Payment Progress target percentage
Contract signature (mobilization) 15 Definition of design criteria 15 Layout of major works 20 Draft of final documents 40 Approval of final documents 10
Lump-sum contracts, which are generally used for assignments of shorter duration, usually do not provide for price escalation.
(b) Physical Contingencies
An amount to cover physical contingencies should be included in all time-based contracts. The amount depends on the degree of definition of the consultant’s scope of work and the type of service required. For example, it may be zero for lump- sum contracts wherein the scope is precisely de- fined; it may be set at 5 percent for the supervision of site investigations; it may rise to 10 percent for well-defined assignments such as the detailed de- sign of a complex project; and it may rise up to 15 percent or more for master plans and complex feasibility studies. Physical contingencies will gen- erally be low for advisory services assignments. (c) Calculation of Contingencies
The following example shows how a calculation may be carried out for price and physical con- tingencies. A contract has been negotiated for US$900,000 equivalent, of which US$780,000 covers foreign costs and US$120,000 equivalent represents local costs. A total of US$180,000 of the foreign cost component of US$780,000 is paid to- ward mobilization and is not subject to price esca- lation. The contract will run for three years, and it is assumed that both foreign and local costs are evenly distributed over this period. The indexes representing the foreign and local cost inflation have risen by 8 and 10 percent, respectively, in the past three years and are expected to do the same in the next three years.
The calculation of price and physical contin- gencies might appear as follows:
•
Foreign Costs.Year 1 Year 2 Year 3 Total $200,000 $216,000 $233,000 $649,000
•
Local Costs. A similar calculation leads to a total of US$132,400 equivalent.•
Total Price Contingency. The total price varia- tion amounts to (US$649,000 + US$132,400– US$600,000–US$120,000) = US$61,400 equiv- alent.•
Physical Contingency. A total of 10 percent of contract value should be allowed (that is, 10 percent of (US$900,000 + US$61,400), or US$96,140.•
Total Contingency Allowance. The total contin- gency allowance (price and physical) is about (US$61,400 + US$96,140) = US$157,540 equiv- alent, which brings the total contract value up to US$1,057,540 equivalent.18.7 Negotiation of
Contract Conditions
Before discussing the financial proposal, the parties should discuss the clauses of the draft contract. The General and Special Conditions of Contract should be reviewed to ensure that both parties understand the contract terms and conditions and that they faithfully and clearly reflect the parties’ agreement. Although the GCC cannot be changed, special conditions are subject to negotiation. However, because they have already been adapted to the assignment before issuing the RFP, negotiations should be limited to specific and justified requirements of the consultant.
Contract negotiations should end with both parties initialing a draft contract and its annexes. For contracts for which prior review is required, a copy of the draft contract is forwarded to the Bank for its review and “no objection” before contract execution.
The draft contract should include all appendixes required by the applicable standard contract form, pro- viding the following information:
•
Negotiated TOR, including the scope of work of the services, agreed-on methodology, organization chart, and program of activities indicating dates for com- pletion of the various tasks•
List of reports indicating format, frequency, con- tent, submission dates, and approval procedures•
Job descriptions of key personnel and the staffing schedule•
List of services, facilities, and counterpart personnel to be made available by the Borrower; also the tim- ing for the provision of such services, facilities, and counterpart personnel•
Estimated contract amounts in foreign or local cur- rency (or both), indicating monthly rates for for- eign and local staff and reimbursable expenses•
Detailed capacity-building program (if this is a spec- ified requirement of the TOR)106 NEGOTIATIONS AND AWARD OF CONTRACT Contingencies
19.1 Contract Effectiveness
Consultants can seldom begin work immediately after signing the contract. A signed contract that has received a written “no objection” from the Bank may not be ef- fective until certain conditions (such as approval by higher authorities) or compliance with certain prereq- uisites (such as funding requirements) are met. A con- sultant is sometimes pressured to start work before its contract is effective. Such practice should be discour- aged, particularly when mobilization of consultant staff involves large expenditures.
To enable the consultant to begin work promptly, the Borrower should make arrangements for the su- pervision of the assignment to be ready, particularly the following:
•
Appoint the counterpart manager and staff within the Borrower agency.•
Prepare office space, vehicles, and other supplies.•
Inform all concerned institutional parties.•
Effectuate advance payments.•
Obtain authorizations, data, and background ma- terial.19.2 Execution of the Assignment
19.2.1 Supervision by the Borrower
The Borrower is responsible for supervising consultant assignments financed with Bank funds. The Borrower must monitor the progress of work, the timely comple- tion of deliverables, the staff-months and money ex- pended (for time-based contracts), and determine where within the contract changes in the scope of work might be appropriate.
The contract usually requires that the consultant submit regular progress reports (see para. 10.3.5) and that the Borrower provide comments promptly.
C H A P T E R
19
Supervising Consultants
The Borrower should designate a counterpart project manager with adequate technical qualifications, managerial experience, and power of authority. In cer- tain instances, involving large and complex projects, a steering committee comprising high-level representa- tives of the Borrower and the consultant may be formed to exercise arm’s length supervision over the assign- ment. The steering committee shall always act through the counterpart project manager and the consultant’s team leader. It can be particularly useful when the Borrower’s executing agency and the consultant must coordinate their work with other Borrower agencies. The opportunity to regularly report to such a commit- tee can facilitate collaboration and understanding be- tween the Borrower and consultant on disputes over important technical and contractual issues. The steer- ing committee should convene for specific purposes and on important assignment or contractual deadlines.
19.2.2 Amendments
The Borrower or the consultant may propose amend- ments to the contract when either unforeseen events or the Borrower’s decisions make it necessary to modify the TOR or the consultant’s scope of work. In Bank-funded assignments subject to prior review, any deviation resulting in a contract price increase of more than 15 percent or any other substantial modi- fication requires a Bank “no objection” and a contract amendment.
19.2.3 Disputes
During execution of the assignment, disputes may arise between the Borrower and consultants. The parties in- volved should attend to such disputes promptly and constructively. Unresolved disputes relating to techni- cal and administrative matters, such as interpretation of the contract, payment of services, or replacement of
108 SUPERVISING CONSULTANTS Disputes
1 9 . 2 . 3
personnel, should be treated in accordance with the provisions of the contract.
19.2.4 Unsatisfactory Performance
Poor performance may involve one or more particular staff from the consultant’s team, or the whole team. Based on the provisions of the contract, the Borrower will advise the consultant to take the necessary meas- ures to address the situation. Poor performance should not be tolerated; therefore, the consultant should act quickly to comply with a reasonable request to improve the performance of the team or to replace any particu- lar staff member who is not performing adequately. If the consultant fails to take adequate corrective actions, the Borrower may consult with the Bank and, if the contract is subject to prior review, request the Bank’s “no objection” to terminate the contract.
19.2.5 Delays
Consulting services may be delayed for a variety of rea- sons. The consultant should notify the Borrower and explain the causes of such delays. If corrective action re- quires extra work and the delay cannot be attributed to the consultant, the extra work should be reimbursed in accordance with the contract.
19.3 Completing the Assignment
The draft final report contains the conclusions of the consultant’s work and its recommendations. Given the delay in publishing the formal final report, the final draft is often the document used by the Borrower to in- form its decision-making process.
This draft final report is distributed, as indicated in the official distribution list, for review to all counter- parts, relevant government departments, local author- ities who could be affected by the project, and the Bank.
The consultant collects and reviews the comments made by all parties and, in agreement with the Bor- rower, addresses these comments in the final report. If additional work is necessary to address important com- ments, such work may have to be financed (with or without a contract amendment) out of the contingen- cies provided for in the contract, by government funds, or through additional financing.
Any mistake or incomplete work on the part of the consultant should be remedied at no extra cost to the Borrower. Furthermore, the consultant is responsible for the technical integrity and impartiality of its find- ings and recommendations. The preferred way to han- dle significant disagreements on technical matters is to substantiate dissenting views in the report. Before the final payment, the consultant must have completed the services, and the Borrower must have acknowledged completion of the assignment.
19.4 Bank Role in Supervision
In accordance with para. 1.4 of the Consultant Guide-
lines, the Borrower is responsible for preparing and im-
plementing the project and, therefore, for selecting the consultant and awarding and subsequently administer- ing the contract.
Bank staff have no direct supervisory role over the consultant. Any contact with the consultant should occur with the Borrower’s permission (and preferably in the Borrower’s presence). Bank staff are often asked to help review the consultant’s work and may be called upon to bridge differences between the Borrower and the consultant on matters that may range from late pay- ments to major technical issues. Bank staff should assist where possible, exercise impartiality, and encourage a sound Borrower-consultant relationship. (The main steps of consultant supervision are illustrated in the flow chart in figure 19.1.)
109
SUPERVISING CONSULTANTS
Bank Role in Supervision 1 9 . 4