The Project
The project is called "Issyk-Kul Environmental Management and Sustainable Tourism Development Project (Issyk-Kul EMSTD)". It is a complex Engineering, Design and Contracts Supervision Water Project in the Kyrgyz Republic where Egis company (the Consultant) is acting with other stakeholders, namely:
- The Asian Development Bank (ADB) is the financing institution which signs the Financing Agreement with the Kyrgyz Ministry of Finance, acting as the Executing Agency for the Project.
- Ministry of Finance (MoF) is the Executing Agency which is responsible for overall oversight of Consulting services, for interagency coordination with the stakeholders, and allocation of counterpart funds.
- Gosstroy (State Agency for Architecture, Construction and Communal Services under the Cabinet of Ministers of the Kyrgyz Republic) is the Executing Agency responsible for day-to-day management which sets up the Project Implementation Unit (PIU) and is the Client for all consulting services.
From the end of August 2022 to mid-October 2022, Egis Company had been mobilizing its team. This "Inception stage" was needed for the Consultant to get better understanding of its assignment after preliminary meetings held and documents / information collected. It also allowed for the development of the scope of work and type of expertise to be provided in the coming months to meet the general objectives of the project.
The use of FIDIC Gold Book
Our initial intention was to use the guide for procurement of Works and Standard Bidding Documents (SBD) provided in December 2021 and related to Design–Build–Operate Contracts for water and wastewater greenfield infrastructure projects which includes the FIDIC Gold Book.
This standard form of the Design–Build–Operate (DBO) Contract has been published in 2008. It includes long-term, contractual, performance-based arrangements between an Employer and a Contractor, where the Contractor is to design, build, operate, and maintain a facility, meet performance standards, carry out asset replacement over its life cycle, or most of it, and hand over the facility/final product to the Employer upon the contract completion.
At the end of February 2023, the Author proposed a procurement strategy to PIU in respect of the Contract as mentioned above, but they preferred another procurement and contract approach.
The preferred procurement and contract solutions
As a matter of fact, PIU preferred another procurement procedure by choosing the procurement of admeasurement (unit rate or rate) type of work contract in open international competitive bidding. Under this procedure, the Employer needs to specify clear-cut, pass-fail qualification criteria in both the Invitation for Bids and the Bidding Document to enable Bidders to make an informed decision on whether to pursue a specific contract, and to do so either as a single entity or in a Joint Venture. The Standard Bidding Documents for Works apply the Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, Multilateral Development Bank Harmonized Edition, published by the Fédération Internationale des Ingénieurs-Conseil or FIDIC (MDB Edition June 2010). As instructed by the PIU, Egis company developed a detailed design to be a part of the Contract.
Introduction of the new Bidding Document for Operation & Maintenance Contract
At the end of March 2023, ADB sent to Egis team the Word version of the Bidding Document for O&M Contract. ADB requested to convert the prepared bidding documents into the Bidding Document for O&M Contract format, as submitted. The Bidding Document to be prepared for this project includes 2 lots as follows:
- Lot 1-(WW-CW1L1): Wastewater Treatment Plant and Equipment
- Lot 2-(WW-CW1L2): Pump Station 1 and 2, Force Main and Effluent
At the beginning of April 2023, ADB representative instructed to use the FIDIC Red Book 2017 with O&M provisions to ensure the proper O&M practice.
Examples of contractual provisions:
In light of the above, ADB requested to adjust the Bidding Documents by adding the particularities related to 2 years of the Operation and Maintenance (O&M) services to be provided by the Contractor.
It is obvious that it turns to be a unique situation when the Contractor is obliged under the same contract to build a facility in accordance with the Employer's design and operate it for a few years which is relatively short time for an operation contract hence imposing additional constraints on the project as follows:
- Procurement stage:
The main issue is the willingness of experienced contractors to participate in a project where it is required to operate a WWTP that was not designed by the Contractor, but only built as per the Employer’s design.
- Commissioning and Taking-Over:
The key issue requires an additional review of the legal context in the Kyrgyz Republic regarding the possibility for a private company to proceed with the commissioning and operation of the WWTP on behalf of a municipal water supply company. In accordance with a classic design-bid-build contract (e.g., the FIDIC Red Book), once the plant is built by the Contractor and the commissioning tests are completed, the Employer takes over this plant and takes ownership of it. As a matter of fact, Clause 10 "Employer’s Taking Over" has been entirely removed from the template of the contract, as received from the ADB and currently used in the bidding documents, and replaced with a new Clause "Commissioning of the Works". This replacement renders uncertainties regarding the ownership rights and may not correspond to the local law applicable to municipal entities.
As an example, Sub-Section 9 of the Decree of the Government #252 dated 30.05.2008 stipulates that a local architecture commission shall issue a relevant certificate as the pre-condition for commissioning and putting into operation. Normally, the commissioning process with the participation of the third party representatives (e.g., a "State Commission") is initiated and led by the Employer, with the full support by the Contractor. At this stage, a taking-over certificate should be issued to allow the Employer to deal with numerous administrative issues (including but not limited to signing contracts with the utility suppliers).
During the months of April and May 2023, we have proposed to prepare 2 bidding documents (1 bidding document for WWTP based on the FIDIC Red Book 2017 and 1 bidding document for operations services contract). Long discussions took place between PIU, Egis team and ADB representatives to clarify procurement and Operation and Maintenance matters.
In the middle of June 2023, ADB representatives confirmed the above-mentioned ambiguities that may pose certain risks for the Operation & Maintenance phase in terms of responsibilities. Finally, they admitted that the proposed new template was not approved by ADB yet and still under the testing/approval phase.
In light of the above, ADB decided not to use it and instructed Egis Team to revert to the FIDIC Red Book2017 template proposing training and O&M support by the contractor for 2 years to 2-3 members of the Employer’s staff in the Operational stage.
Conclusion
The International Financing Institutions have been making significant efforts since 2017 preparing procurement procedures to be used all around the world. It is worth to note that ADB is proactive, and its regulations and procedures are very much appreciated by most of procurement specialists.
From experience, a reasonable procurement consultant acting with due care and diligence needs around 4 weeks to prepare bidding documents for such project when the procurement strategy and tender dossier have been well-defined right from the beginning of the assignment.
The reality for this project is that it has taken 5 months to complete Bidding Documents. It must be said that Egis team has been disrupted in procurement services having a new template of Bidding Documents to follow which has not been approved by ADB yet.
Before starting its assignment, a reasonable Consultant is or should be aware of the procedures which undergo the testing/approval phase in order to avoid wasting time and efforts.
By Roger Ribeiro, Director at Egis, Consulting and Operations BL
https://www.linkedin.com/in/roger-ribeiro-1285737/?originalSubdomain=fr
