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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 63764-CL
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$40 MILLION
TO THE
REPUBLIC OF CHILE
FOR A
TERTIARY EDUCATION FINANCE FOR RESULTS PROJECT III
FEBRUARY 9, 2012
Human Development Sector
Bolivia, Chile, Ecuador, Peru and Venezuela Country Management Unit
Latin American and the Caribbean Regional Office
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization
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CURRENCY EQUIVALENTS
November 29, 2011
Currency Unit = Chilean Pesos
CLP522 = US$1
CLP1 = US$0.002
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AFD Direct Fiscal Grant
APL Adaptable Program Loan
CAE State Guaranteed Student Loan Program, acronym in Spanish
CD Convenios de Desempeño, Performance Agreement
CDI Convenio de Desempeño Institucional, Institutional Performance Agreement
CDF Convenio de Desempeño Mediano, Focused Performance Agreement
CFT Technical Training Centers
CGR Contraloría General de la República, Supreme Audit Institution
CONICYT Comisión Nacional de Investigación Científica y Tecnológica, National Council
for Scientific and Technological Research
CONFECH Conferederación de Estudiantes de Chile, Chile‘s Student Confederation
COREHEG Tertiary Thematic Group
CPS Country Partnership Strategy
CRUCH National Council of Rectors of Chilean Universities
CUT Country‘s main trade union
DAG Departamento de Administración General, General Administration Department
DC Direct contracting
DFI Department of Institutional Financing
DIPLAP Dirección de Planificación y Presupuesto
DIPRES División de Presupuestos, Division of Budget
DIVESUP División de Educación Superior, Division of Higher Education
FA Framework Agreement
FECH Federación de Estudiantes de Chile, Chile‘s Student Federation
FIC Innovation Fund for Competitiveness, acronym in Spanish
FM Financial Management
FMA Financial Management Assessment
GoC Government of Chile
ICB International Competitive Bidding
ICU Institutional Coordination Units
IFR Interim financial report
IP Professional Institute
IPPF Peoples Planning Framework
ISA International Standards on Auditing
MH Ministry of Finance
MINEDUC Ministry of Education
NCB National Competitive Bidding
NPV Net Present Value
OECD Organization for Economic Co-operation and Development
OP/BP Operational Policies and Bank Procedures
ORAF Operational Risk Assessment Framework
PAD Project Appraisal Document
PDO Project Development Objective
PIU Project Implementation Unit
PMI Plan de Mejoramiento Institucional, Institutional Improvement Plan
POA Project Annual Operational Work
POM Project Operational Manual
PSU Prueba de Selección Universitaria (University Selection Test)
R&D Research and development
SEPA Procurement Plan Execution System
SIES Tertiary Education Information System
SIGFE Sistema de Información para la Gestión Financiera del Estado, National
Integrated Financial Management System
SOE Statement of Expenditures
TEI Tertiary Education Institution
TEIs Tertiary Education Institutions
TFP Total factor productivity
UCI Unidades de Coordinación Institucional, Institutional Coordination Units
UCP University-Community Partnerships for Social Action Research
Regional Vice President: Hasan A. Tuluy
Country Director: Susan G. Goldmark
Sector Director: Keith Hansen
Sector Manager: Chingboon Lee
Task Team Leader: Michael Crawford
CHILE
TERTIARY EDUCATION FINANCE FOR RESULTS PROJECT III
TABLE OF CONTENTS
Page No.
1. STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 1
C. Higher Level Objectives to which the Project Contributes .......................................... 4
2. PROJECT DEVELOPMENT OBJECTIVES ................................................................5
A. PDO............................................................................................................................... 5
B. Project Beneficiaries ..................................................................................................... 5
C. PDO Level Results Indicators ....................................................................................... 5
3. PROJECT DESCRIPTION ..............................................................................................5
A. Project Components ...................................................................................................... 5
B. Project Financing .......................................................................................................... 6
Lending Instrument ............................................................................................................. 6
Project Cost and Financing ................................................................................................. 6
C. Lessons Learned and Reflected in the Project Design .................................................. 6
4. IMPLEMENTATION .......................................................................................................7
A. Institutional and Implementation Arrangements .......................................................... 7
B. Results Monitoring and Evaluation .............................................................................. 8
C. Sustainability................................................................................................................. 9
5. KEY RISKS AND MITIGATION MEASURES ............................................................9
A. Risk Ratings Summary ................................................................................................. 9
B. Overall Risk Rating Summary .................................................................................... 10
6. APPRAISAL SUMMARY ..............................................................................................10
A. Economic and Financial Analyses .............................................................................. 10
B. Technical ..................................................................................................................... 11
C. Financial Management ................................................................................................ 12
D. Procurement ................................................................................................................ 13
E. Social (including Safeguards) ..................................................................................... 14
F. Environment (including Safeguards) .......................................................................... 14
Annex 1: Results Framework and Monitoring .........................................................................15
Annex 2: Detailed Project Description .......................................................................................18
Annex 3: Implementation Arrangements ..................................................................................21
Annex 4: Operational Risk Assessment Framework (ORAF) .................................................40
Annex 5: Implementation Support Plan ....................................................................................43
Annex 6: Economic and Financial Analysis ..............................................................................45
PAD DATA SHEET
Chile
TERTIARY EDUCATION FINANCE FOR RESULTS PROJECT III
PROJECT APPRAISAL DOCUMENT .
Latin American and the Caribbean Region
Human Development Unit
Basic Information
Date: February 9, 2012 Sectors:
Tertiary education (100%)
Country Director: Susan G. Goldmark Themes: Education for the knowledge economy (100%)
Sector Manager/Director: Chingboon Lee / Keith Hansen EA Category: C
Project ID: P111661
Lending Instrument: SIL Team Leader(s): Michael F. Crawford
Does the project include any CDD component? NO
Joint IFC: .
Borrower: Republic of Chile
Responsible Agency: Division of Higher Education, Ministry of Education
Contact: Juan José Ugarte Title: Director, Division of Higher Education, Ministry of Education
Telephone No.:
(56-2) 390-4401 Email: [email protected]
.
Project Implementation Period: Start Date: 06/15/2012 End Date: 10/31/2016
Expected Effectiveness Date: October 31, 2012
Expected Closing Date: October 31, 2016 .
Project Financing Data(US$M)
[ X ] Loan [ ] Grant [ ] Other
[ ] Credit [ ] Guarantee
For Loans/Credits/Others
Total Project Cost : 160.00 Total Bank Financing : 40.00
Government: 120.00 Financing Gap : 0.00 .
Financing Source Amount(US$M)
BORROWER/RECIPIENT 120.00
IBRD 40.00
IDA: New
IDA: Recommitted
Others
Financing Gap
Total 160.00 .
Expected Disbursements (in USD Million)
Fiscal Year 2012 2013 2014 2015 2016
Annual 5 10 10 10 5
Cumulative 5 15 25 35 40 .
Project Development Objective(s)
The objective of the Project is to improve quality and relevance for students in tertiary education by strengthening the link between funding of tertiary
education institutions and accountability for performance. .
Components
Component Name Cost (USD Millions)
1. Performance Agreements
2. Policy Support and Project Management
Total estimated cost: US$155 million; Bank: US$38 million
Total estimated cost: US$5 million; Bank: US$2 million
.
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .
Does the project require any exceptions from Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ X ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Performance Subprojects Recurrent Yes Due Date N/A Frequency Throughout
For the purposes of carrying out Part 1 of the Project, the Borrower, through MINEDUC, shall after having selected a Performance
Subproject in accordance with the criteria, guidelines and procedures set forth in the Operational Manual, and prior to the carrying out of
said Performance Subproject by the pertinent TEI, enter into an agreement with said TEI (―Subproject Agreement‖), for the provision of a
Grant for the implementation of a Subproject, under terms and conditions approved by the Bank and included in the Operational Manual.
Name Safeguards Recurrent Yes Due Date N/A Frequency Throughout
1. The Borrower, through MINEDUC, shall and shall cause the TEIs to: (a) implement the Project in accordance with the IPPF, when
applicable; (b) comply with the procedures detailed in said IPPF for screening, evaluation, implementation and monitoring of Performance
Subprojects; and (c) implement the pertinent indigenous peoples development plans, in accordance with their terms and in a manner
acceptable to the Bank.
2. The Borrower, through MINEDUC, shall, and shall cause the TEIs to ensure that any works to be financed under the Performance
Subprojects do not involve any Resettlement.
Name Special Provisions Recurrent Yes Due Date N/A Frequency Throughout
In addition and without limitation to any other provisions set forth in this Section or the Procurement Guidelines, the following principles of
procurement shall expressly govern all procurement of goods, Non-Consulting Services and works under National Competitive Bidding
procedures:
The lowest evaluated bid shall be selected for contract award.
There shall be no prescribed minimum number of bids to be submitted in order for a contract to be subsequently awarded.
ChileCompra, provided that the bidding documents are acceptable to the Bank.
The Mercado Público Framework Agreements (MPFA) may be used as an alternative to Shopping, as determined by the Bank,
provided that: (A) the specific MPFA does not restrict foreign competition, and is limited to a maximum duration of 3 (three)
years; and (B) the maximum aggregate amount for the use of an specific MPFA by each TEI set in the procurement plan is in no
case higher than the applicable Shopping maximum amount, and shall be agreed with the Bank.
In addition and without limitation to any other provisions set forth in this Section or the Consultant Guidelines, the following principles of
procurement shall expressly govern all employment of consultants:
There shall be no prescribed minimum number of proposals to be submitted in order for a contract to be subsequently awarded.
For small assignments not exceeding US$200,000 equivalent, the procedures of ChileCompra may be followed as a consultants'
selection method acceptable to the Bank. .
Team Composition
Bank Staff
Name Title Specialization Unit
Michael F. Crawford TTL Senior Education Specialist LCSHE
Maria Paulina Mogollón STC Technical Project Design & Safeguards LCSHE
Christopher Sharp STC Consultant LCSHE
Diego Ambasz Operations Officer Operations Officer LCSHE
Francisco Rodriguez Procurement Specialist Procurement LCSPT
Ana Lucía Jimenez Financial Management Specialist Financial Management LCSFM
Mariana Montiel Senior Council Lawyer LEGLA
Maria Elena Paz Gutzalenko ACS Program Assistant LCSHE
Guillermo Toral JPA Operations LCSHE
Non Bank Staff .
Locations
Country First Administrative
Division
Location Planned Actual Comments
.
1
1. STRATEGIC CONTEXT
A. Country Context
1. Chile is an upper middle income country which recently acceded to full membership in
the OECD. It has one of the most politically stable systems in Latin America, strong institutions
and a solid record of economic growth during the last two decades. A center-right administration
took office in March 2010, following on 20 years of continuous center-left governments. Despite
differences in political stance, the current Government is pursuing largely centrist policies with
overall goals similar to those of previous governments: promoting reforms to boost growth,
investing in human capital, and tackling poverty and inequality. Within this context, Chile is
challenged to reverse declining relative growth performance and insufficient innovative capacity
so that it can grow the size and wealth of its middle class. Chile's growth has slowed from an
average of 7.6% during the period of 1986-1997 to 3.9% in the period of 2000-2010.1
2. The Government of Chile (GoC) has launched a development agenda which sets the stage
for achieving high-income status by 2018. The strategic areas that the GoC is emphasizing to
reach this goal are: i) achieving greater competitiveness, including modernization of the state; ii)
improving job creation and job quality; and iii) promoting investment, including in human
capital. The Government has embraced increased investment and increased policy attention to
education at all levels as a key pillar of economic and social progress. While the Government
seeks to implement this agenda, it faces youth who want to see educational opportunity and
educational quality improved immediately and who are impatient for change.
B. Sectoral and Institutional Context
3. Chile‘s tertiary education system is diversified geographically and institutionally. Its
tertiary education institutions fall into three categories: Technical Training Centers (CFTs),
Professional Institutes (IPs) and Universities. Universities are further divided into two categories:
the traditional public and private universities who are members of the National Council of
Rectors of Chilean Universities (CRUCH for its acronym in Spanish), and the newer universities,
typically founded after the 1980s, who do not belong to it. Degree programs in Chile range from
short technical degrees to full doctoral programs. Degree length usually varies by the category
of tertiary education institution (TEI): CFT training typically lasts two years, IP professional
degree courses four years and university degree courses five years. Universities also offer
graduate programs and diplomas, including Master‘s and PhD programs. In 2010, 87 of Chile‘s
approximately two hundred (200) tertiary education institutions were accredited.
4. With a population close to seventeen million people, Chile has almost one million
students in tertiary education. A third of these attend CRUCH universities, a third private
universities, and the remaining third IPs and CFTs. Equity has improved significantly over the
past decade, with the number of students from the lowest two quintiles tripling to reach 25% of
total enrollment.
1 Rodrigo Fuentes & Fabián Gredig & Mauricio Larraín, 2007. "Estimating the Output Gap for Chile," Working
Papers Central Bank of Chile 455, Central Bank of Chile.
2
Institution Type Enrollment (2010)
CRUCH Universities 310,890
Private Universities 323,843
IPs 224,339
CFTs 128,571
Total 987,643
5. The Government finances TEIs via several mechanisms: (i) the Direct Fiscal Grant
(Aporte Fiscal Directo, AFD), which accounts for one-third of tertiary education public
resources and is allocated to CRUCH institutions; (ii) the Indirect Fiscal Grant (Aporte Fiscal
Indirecto, AFI), which accounts for about 5% of public spending and is a type of voucher
provided to the top 27,500 scorers on the university entrance exam; (iii) the competitively-
allocated funds available for R&D and quality improvements; and (iv) the student financial aid
packages (grants and loans) which are transferred to TEIs in students‘ names.
6. While Chile has made commendable progress in expanding access and improving equity,
the system still faces numerous challenges. The OECD/World Bank Review of Tertiary
Education (2009) noted that Chile now requires a ―second generation‖ of reforms that focus on
more complex challenges such as linking funding to performance and accountability, and
improving the quality and relevance of classroom instruction. Low quality has been linked to
the low percentage of PhD holders in Chile‘s professorate; raising this percentage is an objective
of policy and has been for more than a decade.
7. More closely linking funding to performance is a pressing need. In 2010, ~87% of
resources given directly to TEIs were allocated according to historical criteria and not
necessarily to merit.2 The Government can leverage progress on specific challenges like quality
and relevance if it ties incremental funding to progress against agreed indicators. In a complex
system like tertiary education, quality and relevance overlap considerably and their improvement
is multidimensional. By making funding competitive and linking it to accountability, the
Government incentivizes a range of responses. Each response is appropriate to the individual
institution while contributing to improved quality and relevance in the aggregate.
8. Chile‘s challenges for quality relate to (i) how to make curriculum and teaching practices
more rigorous and effective; (ii) how to promote institutional management that both facilitates
and requires high quality teaching and learning; and (iii) how to raise academic readiness for
students—especially first generation students—who may have had mediocre secondary
education and are not prepared to succeed in tertiary-level courses. Improving the quality of
pedagogy schools, which train the nation‘s primary and secondary teachers, is a critical corollary
to this.
9. With respect to relevance, the challenges involve (i) replacing the mandatory theoretical
content in many degree programs with content that promotes the skills and competencies
2 Calculated as funds from the Direct Fiscal Grant (AFD) over funds from MECESUP and the AFD. For year 2010
in Chilean pesos: 146,464,177 / 167,970,490.
3
required by employers; (ii) reaching a critical mass of highly qualified professors who can devise
and deliver curricula that, inter alia, connect to labor market needs; and (iii) shifting policy to
encourage students to seek technical and other non-academic degrees, through shorter programs
with closer connections to employment prospects.
10. Despite tremendous recent progress, concerns for equity remain a key issue. Social
expectations regarding government provisions of tertiary education have risen, tolerance for debt
has dropped, and policy mechanisms are challenged to respond.
11. Finally, the sector requires stronger institutional and regulatory capacity, especially in the
Ministry of Education. The size and complexity of Chilean tertiary education has grown
considerably in the last twenty-five years, creating the need for corresponding changes in the
institutional and regulatory agencies.
12. The Government is pursuing a four-pronged strategy to address the challenges in the
sector: (i) increasing resources for the sector; (ii) maximizing the use of performance-based
funding; (iii) improving institutional and regulatory capacity; and (iv) making student finance
more concessionary to address equity concerns.
13. The Government has recognized the need to invest more heavily in tertiary education, as
part of a plan to improve resources for all levels of education. The proposed budget for tertiary
education for 2012 represents a 15% increase over the previous year. The upward trajectory of
real resources for the sector is expected to continue.
14. The Government‘s strategy for the education sector has sought to maximize the use of
performance-based funding mechanisms to channel additional resources to it. By making
institutions compete for incremental resources, and by linking funding to agreed targets in
priority areas, the Government intends to leverage improvements in the quality and relevance of
education, and in the management of educational institutions.
15. The Government has also recognized the need for improved regulatory capacity. It is
seeking to create an Under-Secretariat for Tertiary Education to allow a higher profile for policy
and more resources to be dedicated to policy formulation and implementation. Within the
Under-Secretariat, it has sought to formalize the creation of the Department of Institutional
Financing (Departamento de Financiación Institucional, DFI), with the explicit mandate of
rationalizing and optimizing direct public funding of TEIs. Finally, the Government seeks to
create a Superintendence for Tertiary Education as an agency that can implement policies to
increase transparency and accountability.
16. As part of the strategy to make continued progress on equity, the Government created the
State Guaranteed Student Loan Program (Crédito con Aval del Estado, CAE) in 2005—300,000
qualified students from lower income families have benefitted to date—expanded existing
scholarship (grant) programs, and created two new ones to serve low-income students. Currently
the Government is seeking to lower the real interest rate on CAE loans from 5.6% to 2%. It has
also sought to change the legal sanctions facing 110,000 borrowers from the University Credit
4
Solidarity Fund (Fondo Solidario de Crédito Universitario, FSCU) who are in default. Such
changes remove punitive sanctions on current and future borrowers in default.
17. Over the past few years, the Government has also sought the World Bank for advice and
resources. The World Bank has supported Chile‘s tertiary education sector since 1997 through
the 1998 – 2005 Higher Education Improvement Project – MECESUP1 (Ln.4404, P055481) and
the 2005-2010 Tertiary Education Finance for Results Project – MECESUP2 (Ln.7317,
P088498). Through these projects, quality improvement was competitively funded, performance
agreements were piloted, and the accreditation system and the tertiary education information
system were created, among others. On the knowledge front, in 2009 the World Bank and the
OECD published a review of the tertiary system, ―Reviews of National Policies for Education:
Tertiary Education in Chile‖. The publication was widely disseminated and discussed in Chile.
In 2010, a subset of the World Bank/OECD team carried out a review of the Becas Chile
Program, ―Human Capital Formation Abroad: A Review of Chile‘s Higher Education
Scholarships Programme‖. In 2011, the World Bank analyzed the effectiveness of the CAE
Program, resulting in ―Chile‘s State-Guaranteed Student Loan Program: Analysis and
Recommendations‖. Throughout this period, the World Bank drew on its deep, evidence-based
tertiary education work in Latin America and beyond, and on the combined knowledge of the
Tertiary Education Thematic Group (Coreheg).
18. The rationale for Bank involvement in Chilean tertiary education stems from the lengthy
and substantive partnership that Chile has forged with the Bank in tertiary education since 1997.
The duration and intensity of this partnership is a testament to the fit between the Bank global
knowledge and skills and Chile‘s needs. It has involved fourteen years of continuous co-
financing and technical assistance on the gamut of policy issues. Along with the OECD, the
Bank is one of the non-Chilean institutions with the deepest knowledge of Chilean tertiary
education. The Bank has also been a conduit for Chile to profit from international best practice
in tertiary education and to share its innovative reforms globally. The Bank is active in every
region of the developing world promoting increased quality, relevance, and access to tertiary
education; its networks and knowledge products create value for clients seeking innovative
reform.
C. Higher Level Objectives to which the Project Contributes
19. By helping the Government implement its plan for increasing quality and relevance at
participating TEIs, the Project would continue to develop Chile‘s human capital. This, in turn,
would contribute to the higher level objectives of creating more and better socially and
economically useful skills for the country and its people.
20. The current World Bank Group's Country Partnership Strategy (CPS), for the Period FY
11-FY16, Report 57989, discussed by the Executive Directors on January 11, 2011, aims to
support the GoC‘s vision of becoming a high-income country by 2018. A key factor in
achieving this vision is improving the quality of education. The CPS focuses its intervention in
three areas: (i) Public Sector Modernization, (ii) Job Creation and Equity Improvement, and (iii)
Sustainable Investment Promotion. This Project advances the second of these by scaling up the
use of performance-agreements that improve the quality of tertiary education and focus it on
priority areas relevant to increased competitiveness and employment.
5
2. PROJECT DEVELOPMENT OBJECTIVES
A. PDO
21. The objective of the Project is to improve quality and relevance for students in tertiary
education by strengthening the link between funding of tertiary education institutions and
accountability for performance.
B. Project Beneficiaries
22. The primary target groups are:
(a) Current and future tertiary education students. Students will benefit from increased
quality of education, more remedial classes and services, shorter degree programs,
more coherent curricula, more online course material, new and better PhD programs
and teachers, and more exchange opportunities with other universities both
domestically and abroad.
(b) Academics and staff. Academic staff will benefit from more investments in their
human capital, an increased ability to conduct research and development with better
equipment, and more exchange opportunities with academics in other universities
both domestically and abroad.
C. PDO Level Results Indicators
23. The proposed MECESUP3 project will seek to: (i) improve faculty qualifications; (ii)
shorten actual time to graduation; (iii) increase retention of first-year students; and (iv) raise
employer perception of quality and relevance of graduates of MECESUP3-supported TEIs, as a
proxy for increased employability and wage premiums. This will be done by increasing the
amount of public funding executed under performance-based agreements.
3. PROJECT DESCRIPTION
A. Project Components
24. The Project would achieve its development objective through the implementation of the
following two components.
25. Component 1. Performance Agreements (Total: US$155 million, Bank: US$38
million). Provision of support to TEIs to strengthen the link between funding and accountability
for performance, through the carrying out of Performance Subprojects.
26. Component 2. Policy Support and Project Management (Total estimated cost: US$5
millions; Bank: US$2 millions).
6
a. Provision of policy support and studies needed for the design and implementation of the
tertiary education reforms and potential institutional arrangements.
b. Provision of support to DIVESUP in the administration, monitoring, coordination and
supervision of the Project.
B. Project Financing
Lending Instrument
27. The lending instrument used would be a Specific Investment Loan (SIL) at the
Government‘s request.3 This is appropriate given the flexible nature of the instrument and the
specificity of the investment.
Project Cost and Financing
28. The total cost of the Project is estimated at US$160 million, US$120 million of which
constitutes the GoC‘s contribution.
Project Components Project cost
(US$M)
IBRD Financing
(US$M) % Financing
1. Performance Agreements
2. Policy Support and Project
Management
155
5
38
2
24.52%
40%
Total Project Costs
Interest During Implementation
Front-End Fees
Total Financing Required
160
40
25%
C. Lessons Learned and Reflected in the Project Design
29. The previous MECESUP1 and MECESUP2 provided valuable learning opportunities
regarding tertiary education reforms, leaving lessons that have proved useful in the design of
MECESUP3. The primary lesson from MECESUP2 is that performance agreements are
successful in changing institutional culture. These agreements were public commitments of
individual institutions to seek improvements in exchange for a Government commitment to fund
them. The experience of the MECESUP2 pilot CDs is that the process of taking such a public
decision, signing a contract, and committing an institution to specific changes is a powerful
catalyst to change. Some observers believed that the public commitment trumped the financial
resource as the true engine of change in the MECESUP2 pilot CDs. Once institutions have
publicly committed to a program of reforms, they are motivated to deliver on the promises.
3 The previous MECESUP2 Project constituted the first phase of an Adaptable Program Loan. However, as made
clear by the Implementation Completion and Results Report for that Project (Report No ICR00001840, June 24,
2011, page 10), the Government requested a change to a more adequate lending instrument.
7
30. Competent and stable leadership and team are a key component of success. The General
Coordination of MECESUP already had institutional experience with the MECESUP1 project,
which facilitated implementation of MECESUP2. More importantly, however, the team was
composed of competent and well-prepared professionals committed to Project goals. Little
turnover allowed for continuity and good leadership facilitated Project coordination, execution
and credibility. This same team is in charge of implementing MECESUP3.
31. Realistic timelines for implementation require taking into account the Borrower‘s cycle
for budgetary approval in Congress and the internal approval processes for the various legal
documents needed throughout the life of the Project. In MECESUP2, resources awarded in one
fiscal year could only be disbursed the following year, initially triggering some implementation
delays. The time required for internal approval processes is highly variable, and adequate
flexibility has been included in MECESUP3 project timelines.
32. Execution of performance-based funding requires experienced staff to mediate between
the TEIs implementing the agreements and the Ministry of Education. As implemented, the
performance agreements depended heavily on negotiators hired specifically to mediate between
the TEI Presidents and the Ministry of Education. Without suitable negotiators, national policy
goals would have been difficult to reconcile with the reality of the institutional environments
where they were meant to be implemented. The highly qualified negotiators helped the
agreements gain traction. Generally these were former Presidents or academic Vice-Presidents of
universities themselves, familiar with and well regarded in the academic community. Their past
experience gave them credibility with both parties to the negotiations, and allowed the
negotiations of performance metrics to be productive and grounded in the reality of the situation
of each institution. Further, these negotiators were instrumental in developing specific goals for
each university and the detailed indicators used to measure progress in achieving them. These
negotiators would be an integral component of MECESUP3 CDs.
4. IMPLEMENTATION
A. Institutional and Implementation Arrangements
33. The agency responsible for the implementation of both Components 1 and 2 would be
DIVESUP. The group of people within DIVESUP in charge of implementation, referred to as the
General Coordination of MECESUP, have 13 years of experience working with the World Bank
in the previous MECESUP1 and 2 projects. Stable leadership continues at its helm and
continuity characterizes its team.
34. The General Coordination of MECESUP has four technical directorates (one for each CD
type) and three support units (Administration, Analysis and CD support, and Communications)
to perform its tasks. Each of these has clearly defined tasks in their respective area of
responsibility.
35. Competitive rounds would be held to select those TEIs with which the Ministry of
Education signs performance agreements. All accredited TEIs may compete for funds by
submitting project proposals with clearly defined and measurable objectives, strategies, action
plans, milestones, goals, and performance indicators.
8
36. Proposals would be evaluated by Evaluation Committees, one for each CD type, which in
each case would be led by the technical directorates of the General Coordination of MECESUP
and would include at least five prestigious professionals selected by the Head of DIVESUP. The
Evaluation Committees, on the basis of a closed list of evaluation criteria, would submit their
recommendations for selection to the Selection Committee.
37. The Selection Committee would be responsible for selecting, on the basis of the
recommendations from the Evaluation Committees, those proposals that would be invited to
negotiate and sign a CD. The Selection Committee would be led by the Head of Division of
Higher Education, and would be composed of one professional selected by the Subsecretary of
Education, the General Coordinator of MECESUP, and at least three prestigious professionals
selected by the Head of DIVESUP. Formally, the selection is made by the Minister of Education,
upon recommendation of the Selection Committee. Selected TEIs are invited to fully develop
their proposals, negotiating directly with the Ministry of Education to establish the contractual,
budgetary and technical terms of their agreements.
38. TEIs would carry out the activities as per the CDs and would be responsible for
conducting procurement and financial management in accordance with the stipulations of the
Operational Manual and the requirements of the General Coordination of MECESUP (and of the
Bank). MECESUP2 sponsored the creation of Institutional Coordination Units (ICU) in TEIs
receiving project funds. ICUs had an upstream role of helping TEIs prepare funding proposals
and a downstream role focused on implementation, fiduciary management and monitoring and
evaluation. ICUs would continue in MECESUP3, with additional ICUs sponsored in TEIs that
lack one. There would be significant capacity-building efforts on behalf of the MECESUP team
to strengthen and upgrade CD management.
B. Results Monitoring and Evaluation
39. The majority of the selected MECESUP3 PDO level and intermediate results indicators
(partially stated above and in Annex 1 respectively) are currently tracked by Chile‘s Tertiary
Education Information System (Sistema de Información para la Educación Superior, SIES). The
MECESUP2 project financed the establishment of SIES, which collects, analyzes, tracks and
disseminates a variety of information and statistics related to tertiary education and labor market
outcomes for graduates by institution. These include faculty qualifications, duration of study
across degree programs, retention rates, overall enrolment by institution and degree program,
employment rates and expected salary levels at graduation and over time. TEIs report data
directly to SIES and 99% of institutions are compliant with the system. The SIES statistical
compendium allows for straightforward analysis of the impact of changes in policies on high-
level metrics, hence making monitoring and evaluation for the Project both easy and reliable.
40. At the TEI level, Institutional Coordination Units (ICU) would monitor and evaluate the
progress of performance agreements. In addition to yearly revisions of each performance
agreement to verify progress against goals, midterm reviews of each CD would be conducted
with national and international experts.
9
C. Sustainability
41. The GoC demonstrates a strong commitment to and ownership of the MECESUP
program and its relevant policies. Since the closing of MECESUP2 on December 31, 2010 the
Government has continued to finance the activities of the General Coordination of MECESUP. It
will continue to do so until MECESUP3 is effective. In addition, the Ministry of Education
recently institutionalized MECESUP, absorbing the team, renaming it informally as the
Department of Institutional Financing (DFI), and giving it responsibilities for all public funding
of TEIs. This type of arrangement shows the continuity and permanence of MECESUP activities
for the GoC.
42. The GoC has also addressed factors that are critical to the sustainability of the Project.
(a) Upgrading human capital: DIVESUP continues to upgrade the quality of its human
capital and improve its internal efficiency. Several new PhDs have been brought on
board, including two within the General Coordination of MECESUP, and one in
charge of managing the newly created Center for Higher Education Studies. This
center will further improve internal efficiency by providing opportune evidence and
information for policy decisions.
(b) Increasing the reach of accountability for results: Beyond MECESUP3 funds, the
Government is exploring ways to change the way base funding is allocated to public
universities. The President and Minister of Education have discussed a proposal to
move towards a performance-based system for an additional percentage of base
funding.
(c) Increasing access and equity: The GoC has enhanced access and equity in tertiary
education through student scholarships and loans. CAE has grown exponentially
and now has over 300,000 borrowers (more than a fourth of Chile‘s undergraduate
students), and over 60% of them come from the lowest two income quintiles.
5. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary
Stakeholder Risk Substantial
Implementing Agency Risk Low
- Capacity Low
- Governance Low
Project Risk Low
- Design Low
- Social and Environmental Moderate
- Program and Donor N/A
- Delivery Monitoring and Sustainability Low
10
Overall Implementation Risk Moderate
B. Overall Risk Rating Summary
43. The overall risk rating of the Project is considered to be moderate, largely driven by the
substantial stakeholder risk. The political context for tertiary education has turned volatile since
student protests in June 2011 resulted in major social and political conflict. The protesters have
won notable concessions from the Government, most which have constituted an acceleration or
intensification of planned policy changes. However, students have articulated demands that seek
fundamental change. The initial call for greater quality and equity has been augmented by calls
for ―a new model‖ where tertiary education is publicly provided (―free‖ for students), of high
quality, and where de facto and de jure profits are prohibited. Nevertheless, to date student
leaders have not rejected the idea that increased investment would be accompanied by greater
accountability for results. In fact, greater investments in quality are a key demand of protesters,
especially in public universities. In this sense, the MECESUP Program is aligned with most
stakeholder demands. A small likelihood exists that either: (i) demands could reverse this
position and reject accountability measures; or (ii) strikes could continue indefinitely, preventing
TEI administrators from carrying out normal Institutional Improvement Plans. For both, the
likelihood is low but the impact would be high. The risks associated with the protests are being
mitigated mainly through Government negotiations with the main Chilean stakeholders, and also
through continuous Bank policy dialogue and demand-driven knowledge services.
6. APPRAISAL SUMMARY
A. Economic and Financial Analyses
44. The economic and financial rationale behind the project is sound. On the one hand,
analyses show there is high return on the investment, and on the other, the Project is not expected
to have any short-term macroeconomic consequences.
45. The expected economic value of the project has been assessed through three distinct net
present value (NPV) calculations, each focusing on an expected outcome associated with
MECESUP3. The economic analysis shows that the Project would have to realize only moderate
progress toward its goals to generate a positive return. If the project funds of US$160M are
disbursed evenly across four years, the NPV threshold for a positive return would be ~US$153M
in 2011 currency. Below, the progress required to generate a positive return is detailed:
(a) A shortening of time to graduation would result in time savings and increased
career earnings for graduates. A reduction of approximately one third of a month in
average time to graduation would result in an NPV of ~US$150M (2011).
(b) An increase in the quality of tertiary education is expected to lead to an increased
premium for wage earners with tertiary education. An increase in the premium of
approximately 0.14% would result in a project NPV of ~US$150 M (2011).
11
(c) An increase in first-year retention would be expected to result in a concomitant
uptick in overall graduation rates. An increase of first year student retention of 4%
would result in an NPV of US$~150M (2011).
46. The progress outlined above details the change within each area that would be required to
independently justify the project. In reality, progress towards all goals is expected, and thus only
moderate progress toward each of the goals would likely lead to full recovery of the NPV of the
disbursed funds, along with a sizeable return.
47. With regards to financial impact, the Project poses no risk to Chile‘s macroeconomic and
fiscal stability. In 2010 Chile‘s GDP was US$256 billion and its foreign direct investment (FDI)
was US$15 billion. This US$160 million project, disbursed over the course of four years,
represents 0.016% of GDP and 0.27% of FDI per year. This suggests that inflationary and
monetary pressures created by the project will be marginal, if existent at all. Moreover, there is
no doubt the Government of Chile will be able to provide counterpart funding and fulfill its debt
servicing responsibilities given its strong copper revenues and its low levels of indebtedness
(8.8% debt to GDP in 2010).
B. Technical
48. The rationale for the selected technical approach is based on both local and international
evidence of its effectiveness. Locally, evidence is based on the pilot performance agreements
conducted under MECESUP2. Internationally, evidence is based on the increasing move towards
results-based financing in the tertiary education sector.
49. The history of the MECESUP1 and MECESUP2 projects is key for understanding the
design of MECESUP3. In 1997, MECESUP was conceived as a project that would competitively
fund innovative subprojects to improve the quality of tertiary education. Mostly, academics
submitted applications directly. TEIs did minimal vetting and prioritizing, mostly because they
lacked the tradition and capacity to do so. In 2005, MECESUP helped promote the creation of an
accreditation and quality assurance system that obliged institutions to analyze themselves and to
designate priorities for improvement. At the same time, the MECESUP2 project sought to
transfer greater responsibility to the institutions so they could determine where and how to
improve. This was done by piloting the use of performance-based agreements (CDs) in four
institutions. MECESUP3 seeks to continue that transfer of responsibility by making CDs a
permanent feature of the Chilean tertiary education funding system. This is important because
performance agreements are the most effective means for incentivizing the difficult micro-level
changes in classroom practice and institutional management that raise quality. Most of the
challenges still present in Chile‘s tertiary education can be mitigated or eliminated through the
constituent activities of the CDs. TEIs in Chile will know they are expected to:
(a) Evaluate themselves routinely and create institutional improvement plans, based
substantially on the feedback from their individual accreditation processes.
(b) Compete for resources to implement positive change, to the extent their goals are
consistent with the country‘s overall policy goals (improved teaching and learning,
12
lower dropout, shorter time to degree, improved human capital and research
capacity, among others).
(c) Account for progress and receive funding upon reaching the agreed goals.
50. Internationally, a recent review of tertiary education systems in 24 OECD countries
highlights trends in the evolution of mechanisms to fund educational institutions. One of the
more significant trends is a marked shift to allocation mechanisms that are more performance-
based. Performance agreements, performance set-asides, competitive funds and payments for
results are all performance-based methods of funding.4
51. To sum up, competitive funding of grants and performance agreements has been found to
be the best way to change tertiary education institutions. Tertiary education must serve a great
diversity of aims. Most modern labor markets have thousands of different careers and highly
specialized human capital needs. Centralized control of tertiary education has a terrible record of
meeting these or other social needs. By contrast, systems wherein tertiary education institutions
seek their own niche and develop specific comparative advantages tend to function best.
Competitive funding for quality improvement allows each TEI to propose a program of
improvement. At the same time, it reserves for the government the prerogative to choose the
portfolio of proposed investment that most closely reflects policy goals. This mechanism—
especially when combined with consequential accreditation processes—has been recognized as
the most effective incentive regime for tertiary education improvement.
C. Financial Management
52. Project financial management will seek to be simple, straight-forward, usable, and easy to
understand for TEIs, DIVESUP, and the World Bank. It will seek to include a reporting system
for beneficiaries and a system for classifying expenditure categories, distinguishing between
those that are procurable and those that are not. It will provide an appropriate degree of
granularity for management to review and make decisions. Past experience has informed the
design of Financial Management (FM) procedures, such that things that worked well have been
built upon and solutions for those that could be improved have been sought. The Operational
Manual will further elaborate on these.
53. As part of project preparation, a Financial Management capacity Assessment to evaluate
adequacy of financial management arrangements under the Project was performed from May 19,
2011 to November 30, 2011. In accordance with the implementation arrangements defined, the
project will be implemented by the Division of Higher Education (DIVESUP) of the Ministry of
Education (MINEDUC). Within DIVESUP, financial management function would be undertaken
by the General Coordination of MECESUP5, with the support of the Ministry‘s General
Administrative Unit (DAG), the Planning and Budgeting Unit (DIPLAP) and selected Chilean
Tertiary Education Institutions (TEIs).
4 Santiago, Tremblay, basru and Arnal (2008) Tertiary Education for the Knowledge Society, Volume 1. OECD.
Available on: http://oecd-conference-teks.iscte.pt/downloads/OECD_vol1.pdf 5 Former UCP under Mecesup1 & 2. The GoC has sought to formalize the General Coordination of Mecesup as the
Department of Institutional Financing. The latter would seek to optimize direct public funding of TEIs.
13
54. The General Coordination of MECESUP has gained experience implementing World
Bank financed projects, has increased its number of qualified and experienced staff familiarized
with Bank procedures, and has piloted performance-based subprojects under the former
MECESUP1 and MECESUP2 projects. Considering that current project design involves scaling
up of the use of performance-based funding subprojects, using more decentralized arrangements,
and large numbers of TEIs with diverse capacity; strengthening measures based on the lessons
learned from the pilot projects in MECESUP2 have been agreed upon. These include: having
straightforward procedures to implement subprojects (including strengthened criteria to qualify
compliance with agreed targets) and enhancing financial reporting at the project level.
55. On the basis of the review performed and the actions taken by DIVESUP to complete
pending requirements that will be also followed-up during implementation, the FM team
concludes that proposed FM arrangements are acceptable.
D. Procurement
56. Achieving the objectives of the performance agreements requires the Project to finance
both procurable (goods, services, and consultants‘ services, etc.) and non-procurable items (such
as scholarships and personnel).6 In each case the Operational Manual will specify the appropriate
documentation necessary for TEIs to keep and to submit as part of the regular reporting process.
57. The overall principle regarding procurement will be to have sufficient definition to allow
the World Bank to fully carry out its fiduciary responsibilities, while recognizing the time and
effort invested by beneficiaries for its processes and reporting. The Operational Manual will
specify when, how and which procurement procedures ought to be carried out.
58. An assessment of the capacity of the General Coordination of MECESUP to implement
procurement actions for the Project was updated in October 2011 and a detailed action plan was
prepared to address all risks identified (see Annex 3). The General Coordination will maintain its
capacity for selecting consultants and procuring goods and services for MECESUP3. As part of
the Project‘s preparation, the Operational Manual has been updated to provide detailed
procurement information for implementation. The corrective mitigating measures proposed are:
(i) adjust acceptable sample bidding documents for NCB and shopping; and (ii) establish a
system to monitor and expedite TEI Procurement Plans.
59. The Borrower has prepared an acceptable Procurement Plan (PP) which will be made
available through a Procurement Plans Execution System (SEPA). TEI Procurement Plans will
be incorporated into SEPA using a second level approval mechanism, where the General
Coordination and the Bank will approve the PPs of the TEIs. Procurement for the proposed
Project would be carried out in accordance with the Bank‘s ―Guidelines Procurement of Goods,
Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World
Bank Borrowers‖, dated January 2011; the Bank‘s ―Guidelines Selection and Employment of
6 Examples of recurrent costs include scholarships (tuition, maintenance, etc.), national and international
transportation, personnel and equipment insurance, per diems, registration fees, appearance fees, staff salaries,
pedagogical expenses, maintenance and services, basic services, taxes, permits and patents.
14
Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers‖, dated
January 2011; and the provisions stipulated in the Loan Agreement.
E. Social (including Safeguards)
60. DIVESUP has disseminated MECESUP3 plans in several dedicated meetings with
stakeholders. The first of these meetings took place on April 13, 2011 in an auditorium with 50
TEI Presidents and over 250 people. The scale-up of Performance Agreements and their broad
policy goals were shared with the TEI community. Similar meetings have taken place since then,
both in Santiago and beyond, as part of an effort to encourage TEIs to begin thinking about their
Performance Agreement proposals and the application process.
61. The Project's overall approach to strengthening quality and relevance in tertiary education
involves action at all levels and types of TEIs. OP/BP 4.10 (Indigenous Peoples) is triggered,
given that Indigenous peoples are present in the Project area (since coverage of the project is
nationwide) and can potentially benefit from Project activities.
62. The Project has designed an Indigenous Peoples Planning Framework (IPPF), which was
disclosed November 17, 2011 through Infoshop and on December 8, 2011 through MINEDUC‘s
website (www.mecesup.cl). Its main areas of focus are:
(a) Alignment of select project activities with the relevant areas of the GoC‘s national
Araucanía Plan, a strategy for the region where most of Chile‘s indigenous
population is concentrated.
(b) Close monitoring of the participation of indigenous students in Project activities.
(c) Promotion of learning quality and relevance at participating TEIs with indigenous
students.
(d) Continuity with the efforts of the previous MECESUP2 project, particularly in
remediation initiatives. Remediation initiatives are important because they focus on
strengthening basic core competencies—math, science, reading comprehension, and
study skills, among others—to increase student success in tertiary education.
Remediation caters to students with weak secondary education, most of which are
from lower socioeconomic backgrounds, municipal schools and rural areas. Given
that indigenous Chileans are, lamentably, over represented in this target category,
remediation activities benefit them directly.
F. Environment (including Safeguards)
63. Civil works for MECESUP3 will be limited to minor refurbishments in existing buildings
(cosmetic changes and/or minor internal renovations) to facilitate new equipment or proper
ventilation for scientific equipment, as appropriate. No new structures will be built in
MECESUP3.
15
Annex 1: Results Framework and Monitoring
CHILE: Tertiary Education Finance for Results Project
Results Framework
Project Development Objective (PDO): To improve quality and relevance for students in tertiary education by strengthening the link between funding of tertiary education institutions and
accountability for performance.
PDO Level Results Indicators*
Co
re
Unit of
Measure Baseline
Cumulative Target Values** Frequency
Data Source/
Methodology
Responsibility
for Data
Collection
Description
(indicator
definition etc.) 2012 2013 2014 2015
Indicator One: Number of full-
time-equivalent faculty members
who hold PhDs.
# 4,148 4,300 4,500 4,700 4,900
Annual SIES:
Academics.
Baseline data
from May
2011
SIES PhD professors
hired for ≥39
hours a week at
a TEI.
Indicator Two: Average actual
duration of undergraduate studies
until the degree is awarded.
# of
semesters Univ.
12.9
IPs
9.3
CFTs
7.2
Annual SIES:
Graduates.
Current data
is from 2007.
SIES The formula is
currently being
updated.
Indicator Three: Retention rate:
first-year undergraduate students
that remain at the institution in the
second year.
% 69.5% 70% 72% 74% 76%
Annual SIES:
Enrolment.
Baseline data
from 2010
SIES First-year
students in year
t who continue
studying in year
t+1, divided by
first year
students in year
t, multiplied by
100. (Formula
is being
updated.)
Indicator Four: Employers‘
perception of quality and
relevance of graduates of
MECESUP 3-supported TEIs, as
a proxy for increased
employability and wage
premiums.
Semi-
Annual
Employers
surveys
DESUP Consultancy
services will be
hired to develop
employer
surveys.
The baseline
will consider the
16
likely
distribution of
disciplines and
degree programs
in MECESUP3
and will
anticipate best
ways to survey
likely employers
of graduates
who have
attended TEIs
and programs
benefitting from
CDs. Futuro
Laboral will
help identify
representative
samples of
employers.
INTERMEDIATE RESULTS
Intermediate Result (Component One):
Intermediate Result indicator
One: Number of signed
performance agreements.
# N/A Teacher
Training:
6
Academic
Innovation:
7
Technical
& Profess.:
5
Small
Projects:
14
Teacher
Training:
12
Academic
Innovation:
12
Technical
& Profess.:
10
Small
Projects:
24
Annual DESUP
registers
DESUP
Intermediate Result indicator
Two: Rate of fulfillment of
indicators included in the CDs
% N/A Annual TEI DESUP Average
percentage of
fulfillment of
indicators (sum
of percentage of
17
fulfillment of
CD indicators,
divided by
number of
indicators.) Each
indicator may
vary from 0 to
100%.
Intermediate Result indicator
Three: Direct Project beneficiaries
(number), of which women
(percentage).
# and % Students
Acade-
mics
Students
Acade-
mics
Students
Acade-
mics
Students
Acade-
mics
Students
Acade-
mics
Annual Number of
students and
academics at
TEIs that hold at
least one CD.
Intermediate Result indicator
Four: Number of students
completing remediation classes.
# Annual TEIs DESUP
Intermediate Result indicator
Five: Number of full-time-
equivalent faculty members who
hold PhDs in pedagogy schools.
# Annual SIES:
Academics.
DEMRE PhD professors
at pedagogy
schools hired for
≥39 hours a
week at a TEI.
Intermediate Result indicator Six:
Number of graduates from
domestic PhD programs
# 433 460 480 500 530 Annual SIES:
Graduates,
data from
2010
SIES Domestic PhDs
graduates.
Intermediate Result indicator
Seven: Number of new technical
programs.
# Annual SIES:
Degree
programs
SIES New ―Técnico
de Nivel
Superior‖
programs
Intermediate Result (Component Two):
Intermediate Result indicator
One: Number of policy notes and
studies carried out.
# 0 1 2 3 Annual. Number of
policy notes
and studies.
DESUP Policy notes and
studies delivered
with Project
support.
18
Annex 2: Detailed Project Description
CHILE: Tertiary Education Finance for Results Project
1. Component 1. Performance Agreements (Total: US$155 million, Bank: US$38
million). Provision of support to TEIs to strengthen the link between funding and accountability
for performance, through the carrying out of Performance Subprojects.
This component will scale up the use of innovative performance-agreements with TEIs.
These performance agreements, piloted under the MECESUP2 project, are written agreements
between the Government and a given TEI which stipulate an amount of funding to be provided to
finance activities that will allow the TEI to reach agreed milestones for improved quality and
relevance. Performance agreements (CDs) will improve the quality and relevance of tertiary
education by linking funding to accountability in TEIs. The activities that the CDs will finance
include: (i) remediation activities, including special classes for those with academic deficiencies,
and other programs that will help strengthen students‘ basic core competencies in math, reading
comprehension, and study skills, among others; (ii) actions that strengthen managerial capacity
and improve institutional analysis, such as the creation or improvement of offices of institutional
analysis; and (iii) programs to improve quality and relevance in specific priority areas including
training of future school teachers, promotion of academic innovation for student-centered
learning, improvement of technical-professional education, and the encouragement of discrete
new ideas for quality through small projects. The inputs to these activities, to be financed by the
project, include recurrent costs for more intensive employment of TEI academic staff and senior
management, goods such as software, hardware, and equipment for research and pedagogical
activities.
2. There will be four types of CDs, each responding to specific Government priorities.
(a) CDs for Improvement of Teacher Training. These CDs will finance efforts to reform
departments of pedagogy and schools of education within tertiary institutions, so
they can better prepare graduates to become effective school teachers at the early
childhood, primary and secondary school levels. They will finance, inter alia,
greater incorporation of educational research into curricula, efforts to reform and
improve the quality of teaching and learning in Math, Language and Science,
remediation activities, and actions that strengthen managerial capacity and improve
institutional analysis.
(b) CDs for Academic Innovation. These CDs will finance incorporation of innovative
and student-centered learning techniques into the curricula, revision and updating of
degree program length and contents, increases in student mobility through the
implementation of the Chilean Credit Transfer System (SCT-Chile), remediation
activities, and actions that strengthen managerial capacity and improve institutional
analysis. These CDs may also include thematic modules, such as the (i) development
of world-class PhD programs via international exchanges of PhD students, joint PhD
programs with foreign doctoral schools, and increased research, among others, and
the (ii) training of (new) engineers.
19
(c) CDs for the Improvement of Technical-Professional Education. These CDs will
finance the development of updated and innovative technical degree programs that
are aligned with the labor market, and allow for expanding the provision of highly-
quality training of technicians. Activities financed may include, inter alia, revisions
to the content and length of programs, outreach to the private sector, updating of
tools and equipment, remediation activities, and actions that strengthen managerial
capacity and improve institutional analysis.
(d) CDs for Small Projects (SP). These CDs will finance capacity-building initiatives
and discrete activities that improve the quality of tertiary-level teaching, learning
and management. These CDs are similar to the CDs for Academic Innovation,
except they will focus on discrete new ideas and pilot initiatives for organization of
instruction that may be scalable, rather than a full program of interventions to raise
the quality of education throughout the institution.
3. It is expected that the Project fund 93 CDs. Each CD will be allocated funds of up to
US$4 million, and its implementation period will last up to 4 years. Table 1 presents a rough
approximation of the length and resources for each CD type, as well as the expected number of
agreements per type.
Table 2 – Estimated number of CDs and funds, by year
Number of CDs Budget Length
2012-
1
2012-
2
2013 Nº de
CDs
US$ million
per CD
Total US$
million
Years
Teachers training 6 6 6 18 2.5 45 3-4
Academic Innovation 7 6 6 19 4.0 76 3-4
Technical-Professional Education 5 5 5 15 1.0 15 3-4
Small Projects 14 12 12 38 0.50 19 1-2
Total CDs 32 29 29 90
Total cost (US$ million) 55 50 50 155
155
4. Calls for proposals for CDs. Applications will be done through open, competitive
Calls-for-Proposals managed by the Ministry of Education, through DIVESUP. These will
inform perspective proponents of the opportunities available and the requirements for submitting
proposals, the selection criteria, the evaluation process, and the negotiations process for
transforming selected proposals into CDs. All the information in the Calls-for-Proposals will be
drawn from the Project‘s Operational Manual. The Calls-for-Proposals will authorized after the
appropriate budget allocations have been made and will take place according to the calendar
indicated in the Operational Manual. The calendar envisions the emission of Calls-for-Proposals
(and the subsequent selection of winning proposals) in both the first and second semesters of
2012, as well as in the first half of 2013.
20
5. Prerequisites for submitting proposals for CDs. TEIs that participate in calls for
proposals must present the following minimum prerequisites. These are detailed in the
Operational Manual.
a. A preliminary Institutional Improvement Plan (Plan de Mejoramiento
Institucional, PMI) or plans for its development. When fully fleshed out, a PMI is
a strategic plan that identifies the strengths, weaknesses, threats, and opportunities
faced by a TEI and outlines a plan of action to address them.
b. A set of goals and indicators that are relevant, measurable, and verifiable, and that
are to be reached during the CD‘s lifespan. These indicators, which will be
closely related to the activities to be financed under the CD, will feed into the
quality or relevance indicators detailed in Annex 1.
c. A preliminary budget.
6. Evaluation and Selection of Proposals. The proposals will be evaluated by the
Evaluation Committees and recommended for selection by the Selection Committee, in
accordance with the procedures in the Operational Manual. These processes are described in
Annex 3: Implementation arrangements.
7. Implementation of the CDs. The CDs will contain a full description of the activities
to be carried out, the calendar of activities, and the milestones to be reached. The CDs will be
implemented by the respective TEIs in accordance with the terms of the contract. Supervision
arrangements are described in Annex 3.
8. Component 2. Policy Support and Project Management (Total estimated cost: US$5
millions; Bank: US$2 millions). This component has two subcomponents:
a. 2.1 Policy Support. Provision of policy support and studies needed for the design
and implementation of the tertiary education reforms and potential institutional
arrangements. These may include the transition to a new Under-Secretariat of
Tertiary Education, the design of a Student Financial Aid Agency, and efforts to
strengthen accreditation and quality assurance, including strengthening of the
SIES, among others.
b. 2.2 Project Management. Provision of support to DIVESUP in the administration,
monitoring, coordination and supervision of the Project. Specifically, it would
finance equipment and software required for high-level performance (i.e.
computers, computer systems, and information system software, among others),
personnel training, professionals, and dissemination activities to help carry out
Component 1 activities.
21
Annex 3: Implementation Arrangements
CHILE: Tertiary Education Finance for Results Project
Project Institutional and Implementation Arrangements
1. The Project will be administered by the General Coordination of MECESUP in the
Division of Higher Education of the Ministry of Education. This General Coordination has
evolved from the Project Coordinating Unit for MECESUP1 and 2, and is expected to be
formalized as the Department of Institutional Financing (DFI). The General Coordination Unit of
MECESUP is led by a General Coordinator who is the Bank‘s principal operational counterpart
(Project Coordinator). The General Coordination Unit of MECESUP has four technical
directorates (in teacher training, academic innovation, technical and professional education, and
small projects) and three support units: Administration, Analysis and CD support, and
Communications.
2. The basis for these institutional arrangements has been the successful implementation of
the previous two projects over the past 13 years. It has had a notable stability of personnel, and
the tenure of the Coordinator extends to the original MECESUP1 Project design phase and has
become a recognized international expert on performance-based funding.
Project administration mechanisms
3. The distribution of responsibilities within the General Coordination of MECESUP3 will
be as follows:
a. The technical directorates, in conjunction with the General Coordinator of
MECESUP and under the Supervision of the Head of the Division of Higher
Education, will be responsible for all the substantial and technical aspects of
implementation. These directorates will rely on the Analysis and CD Support Unit
to prepare the calls-for-proposals for the CDs, organize the Evaluation and
Selection Committees, review for technical completeness all submitted proposals,
lead the negotiations of the CDs, and carry out the technical supervision of the
progress toward stated goals. This includes the monitoring of the PDO and
intermediate indicators, and the overall sectoral monitoring and evaluation.
b. The Administration Support Unit will be responsible for all the fiduciary aspects
of the Project related to financial management. It will help transfer resources to
the TEIs under the terms of the CDs and will receive and validate financial
management information. It will also be responsible for, inter alia, supervision of
procurement by the TEIs and for organization of the overall procurement plan.
c. The Communications Support Unit will disseminate Project opportunities,
maintain fluid communications with stakeholders and keep up the MECESUP
webpage, among others.
22
4. The procedures for the submission, evaluation, selection, negotiation and
implementation of Performance Agreement proposals will be the following.
a. Calls for proposals will be made and publicized by DIVESUP.
b. TEIs will present proposals, specifying which CD type they are pursuing.
c. Proposals will be checked to ensure they are complete and meet minimum
requirements.
d. Complete proposals are submitted to the corresponding Evaluation Committee.
i. Composition of Evaluation Committees. The Evaluation Committee for
each call for proposal will be led by the relevant technical directorates
within the General Coordination of MECESUP. There will be four
committees, each including at least five professionals selected by the Head
of DIVESUP. The Evaluation Committees will be allowed to (i) form sub-
committees and (ii) invite external consultants from Chile and abroad, in
order to better develop their tasks.
ii. Responsibilities of Evaluation Committees. The Evaluation Committees
are responsible for assessing the proposals according to the evaluation
criteria outlined below, and submitting a recommendation for selection to
the Selection Committee.
iii. Evaluation criteria. Proposals will be evaluated according to three
criteria: the impact of the objectives, the impact of the proposal on
students, and the overall viability of the proposal. These criteria are
detailed in the Operational Manual.
1. Impact of objectives. Proposals will be chosen based on their: (a)
alignment with Project objectives to improve quality and
relevance, (b) alignment with regional and national development
priorities; and (c) clarity and cohesion between the PMI and the
goals and indicators for the Performance Agreement.
2. Impact of the proposal on students. Proposals will be chosen based
on their orientation towards students‘ needs, with special emphasis
on: (a) the development of a TEI‘s academic and institutional
capacity, which ultimately increases the quality of its education,
and (b) the development of students‘ basic and general skills and
competencies, which ultimately increases the relevance of their
education.
3. The viability of the proposal. Proposals will be chosen based on (a)
the degree of institutional commitment for implementation,
including that of student and faculty stakeholders; (b) the
23
institutional capacity for implementation; and (c) the ability to
implement with economy and efficiency.
e. Evaluation Committees submit to the Selection Committee their recommendation
for proposal selection. Their recommendations must take into account the overall
assessment of each proposal as well as the assessments of Subcommittees
regarding thematic modules (i.e. developing world-class PhDs).
f. The Selection Committee will submit to the Minister of Education a
recommendation for the selection of proposals. The selection must be made by the
Minister of Education.
i. Composition of the Selection Committee. The Selection Committee will
be led by the Head of DIVESUP. It will be composed of one professional
selected by the Subsecretary of Education, the General Coordinator of
MECESUP, and at least three prestigious professionals with proven
experience in the management of TEIs, selected by the Head of
DIVESUP.
ii. Responsibilities of the Selection Committee. The Selection Committee
is responsible for submitting to the Minister of Education a
recommendation for the selection of Performance Agreement proposals.
iii. Selection criteria to be used by the Selection Committee. In making its
recommendation, the Selection Committee will consider the overall
proposal submitted by the TEI and the evaluation and recommendations of
the Evaluation Committee. A detailed list of additional criteria that may be
considered by the Selection Committee will be included in the Operational
Manual.
g. The Minister of Education selects the proposals and invites the TEIs to prepare
and negotiate their final versions, which will include the allocation of resources
for its implementation and the achievement of an agreed set of targets.
h. Negotiations take place once proposals have been selected. The negotiation
processes gives both parties a sense of ownership of the final Performance
Agreement, in an atmosphere of mutual interest and commitment that maximizes
the chances of success. Negotiations will be under the responsibility of
Negotiation Managers, who will be professionals—often employees of the
General Coordination of MECESUP itself—with enough qualifications and
experience to ensure an effective and balanced outcome.
i. Once the budget and the terms of implementation have been agreed upon, the
legal Performance Agreement contract between MINEDUC and the
corresponding TEI can be celebrated.
24
j. TEIs will carry out the activities as per the CDs and will be responsible for
conducting procurement and financial management in accordance with the
stipulations of the Operational Manual and the requirements of the General
Coordination of MECESUP (and of the Bank).
5. The following rules will govern the process of submission and selection of CD proposals
throughout the life of the Project:
a. Only accredited TEIs will be eligible for funding under the Project. The
Operational Manual includes additional prerequisites for each CD type.
b. Restrictions for proposal submissions exist at the institutional unit level for large
TEIs7 and at the TEI level for medium and small TEIs.
i. Institutional units may not have, at any given time throughout the Project,
more than two Performance Agreements for each of the larger CD types:
Teacher Training, Academic Innovation, and Technical and Professional
Education.
ii. Institutional units may have more than one Small Project.
iii. TEIs may not be granted in any specific call for proposals more than 18%
of the funds allocated for that call.
6. In accordance with Chilean legislation, making Performance Agreements a reality
requires a variety of formal, legal procedures to be carried out. These involve the participation of
a various actors, including the Ministry of Education, the Ministry of Finance, the Presidency,
and the Treasury, among others. Table 3 lists the steps required and the actors involved in each.
Table 3. Activities Legally Required
Activity Actors Involved
Dissemination of Terms of Reference Ministry of Education
Processing the legal basis for Performance Agreements (―reglamento‖) Ministry of Education; Ministry of Finance;
Presidency; Comptroller General
Processing rules for the call for proposals (―Bases del concurso‖) Ministry of Education; Comptroller General
Issuing calls for proposals and closing the period for the submission of
applications Ministry of Education
Selecting TEIs for negotiation Ministry of Education
Negotiating with selected TEIs Ministry of Education
Processing final terms and budget allocation for Performance Agreements Ministry of Education, Comptroller General
Processing and legalizing the Performance Agreements Ministry of Education; Comptroller General
Transferred fund to the TEIs Ministry of Education; Ministry of Finance;
Comptroller General, Treasury
7 An institutional unit is defined as a full disciplinary campus with a semi-autonomous, semi-independent
management structure. The possibility of considering ‗institutional units‘ instead of TEIs aims at recognizing the
specificities of some universities in Chile that are especially large and have a high degree of internal differentiation.
25
Financial Management, Disbursements and Procurement
Financial Management and Disbursements
7. As part of project preparation, a Financial Management capacity Assessment to evaluate
adequacy of financial management arrangements under the Tertiary Education Finance for
Results Project was performed from May 19, 2011 to November 30, 2011. In accordance with
the implementation arrangements defined, the project will be implemented by the Division of
Higher Education (DIVESUP) of the Ministry of Education (MINEDUC). Within DIVESUP,
financial management function would be undertaken by the General Coordination of MECESUP,
with the support of the Ministry‘s General Administrative Unit (DAG), the Planning and
Budgeting Unit (DIPLAP) and selected Chilean Tertiary Education Institutions (TEIs).
8. The General Coordination of MECESUP has gained experience implementing WB-
financed projects, has increased its number of qualified and experienced staff familiarized with
Bank procedures, and has piloted performance-based subprojects under the former MECESUP1
and MECESUP2 projects. Considering that current project design involves scaling up of the use
of performance-based funding subprojects, using more decentralized arrangements, and large
numbers of TEIs with diverse capacity; strengthening measures based on the lessons learned
from the pilot projects in MECESUP2 have been agreed upon. These included: having
straightforward procedures to implement subprojects (including strengthened criteria to qualify
compliance with agreed targets) and enhancing financial reporting at the project level.
9. The Project‘s residual inherent and control risk are rated as moderate, therefore overall
project FM risk is also considered moderate. This takes into account the experience developed by
DIVESUP through the General Coordination of MECESUP regarding projects and WB
requirements; the project design which foresees performance-based funded subprojects in a large
scale and participation of TEIs with diverse capacity; and the need to strengthen financial
management procedures to implement subprojects.
10. On the basis of the review performed and the actions taken by DIVESUP to complete
pending requirements that will be also followed-up during implementation, the FM team
concludes that proposed FM arrangements are acceptable.
11. Organization and staffing. The financial unit within the General Coordination of
MECESUP includes three experienced staff which will be in charge of daily implementation,
follow-up of budgetary, accounting information, flow funds and disbursement activities in
coordination with DIPLAP and DGAD. Based on existing capacities, there is no need for
additional FM staff at this stage. TEIs at a decentralized level will undertake responsibility for
subproject implementation and for project purposes a financial management professional would
be designated. Specific training for TEI‘s financial management professionals is provided under
the Operational Manual.
12. Programming and Budgeting. The preparation of the annual program and budget will
follow regulations and budgetary framework submitted by the Division of Budget (División de
Presupuestos, DIPRES) in the Ministry of Finance. DIVESUP would be responsible for project
26
budget preparation in coordination with DIPLAP. The Budget is operated under the National
Integrated Financial Management System (Sistema de Información para la Gestión Financiera
del Estado, SIGFE). Once the Project budget has been approved by DIPRES, the commitment
and implementation of activities will take place.
13. Accounting and information systems. All project transactions will be processed and
recorded in SIGFE at an aggregate level in accordance with local regulations. Complementarily,
the UCI information system (developed under Mecesup2), will be used to record project
transactions under component 1 and Excel spread sheets will be used to record project
transactions under component 2. The project will utilize the cash basis of accounting for project
information purposes. Project transactions will be exported to Excel to obtain consolidated
information by project component, activities and cost categories. This same approach was used
under the preceding project, and proved to be acceptable since DIVESUP was able to put in
place adequate internal control arrangements to ensure project transactions processed in SIGFE
are timely and systematically recorded in Excel.
14. To this end, information recorded in the UCI information system (an operational tool that
allows recording and control of subproject under Component 1) will be also disaggregated in
Excel, to be reflected in the corresponding financial reports, on which performance ratings will
have to be reflected. Although DIVESUP is planning to update the information system for
subprojects with one that has more functionality; the UCI system will be used until then, utilizing
internal control mechanisms acceptable to prepare project information. Once the new software is
installed, it will require World Bank FM review (under project Supervision) to confirm its
adequacy.
15. Project Operational Manual and Internal Controls. Overall processes and procedures
followed during the second project were adequate to process payments and disbursements to
subprojects; monitor Performance Agreement implementation, collect financial information;
record information into UCI and generate financial information on a timely basis. Some
adjustments to strengthen those procedures have been discussed and agreed and are reflected in
the final version of the Operational Manual.
16. Financial Reporting. At TEI level (component 1), TEIs would be requested to submit—
for review and later consolidation by the General Coordination of MECESUP—semester
financial reports comprising: Statement of Sources and Uses of Funds; detailed data on the
sources and use of resources; and a reconciliation of the bank account accompanied by the bank
statement not later than 45 days after the end of each semester. These reports would be directly
prepared from UCI system.
17. At the Project level, the General Coordination of MECESUP will be responsible for the
preparation of consolidated unaudited interim financial reports (IFRs) and financial statements
for the Project. On a semi-annual basis, for monitoring purpose, the General Coordination of
MECESUP will prepare IFRs and send for Bank review—not later than 45 days after the end of
each semester—comprising: i) a statement of sources and uses of funds and cash balances; (ii)
statement of cumulative investments; and (iii) report on subproject status (comprising detailed
information by each TEI on funds transferred, documented and not documented; performance
27
ratings), and (v) explanatory notes to the financial statements. IFRs must be submitted to the
Bank by the General Coordination of MECESUP. On an annual basis, the General Coordination
will have to prepare annual financial statements for the project, comprising the same financial
statements mentioned above which must be audited. Core content and frequency of IFRs have
been reviewed and agreed with the Bank.
18. Audit Arrangements. Audit of project annual financial statements will be conducted by
independent private sector auditors, acceptable to the Bank. Audit fees may be covered with loan
proceeds. DIVESUP will be responsible for submitting timely financial annual audits on the
project for Bank‘s review, not later than six months after the end of each fiscal year. The audit
would comprise an opinion: (i) on the project financial statements; (ii) on Statement of
Expenditures; and (iii) management letter on internal control. The audit review would also
include a sample of TEIs.
19. Funds Flow Arrangements. The General Coordination of MECESUP will have to ensure
funds will be used only for the intended purposes and consolidate project reporting information.
The funds flow arrangements under Component 1: Performance Agreements will follow
decentralized arrangements. Component 2: Policy Support and Project Management will have
centralized funds flow arrangements and would be fully financed with loan proceeds. All project
activities would be pre-financed with GoC‘s own funds and then reimbursed by the WB Loan
account to the MEF‘s General Treasury bank account maintained in the Central Bank of Chile.
20. Disbursement Arrangements. The operation will use the reimbursement method where
the GoC would pre-finance project expenditures and request reimbursement for the WB‘s share
of the financing. All reimbursements will be deposited in the bank account of the General
Treasury of MEF maintained in the Central Bank de Chile.
21. Request for reimbursement under Component 1 will be made on the basis of customized
Statements of Expenditure (SOE) reflecting disbursements from MINEDUC to TEIs and
performance ratings. To receive the first reimbursement, all administrative pre-requisites would
have to be accomplished. Subsequent reimbursements will be made after a review of the
technical progress of the individual CD in question, using a system of technical ratings with
three categories: Satisfactory, Satisfactory with flag, and Unsatisfactory (S, S-with flag and U).
Only those projects with a rating of Satisfactory or Satisfactory with flag would receive
reimbursements; while subprojects rated as unsatisfactory would be either suspended or
cancelled. In addition, any reimbursement would be treated as eligible expenditures for Bank‘s
disbursement purposes, and would require that the technical review have been carried out in
accordance with arrangements established in the PAD and Operational Manual. A customized
SOE has been agreed upon and appears in the Operational manual; it will be used for request for
reimbursement.
22. Requests for reimbursements under Component 2 will be made on the basis of Statements
of Expenditure (SOEs) for consulting services, goods, non consulting services and operational
costs to support project operation and GoC reforms.
28
23. Loan proceeds will be reimbursed against the expenditure categories in the disbursement
table of the Loan Agreement, reproduced below. The Disbursement Letter will establish
requirements for reporting eligible expenditures for disbursement processing.
Category
Amount of the Loan
Allocated
(expressed in USD)
Percentage of Expenditures to be
financed
(inclusive of taxes)
(1) Goods, works, Non-consulting
Services, consultants‘ services,
Scholarships, Training and Operating
Costs required for Performance
Subprojects, under Part 1 of the
Project
38,000,000 Up to 100% of the amounts disbursed
under the relevant Grant
(2) Consultants‘ services, Non-
consulting Services, goods,
Operating Costs and Training (except
those covered by Category (1)
above) required for Part 2 of the
Project
1,900,000 Up to 100%
(3) Front-end Fee 100,000 Amount payable pursuant to
Paragraph 2.03 of this Agreement in
accordance with Section 2.07 (b) of
the General Conditions
(4) Interest Rate Cap or Interest Rate
Collar premium
-0- Amount due pursuant to Paragraph
2.07 (c) of this Agreement
TOTAL AMOUNT 40,000,000
24. Supervision Plan. Financial Management supervision would include on-site and off-site
supervisions. On site supervision missions will be carried twice a year to the extent possible, to
review adequacy of financial management arrangements implementation. Off-site supervisions
will comprise desk reviews of interim financial reports and audited financial statements.
Procurement
A. General
25. Procurement for the proposed Project would be carried out in accordance with the World
Bank‘s ―Guidelines Procurement of Goods, Works and Non-Consulting Services under IBRD
Loans and IDA Credits & Grants by World Bank Borrowers‖, dated January 2011; the World
Bank‘s ―Guidelines Selection and Employment of Consultants under IBRD Loans and IDA
Credits & Grants by World Bank Borrowers‖, dated January 2011; and the provisions stipulated
in the Loan Agreement. For each contract to be financed by the Loan, the different procurement
methods or consultant selection methods, the need for pre-qualification, estimated costs, prior
review requirements, and time frame are agreed between the Borrower and the Bank in the
Procurement Plan. The Borrower, through the General Coordination of MECESUP, has prepared
a Preliminary Procurement Plan for the entire scope of the Project and a detailed and
comprehensive procurement plan, that includes all contracts for which bid invitations and
29
invitations for proposals are to be issued in the first 18 months of Project implementation. The
Procurement Plan will be available at the Procurement Plans Execution System (SEPA). Goods,
works (subprojects) and non-consulting services shall be procured under contracts awarded on
the basis of International Competitive Bidding, National Competitive Bidding, Shopping, Direct
Contracting and Framework Agreements. Consultants‘ services shall be procured under
contracts awarded on the basis of Quality and Cost-based Selection, Quality-Based Selection,
Selection under a Fixed Budget, Least Cost Selection, Selection Based on the Consultants‘
Qualifications, Single Source Selection and, Procedures set forth in Section V of the Consultant
Guidelines for the Selection of Individual Consultants, including single-source Selection for
Individual Consultants.
26. Framework Agreements (FA) of the Public Market (Mercado Público) of ChileCompra
would be used for the procurement of goods and non-consulting services as an alternative to the
Shopping: (a) goods that can be procured off-the-shelf, or are of common use with standard
specifications; (b) non-consulting services that are of a simple and non-complex nature and may
be required from time to time by the DIVESUP or the TEI.
B. Assessment of the agency’s capacity to implement procurement
27. Country. The risk associated with the Bank portfolio in Chile should be considered low;
government contracts in Chile are conducted transparently and efficiently thanks, in part, to a
modern and transparent electronic procurement system (the Public Market of ChileCompra);
although procurement processes, outside the use of this system could be lengthy at times, the
robustness and capacity of institutions in charge of procurement make Chile one of the countries
with the most reliable and transparent procurement system in the region.
28. Agency. In accordance with the implementation arrangements, the General Coordination
of MECESUP will be responsible for the administration of the Project, including procurement at
the central level and monitoring and supervising procurement conducted by the TEI. The
General Coordination is adequately staffed and will maintain its capacity to conduct Procurement
under this new operation. The TEI would use their Institutional Coordination Units (ICU) to
oversee project activities, including fiduciary responsibilities. As part of the Project preparation,
the General Coordination of MECESUP has prepared the Operational Manual which provides
detailed procurement information for the Project‘s implementation. The General Coordination of
MECESUP has the experience and capacity from the previous operations to manage a large
project, implement Bank fiduciary procedures, monitor implementation and provide technical
assistance to beneficiaries. An assessment of the implementation agency‘s capacity to implement
procurement actions for the Project was finished on October 2011. The capacity assessment
looked into the General Coordination of MECESUP‘s: (a) organizational structure, (b) facilities
and support capacity, (c) qualifications and experience of the staff that will work in procurement,
(d) record-keeping and filing systems, (e) procurement planning and monitoring/control systems
used, and (f) capacity to meet the Bank‘s procurement contract reporting requirements. It also
reviewed the procurement arrangements proposed in the Procurement Plan.
29. Considering the country‘s and the agency‘s capacity to implement procurement, as
outlined above, the overall project risk for procurement is Moderate (M).
30
30. The corrective mitigating measures proposed are:
MITIGATING MEASURES STAGE
Update the Procurement capacity assessment Completed
Configurate SEPA as the system to monitor and expedite TEI‘s
Procurement Plans (SEPA) Completed
Adjust sample bidding documents for NCB and shopping Completed
Update the Operational Manual to include the new Procurement
methods approved for this new operation
Completed
C. Special Provisions
(a) In addition and without limitation to any other provisions set forth in this Section or the
Procurement Guidelines, the following principles of procurement shall expressly govern all
procurement of goods, Non-Consulting Services and works under National Competitive Bidding
procedures:
(i) The lowest evaluated bid shall be selected for contract award.
(ii) There shall be no prescribed minimum number of bids to be
submitted in order for a contract to be subsequently awarded.
(iii) ChileCompra, provided that the bidding documents are acceptable to the Bank.
(iv) The Mercado Público Framework Agreements (MPFA) may be used as an
alternative to Shopping, as determined by the Bank, provided that: (A) the
specific MPFA does not restrict foreign competition, and is limited to a
maximum duration of 3 (three) years; and (B) the maximum aggregate amount
for the use of an specific MPFA by each TEI set in the procurement plan is in no
case higher than the applicable Shopping maximum amount, and shall be agreed
with the Bank.
(b) In addition and without limitation to any other provisions set forth in this Section or the
Consultant Guidelines, the following principles of procurement shall expressly govern all
employment of consultants:
(i) There shall be no prescribed minimum number of proposals to be submitted in
order for a contract to be subsequently awarded.
(ii) For small assignments not exceeding US$200,000 equivalent, the procedures of
ChileCompra may be followed as a consultants' selection method acceptable to
the Bank.
31
D. Procurement Plan
I. General
31. Date of the Procurement Plan: January 20, 2012
32. Date of General Procurement Notice: After effectiveness, 2012.
33. Period covered by this Procurement Plan: 18 months.
II. Goods, Works and non-consulting services
34. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as
stated in Appendix 1 to the ―Guidelines: Selection and Employment of Consultants by World
Bank Borrowers‖:
Thresholds for procurement methods and prior review (thousands of USD)
Expenditure
Category
Contract Value
(Thresholds) US $
thousands
Procurement
Method
Contracts
Subject to Prior
Review by the
Bank
Contracts Subject to
Prior Review by the
General Coordination of
MECESUP
1. Works >350 NCB First All
<350 Shopping First First of each TEI
NA DC >50 All
2. Goods and
Non-Consulting
Services
>750 ICB All All
100-750 NCB* First two First of each TEI; >200
<100 Shopping First First two of each TEI
<100 (for each FA
of each TEI)
Convenio
Marco NA NA
NA DC >25 All
Note: ICB = International Competitive Bidding
NCB = National Competitive Bidding
DC = Direct Contracting * Mercado Público portal may be used for advertisement and processing provided that the bidding documents
are acceptable to the Bank.
Reference to Project Operational/Procurement Manual:
35. The Borrower through the General Coordination of MECESUP, as part of the Project‘s
preparation, has updated the Operational Manual which provides detailed procurement
information for Project implementation.
32
Summary of the Procurement Packages for Works and Goods
(based on Procurement Plan of January 20, 2012) 1 2 3 4 5 6 7
Ref.
No.
Description Estimated
Cost US$
million
Packages Domestic
Preference
(yes/no)
Review by
Bank
(Prior/Post)
Comments
WORKS
1 NCB –
Remodeling
0,350 NA NO PRIOR
2 Shopping –
Remodeling
(around 10
processes)
0,505 NA NO First
GOODS
1 ICB - Scientific
Equipment
0,760 NA NO PRIOR
2 NCB –
Scientific
Equipment (6
processes
approx.)
0,713 NA NO First two
3 Shopping of
different items
(around 250
processes)
0,745 NA NO First
4 Framework
Agreements
(aggregate
amount that will
be split in the
Procurement
Plan in SEPA)
0,495 NA NO NA
5 Direct
Contracting of
particular items
(Books,
Scientific
Magazines, etc)
0,137 NA NO Prior >0,025
NON-CONSULTING SERVICES
1 Shopping of
different items
(around 40
processes)
0,285 NA NO First
2 Framework
Agreements
(aggregate
amount that will
be split in the
Procurement
0,285 NA NO NA
33
Plan in SEPA)
III. Selection of Consultants
36. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in
Appendix 1 to the Guidelines Selection and Employment of Consultants:
Thresholds for methods and prior review (thousands of USD)
Consulting
Services
Contract Value
(Thresholds) US $
thousands
Procurement Method
Contracts Subject to
Prior Review by the
Bank
Contracts Subject to
Prior Review by the
General Coordination
of MECESUP
Firms
>300 QCBS, QBS, FBS, LCS >300 ;
100-300 Terms of
Reference
First of each method of
each TEI; >100; 100<
Terms of Reference
<300 QCBS, QBS, FBS, LCS,
CQS
<200 Mercado Publico First two
NA SSS >25 All
Individuals
Comparison of 3 CVs in
accordance with Chapter V
of the Guidelines
>100 First of each TEI; >25
NA SSS >25 All
Note:
QCBS = Quality- and Cost-Based Selection
QBS = Quality-Based Selection
FBS = Fixed Budget Selection
LCS = Least-Cost Selection
CQS = Selection Based on Consultants' Qualifications
SSS: Single Source Selection
37. Short list comprising entirely of national consultants: Short list of consultants for
services, estimated to cost less than $500,000 equivalent per contract, may consist entirely of
national consultants in accordance with the provisions of paragraph 2.7 of the Consultant
Guidelines.
34
Consultancy Assignments with Selection Methods and Time Schedule
(based on Procurement Plan of January 20, 2012)
1 2 3 4 5 6
Ref.
No. Description of Assignment
Procurement
Method
Estimated
Cost US$
million
Processes
Review by
Bank
(Prior/Post)
Firms
1 Studies and Researches QCBS 0,655 9 Prior >0,3
2 Study QBS 0,040 1 Post
3 Studies and Researches CQS 0,270 5 Post
4 Study LCS 0,100 1 Post
5 Studies and Researches ChileCompra 0,201 5 First two
6 Studies and Researches SSS 0.150 2 Prior
Individuals
1 Individual Consultants (approx.
97)
Individual
Consultants
2,129 97 Prior >0,1
38. In addition to the prior review supervision to be carried out from Bank offices, the
capacity assessment of the General Coordination of MECESUP has recommended annual
supervision missions to visit the field to carry out post review of procurement actions. The size
of the sample for post-review will be not less than 1 in 10 contracts.
Environmental and Social (including safeguards)
39. The IPPF for the MECESUP3 project is likely to promote the quality and relevance of
tertiary education in some TEIs determined to have significant populations of current and
potential future indigenous students. This IPPF will build on the efforts of the previous
MECESUP2 project, particularly in remediation initiatives, by closely monitoring the
participation of indigenous students in Project activities. It will also seek to align select Project
activities with the applicable GoC initiatives where relevant. The goal is that these actions
ultimately lead to increases in the academic success of indigenous students in tertiary education,
at least in the same proportions as corresponding students who are not indigenous Chileans.
35
40. IPPF activities will focus on TEIs where indigenous students represent more than 14% of
the total student body.8 The set of TEIs that fall into this category will be henceforth referred to
as ―TEIs with a vocation for the education of indigenous students‖. Table 4 shows the total
number and percentage of indigenous undergraduate students to total undergraduate students in
select TEIs. Universidad Católica de Temuco has the highest percent of enrolled indigenous
students, at 18.7% for 2011.
Table 4. Indigenous Undergraduate Enrollment in Select TEIs9
Source: Unit of Institutional Analysis in each of the aforementioned universities
41. TEIs deemed to have a vocation for the education of indigenous students must design and
implement an Indigenous People‘s Plans (IPPs) if they are to participate in the MECESUP3
Project. This IPPF offers the aforementioned TEIs the ability to implement pro-indigenous
actions in a variety of ways. Importantly, it allows those TEIs to determine, in consultation with
representatives of indigenous students and/or relevant local indigenous leadership, which pro-
indigenous actions best fit the educational mission of the TEI and the situation and context of the
students.
42. A suggested ―menu‖ of pro-indigenous actions is detailed in Table 5 below. TEIs deemed
to have a vocation for the education of indigenous students may choose one or more activities
from the column labeled ―Actions‖, and then conduct its corresponding ―Diagnosis‖ and
―Results Monitoring‖. This menu of options is not exclusive: TEIs can develop their own
activities to further the academic success of their current and future indigenous students.
Importantly, however, monitoring the participation of indigenous students in overall
Performance Agreement activities will be a requirement.
43. Among the options listed, remediation initiatives are particularly important for the
Government of Chile and for the World Bank because they focus on strengthening basic core
competencies—math, science, reading comprehension, and study skills, among others—to
increase student success in tertiary education. Remediation caters to students with weak
secondary education, most of which are from lower socioeconomic backgrounds, municipal
schools and rural areas. Given that indigenous Chileans are, lamentably, over represented in this
target category, remediation activities benefit them directly.
8 This percentage was determined with the Division of Higher Education based on in-depth knowledge of Chile‘s
TEIs and data provided by various Institutional Analysis Units in the TEIs themselves. 9 Information for all TEI is not yet available.
Undergraduate
Enrollment
Indigenous
Students
% of
Indigenous
Students
Undergraduate
Enrollment
Indigenous
Students
% of
Indigenous
Students
U. de Tarapacá 7,991 1,270 15.9% 7,903 1,325 16.8%
U. C. Temuco 6,400 1,091 17.0% 6,767 1,268 18.7%
U. de La Frontera 8,025 1,322 16.5% 8,263 1,483 17.9%
U. del Bío Bío 10,597 259 2.4%
Total 22,416 3,683 16.4% 33,530 4,335 12.9%
Institution
2010 2011
36
Table 5. “Menu” of Pro-Indigenous Actions Theme Diagnosis Action Results Monitoring
Overall
Performance
Agreement
Monitoring the participation of
indigenous students in Project
activities (required)
Increasing the
quality of the
tertiary
education
experience
Diagnosing the level and
quality of the skills of
incoming indigenous students.
Offering remediation classes to
academically poorly prepared students,
which often include a large portion of
indigenous students. These should include
ICT tools and the different ways in which
their use can be optimized.
Tracking of the academic
progress of indigenous students
throughout their degree,
including potential reasons for
dropping out.
Introducing pre-tertiary education
orientation to ease the integration of
indigenous students already admitted into
TEIs.
Offering special in-school services to
indigenous students, including those that
address integration challenges both on a
cultural level and on a language level. This
can be accomplished through an advising
program specifically geared towards the
challenges faced by indigenous students in
tertiary education.
Surveying career prospects and
current levels of employability
and salaries of indigenous
graduates.
Creating stronger links between indigenous
students and potential employers through
more tailored career services and internship
opportunities.
Tracking of the employability
and salary levels of indigenous
students.
Increasing
tertiary
education
access
Diagnosing the reasons for
which otherwise qualified
indigenous students choose not
to enroll in the TEI, or are
rejected by the TEI, and action
plan to address them.
Increasing the awareness of tertiary
education financing options, including
indigenous-specific student aid, through on
campus and off campus advertisement and
outreach.
Tracking of the number of
indigenous students which apply
and gain admission to the TEI.
Introducing specific affirmative action
criteria in the TEI student admission
process.
Adding to the
content and
relevance of
research and
instruction
Surveying the academic
research related to indigenous
issues to identify potential gaps
and/or areas that require
further clarification.
Encouraging academic research related to
indigenous culture, indigenous language,
and/or issues that specifically affect
indigenous populations.
Tracking academic production
related to indigenous issues.
Surveying the content and
relevance of indigenous issues
in the curriculum and in
educational policies, in order
to identify potential gaps
and/or areas that require
further clarification.
Including issues relevant to the racial and
ethnic diversity of Chile in applicable
courses and curriculum.
Tracking the amount, the quality
and/or relevance of indigenous
issues included in the curriculum
and in educational policies. Increasing the relevance of existing
educational policies for indigenous
students.
37
Diagnosing the extent of
teacher training in intercultural
bilingual education and
indigenous culture, and
drawing up an action plan to
improve it.
Improving teacher training in intercultural
bilingual education and indigenous culture.
Tracking the number and quality
of teachers trained in
intercultural bilingual education
and indigenous culture.
Surveying the awareness of
indigenous students regarding
their rights as indigenous
people.
Increasing the awareness of indigenous
students regarding their rights as
indigenous people.
Measure the awareness of
indigenous students regarding
their rights as indigenous
people.
44. Once the broad parameters of the Performance Agreement between the TEI and the
Ministry of Education are established, TEIs deemed to have a vocation for the education of
indigenous students will hold consultations with representatives of indigenous students and/or
relevant local indigenous leadership to determine which pro-indigenous actions best fit the
educational mission of the TEI and the situation and context of the students. TEIs may wish to
create an indigenous consultative committee beforehand in order to discuss and incorporate said
actions in an efficient manner. In order to avoid creating false expectations, consultations are
best carried out after TEIs have been selected for a Performance Agreement and as part of the
negotiation process between the TEI and the Ministry of Education.
45. Once the consultations are carried out and the options chosen, the ―Plan‖—known as the
―Indigenous Peoples Plan‖ or IPP—will be submitted to the Division of Higher Education, in
charge of implementing the MECESUP3 Project. Plans will:
i. Describe the consultation processes and their outcomes;
ii. Summarize the results of any stakeholder analysis or social assessment performed;
iii. Describe the pro-indigenous actions that will be carried out, their respective timelines,
baselines, success indicators, and monitoring processes, and the support they have
garnered from indigenous students.
46. DIVESUP in the Ministry of Education will review the IPP proposed by each TEI during
the Performance Agreement negotiation process. Final plans will be forwarded to the World
Bank for their ―No Objection‖ and their subsequent publishing in the information website
(―Infoshop‖).
47. Each TEI with an IPP will be in charge of implementing the pro-indigenous actions
specified in its Performance Agreement. Each TEI will report their progress through their
designated M&E unit, with the same periodicity with which they reports progress of the
Performance Agreement as a whole.
48. The Division of Higher Education will supervise the Performance Agreements and carry
out their Midterm Reviews. Through these Reviews the Division will evaluate the progress of the
IPP and determine, in conversation with the TEI, whether any action is needed.
38
Monitoring & Evaluation
49. Advancement of the PDO and the pursuit of result indicators would be measured for the
two components at least annually and would be publicly disclosed. Data would be obtained from
a number of sources, including SIES, DIVESUP, university registers and the National Council of
Scientific and Technological Research (Comisión Nacional de Investigación Científica y
Tecnológica). Significant capacity for data collection and indicator tracking has been identified
both at universities and other bodies like SIES, as proved by the collection, processing and
dissemination of information regarding tertiary education by institution. Standardized testing at
the tertiary level would be piloted to better measure student learning and outcomes.
50. DIVESUP would monitor and evaluate the implementation of the CDs, the progress
towards goals, financial management, and procurement. It would also involve regular
communication with ICUs regarding M&E activities undertaken, and offer cooperation and
support as needed for the achievement of Performance Agreement objectives. Visits will be
arranged for each beneficiary TEI, with the number of visits between one and three per year. The
technical divisions of the General Coordination of MECESUP will be responsible for the
technical supervision of the CDs. Fiduciary supervision will be carried in accordance with that
stipulated in Annexes 5 and 6 and the Operational Manual.
51. Each CD will be subject to an annual progress evaluation that determines whether
resources continue to flow to the corresponding TEI. The technical evaluation of CDs will
consider:
a. The use of allocated resources, to the date, in relationship to what was agreed upon
in the CD.
b. The progress of activities and indicators, and especially progress toward the targets
established in the CD. As progress toward targets in many cases is not linear, this
assessment will be based on the overall judgment of the technical staff of
MECESUP, not an application of a formulaic algorithm to judge progress toward
indicators.
c. Indicators of institutional commitment to the CD, such as time and energy expended
by key TEI staff to carry out the activities and keep the implementation of the CD on
schedule.
52. Each semester each CD will be rated as either Satisfactory, Satisfactory with flag, or
Unsatisfactory. Satisfactory CDs will be those that are making progress toward overall
objectives. Satisfactory with flag will be those where progress may have stalled, but institutional
efforts are adequate. Unsatisfactory CDs will be those where progress is stalled and institutional
effort is inadequate. A project receiving a rating of Satisfactory with flag will be informed that
it risks being rated in the next iteration as Unsatisfactory. Disbursements will be suspended to
Unsatisfactory CDs, and, if the subsequent rating does not restore the CD to at least satisfactory
with flag, the CDs risks to be cancelled. The technical ratings (S, S with flag, or U) will be
reported in various fiduciary reports and in the SOEs so that disbursement staff can ensure that
disbursements are not made to CDs with U ratings.
39
53. At the TEI level, Institutional Coordination Units (ICU) would monitor and evaluate the
progress of Performance Agreements. ICUs will present progress reports to DIVESUP twice a
year, describing the achievement of results, financial management, and procurement.
54. Regarding overall Project monitoring and evaluation, the Bank Team would work closely
with the Project Coordinator, as well as with TEIs, to evaluate Project implementation progress
during supervision missions.
55. An International Advisory Committee (CAI, Comité Asesor Internacional) made up of
tertiary education experts would be created to provide feedback to the Project as desirable and
appropriate.
40
Annex 4: Operational Risk Assessment Framework (ORAF)
Chile: Tertiary Education Finance for Results 3 Project
Stage: Board
Project Stakeholder Risks Rating Substantial
Description :
There is a risk students continue to hold the Cruch
universities for an extended period. This would
prevent the normal functioning of TEIs and the
ability of students to pursue their education.
There is a risk that groups of TEIs may persuade
Congress to restrict institutional eligibility for Project
resources.
Risk Management : The Task Team has contributed as technical advisors on
issues under discussion. It will continue to provide these technical inputs for draft
legislation. The primary risk management strategy on behalf of the Government is
a call for dialogue with the students and continuous reasonable policy responses to
the evolving situation.
With regards to TEIs, it is unclear what current protests have done to the balance
of power between different TEI types. Insufficient TEI funding has been a primary
complaint of students and the Government has pledged to increase it substantially.
Promotion of Ministry of Education dialogue with Dipres, and the relevant
Congressional committees will be key to ensure that the implementation of
Government policies are not obstructed through targeted lobbying.
Resp: Government
of Chile
Stage: Ongoing
Dialogue Due Date : N/A
Status:
ongoing /
evolving
Capacity Rating: Low
Description :
There is a risk that workload overwhelms the General Risk Management :
During preparation, the Team will seek to ensure that there is sufficient early
41
Coordination of MECESUP, which is in charge of
executing all funds allocated to TEIs. Since funds
will increase several-fold as a result of the
Government‘s new commitments vis-à-vis tertiary
education, the General Coordination of MECESUP
may find the increase in workload to strain its
capacity.
There is a potential risk of insufficient capacity in
some beneficiary institutions, particularly those who
have not benefitted from previous MECESUP 1 & 2
projects.
planning and budget resources to allow Project Management to avoid bottlenecks,
conduct routine reporting, and maintain a high level of efficiency.
An assessment of sample beneficiary institutions has been finalized and results
indicate reasonable capacity. Findings have informed the Operational Manual,
which will seek to include clear and detailed information to facilitate and guide
fiduciary administration by beneficiary institutions. During implementation, the
General Coordination of MECESUP will provide support for weaker institutions.
Resp: World Bank
task team and the
General
Coordination of
MECESUP
Stage: Completed Due Date :
Appraisal
Status: Completed
Resp: Stage: Due Date : Status:
Project Risks
Design Rating: Low
Description :
There is a risk that Performance Agreements become
bureaucratized by policies and procedures that are
additional to those specified in the Project
Documents.
Risk Management :
During preparation, sufficient personnel and time for negotiation and
implementation of Performance Agreements has been built into Project guidelines
and timelines.
During implementation, the Team would conduct a special technical audit to
ensure that procedures specified in Project documents are used and not being
duplicated.
Resp: World Bank
task team and the
General
Coordination of
MECESUP
Stage: ongoing Due Date :
Implementation
Status:
ongoing
Social & Environmental Rating: Moderate
Description :
There is a negligible risk that indigenous peoples
Risk Management :
The Project has designed an Indigenous Peoples Planning Framework (IPPF) in
which main areas of focus are alignment of select project activities with the
42
concerns are not addressed because they are typically
aligned with those of Project beneficiaries: poor
Chileans students from municipal schools and rural
backgrounds. This group benefits through the
increase in quality at pedagogy schools and through
remediation initiatives at TEIs aimed to strengthen
basic competencies.
There is a negligible risk of environmental damage
because civil works supported by the Project will be
limited to minor refurbishments in existing buildings.
relevant areas of the GoC‘s upcoming national Araucanía Plan for indigenous
people, continuity with the efforts of the previous MECESUP2 project,
particularly in remediation initiatives, close monitoring of the participation of
indigenous students in Project activities, and subsequent promotion of learning
quality and relevance at participating TEIs with indigenous students. The Project is
also encouraging investments in improvements of tertiary education that to varying
degrees focus on issues relevant to the racial and ethnic diversity of Chile and
consistent with Project development objectives.
During implementation, the Implementation Agency will ensure environmental
measures are included in the minor works that are taken on with Project funds.
Resp: World Bank
task team and the
General
Coordination of
MECESUP
Stage: preparation Due Date :
Implementation
Status:
ongoing
Resp: Stage: Due Date : Status:
Delivery Monitoring & Sustainability Rating: Low
Description : There is a risk that failure to adopt
electronic record keeping procedures delays contract
management.
Risk Management: During implementation, the Team would encourage adoption
of specific practices that would facilitate electronic record keeping for contract
management.
Resp: World Bank
task team and the
General
Coordination of
MECESUP
Stage: preparation Due Date :
Implementation
Status:
ongoing
Implementation Risk Rating: Moderate
Comments: Chileans currently believe that education is one of the most important challenges facing the country (upwards of 70% felt
this way in a national poll conducted in August). As such, support for the Project, as well as the enabling political environment, will
undoubtedly be strong. Nevertheless, student protests will pose challenges.
43
Annex 5: Implementation Support Plan
CHILE: Tertiary Education Finance for Results Project
Strategy and Approach for Implementation Support
1. This Implementation Support Plan (ISP) has been developed on the basis of the
specificities of the Project and its risk profile. It aims at making implementation support to the
client both flexible and efficient. In order to do so, it focuses on the implementation of the risk
mitigation measures identified in the ORAF, particularly in the areas with a risk rating moderate
or significant (i.e. stakeholder risk and social risk).
2. Regarding stakeholder risk, the Team‘s approach to implementation support strongly
emphasizes open and regular communication with the Government of Chile, including technical
advice on some of the issues that are under discussion.
3. As for social and environmental risk, the Team has devised an Indigenous Peoples
Planning Framework (IPPF), which focuses on the alignment of selected Project activities with
the relevant areas of the GoC‘s upcoming Araucanía Plan for Indigenous peoples, among others.
Moreover, continuity is being given to efforts previously made in the framework of the
MECESUP2 Project, particularly regarding the undertaking remediation activities and the close
monitoring of Indigenous students‘ participation in Project activities. Furthermore, during
implementation the General Coordination of MECESUP will ensure that due environmental
measures are included in the minor works that could be financed with Project funds.
4. In general, the Team has identified significant capacity for implementation and for M&E
at DIVESUP, as the agency responsible for Project Implementation. Furthermore, a sample of
beneficiary institutions has been analyzed and the Team has concluded that they have reasonable
implementing capacity. Therefore, the Bank‘s approach for implementation support in this
Project focuses on (i) devising a detailed, unambiguous Operational Manual altogether with the
General Coordination of MECESUP in order to govern the process of implementation, and (ii)
ensuring the supply of capacity building in those few cases where institutional weaknesses have
been identified.
5. The strategy for implementation support in this Project places strong emphasis on close
supervision and good communication between the Bank, on one hand, and the General
Coordination of MECESUP, on the other hand. The Project benefits of and builds on the trust,
communication channels, and experience of previous MECESUP1 and 2 projects.
Implementation Support Plan
6. The Bank will closely supervise the implementation of the Project‘s Components and
Subcomponents and will provide guidance to the relevant agencies regarding technical,
fiduciary, and social issues. Formal supervision and field visits will be carried out semi-annually,
and will focus on:
44
(a) Technical inputs. The Bank‘s team will focus especially on the follow up of
subprojects under Component 1 (CDIs and CDFs). In particular, close work with the
General Coordination of MECESUP as well as with a sample of universities‘
implementing teams will help ensure that implementation progresses adequately.
(b) Fiduciary requirements and inputs. Training as needed will be provided by the
Bank‘s financial management specialist and the procurement specialist before Project
effectiveness and during Project implementation. This will allow building capacity in
matters of FM and Procurement matters, particularly regarding Bank procedures.
Supervision of financial management and procurement arrangements will be carried out
semi-annually as part of the project supervision plan and support will be provided on a
timely basis to respond to client needs.
(c) Safeguards. On the social side, supervision will focus on the implementation of the
agreed IPPF to ensure compliance with safeguard policy on Indigenous Peoples (OP/BP
4.10). Field visits will be made on a semi-annual basis. On the environmental side,
supervision will focus on ensuring that the minor civil works to be financed are done
with respect to environmental norms.
(d) Client Relations. The Task Team Leader will coordinate the Bank Team to ensure
project implementation is consistent with Bank requirements, as specified in the legal
documents. Moreover, the TTL will meet with senior officials on a regular basis to
keep them apprised of project progress and issues requiring resolution at their level. As
stated above, constant channels for information exchange will be maintained with all
major actors, taking advantage of trust and communication capacity built during Project
preparation.
7. The tables below present the main areas of focus in implementation support (Table 1) and
the staff skills mix required for implementation support (Table 2).
Table 1 – Staff Skills Mix Required
Skills Needed Number of Staff Weeks Number of Trips
Task Team Leader 20 SW the first year then 15 SW 4 the first year, then 2
Higher Education
Specialist
10 SW annually 2 per year
Finance expert 10 SW annually
Financial Management
Specialist
4 SW annually 2 per year
Procurement Specialist 6 SW annually 2 per year
45
Annex 6: Economic and Financial Analysis
CHILE: Tertiary Education Finance for Results Project
1. The expected economic value of the project has been assessed through three distinct net
present value (NPV) calculations, each focusing on an expected outcome associated with
MECESUP-3. The approach builds on the same concepts used to derive the returns of the
previous project, MECESUP2. The economic analysis shows that the project would have to
realize only moderate progress toward its goals to generate a positive return. If the project funds
of US$160M are disbursed evenly across four years, the NPV threshold for a positive return
would be ~US$153M in 2011 currency.10
Below, the progress required to generate a positive
return is detailed:
A shortening of time to graduation would result in time savings and increased career
earnings for graduates of tertiary education. A reduction of approximately one third of a
month in average time to graduation would result in an NPV USD of ~$150M.
An increase in the quality of tertiary education is expected to lead to an increased
premium for wage earners with tertiary education. An increase in the premium of
approximately 0.14% would result in a project NPV USD of ~$150 M.
An increase in first-year retention would be expected to result in a concomitant uptick
in overall graduation rates. An increase of first year student retention of 4% would
result in an NPV USD of $~150M.
2. The progress outlined above details the change within each area that would be required to
independently justify the project. In reality, progress towards all goals is expected, and thus only
moderate progress toward each of the goals would likely lead to full recovery of the NPV of the
disbursed funds, along with a sizeable return. Annex 3 outlines in detail the methodologies
underlying the above assessments. Although project improvements are expected to endure, for
the purposes of NPV calculations, the financial effects of the project were only considered for
students graduating within the next decade. Finally, all analyses are restricted to graduates of
CRUCH universities, disproportionate recipients of previous aid programs. This will likely have
the effect of understating project returns, as graduates of other institutions are also likely to
benefit in similar ways.
Increased Earnings from Shortened Education Duration
3. A significant focus area of the project will be shortening the duration of tertiary education
in Chile. Historically, university study has required an investment of approximately seven years.
If the project succeeds in reducing time-to-completion, students will be required to spend both
less money and less time in acquiring their education. Additionally, overall lifetime earnings will
increase because the avoided study time can be productively allocated to work. The NPV of the
project can be calculated in part by examining the value of these incremental earnings.
10
All US dollars have 2011 value.
46
4. To calculate the NPV of these incremental earnings, a number of assumptions needed to
be made; they are as follows:
The size of each year‘s graduate cohort is based on the average growth rate in CRUCH
graduates from 2002 to 2009, which was 5.2%. This was used to project the number of
graduates expected from 2013-2022.
The employment rate of future graduates was assumed to be 81.8 percent, which was
the weighted average employment of graduates from all university programs in 2009
from the SIES database.
The weighted average salary earned by 2009 graduates was also based on SIES data,
and was determined to be CLP622, 694.
First year wages were assumed to grow at an annual rate of 2.5%, (the per capita
growth of the economy).
The discount rate is taken as 6%, as in the previous PAD, and the exchange rate is taken
as CLP475.
Savings were calculated based on three potential reductions in time until graduation:
one third of a month, one month, and three months.
5. Table 1 shows these assumptions would result in an NPV ranging from US$150 – 750
million in increased earnings for 2013-2022 graduates. It is expected that a number of factors in
addition to the project will influence reductions in time until graduation, so the actual returns of
the project will have to be considered to be only a fraction of the figures below.
Table 1. Earnings from Decreased Education Duration
Year Projected
Graduates
Projected
Employed
NPV of Earnings Increase from
Decrease in Career Length of:
1/3 of a
Month 1 Month 3 Months
2013 41,601 34,030 15,265,839 46,260,117 138,780,351
2014 43,765 35,799 15,529,390 47,058,759 141,176,276
2015 46,040 37,661 15,797,492 47,871,188 143,613,565
2016 48,434 39,619 16,070,222 48,697,644 146,092,931
2017 50,953 41,680 16,347,661 49,538,367 148,615,101
2018 53,603 43,847 16,629,890 50,393,605 151,180,815
2019 56,390 46,127 16,916,991 51,263,608 153,790,823
2020 59,322 48,526 17,209,048 52,148,630 156,445,891
2021 62,407 51,049 17,506,148 53,048,932 159,146,797
2022 65,652 53,703 17,808,376 53,964,777 161,894,331
Total: 165,081,057 500,245,628 1,500,736,883 Note: considers graduates from Consejo de Rectores universities, assumes new graduates growing at 5.2% (average 2002 to
2009), initial mean wage in 2009 of M$1,132, grown at 2.5% annually, employment rate of 81.8%, US$ 1.0 = CLP550.
47
Increased earnings from Higher Tertiary Wage Premium
6. A significant focus area of MECESUP3 will be increasing the quality of tertiary
education by improving the faculty qualifications. Additionally, the project anticipates raising
the perception of quality among future employers by increasing relevance and quality of degree
programs. As the quality and relevance of tertiary education increases, the wage premium for
having completed tertiary education is expected to rise, with employers willing to pay increasing
premiums for graduates with well developed and highly relevant skills. The NPV of the project
was calculated in part by examining the value of these incremental earnings.
7. If the wage premium paid to tertiary education graduates increases faster than the
historical average, a portion of that premium can be attributed, in part, to the success of this
project. A number of assumptions were made to assess the potential impact of such a premium
on the earnings of university graduates over the decade from 2013 to 2022. Because the
graduates are expected to benefit from the wage premium over their entire career [30 years
assumed], the assumptions calculate the present value of the wage premium in the year of
graduation; future year premiums are discounted. The rest of the assumptions are detailed below.
8. The same assumptions used for calculating increased wages from shortened study-spans
are used here, as well as a few supplementary assumptions:
In addition to the 2.5% annual growth rate applied to first year wages, through the 30
year employment span, a 1.5% annual lifecycle earnings increase was projected.
As in the PAD, a discount rate of 6% is applied. This rate is used to normalize present
value earnings from 2013-2022 back to USD 2011 and to calculate the 30-year present
value of the wage increase for each graduation cohort.
The wage premium attributable to the project was varied from 0.15%-0.45%.
9. Table 2 shows these assumptions can result in returns ranging from an NPV of $170-510
million in increased earnings for 2013-2022 graduates. A variety of factors can influence the
premium associated with higher education, and given the variety of increases in funding to
higher education and the ongoing transformation of the Chilean economy, it is expected that a
larger premium than 0.45% will be observed, of which only a portion will be attributable to the
project.
48
Table 2. Increased Wage Premiums Associated with Tertiary Education Quality
Note: considers graduates from Consejo de Rectores universities, assumes new graduates growing at 5.2% (average 2002 to
2009), initial mean wage of M$1,132, employment rate of 81.8%, US$ 1.0 = CLP550, assumes 2.5% continued initial salary
growth, with incremental 1.5% lifecycle growth.
* = projected
Increased Earnings from Higher Graduation Rates
10. The final source of returns from the project is associated with increasing retention rates of
students. Tertiary education graduates enjoy a significant wage premium over non-graduates,
earning approximately double what drop-outs can be expected to make. Thus increasing the
graduation rate would have the effect of moving more wage-earners into a higher income group.
11. Reliable data to develop a historical baseline for graduation rates is limited. Accordingly,
the metric targeted by the project is a reduction in first year attrition, an area with more reliable
statistics. This analysis was based on a number of assumptions, including:
CASEN survey data to determine the magnitude of the premium for completion of
tertiary education vs. partial exposure to tertiary education. The premium was
determined, based on 2009 CASEN data, to be ~ $85/month.
Ongoing growth in the premium associated with higher education of ~3.3% per year, in
line with growth in the premium from the 2000-2009 CASEN surveys.
Because the NPV analyses are limited to the near-term decade, and because Chilean
university education on average lasts 7 years, only a handful of graduating classes are
expected to be influenced over the course of the next decade. Specifically, the enrolling
classes of 2012-2015 are expected to graduate between 2019-2022. If the analysis
included more cohorts, the NPV would grow correspondingly.
The first year drop-out rate was based on reported statistics; longer term graduation rates
were derived by extrapolating a steady state graduation rate by excluding first year
enrollees and extrapolating the retention rate necessary to generate the observed number
Year Projected
Graduates
Projected
Employed NPV of Wage Premium Increase of:
0.15% 0.30% 0.45%
2013 41,601 34,030 15,717,559 31,435,117 47,152,676
2014 43,765 35,799 15,988,909 31,977,818 47,966,727
2015 46,040 37,661 16,264,944 32,529,888 48,794,831
2016 48,434 39,619 16,545,744 33,091,488 49,637,233
2017 50,953 41,680 16,831,392 33,662,785 50,494,177
2018 53,603 43,847 17,121,972 34,243,944 51,365,916
2019 56,390 46,127 17,417,568 34,835,137 52,252,705
2020 59,322 48,526 17,718,268 35,436,536 53,154,804
2021 62,407 51,049 18,024,159 36,048,318 54,072,477
2022 65,652 53,703 18,335,331 36,670,661 55,005,992
Total: 169,965,846 339,931,692 509,897,538
49
of university graduates. The graduation rate excluding first year dropouts appears to be
~90%; when first year drop-out rates are included, the graduation rate falls to ~70%.
12. Table X shows these assumptions can result in returns ranging from NPV USD of $57-
170 million in increased earnings for 2019-2022 graduates. A variety of factors can influence
changes in retention and graduation rate. Ultimately, the project will likely only accrue a portion
of its overall NPV from a decrease in drop-out rates.
Enrollment
Year
First Year
Students
Graduation
Year
NPV of Lifecycle Earnings Increase for First Year
Retention Increase of:
1.5% 3.0% 4.5%
2012 66,065 2019 13,698,516 27,397,032 41,095,549
2013 69,368 2020 14,021,142 28,042,284 42,063,426
2014 72,837 2021 14,351,366 28,702,733 43,054,099
2015 76,479 2022 14,689,368 29,378,736 44,068,105
Total: 56,760,393 113,520,786 170,281,179
Total Project Returns
13. If the project performs similarly to the previous MECESUP2 project, the leverage from
the US$153M is expected to be 5-7x, implying the potential for significant overall returns.