CONFORMED COPY LOAN NUMBER 1324 BO PART C PROJECT AGREEMENT (Urban and Rural Communities Water Supply and Severage Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND LEVELOPMENT and CORPORACION DE AGUA POTABLE Y ALCANTARILLADO - CORPAGUAS Dated October 15, 1976 PART C PROJECT AGREEMENT AGREEMENT, dated October 15, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and CORPORACION DE AGUA POTABLE Y ALCANTARILLADO - CORPAGUAS (here- inafter called CORPAGUAS). WHEREAS (A) by the Loan Agreement of even date herewith be- tween the Republic of Bolivia (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eleven million five hundred thousand dollars ($11,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition, inter alia, that CORPAGUAS agree 'Zo undertake such obligations toward the Bank as hereinafter set forth; (B) by a financing agreement between the Borrower and CORPAGUAS, part of the proceeds of the loan provided for under the Loan Agree- ment will be made available to CORPAGUAS on the terms and condi- tions therein set forth; and WHEREAS CORPAGUAS, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the Gen- eral Conditions (as so defined) have the respective meanings therein set forth. -3- ARTICLE II Execution of Part C of the Project Section 2.01. CORPAGUAS shall carry out Part C of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. Section 2.02. (a) In order to assist CORPAGUAS in the (i) establishment of standard designs and bills of materials for the construction of typical rural community water supply systems, (ii) production of operating manuals for the rural communities maintenance staff, (iii) elaboration of procedures for coordination of supplies and bulk procurement of imported materials by the DDOs, and (iv) preparation of plans for the transfer of water supply system maintenance and construction responsibilities to the DDOs, CORPAGUAS shall employ engineering consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank. (b) CORPAGUAS shall, not later than June 30, 1978 or such other later date as the Bank shall agree, present to the Bank for approval the designs, manuals, procedures and plans referred to in paragraph (a) of this Section. Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods or for civil works to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 1 to this Agreement. Section 2.04. (a) CORPAGUAS undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan made available to it by the Borrower against hazards incident to the acquisition, trans- portation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by CORPAGUAS to replace or repair such goods. (b) Except as the Bank may otherwise agree, CORPAGUAS shall cause all goods and services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) CORPAGUAS shall furnish to the Bank, promptl upon their preparation, the plans, specifications, reports, con- tract documents and construction and procurement schedules for Part C of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) CORPAGUAS: (i) shall maintain records adequate to record the progress of Part C of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan made available to it by the Borrower, and to disclose the use thereof in Part C of the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's represen,iatives to visit the facilities and con- struction sites included in Part C of the Project and to examine the goods financed out of such proceeds and any relevant records -5- and documents; and (iii) shall furnish to the Bank all such infor- mation as the Bank shall reasonably request concerning Part C of the Project, the expenditure of the proceeds of the Loan so made available to it and the goods and services financed out of such proceeds. . (c) CORPAGUAS shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of CORPAGUAS and any relevant records and documents. Section 2.06. CORPAGUAS shall duly perform all its obligations under the Financing Agreement. Except as the Bank shall otherwise agree, CORPAGUAS shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Financing Agreement or any provision thereof. Section 2.07. (a) CORPAGUAS shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part C of the Project, the performance of its obligations under this Agree- ment and under the Financing Agreement, and other matters relating to the purposes of the Loan. (b) CORPAGUAS shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of Part C of the Project, the accomplishrant of the purposes of the Loan, or the performance by CORPAGUAS of its obligations under this Agreement and under the Financing Agreement. -6- Section 2.08. CORPAGUAS shall take or cause to be taken all reasonable measures to ensure that Part C of the Project is carried out with due regard to ecological and environmental factors. - 7 ARTICLE III Management and Operations of CORPAGUAS Section 3.01. CORPAGUAS shall at all times maintain its corpo- rate existence and right to carry on its operations, and shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges, concessions and franchises which are necessary or useful in the conduct of its business. Section 3.02. CORPAGUAS shall operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with appropriate engineering and public utility practices. Section 3.03. CORPAGUAS shall at all times carry on its opera- tions, manage its affairs, and maintain its financial position, all in accordance with appropriate business, financial and public utility practices and under the supervision of experienced and competent management assisted by adequate competent staff. Section 3.04. CORPAGUAS shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.05. In order to assist CORPAGUAS in carrying out the action specified in Part C.5 of the Project, CORPAGUAS shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. S -8 - Section 3.06. CORPAGUAS shall: (i) not later than June 30, 1978 or such other later date as the Bank shall agree, with re- spect to the Departments of Potosi, Cochabamba, La Paz and Oruro, present to the Bank for approval a program for the transfer from CORPAGUAS to the respective DDOs of the responsibilities for the supervision of operation and maintenance of rural water systems built by CORPAGUAS and for the construction of specific rural water systems, and (ii) promptly thereafter put such program into effect. Section 3.07. CORPAGUAS shall not commence construction of any rural water system until it has concluded contractual arrangements with the respective CWC and DDO. Such arrangements shall be satis- factory t*i the Bank and shall: (a) in the case of a CWC, provide for, inter alia, payment to CORPAGUAS of such amounts as shall represent the cash, materials and labor contribution of the rural community concerned to the construction coat of their water system; and (b) in the case of a DDO, provide for, inter alia, guarantee of payment to CORPAGUAS of any amounts due to CORPAGUAS by the CWC concerned under the contractual arrangements of CORPAGUAS with such CWC. Section 3.08. Except as the Bank shall otherwise agree, CORPAGUAS shall continue to utilize, in its selection of rural communities for the construction of a water supply system, the following criteria:. -9- (i) desire and initiative of the community to obtain a potable water supply; (ii) existence of a community organization willing to participate in the planning, building and operation and maintenance of the water supply system; (iii) willingness of the community to pay tariffs and charges for the water supply service; (iv) size and density of community's population; (v) availability of safe, easily developed source of water; (vi) accessibility; (vii) per capita cost of the water supply system; (viii) capacity of the community to contribute funds, labor and local materials to the construction of the water supply system and to pay for the opera- tion and maintenance of such system; and (ix) capacity of the community to administer and operate the water supply system. - 10 - ARTICLE IV Financial Covenants Section 4.01. CORPAGUAS shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. CORPAGUAS shall: (i) have its accounts and fi- nancial statements (balance sheets, statements of income and ex- penses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently ap- plied, by independent auditors acceptable to the Bank; (ii) fur- nish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of CORPAGUAS and the audit there- of as the Bank shall from time to time reasonably request. - 11 - ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of CORPAGUAS thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. - 12 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such re- quest. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 44oo98 (ITT) Washington, D.C. 2L 2? (LCA or For CORPAGUAS: Corporacion de Agua Potable y Alcantarillado - CORPAGUAS Casilla 6175 La Paz, Bolivia Cable address: CORPAGUAS La Paz - 13 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of CORPAGUAS may be taken or executed by its Executive Director or such other person or persons as he shall designate in writing. Section 6.03. CORPAGUAS shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of CORPAGUAS, take any action or execute any documents required or permitted to be taken or executed by CORPAGUAS pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. -14- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S.M.L. van der Meer Acting Regional Vice President Latin America and the Caribbean CORPORACION DE AGUA POTABLE Y ALCANTARILLADO - CORPAGUAS By /s/ Jaime Delgadillo Cortes Authorized Representative - 15 - SCHEDULE 1 Procurement A. International Competitive Bidding Except as provided in Part B and D hereof, contracts for the purchase of goods or for civil works shall be procured in accor- dance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Other Procurement Procedures Contracts for civil works in those rural communities where CORPAGUAS determines, in consultation with the Bank, that competi- tive bidding is not feasible shall be procured on the basis of local procurement procedures satisfactory to the Bank. C. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with local procedures: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex- factory price for domestically-manufactured goods; (ii) customs 6 - 16 - duties and other import taxes on imported goods, and sales and sim- ilar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to CORPAGUAS of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Bolivia may be granted a margin of preference in accordance with, and subject to, the following pro- visions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fo.- loved in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Bolivia if the bidder shall have established to the satis- faction of CORPAGUAS and the Bank that the manu- facturing cost of such goods includes a value added in Bolivia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Bolivia. - 1T - (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evalu- ated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. d) If, as a result of the comparison under paragraph (c) above, "he lowest bid is a bid from group C, all group C bids shall 'Ie further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this fur- ther comparison only, an amount equal to (i) the amount of cus- toms duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. D. Procurement Without Contracting CORPAGUAS may use force account for the civil works to be carried out in very isolated rural communities.