The World Bank DOCUMETOfia e INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP ENT Africa Avenue, B Road Tel: (251-11) 5176000 INTERNATIONAL DEVELOPMENT ASSOCIATION g Addibabi a pia Fax: (251-11) 6627717 November 4, 2013 Ref.: WB-CD/380/11/04/2013 H.E. Ato Sufian Ahmed Minister Ministry of Finance and Economic Development Addis Ababa Re: Federal Democratic Republic of Ethiopia: Advance Agreement for Preparation of Proposed Water Supply and Sanitation Project (WaSH II) Project Preparation Advance No. Q8850-ET Dear Ato Sufian, In response to the request for financial assistance made on behalf of the Federal Democratic Republic of Ethiopia ("Recipient"), I am pleased to inform you that the Intemational Development Association ("World Bank") proposes to extend to the Recipient an advance out of the World Bank's Project Preparation Facility in an amount not to exceed five million nine hundred and ninety thousand Dollars (US$5,990,000) ("Advance") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in financing the activities described in the Annex ("Activities"). The objective of the Activities is to facilitate the preparation of a proposed project designed to provide increased access to improved water supply and sanitation services for rural and urban residents of selected woredas/towns and communities in the Recipient's territory ("Project"), for the carrying out of which the Recipient has requested the World Bank's financial assistance. The Recipient represents, by confirming its agreement below, that: (a) it understands that the provision of the Advance does not constitute or imply any commitment on the part of IBRD or IDA to assist in financing the Project; and (b) it is authorized to enter into this Agreement and to carry out the Activities, repay the Advance and perform its other obligations under this Agreement, all in accordance with the provisions of this Agreement. H.E. Ato Sufian Ahmed -2- November 4, 2013 Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature; provided, however, that the offer of this Agreement shall be deemed withdrawn if the World Bank has not received this countersigned copy within ninety (90) days after the date of signature of this Agreement by the World Bank, unless the World Bank has established a later date for such purpose. Very truly yours, INTERNATIONAL DEVELOPMENT A BGuang Zhe Chen ()I Country Director for Ethiopia Africa Region AGREED: FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA By Authorized Rep es tativ Name Title Date Enclosures: * "Standard Conditions for Advances Made by the World Bank under its Project Preparation Facility", dated July 31, 2010; and * Disbursement Letter for the Advance, of the same date as this Agreement, together with "World Bank Disbursement Guidelines for Projects", dated May 1, 2006. -3- PPA No. Q885-ET Annex Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Advances Made by the World Bank under its Project Preparation Facility dated July 31, 2010, ("Standard Conditions"), constitute an integral part of this Agreemept. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Execution of the Activities. 2.01. Description of the Activities. The Activities for which the Advance is provided consist of the following parts: (a) Carrying out Project preparation activities, including water supply system studies and designs for larger, medium and small towns. (b) Carrying out Project start up activities as follows: (i) establishing/strengthening Project coordination structures at federal, regional and woreda (the third tier of government in the Recipient's administrative system) levels through the provision of technical advisory services, office equipment, vehicles, and operating costs; (ii) strengthening the institutional capacities at regional, zonal and woreda levels through hiring support teams including national consultants, consisting of town support groups and woreda support groups to assist in the preparation of district wide plans for the Project; (iii) maintaining the existing Project Management Unit (PMU) staffs at federal and regional levels through the provision of technical advisory services, office equipment, vehicles, training and workshops, and operating costs. 2.02. Execution of the Activities Generally. The Recipient declares its commitment to the objectives of the Activities. To this end, the Recipient shall carry out the Activities through its Ministry of Water and Energy in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) this Article II; and (c) the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006, and revised in January 2011. 2.03. Institutional and Other Arrangements. The Recipient shall maintain the existing PMU at its Ministry of Water and Energy, which will be headed by a Project Coordinator and will include procurement, financial management, and social safeguard specialists, all with qualifications, experience and terms of reference acceptable to the World Bank. 2.04. Monitoring, Reporting and Evaluation of the Activities. The Recipient shall monitor and evaluate the progress of the Activities in accordance with the provisions of Section 2.08 of the Standard Conditions. -4- 2.05. Financial Management (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.09 of the Standard Conditions. (b) The Recipient shall ensure that interim un-audited financial reports for the Activities are prepared and furnished to the World Bank not later than forty-five (45) days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the World Bank. (c) The Recipient shall have its Financial Statements audited in accordance with the provisions of Sections 2.09(b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient, commencing with the fiscal year in which the first withdrawal under the Advance was made. The audited financial statements for such period shall be furnished to the World Bank not later than six months after the end of such period. 2.06. Procurement (a) General. All goods, non-consulting services and consultants' services required for the Activities and to be financed out of the proceeds of the Advance shall be procured in accordance with the requirements set forth or referred to in: (i) Section I of the Procurement Guidelines in the case of goods and non- consulting services; (ii) Sections I and IV of the Consultant Guidelines in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the Procurement Plan. (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. (c) Particular Methods of Procurement of Goods and Non-consulting Services (i) Except as otherwise provided in sub-paragraph (ii) below, goods and non- consulting services shall be procured under contracts awarded on the basis of International Competitive Bidding. (ii) The following methods, other than International Competitive Bidding, may be used for procurement of goods and non-consulting services for those contracts specified in the Procurement Plan: (A) National Competitive Bidding, subject to the following additional procedures: -5- 1. The Recipient's standard bidding documents for procurement of goods and works acceptable to the World Bank shall be used. At the request of the Recipient, the introduction of requirements for bidders to sign an Anti-Bribery pledge and/or statement of undertaking to observe Ethiopian Law against fraud and corruption and other forms that ought to be completed and signed by him/her may be included in bidding documents if the arrangements governing such undertakings are acceptable to the World Bank. 2. If pre-qualification is used, the World Bank's standard prequalification document shall be used. 3. No margin of preference shall be granted in bid evaluation on the basis of bidder's nationality, origin of goods or services, and/or preferential programs such as but not limited to small and medium enterprises. 4. Mandatory registration in a supplier list shall not be used to assess bidders' qualifications. A foreign bidder shall not be required to register as a condition for submitting its bid and if recommended for contract award shall be given a reasonable opportunity to register with the reasonable cooperation of the Recipient, prior to contract signing. Invitations to bids shall be advertised in at least one newspaper of national circulation or the official gazette or on a widely used website or electronic portal with free national and international access. 5. Bidders shall be given a minimum of thirty (30) days to submit bids from the date of availability of the bidding documents. 6. All bidding for goods shall be carried out through a one-envelope procedure. 7. Evaluation of bids shall be made in strict adherence to the evaluation criteria specified in the bidding documents. Evaluation criteria other than price shall be quantified in monetary terms. Merit points shall not be used, and no minimum point or percentage value shall be assigned to the significance of price, in bid evaluation. 8. The results of evaluation and award of contract shall be made public. All bids shall not be rejected and the. procurement process shall not be cancelled, a failure of bidding declared, or new bids shall not be solicited, without the World Bank's prior written concurrence. No bids shall be rejected on the basis of comparison with the cost estimates without the World Bank's prior written concurrence. 9. In accordance with para.1.16(e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds -6- of the Financing shall provide that: (1) the bidders , suppliers, contractors and subcontractors, agents, personnel, consultants, service providers, or suppliers shall permit the World Bank, at its request, to inspect all accounts, records and documents relating to the bid submission and performance of the contract, and to have them audited by auditors appointed by the World Bank; and (2) Acts intended to materially impede the exercise of The World Bank's audit and inspection rights constitutes an obstructive practice as defined in para. 1.16.a(v) of the Procurement Guidelines. (B) Local Shopping. (d) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost- based Selection. (ii) The following methods may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Selection based on Consultants' Qualifications; and (B) Single- source procedures for the Selection of Individual Consultants. (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. Article III Withdrawal of the Advance 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Advance in accordance with the provisions of: (a) Article III of the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance 100% of Eligible Expenditures consisting of goods, non-consulting services, consultants services, Operating Costs, and Training and Workshops, inclusive of Taxes. "Operating Costs" means the operating costs incurred on account of the implementation of the Activities, including maintenance of vehicles and equipment, fuel, office supplies, utilities, consumables, bank charges, advertising expenses, travel, per diems, and accommodation, but excluding salaries of civil servants of the Recipient. "Training and Workshops" means the costs associated with the training, study tours and workshop participation of personnel involved in the Activities, including travel and subsistence costs for training and workshop participants, costs associated with securing the services of trainers and workshop speakers, rental of training and workshop facilities, preparation and reproduction of training and workshop materials, and other costs directly related to training course and workshop preparation and implementation. -7- 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countetsignature of this Agreement by the Recipient. 3.03. Refinancing Date. The Refinancing Date is July 7, 2014. Article IV Terms of the Advance 4.01. Service Charge. The Recipient shall pay a service charge on the Withdrawn Advance Balance at the rate of three-fourths of one percent (3/4 of 1%) per annum. The service charge shall accrue from the respective dates on which amounts of the Advance are withdrawn and shall be paid in arrears in accordance with the provisions of Section 4.02 of this Agreement. Service charges shall be computed on the basis of a 360-day year of twelve 30-day months. 4.02. Repayment. The Withdrawn Advance Balance shall be repaid by the Recipient to the World Bank (together with any service charges accrued thereon) in accordance with the provisions of Article IV of the Standard Conditions and the following provisions: (a) Refinancing under the Refinancing Agreement: If, on or before the Refinancing Date, a Refinancing Agreement has been executed by all of its parties, then the full amount of the Withdrawn Advance Balance shall be repaid to the World Bank (together with any service charges accrued on the Advance to the date of repayment) as soon as the Refinancing Agreement becomes effective, by means of a withdrawal by the World Bank of an amount of the Refinancing Proceeds equivalent to the Withdrawn Advance Balance plus such service charges, in accordance with the provisions of the Refinancing Agreement. (b) Repayment in the absence of a Refinancing Agreement: If, on or before the Refinancing Date, no Refinancing Agreement has been executed by all of its parties, or if, by such date or at any time thereafter, it has been so executed but terminates without becoming effective, then: (i) if the amount of the Withdrawn Advance Balance does not exceed $50,000, it shall be repaid by the Recipient to the World Bank (together with service charges accrued on the Withdrawn Advance Balance to the date of repayment) on such date as the World Bank shall specify in a notice to the Recipient, which shall in no event be. earlier than 60 days following the date of dispatch of such notice; and (ii) if the amount of the Withdrawn Advance Balance exceeds $50,000, it (together with service charges accrued on the Withdrawn Advance Balance to the Notice Date) (the "Aggregate Balance") shall be paid by the Recipient to the World Bank in ten approximately equal semiannual installments, in the amounts and on the dates ("Payment Dates") which the World Bank shall specify in a notice to the Recipient. In no event shall the first Payment Date be set earlier than 60 days following the date ("Notice Date") of dispatch of such notice. The Recipient shall pay a service charge on the Aggregate Balance at the rate of three-fourths of one percent (3/4 of 1%) per annum, payable in arrears on each Payment Date. The service charge shall be computed on the basis of a 360-day year of twelve 30-day months. -8- Article V Recipient's Representative; Addresses 5.01. Recipient's Representative. The Recipient's Representative referred to in Section 9.02 of the Standard Conditions is its Minister responsible for Finance and Economic Development. 5.02. Recipient's Address. The Recipient's Address referred to in Section 9.01 of the Standard Conditions is: Ministry of Finance and Economic Development P.O. Box 1905 Addis Ababa Federal Democratic Republic of Ethiopia Telex: Facsimile: 21147 (25-11) 1551355 5.03. World Bank's Address. The World Bank's Address referred to in Section 9.01 of the Standard Conditions is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INDEVAS INTBAFRAD 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI)