mandate: ADB’s Anticorruption Policy requires all parties, including borrowers, beneficiaries, bidders, consultants, suppliers, contractors, and ADB staff to observe the highest ethical standards when participating in ADB-related activities. The Policy supports ADB’s obligation, under Article 14 (xi) of the Agreement Establishing the Asian Development Bank, to ensure that the proceeds of ADB financing are used only for intended purposes. The Office of Anticorruption and Integrity (OAI) conducts proactive integrity reviews (PIRs), formerly known as project procurement-related reviews, to help prevent and detect integrity violations (i.e., fraud, corruption, collusion, coercion, abuse, conflict of interest, and obstruction). Objective: A PIR identifies and assesses project integrity risks through the (i) examination of processes, procedures, and documentation related to procurement, financial management, and contract implementation/management, and (ii) inspection of outputs. Where necessary, OAI recommends enhancements to mitigate or eliminate opportunities for integrity violations. OAI conducts follow-up reviews on selected PIRs to (i) assess the implementation progress of the PIR recommendations, and (ii) assist the executing/implementing agencies and ADB in implementing any remaining recommendations. A PIR is neither an investigation of fraud and corruption nor an evaluation to assess development effectiveness of ADB-funded projects. It does not review project outcomes or development impact, which can only be assessed after the completion of a project.

    By making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

  • CONTENTS

    Page

    EXECUTIVE SUMMARY i

    I. INTRODUCTION 1

    II. SCOPE AND METHODOLOGY 2

    III. RESULTS 3

    A. Strength 3

    B. Project Vulnerabilities 3

    IV. RECOMMENDATIONS 8

    V. CONCLUDING REMARKS 9

  • EXECUTIVE SUMMARY The Office of Anticorruption and Integrity (OAI) of the Asian Development Bank (ADB) conducted a proactive integrity review (PIR), formerly known as project procurement-related review, of Afghanistan’s Water Resources Development Investment Program – Project 1 (Project) between March and November 2019. The Project is financed through ADB and Government of the United Kingdom grants, respectively, amounting to $86.6 million (Grant 0167-AFG) and $3.3 million (Grant 0170-AFG). The PIR team examined the Project’s 12 highest value contracts for civil works, consulting services, and goods. These contracts represent about 74% of the total value of the 154 contracts awarded and 77% of total disbursements under the Project as of the PIR cut-off date (i.e., 7 October 2019), The PIR team also reviewed selected project management office (PMO) expenses. Due to the fragile security situation, the PIR did not inspect project outputs. Results The PIR team observed that the PMOs have strong financial management capacity in respect of disbursement processes and procedures. The disbursement transactions reviewed were sufficiently supported and appropriately approved. The review resulted in two findings that were assigned a high-risk rating and four findings with a medium-risk rating, all in the area of procurement. These findings mainly arose from the weak capacity of bid evaluation committees (BECs) in evaluating bids and documenting shortcomings in the evaluation reports. The capacity constraints were compounded by a lack of permanent BEC members and the poor quality and deficiencies in bids submitted by local firms. The two high-risk findings are:

    (i) Lack of due diligence in bid evaluation. The PIR team observed deficiencies in the evaluation of winning and losing bids across four civil works contracts. In one case involving two contracts, the BECs did not verify construction experience in key activities because bids lacked the necessary information. Since non-compliance with the criteria was a ground for disqualification, and the PIR team could not establish the bidders’ responsiveness to these criteria, all bidders should have been disqualified. In two other cases pertaining to two contracts, the BECs assessed the available financial resources of two second-ranked bidders based on incomplete or questionable sources of financing. Without adequate clarification, both second-ranked bidders should have been disqualified due to insufficient financial capacity. The errors could have adversely affected the Project if negotiations with the winning bidder had failed and the second-ranked bidder was selected.

    (ii) Inaccuracies in bid evaluation report. The BEC incorrectly reported in the bid evaluation report that the winning bidder submitted complete bidding documents in one civil works contract. The PIR team identified that the bidder did not disclose its ongoing contract commitments. As the sufficiency of available financial resources against contractual commitments could not be determined, the bidder should have been disqualified.

  • ii

    Recommendations To prevent these issues from recurring and ensure transparency and fairness in all bid evaluations, the PIR team recommends the following:

    • The BECs should carefully review bids against the evaluation criteria of the bidding documents and should seek clarifications as necessary and permissible within the limits allowed under the bidding documents and ADB’s procurement rules.

    • The BECs must ensure that bid evaluation reports clearly and accurately document all bid deficiencies identified and the attributes of bids examined.

    • The PMOs should appoint permanent BEC members to retain the knowledge and experience gained from evaluating past ADB-financed contracts.

    • Before providing its no-objection, ADB must review the underlying bid documentation if its review of a bid evaluation report gives rise to concerns.

    • The ADB project team, in consultation with ADB’s Procurement, Portfolio, and Financial Management Department (PPFD), should work with the Ministry of Finance and PMOs to identify additional training needs of the PMOs and BEC members.

    • The ADB project team should explore with PPFD the feasibility of holding a business opportunities fair in Afghanistan or in the region to broaden the local firms’ familiarity with ADB’s procurement rules and regulations.

    Concluding remarks OAI recognizes the challenges associated with managing projects in fragile and conflict-affected countries like Afghanistan. The lessons from this PIR, if adopted in this Project, its next phase, and in future similar projects, will bolster the ability of government agencies to maintain integrity in government procurements. Stronger internal controls will enhance the transparency and fairness of the procurement processes and lead to better managed contracts. Ultimately, the beneficiaries will gain from the successful implementation of the Project. The PIR team discussed all the findings and recommendations with the PMOs. OAI will conduct a follow-up review on the implementation of PIR recommendations after a period of at least 8 months from the issuance of this report.

  • 1

    I. INTRODUCTION

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