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 1. The Office of Anticorruption and Integrity (OAI) of the Asian Development Bank (ADB) conducted a proactive integrity review (PIR) of the Water Resources Development Investment Program – Project 1 (Project). Due to the prevailing adverse security situation in Afghanistan, the PIR team performed a desktop review between March and November 2019 from ADB headquarters. The PIR team discussed the findings and recommendations with representatives of the implementing agencies during its wrap-up mission in Kabul, Afghanistan in November 2019.1 2. This report presents the results of the PIR of the Project. OAI conducted the PIR to (i) identify and assess integrity risks in the Project’s procurement and financial management processes, and (ii) recommend measures to mitigate or eliminate integrity risks to ensure that the Project funds are used for intended purposes.

3. The Project aims to increase productivity of irrigated agriculture resulting from improved water resources management through infrastructure development, capacity building, and institutional strengthening. It is in line with the Afghanistan’s National Development Strategy (ANDS), which is addressing the severe degradation of Afghanistan’s water resources infrastructure caused by decades of civil unrest. Ultimately, the ANDS’ water section envisions reduced poverty, increased sustainable economic and social development, improved quality of life for all Afghans, and an adequate supply of water for future generations. Table 1 summarizes key details of the Project.

Table 1: Afghanistan Water Resources Investment Program – Project 1 at a Glance

Project title Water Resources Development Investment Program – Project 1

Grant numbers Grant 0167-AFG(COL) Grant 0170-AFG

Total estimated project cost

$89.5 million $3.3 million

Approval and effectivity dates

6 October 2009; 8 January 2010

Financing sources COL / Asian Development fund: $86.6 million Counterpart funding: $2.9 million

Government of the United Kingdom: $3.3 million

Project outputs Project 1 has the following four components: (a) northern basins development; (b) Nangahar Valley Development Authority improvement; (c) flood management; and (d) project management and program development.

Executing and Implementing agencies

EA: Ministry of Finance IA: National Water Affairs Regulation Authority (NWARA, formerly known as Ministry of Energy and Water) IA: Ministry of Agriculture, Irrigation, and Livestock (MAIL)2

COL = concessional ordinary capital resources lending, EA = executing agency, IA = implementing agency. Source: Asian Development Bank (ADB). 25 Sep 2018. Project Data Sheet. Manila, Philippines

1 OAI was assisted by Lochan & Co., CPAs (collectively, the PIR team). Feedback received from MAIL and NWARA

in December 2019 was suitably incorporated in this report. 2 PMOs were established under the respective implementing agencies to the manage the day-to-day project

implementation activities.

2

II. SCOPE AND METHODOLOGY 4. As of the PIR cut-off date, 154 contracts amounting to $87.71 million had been awarded.3 The PIR team selected the 12 highest value contracts and PMO expenses for the review, with a total value of $65.31 million and accounts for $63.44 million of total disbursements under the Project. The team examined documentation related to procurement and financial management of 10 contracts, (72% of total contracts awarded; 75% of total Project disbursements), comprising 4 consulting services contract, 5 civil works contracts, and 1 supply of goods contract. The PIR team also reviewed the financial management-related documentation for 2 project management office (PMO) expenses charge accounts totaling $1.86 million (2% of total contracts awarded and total Project disbursements). Figure 1 depicts the PIR team’s review samples.

Figure 1: Contracts and Disbursements Reviewed

5. Through the desktop review of scanned procurement and financial management documentation and discussions with PMO staff, the PIR team (i) assessed the internal controls and capacity of the PMOs, (ii) examined procurement processes and related documentation for all procurement stages, and (iii) verified the appropriateness of Project disbursements and related financial management. The PIR team also reviewed the Project’s quarterly progress reports. The PIR team did not physically inspect project outputs. 6. Moreover, the PIR team analyzed how each finding could comprise project integrity in terms of weaknesses in accountability and control and threats to transparency and fairness.4

3 OAI sampled transactions from 7 August 2010 to 7 October 2019, the PIR cut-off date. 4 The three core principles of project integrity or ‘integrity pillars’ are the following: (i) Transparency (proper

documentation of key decisions, public disclosure of project information, and protection of confidential information);

(ii) Fairness (objective and reliable bidding process and requirements optimizing competition, impartial evaluation,

and credible complaints mechanism); and (iii) Accountability and control (accurate and timely project accounting

and reporting, eligibility of expenditures and timely payments; adherence to contract provisions, and adequate

project oversight and management).

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

87,705 82,848

65,315 63,442

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ounts

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in $

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Awar

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Con

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s R

evie

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Tot

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rant

Dis

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ts

Dis

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3

III. RESULTS A. Strength

7. Sound financial management practices. The MAIL and NWARA complied with the payment provisions of the contract agreements and ADB’s Loan Disbursement Handbook. Approvals and endorsements for financial transactions followed the established authorization limits. Disbursements to suppliers, consultants, and contractors, and PMO expenses, which the PIR team examined, were adequately supported and accurate. Also, the PMOs promptly provided the PIR team requested financial management documentation. B. Project Vulnerabilities

8. The PIR resulted in 17 findings of deficiencies in the procurement process or contract management across 10 of the 12 contracts reviewed. The PIR team rated each finding as high, medium, or low risk, so that the PMOs and ADB can prioritize corrective action.5

9. This report discusses the six high and medium-risk findings: four pertaining to procurement and two relating to contract management. The procurement findings principally result from the NWARA and MAIL BECs’ weak capacity in evaluating bids and reporting bid results, and PMOs’ shortcomings in maintaining project records. The contract management findings underscored the need for PMOs to ensure validity of contract insurance policies and timely and accurate progress reporting. Table 2 summarizes the high- and medium-risk findings.

Table 2: Procurement and Contract Management Findings

Finding Integrity Pillar Compromised

Number of Contracts Affected

in Respective PMOs

High Risk

1. Lack of due diligence in bid evaluation

Fairness NWARA – 3 MAIL – 1

2. Inaccuracies in bid evaluation report Transparency and fairness NWARA – 1

Medium Risk

3. Incomplete information in the bid evaluation report

Transparency NWARA – 1

4. Weak procurement records management system

Accountability and control & Transparency

NWARA – 6 MAIL – 1

5. Insurance policies did not fully cover the required period and amount

None (contractual issue) NWARA – 2

6. Insufficient details in quarterly progress reports

Accountability and control NWARA – 8 MAIL – 2

High-Risk Findings 10. Lack of due diligence in bid evaluation. The PIR team noted deficiencies in the BECs’ evaluation of four civil works contracts as shown in Table 3. While each of the deficiencies

5 Risks are defined as follows: (i) High: Immediate attention and prompt corrective action are required since failure to

take action could result in major adverse impact on the Project and the reputation of ADB and the Government of Afghanistan. Medium: Action is required since failure to take action could result in negative consequences on the Project and the reputation of ADB and the Government of Afghanistan. Low: The finding may not negatively impact the Project and ADB’s reputation, yet any corrective actions will result in increased efficiencies. The PIR team communicated the low risk findings to NWARA and MAIL for consideration and action as deemed necessary.

4

concerns different evaluation aspects, collectively, they reflect gaps in the BEC’s capacity to evaluate bids. If not addressed, these gaps may lead to awarding of contracts to unqualified bidders and may result in project losses.

Table 3: Lack of Due Diligence in Bid Evaluation Findings

Deficiency Contracts Affected

in Respective PMOs

Construction experience in key activities not evaluated NWARA: Contracts A and B

Errors in the BEC’s scrutiny of personnel capacity NWARA: Contract C

Available financial resources inappropriately assessed NWARA: Contract A MAIL: Contract D

11. Construction experience in key activities not evaluated. In two ICB civil works contracts,6 although the bidders summitted bid Form EXP-1(b)7 and/or supporting documents, the BECs deemed the information in these documents to be inadequate to determine the bidders’ compliance.8 The BER narrative and/or supplementary appendixes reflected that the BECs did not evaluate any of the bids against the key experience criteria. The BECs should have sought clarifications, at least from the otherwise substantially responsive bidders, so that the contract would be fairly and appropriately awarded to the responsive bidder.9 Alternatively, both contracts should have been rebid. Notwithstanding the finding, the contractors successfully completed the required works.10 12. Errors in the BEC’s scrutiny of personnel capacity. The PIR team established that the winning bidder of one contract provided insufficient years of work experience and failed to provide required information on key personnel in its bid.11 In particular, the bidder did not provide names in the bid form nor resumes for the hydraulic engineer and resettlement specialist. Moreover, the years of experience of three other key personnel were short of the requirements by two to six years, and one other expert did not have a resume. The BEC considered the absence of the name of the hydraulic engineer to be a minor deviation and did not detect the other deviations. The BEC did not seek clarification from the winning bidder, nor require it to rectify the deviation in key personnel prior to contract awarding, as required by the bidding documents.12 Thus, the contract should not have been awarded to this bidder.

6 The subject NWARA contracts are Contracts A and B. 7 This form describes the bidder’s past construction experience by providing information on contract details,

percentage of participation, and volume of work done. Bidders submitted any or a combination of bid Form EXP-1(b) and other supporting documents for evaluation of their compliance with the bidding document requirements for construction experience in key activities.

8 The PIR team independently assessed the substantially responsive bidders (identified in the BERs) to have not met the requirements since the bid forms, completion certificates, contracts, payment certificates, letters of acceptance, and/or photos of completed works that they provided did not clearly show that previously completed contracts in the last five years have scope of work covering: (i) common excavation, (ii) reinforced cement concrete, (iii) embankment and bank filling, (iv) stone masonry, (v) fixed wheel gates [applicable to Contract A only], and (vi) slide gates [applicable to Contract A only], which met or exceeded the threshold amounts specified in the bidding documents.

9 The PMO’s explanation that no clarifications were sought from the bidders because sufficient information was received contradicted the BER.

10 Contracts A and B were completed on 24 November 2016 and 16 January 2018, respectively, based on progress reports.

11 NWARA Contract C is the subject contract. 12 Section 3 Evaluation and Qualification Criteria, para 1.1. states that “Non-compliance with equipment and

personnel requirements described in Section 6 (Employer’s Requirements) shall not be grounds for bid rejection and such non-compliance will be subject to clarification and rectification prior to contract award.”

5

13. Available financial resources inappropriately assessed. In two ICB civil works contracts, the BECs incorrectly evaluated the second-ranked bidders’ available financial resources. In one of the contracts, the second-ranked bidder’s letter of credit did not show the available/unutilized balance, yet the BEC considered the credit line’s total amount.13 The BEC did not seek clarification from the bidder to establish the portion of the credit line that may be considered for evaluation purposes. In the other contract, the BEC incorrectly included fixed assets as a component of the second-ranked bidder’s available financial resources.14 In addition, one of the members of the same bidder’s joint venture reported questionable cash and cash equivalents in the form for its available financial resources (Form FIN-3). Specifically, the joint venture member indicated that its cash and cash equivalents amounted to $6.7 million, which was impossible as it cannot exceed the $6.5 million current assets in its audited financial statements. 14. Had the bids been evaluated correctly, both second-ranked bidders would have been disqualified for having insufficient financial resources. Although this did not have an impact on the awarding of the contracts this time, the Project could have been adversely affected if negotiations with the winning bidder had failed and the second-ranked bidders were selected.

15. Inaccuracies in bid evaluation report. In an ICB civil works contract,15 the winning bidder and a JV partner of the second-ranked bidder did not submit information on ongoing contractual commitments16 as required under the bid Form FIN-4.17 The BER, however, showed that the BEC considered these bidders to have submitted complete bids. Without the bid Form FIN-4, or the BEC’s analyses of ongoing contractual commitments against available financial resources, both the winning and second-ranked bidders should have been disqualified. Since there were no other substantially responsive bids, the contract should have been rebid. Medium-Risk Findings 16. Incomplete information in the bid evaluation report. In an NCB civil works contract, the BER and supplementary tables did not provide full and clear disclosure of all bid deficiencies identified.18 Table 4 sets out examples, including deficiencies in the bid of the winning bidder.

Table 4: Deficient Bids

Bidder Bids Forms Not Filled Out

Properly

Audited Financial Statements Submitted?

Bidder 1 None No

Bidder 2 FIN-4 No

13 NWARA Contract A is the subject contract. 14 MAIL Contract D is the subject contract. JV Members 1 and 2 incorrectly included fixed assets in their bid Form

FIN-3. The bidding documents defines available financial resources as liquid assets, lines of credit, or other financial resources (other than any contractual advance payments) that would meet the financial resources requirements indicated in bid Form FIN-4.

15 Contract A is the subject contract, which was awarded by NWARA. 16 Specifically, neither the bid Form FIN-4 nor any supporting attachment was provided by the bidder and JV partner. 17 The bid Form FIN-4 summarizes the other current contractual obligations of the bidder as of the bid submission

deadline. For a bidder to be assessed as having good financial health, its available financial resources should exceed the requirements of the contract being considered for award as well as the current financing needs of the contracts identified in bid Form FIN-4.

18 NWARA Contract E is the subject contract.

6

Bidder Bids Forms Not Filled Out

Properly

Audited Financial Statements Submitted?

Bidder 3 (winning)

FIN-1/-2/-4/-5, EXP-1, and EQU19

Yes

Bidder 4 None No

17. For the winning bidder, PMO explained that the BEC reviewed the audited financial statement, construction contract, and information provided by the relevant bank to assess the winning bid’s compliance. While the PIR team verified and confirmed PMO’s explanations, BER should contain clear and complete information to better inform ADB’s decision to issue its no-objection. 18. Weak procurement records management system. The NWARA PMO did not systematically maintain projects records.20 The NWARA PMO cited several reasons, including turnover of staff and lack of handover notes (e.g., the locations of documents were not easily identifiable). The NWARA PMO’s extensive delays and/or inability to provide project documents to the PIR team demonstrated lack of accountability and control over project records. Proper recordkeeping is critical to ensure transparency and fairness in bid evaluation. The PIR team observed a significant improvement in NWARA PMO’s ability to furnish procurement records in mid-2019 for contracts awarded from 2019 onwards after it took corrective action to strengthen its document retention system.21 19. Insurance policies did not fully cover the required period and amount. The PIR team observed that the insurance policies taken for two ICB civil works contracts did not fully cover the required insurance period and amount.22 The insurance policies protect the Project from losses arising from damage to or theft of (as applicable) equipment, materials, works, and contractor’s documents, among others. The PMO did not thoroughly check the adequacy of the insurance policies’ coverage upon contract awarding and variation. If not addressed, the Project remain exposed to financial loss and contractual issues if a contractor defaults on its contractual obligations. Details of defects noted in insurance policies are shown in Table 5.

19 Information on financial stability, experience, and equipment that the PIR team extracted from the supporting

documents demonstrates that the winning bidder sufficiently met the capacity and experience requirements of the bidding documents.

20 While the PIR team also experienced delays in the receipt of records from MAIL PMO, these were relatively minor and the subject missing records did not include bids and/or quotations.

21 Under its new system, the NWARA PMO creates digital/scanned copies of procurement and disbursement records, sets up contract-wise electronic folders, and uploads records in a cloud-based storage.

22 The subject contracts that were both awarded by NWARA are Contracts A and B.

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Table 5: Insurance Period Requirements and Deficiencies Noted

Contract Reference

Number of months to be

covered by the Insurance policy

Required Policy Coverage

(inclusive dates)

Number of Months Covered

by Submitted Insurance Policy

Number of Months, the

Project was Not Covered by Insurance

Contract A 32 months 20 January 2015 to 18 December

2016

23 months 9 months

Contract B 37.5 months 27 January 2017 to 26 January

2018

12 months 25.5 months

* In addition, the insured amount was short by $5.9 million.

20. Insufficient details in quarterly progress reports. A review of quarterly progress reports from 2010 to 2019 showed that:

(i) several reports lacked the contract references necessary to identify the exact location of the sites, sections of works covered, and the contractor responsible for the works;23

(ii) the progress reports did not adequately report on project implementation issues and corresponding corrective actions taken, other than with respect to social and environmental safeguards;

(iii) reports did not analyze physical progress against disbursements made under each contract; and

(iv) information was not consistently updated on a quarterly basis.

21. Lack of detail in progress reports diminishes accountability and control over project implementation because it may convey an unreasonably optimistic view of implementation progress. Issues that may require ADB’s attention may not be timely communicated. Other matters 22. Questionable justifications for contract variation. In an ICB civil works contract, the design and supervision consultant (DSC) failed to include critical bill of quantity (BOQ) items in the engineer’s estimates. As a result, bidders submitted bids without the BOQ items. The subsequent contract variation to account for missing BOQ items increased the contract amount by approximately 60%. 23. Based on the PIR engineer expert’s analysis, the explanations given by the DSC to justify the errors and/or omissions in the BOQ estimates were questionable. The PMO decided not to take action against the DSC in the interest of not further delaying the Project timeline.

23 Although there were indications of the general locations of the contract implementation sites, specific contract

references are important for clarity and accuracy given that other international financial institutions and/or donor agencies may have development interventions in the same general locations.

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IV. RECOMMENDATIONS 24. To improve the quality of procurement and contract implement in ongoing and future contracts under the Project, the PIR team recommends that

(i) the NWARA and MAIL PMOs:

(a) Strictly evaluate bidders’ eligibility, financial capacity, and personnel

experience following the prescribed evaluation and qualification criteria. The BEC should carefully review submitted bid forms against supporting documents and seek clarifications from bidders for discrepancies and/or deficiencies noted. The BEC should sufficiently document evaluation results, including the basis for procurement decisions made (e.g., a decision to not seek clarifications from bidders), in the evaluation report and supplement these with evaluation tables and appendixes (paras. 10 to 17).

(b) Project documents must be retained for the minimum duration prescribed in ADB’s Loan Disbursement Handbook. The record-keeping system must be in writing and (i) ensure systematic filing and updating of project records (e.g., both manual and electronic), and (ii) facilitate timely and effective turnover procedures during employee movements. The system must be applied to ADB-financed contracts that are ongoing. (para. 18).

(c) Provide up-to-date and clearly labeled contract-wise information, including contract management issues, in the succeeding progress reports. Summarize issues and actions taken/to be taken in progress reports for better tracking. (paras. 20 to 21).

(d) Include contract-wise analyses of physical progress (e.g., based on certified completion of construction progress/goods delivery) against financial progress (e.g., based on contractor payments) in succeeding progress reports. Ensure that physical progress of each contract is reasonably in line with its financial progress. (paras. 20 to 21)

(ii) the NWARA PMO:

(a) During pre-bid meetings, proactively provide detailed guidance to potential

bidders on the expected level of clarity in bids to fully comply with the issued bidding documents and relevant ADB rules and regulations. Ensure that pre-bid meetings are properly documented. Questions on interpretation of bid requirements must be fully addressed during the pre-bid meeting or, subsequently, in addendum/addenda to the bidding documents (paras. 10 to 17).

(b) Appoint experienced permanent BEC members to ensure continuity in bid evaluation expertise. A BEC must have a mix of qualified technical and financial experts to adequately cover all critical bid evaluation aspects. BEC members must be appointed in writing and evidence of their appointment must be kept in the project files (paras. 10 to 17).

(c) Should consider the use of Dari translation of bidding documents for selected contracts to be implemented during the next phase of the Project to aid potential bidders in understanding the bidding requirements (paras. 10 to 17).

9

(d) In future contracts ensure that contractors obtain and submit fully compliant insurance policies. Submitted insurance policies should be checked annually upon their renewal, when the duration and/or amount is varied, and whenever there are significant project delays. Evidence of completion of review of insurance policies should be maintained. (para. 19).

(e) Thoroughly review biddings documents prior to seeking ADB’s no-objection or issuance of bidding documents to prospective bidders (para. 22).

(iii) the ADB’s:

(a) Project team should coordinate with PPFD to explore the possibility of organizing a business opportunities fair in Afghanistan or in the region so that more local firms become familiar with ADB’s procurement policies and procedures (paras. 10 to 17).

(b) Project team must review bids/proposals (for prior review contracts) when there are concerns on bid/proposal evaluation aspects, before providing ADB’s “no objection,” and document the review and comments in the electronic Procurement Approval Forms (paras. 10 to 17).

(c) AFRM staff who are supporting ADB projects further enhance their procurement technical knowledge by obtaining PASS accreditation (paras. 10 to 17).

(d) PPFD considers out posting a procurement specialist to train EAs and IAs, and timely provide inputs to AFRM on procurement issues, as and when needed (paras. 10 to 17).

(e) Project team, in consultation with PPFD, collaborates with the Ministry of Finance and PMOs to determine the extent of procurement and/or project management (refresher training that should be provided to PMO and BEC members (paras. 10 to 21).

V. CONCLUDING REMARKS 25. Despite the difficulties in implementing ADB-financed projects in a fragile and conflict afflicted country like Afghanistan, the PIR team observed that PMO staff are dedicated and has been implementing continuous process and system improvements. 26. Notwithstanding the progress made by the PMOs, their capacity may be further enhanced, with assistance from ADB, by attending trainings in the areas of procurement, project monitoring, ADB’s Anticorruption Policy, and other guidelines and best practices. Stricter evaluation of bids following prescribed evaluation criteria, and clear and accurate BERs are imperative to ensure that evaluation process and procedures are fair and transparent. Finally, better project reporting will identify and rectify project issues more effectively and timely.

27. OAI requests CWRD through AFRM to monitor MAIL’s and NWARA’s implementation progress and provide periodic updates to OAI by sharing BTORs after each review mission. 28. The PIR team acknowledges and thanks the officers and staff of MAIL and NWARA, their respective PMOs, and the MOF for their cooperation and assistance during the PIR and for addressing shortcomings identified during the PIR fieldwork. The PMOs’ corrective actions to address Project document provision challenges during and shortly after the PIR fieldwork is evidence thereof. The PIR team also appreciates the support received from ADB’s Afghanistan

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Resident Mission in the planning and execution of the PIR. OAI remains available to discuss matters in this report or issues that may affect the integrity of Project implementation.