Government of Iraq
Federal Budget Process
Investment Budget
USAID
Local Governance Project II
RTI International
October 2008
GoI Federal Budget Process – Investment Budget
2
GOI Federal Budget Process
Investment Budget
Table of Contents
I.
II.
III.
IV.
V.
VI.
VII.
A.
B.
Introduction ....................................................................................................5
Objective............................................................................................... 5
Target Audience ..................................................................................... 5
Supporting Legislation .....................................................................................6
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
A.
B.
A.
B.
C.
D.
Legal Foundation ................................................................................... 6
Constitution of Iraq – 2005........................................................................ 6
CPA Order 71 – Local Governmental Powers – 2004 ......................................... 7
Law of Governorates Not Incorporated into a Region – 2008................................ 7
CPA Order 95 – Financial Management Law and Public Debt Law – 2004 ............ 7
Annual General Federal Budget Law ........................................................... 8
Annual Instructions on the Implementation of the General Federal Budget.............. 8
CPA Order 87 – Public Contracts - 2004 ....................................................... 9
Regulations for Implementing Governmental Contracts – 2007 ............................10
Instructions for Government Contracts Execution – 2008...................................10
Quick Start Contracting Guide – 2007 ......................................................10
MoPDC Subsidiary Contracting Regulations.................................................11
Federal Government Structure........................................................................13
Central Government Structure....................................................................13
Provincial Government Structure................................................................15
Federal Budget Components ...........................................................................17
Budget Categories ..................................................................................17
Operations and Maintenance ....................................................................17
Central Government Ministry Investment Budget ............................................18
Accelerated Reconstruction Development Program ...........................................18
Federal Budget Formulation ..........................................................................20
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
A.
B.
A.
Budget Formulation Procedures .................................................................20
Budget Formulation – Central Government Ministries......................................20
Budget Formulation – Ministry of Finance...................................................21
Budget Formulation – Ministry of Planning and Development Cooperation ...........21
Budget Formulation - Provincial CG Ministries .............................................22
Budget Formulation - ARDP....................................................................22
Budget Formulation - Council of Ministers ...................................................23
Budget Formulation - Council of Representatives ............................................23
Continuing Resolution ............................................................................23
Supplemental Budget Process ....................................................................24
Federal Budget Execution ..............................................................................25
Budget Execution – O&M Budget ..............................................................25
Federal Budget Execution – Investment Budget ..............................................25
Federal Investment Budget.............................................................................27
Defining the Federal Investment Budget.......................................................27
GoI Federal Budget Process – Investment Budget
B.
C.
D.
E.
3
Federal Investment Budget Planning Process ................................................28
Investment Bank Account ........................................................................29
Allocation Releases ................................................................................30
Multi-Year Considerations.......................................................................32
VIII. Project Management......................................................................................33
A.
B.
C.
D.
E.
F.
G.
IX.
X.
XI.
XII.
A.
B.
C.
D.
E.
Project Management Phases .....................................................................33
Initiation Phase....................................................................................33
Planning Phase ....................................................................................34
Execution Phase....................................................................................34
Closure Phase .......................................................................................35
Project Manager Responsibilities ...............................................................35
Project Reporting...................................................................................36
Project Preparation and Approval ..................................................................38
Feasibility Studies .................................................................................38
Project Selection ....................................................................................38
Project Technical Specifications.................................................................40
Site Acquisition ....................................................................................42
Site Preparation ....................................................................................42
Procurement..................................................................................................43
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
Procurement Components .........................................................................43
Procurement Methods .............................................................................43
Contract Preparation ..............................................................................46
Contract Conditions................................................................................46
Contractor Payments:..............................................................................46
Contract Modifications............................................................................48
Contract Extensions................................................................................48
Contract Cancellations ............................................................................49
Contract Administrative Expenses ..............................................................50
Performance Bonds ................................................................................51
Letters of Credit.....................................................................................51
Dispute Resolution.................................................................................52
Transfer of Rights/Obligations ...................................................................54
Contracting Ethics .................................................................................54
Tender Solicitations .......................................................................................55
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
A.
B.
C.
Tender Solicitation Scope.........................................................................55
Tender Solicitation Requirements ...............................................................55
Tender Solicitation Technical Specifications .................................................56
Tender Solicitation Announcement .............................................................57
Tender Solicitation Closing Date................................................................58
Late Tender Submission ..........................................................................58
Tender Solicitation Confidentiality .............................................................59
Tender Submission Acceptance..................................................................59
Public Tender Opening Committee..............................................................60
Tender Analysis and Evaluation................................................................62
Tender Preparation for Bidders.......................................................................67
Bidder Information and Eligibility .............................................................67
Bidder Tender Content ............................................................................69
Bidder Tender Submission Agreement .........................................................71
GoI Federal Budget Process – Investment Budget
D.
E.
4
Bidder Bank Guarantee ...........................................................................74
Bidder Performance Bond ........................................................................77
XIII. Project Turnover and Final Acceptance..........................................................79
A.
B.
C.
XIV.
XV.
XVI.
A.
B.
C.
D.
Project Turnover ...................................................................................79
Preliminary Acceptance...........................................................................80
Final Acceptance...................................................................................80
Audit and Evaluation.....................................................................................81
Audit Legislation ..................................................................................81
Audit Institutions..................................................................................81
Types of Audits.....................................................................................82
Types of Evaluations ..............................................................................84
Acronyms ......................................................................................................87
Annexes.........................................................................................................89
GoI Federal Budget Process – Investment Budget
I.
5
Introduction
A. Objective
The objective of this manual is to provide a thorough explanation of the Iraqi
Investment Budget process from budget formulation to project implementation
and budget execution. In addition, it also provides, in one publication, the
collection of laws, regulations, and official guidance that is the legal foundation
for the management of State funds known as the annual General Federal
Budget.
The past several years of dismal Iraqi budget measurement analysis has fueled
the repetitive drumbeat of how Iraqis must improve their budget management
performance and especially Investment Budget execution. Budget execution in
Iraq is impacted by many variables beyond security, and which have little to do
with actual budget execution. Political power struggles, the lack of dependable
financial infrastructure and a complicated centralized system is impacting, and
some would say, crippling successful budget execution.
B. Target Audience
The target audience for this manual is comprised of Iraqi organizations and
international development agencies which are working toward the same goal of
improved Iraqi budget performance. While as individual groups, their
assessments of the problem and proposed solutions often vary, they all agree
that the Iraqi budget system is complicated and difficult to navigate even for
the seasoned budget professional.
Below is a summary list of those who would most obviously benefit from the
materials included in this manual, but of course it could be useful to anyone who
would like to gain insight and perspective on the challenges the Iraqis face in
converting their considerable oil wealth into services for the public.
•
Iraqi ministry and state-owned enterprise (SOE) officials responsible for
implementing investment projects.
•
Provincial and local officials responsible for implementing provincial and
local investment projects.
•
Provincial Reconstruction Team (PRT) Advisors who assist the above
groups in developing capacity and who need to be thoroughly familiar
with the Iraqi budget requirements.
GoI Federal Budget Process – Investment Budget
6
II. Supporting Legislation
A. Legal Foundation
The legal foundation for implementation of the Investment Budget can be found
in several sources.
•
Constitution of Iraq – 2005
•
CPA Order 71 – Local Governmental Powers - 2004
•
Law of Governorates Not Incorporated Into a Region – 2008
•
CPA Order 95 -Financial Management and Public Debt Law – 2004
•
Annual General Federal Budget Law
•
Annual Instructions on the Implementation the General Federal Budget
•
CPA Order 87 – Public Contracts - 2004
•
Regulations for Implementing Governmental Contracts – 2007
•
Instructions for Government Contract Execution – 2008
•
Quick Start Contracting Guide – 2007
•
MoPDC Subsidiary Regulations and Guidelines
o
Part 1 - Direct Invitation – Purchase of Goods
o
Part 2 – Direct Invitation – Minor Works
o
Part 3 – Unified Tender Instructions
o
Part 8 – Standard Tender Assessment Forms
B. Constitution of Iraq – 2005
The Constitution of Iraq was adopted in December 2005. It replaced the
Transitional Administrative Law (TAL), except for the stipulations of Article
53(A) and Article 58.
The TAL was issued by the Coalition Provisional
Authority (CPA) in 2004.
With regard to the duties of the Council of Ministers (CoM), Section 3, Chapter
1, Article 62 of the Constitution states that the CoM will submit the draft
General Federal Budget bill and the proposed amount to the Council of
Representative (CoR) for approval. In the same Article, it states that the CoR
may conduct transfers between the sections of the General Federal Budget and
reduce the total of its sums, and it may suggest to the CoM that they increase
the total expenses, when necessary.
In Section 4 - Powers of the Federal Government, Article 110, it states that the
federal government will have exclusive authority in formulating the National
GoI Federal Budget Process – Investment Budget
7
Budget of the State.
It further identifies in Article 112 the shared
responsibilities between federal, regional, and provincial authorities. Shared
responsibilities include the distribution of State revenues in a fair manner
proportion to the population in all parts of the country. Article 114 further
designates the following shared responsibilities:
•
•
•
•
•
•
•
Manage customs;
Manage main sources of electric energy and its distribution;
Formulate environmental policies;
Formulate development and general planning activities;
Develop public health policies;
Establish public educational policies; and
Formulate and regulate internal water resources policies.
C. CPA Order 71 – Local Governmental Powers – 2004
This Order describes the authorities and responsibilities of the provincial and
local government and promotes the idea of government decentralization. The
principles of the Order were designed to improve the delivery of public services
to the Iraqi people and help the Iraqi government become more responsive to
their needs. It recognized the Kurdistan Regional Government (KRG); and
acknowledges no power over the territories under that government’s
jurisdiction. Provincial elections are scheduled for January 2009. Following the
elections, CPA Order 71 will be dissolved and the Law of Governorates Not
Incorporated into Region – 2008 will replace it.
D. Law of Governorates Not Incorporated into a Region – 2008
The Law of Governorates Not Incorporated into a Region was passed in 2008.
The provisions of the Law do not take effect until the election of new
governorate councils scheduled for late January 2009. Until elections are held, a
variety of laws enacted prior to 2003 and CPA Order 71 remain in effect.
The Law does not apply to the three provinces of Kurdistan. The Kurdish
Regional Government (KRG) may or may not decide to hold local elections
simultaneously with the rest of Iraq. The KRG also may or may not choose to
adopt all or some provisions of this Law.
E. CPA Order 95 – Financial Management Law and Public Debt
Law – 2004
The Financial Management Law and Public Debt Law – 2004 established a
comprehensive framework for the conduct of fiscal and budgetary policy in line
with international best practices. It crafted a structured process for the
formulation of the federal budget and reporting requirements aimed at
increasing the accountability and transparency of the budgeting process.
Annex A of this Order regulates the arrangements governing the preparation,
adoption, recording, management, execution, and reporting of the federal
GoI Federal Budget Process – Investment Budget
8
budget of Iraq. It also governs the other budget related areas of internal
control, accounting, and auditing. According to this Order, the principles of
transparency, comprehensiveness, and unity will be of fundamental importance
in the preparation and execution of the budget.
F.
Annual General Federal Budget Law
At the recommendation of the CoR, the Presidency Council decrees an annual
General Federal Budget Law each fiscal year (FY). The Iraqi FY begins on 1
January and ends 31 December. According to the budget cycle, the annual
General Federal Budget Law should be decreed by 31 December of each year.
Should that not happen, and it often does not, a Continuing Resolution is then
placed in motion until the budget is finally approved. Each annual law
corresponds with the formulated budget for that FY. Authorizations within
that law are not carried over from one year to the next. For example, the
annual General Federal Budget Law for FY 2006 does not apply to FY 2007 and
beyond.
The General Federal Budget Law covers many areas from legal authorizations to
tax exemptions. Below is a summary list of the topics covered in the Law:
•
Identify the expected revenue amounts and sources;
•
Direct the allocation of those revenues fairly;
•
Estimate expenditure and deficit amounts;
•
Authorize emergency reserve funds;
•
Authorize spending authority;
•
Stipulate transfers and reallocations between entities;
•
Authorize the rollover of prior year funding;
•
Determine the KRG allocation;
•
Identify the percentage of Operations and Maintenance and Investment
budget expenditures in regard to the total budget;
•
Identify the official auditing authorities; and
•
Authorize the Ministry of Finance to issue implementing instructions to
facilitate the execution of the law.
G. Annual Instructions on the Implementation of the General
Federal Budget
In accordance with the authority granted in the annual General Federal Budget
Law, the Ministry of Finance (MoF) issues annual Instructions on the
Implementation of the General Federal Budget for that year. As with the
Budget Law the Instructions are also specific to each annual budget and do not
carry over from one FY year to the next. For example, the Instructions for FY
GoI Federal Budget Process – Investment Budget
9
2007 do not apply to FY 2008. When a new budget is passed, both a new
Budget Law is enacted and new Instructions are issued.
This is a comprehensive document covering all aspects of the State budget and is
heavily grounded in CPA Order 95 – Annex A. Below is a summary listing of the
topics:
•
Revenues
•
Expenditures
•
Budget Allocations
•
Budget Transfers
•
Purchasing Authority
•
Employee Awards and Bonuses
•
Write-offs – Assets and Debts
•
Government Property
•
Public Services
•
Social Benefits
•
Non-Financial Assets
•
Public Corporations
•
Capital Projects Expenditures
•
Powers of a Minister
•
Powers of the Ministry of Finance
•
Powers of the Ministry of Planning and Development Cooperation
H. CPA Order 87 – Public Contracts - 2004
CPA Order 87 – Public Contracts was issued in May of 2004 as the governing
regulation for public procurement. In Section 14, Paragraph 1 it states that the
Minister of Planning and Development Cooperation (MoPDC), through the
Office of Government Public Contract Policy (OGPCP) shall issue
administrative instructions and regulations to implement this Order. Until
2007, this Order was the only implementing regulation. In 2007, in accordance
with the guidance in Section 14, Paragraph 1, the MoPDC issued the
Regulations for Implementing Governmental Contracts. These implementing
Regulations expanded on the language of the Order and upheld the
establishment of the dispute resolution Administrative Tribunals.
GoI Federal Budget Process – Investment Budget
I.
10
Regulations for Implementing Governmental Contracts –
2007
The Regulations for Implementing Governmental Contracts was issued by the
MoPDC and approved by the CoM in 2007. These regulations are intended to
establish general principles for implementing the public contracts that the
governmental bodies and the public sector enter into with both Iraqi and foreign
companies. The regulations are also intended to lay down the implementation
methods of public tender solicitations for major construction, minor works,
supplies, and consultative services. It also designates the bodies, authorized to
open and evaluate tenders and determine contract awards. This regulation, in
conjunction with CPA Order 87 – Public Contracts - 2004, lays out in detail the
ministerial dispute resolution process. These contracting procedures are
characterized by transparency, predictability and fair competition.
J.
Instructions for Government Contracts Execution – 2008
The Instructions for Government Contracts Execution was issued by the
MoPDC in 2008 and it replaced the Regulations for Implementing
Governmental Contracts – 2007. These new Instructions basically restate
similar language as in the previous Regulation but expand the explanations in
some sections. In general, it intends to set general principles for the execution of
government contracts that are signed by the public sector directorates with
Iraqi and foreign entities for contracts supplying public works, supplies, goods
and services, and consultations. It describes the authorized contract execution
methods in addition to defining entities authorized to compete for public
contracts and the eligibility requirements.
It lays out the procedures for tender solicitation and instructions to bidders on
tender preparation and submission. General Contract Conditions are described as
well as requirements for bidder bank guarantees and performance bonds.
K. Quick Start Contracting Guide – 2007
This guide was produced by the Office of Government Public Contract Policy
(OGPCP). It was developed under the authority vested in the OGPCP through
Article 16, Second Paragraph, of the Regulations for Implementing
Governmental Contract – 2007 issued by the MoPDC.
In the absence of guidance and standardized forms, contracts often evolve into
many different formats. The best contracting procedures are grounded in
guidelines that use specially designed forms and standard contract provisions
that vary little from contract to contract. In the development of this guide, the
OGPCP attempted to provide that standardized approach.
The purpose of the guide is to simplify and clarify the procedures for executing
public contracts. Following the ten step process and associated checklists and
forms outlined within the guide will help procurement offices prepare contracts
and ministries execute the Investment Budget in a uniform manner.
GoI Federal Budget Process – Investment Budget
11
The list below is a summary of the topics covered in the guide:
L.
•
Contracting Process
•
General Instructions to Bidders
•
Contracting Officer Authority
•
Conflicts of Interest
•
Evaluation Criteria
•
Contract Delivery
•
Service Contracts
•
Construction Contracts
•
Contract Terminations
•
Letters of Credit
•
Tenders
•
Claims
•
Contract Awards
MoPDC Subsidiary Contracting Regulations
In conjunction with the regulations listed above there are additional guidance
regulations issued by the MoPDC to address specific aspects of the contracting
process. Below is a list of those regulations with a summary of their content.
•
•
•
Part 1 - Direct Invitation – Purchase of Goods
o
Includes a model form to be used by the executing
Ministry/Directorate for the solicitation of a Direct Invitation to
purchase goods from perspective vendors.
o
It also includes a model form for the submission of tenders from the
bidder.
Part 2 - Direct Invitation – Minor Works
o
Includes a model form to be used by the executing
Ministry/Directorate for the solicitation of a Direct Invitation for
minor works from perspective bidders. It also includes a model
form for the submission of tenders from the bidder.
o
It includes samples of tables for a Price Delivery Sheet and
Statement of Requirements.
Part 3 – Unified Tender Instructions
GoI Federal Budget Process – Investment Budget
•
12
o
This document provides guidance on tender procedures regarding
instructions to bidders, eligibility of bidders, tender preparation,
and contract conditions.
o
It includes a sample Tender Solicitation Announcement,
contracting language, and Performance Bond bank forms.
o
It provides illustrated samples for the List of Goods and Delivery
Schedule, Related Services and Completion Table, Technical
Specifications Table, Layouts and Drawings Table, and Testing and
Engineering Examination Table.
o
In addition, the regulation lays out 33 Clauses for General Contract
Conditions and sample banking forms for Performance Bond
Guarantee and Advance Payment Bank Guarantee.
Part 8 – Standard Tender Assessment Forms
o
This guiding regulation describes the process of accepting tenders,
public announcement of tender openings, tender evaluation criteria,
and tender modifications.
o
It includes sample forms and tables that should be used for tender
evaluation in examination of bidder eligibility, tender prices, tender
modifications, price modifications, and tender award.
GoI Federal Budget Process – Investment Budget
13
III. Federal Government Structure
A. Central Government Structure
1.
President of the Republic
The federal executive power of Iraq resides in the President of the Republic
and the Council of Ministers. The powers of the President are stipulated in
Articles 67-75 of the Constitution of Iraq – 2005.
The President is the head of state and is charged with safeguarding the
commitment to the Constitution and the preservation of Iraq's
independence, sovereignty, unity, and the security of its territories in
accordance with the provisions of the Constitution. The President is elected
by the Council of Representatives (CoR) by a two-thirds majority, and is
limited to two, four-year terms. The President ratifies treaties and laws
passed by the CoR, issues pardons on the recommendation of the Prime
Minister, confirms death penalties sentences, and performs the duty of the
Higher Command of the armed forces for ceremonial and honorary
purposes. The President is currently a member of the three-member
Presidency Council which is due to be dissolved after the national election
in 2009.
Jalal Talabani is the President of Iraq. He is Kurdish and was elected to
his second term as President in April 2006.
2.
Prime Minister
The Prime Minister (PM) is appointed by the President and represents the
largest majority in the CoR. The powers and role of the PM are described
in Articles 76-83 of the Constitution.
The PM forms the Council of Ministers (CoM) within 15 days from the date
of the election of the President of the Republic and must be confirmed by
the CoR. The PM is the direct executive authority responsible for the
general policy of the State and the Commander-in-Chief of the armed
forces. He directs the CoM, presides over its meetings, and has the right to
dismiss the Ministers, with the consent of the CoR. Additional duties of
the PM are:
a)
b)
c)
Propose legislation;
Issue rules, instructions, and decisions for the purpose of
implementing laws; and
Prepare the annual draft General Federal Budget and national
development plans.
Nouri Al-Maliki is the current PM of Iraq. He is Shiite and was sworn into
office in May 2006.
GoI Federal Budget Process – Investment Budget
3.
14
Vice President and Presidency Council
Iraq has two Vice Presidents who are selected and confirmed by the CoR.
Their position is prestigious but mostly ceremonial. The role of the VPs
and the Presidency Council is defined in Article 138 of the Constitution.
In conjunction with the President, the VPs form a three-member
Presidency Council. The purpose of the three members is to accommodate
Iraq's three largest groups: Sunni Muslim Arabs, Shiite Muslim Arabs, and
Kurds. As a unit, the Presidency Council is meant to symbolize the unity of
the nation and they must act in unison. The Presidency Council is a
temporary body mandated by the Constitution and will dissolve upon the
seating of the second session of the CoR which follows the national
elections in 2009.
Tariq al-Hashimi, a Sunni Arab, and Adil Abdul Mahdi, a Shiite Arab, are
the current VPs.
4.
Council of Representatives
The powers and responsibilities of the Council of Representatives (CoR) are
described in detail in Articles 49 – 64 of the Constitution. The CoR
membership consists of a ratio of one seat per 100,000 Iraqi citizens and is
elected through a direct secret general ballot. The electoral term of the CoR
is four calendar years, starting with its first session and ending with the
conclusion of the fourth year.
Decisions in the sessions are made by a simple majority after quorum is
achieved, unless otherwise stipulated. A quorum is achieved by an absolute
majority of its members. Below is a summary list of their duties:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
Elect the President of the Republic;
Confirm Prime Minister;
Confirm Council of Ministers members;
Present draft laws to the President of the Republic and the Council of
Ministers;
Enact federal laws;
Monitor the performance of the executive authority;
Regulate the ratification process of international treaties;
Review and approve the annual General Federal Budget;
Recommends the Presidency Council issue the annual Budget Law;
and
Approves the appointment of the following:
i.
ii.
iii.
iv.
v.
vi.
Members of the Federal Court of Cassation;
Chief Public Prosecutor;
President of Judicial Oversight Commission;
Ambassadors and those with special grades;
Iraqi Army Chief of Staff and Assistants;
Division Commanders and above; and
GoI Federal Budget Process – Investment Budget
vii.
5.
15
Director of the Intelligence Service
Council of Ministers
The President of the Republic nominates the PM from the largest majority
of the CoR to form a Council of Ministers (CoM) within 15 days from the
date of the Presidential election. The PM-designate names members of the
CoM within 30 days and presents the names to CoR for confirmation. The
powers of the CoM are described in Articles 76-86 of the Constitution. Some
of the duties of the CoM are as follows:
a)
b)
c)
d)
e)
f)
g)
Plan and execute the general policy and plans of the State;
Oversee the work of the ministries and agencies not associated with a
ministry,
Propose legislation;
Issue rules, instructions, and decisions for the purpose of
implementing the legislation;
Debates and approves the MoF fiscal policies and budgetary spending
limits;
Review and approve the annual draft General Federal Budget; and
Present the annual draft General Federal Budget to the CoR for
approval.
B. Provincial Government Structure
1.
Provincial Government Structure
A province, also commonly known as a governorate, is an administrative
unit, with three levels:
a)
b)
c)
Provincial - Governorate
Districts - Qada’a
Sub-districts - Nahiya
The law establishes legislative councils corresponding to each of those three
administrative units. Across Iraq, those three levels of councils already
exist as a result mainly of CPA Order 71 and other laws and actions of the
GoI predating the CPA.
2.
Provincial Council
At the provincial level, the Provincial Council (PC) has an active role and
does the following:
a)
b)
Elect and can remove the Governor and the Deputies in their
associated province. The CoR can also remove the Governor with the
recommendation of the Prime Minister
Has an active role in nominating senior provincial officials serving in
Central Government ministries in the province
GoI Federal Budget Process – Investment Budget
c)
d)
e)
3.
Approves the local security plans in conjunction with the national
security plans
Has the right to issue local laws, instructions, by-laws and regulations
to organize the administration and financial affairs of the province in
a manner that does not contradict the provisions of the Constitution
of Iraq – 2005 and other federal laws
Prepares the provincial operational budget, approves the draft
general budget plan and capital investment project list referred to it
by the Governor
District and Sub-District Councils
The qada’a and nahiya councils
responsibilities and their duties are:
a)
b)
c)
d)
e)
4.
16
have
considerable
rights
and
Elect and remove district and sub-district council chairman and
director;
Prepare and approve district and sub-district draft operational
budget investment project listings before sending to the Governor;
Approve naming of streets and planning roads;
Monitor and evaluate education activities and public land; and
Present scientific studies and research for development of the
districts.
Baghdad Provincial Structure
The administrative and council structure of the Baghdad province is
unique. It is an exception to the other provinces. Baghdad is divided into
two parts.
a)
b)
Municipal Boundaries - City of Baghdad Center
Administrative Boundaries - Outskirts of Baghdad Province
Baghdad’s basic design dates from 1971 and it is legally recognized by the
judicial authority and federal ministries.
GoI Federal Budget Process – Investment Budget
17
IV. Federal Budget Components
A. Budget Categories
The General Federal Budget, also known as the National Budget, is a
combination of both operations and maintenance (O&M) expenses and capital
investment project funding. The O&M budget accounted for 71% of the total
budget for 2008. The Central Government (CG) Ministry Investment Budget
funding covered 20% and ARDP amounted to 9%.
Budget Analysis - 2008
O&M Budget
CG Ministry
Investment
Budget
Total Budget USD
ARDP Budget
O&M
%
CG
Ministry
Inv. %
ARDP
%
Total
Inv.
%
19%
8%
26%
23%
13%
36%
20%
9%
29%
Total Budget - Original - 2008
$36,825,622,003
$9,233,647,621
$3,825,708,333
$49,884,977,957
74%
Supplemental Budget - 2008
$14,298,392,078
$5,183,607,300
$2,869,550,000
$22,351,549,377
64%
Total Budget w/Supplemental
$51,124,014,080
$14,417,254,921
$6,695,258,333
$72,236,527,334
71%
B. Operations and Maintenance
The O&M budget is the largest category of the General Federal budget. It is the
largest because it covers all the expenses necessary to run the operations of the
federal government to include the following:
1.
2.
3.
4.
5.
Operating Expenses
Salaries
Services, Supplies, and Maintenance
Depreciation/Amortization
Sustaining funds for ARDP and donor projects
Central Government ministries must be informed of ARDP and donor projects
well in advance of project completion. This is important in order for the
sustainment costs to be included in the O&M budget to ensure operational
support for the projects following implementation.
GoI Federal Budget Process – Investment Budget
18
C. Central Government Ministry Investment Budget
The Investment Budget funding represented on the chart above is confined to
the CG ministry capital investment projects. This category does not include the
funding for provincial investment projects in ARDP which is identified
separately on the chart. Central Government ministry investment project
funding is not confined to projects within the capital of Baghdad or managed by
Baghdad even though that is where the main ministry headquarters for all the
ministries are located.
Some Central Government ministries extend out to all the provinces. Funding
for projects within the provinces for those ministries is allocated to the
provincial offices of each ministry. For example, the CG Ministry of Education
(MoE) is represented in the province by employees of their branch office who
live and work in that province. Funding for schools and other MoE capital
investment projects is allocated to those provincial offices which oversee the
implementation of those projects and manage the budget allocation. That is
repeated for many of the ministries as designated in the Constitution of Iraq –
2005, which authorized the separation of functions within the government. One
exception to this decentralized structure is the Ministry of Oil.
D. Accelerated Reconstruction Development Program
The 2006 General Federal Budget Law transferred reconstruction funds to the
province to implement projects to meet public service needs that are simple in
design and which should be implemented within one year. Each annual General
Federal Budget Law has since upheld the same authorization for provincial
reconstruction funding. This is called the Accelerated Reconstruction and
Development Program (ARDP) and in 2008 it amounted to roughly 9% of the
General Federal Budget.
The ARDP budget is the only budget where the Governor and the PC have
discretionary authority. Annual allocations for the ARDP are based on
population and prioritized according to public service needs. These allocations
are independent of the CG ministerial allocations to the provinces. Being
independent does not imply that the projects of provincial CG ministries and
ARDP should not be coordinated. In fact, it is imperative that the ARDP
managers and the CG ministerial managers exchange information regarding
their investment project plans.
1.
Provincial Development Strategy - Both the provincial investment
project listings and the provincial CG ministerial project listings are
required to reflect the Provincial Development Strategy (PDS) for the
province. The PDS is a bottom-up planning process that represents the
input of needs from the perspective of citizens’ groups, traditional tribal
leaders, religious leaders, business owners and professionals, members of
district and provincial councils, governors, and provincial CG ministry
GoI Federal Budget Process – Investment Budget
2.
19
personnel. The PDS is updated annually to reflect the changing needs of
the public and is a major component of the Investment Budget with regard
to the ARDP funds.
Provincial Development Plans - The Provincial Development Plan
(PDP) is a list of projects developed from the PDS covering a rolling fiveyear planning period. Each year following the review of the PDS, the PDP
listing is modified. The Proposed Project Listings (PPL) that is compiled
during the provincial budget formulation period is developed from the PDS
and PDP.
GoI Federal Budget Process – Investment Budget
20
V. Federal Budget Formulation
A. Budget Formulation Procedures
Budget formulation is one of the most critical components of the federal budget
process. It is the foundation and backbone of the budget. If budget formulation
is weak and not grounded in research and analysis, budget execution will suffer.
Basically, budget performance does not improve as it moves through the
lifecycle. It is only as good as the research and analysis that was applied to the
formulation of the plans of the budget.
In the past, budget formulation amounted to reviewing what the funding was in
the previous year and adding an arbitrary percentage increase. Obviously, this
kind of budget formulation can lead only to dismal budget performance and
government’s failure to meet the needs of the public.
Development for the O&M Budget is an ongoing process that is based on
historical data from previous budget periods. Compared to the prior period
expense or historical data current expenses for salaries, fuel, and office supplies
must also be modified by expected growth or decline. Sustainment for
investment projects that become operational during the budget period must be
considered and planned for in the proposed budget. Sustainment of the
investment projects includes those from the CG ministry, ARDP, and donors
such as the US Government (USG) and Non-Governmental Organizations
(NGO).
The Investment Budget formulation process begins roughly 15 - 18 months prior
to the expected delivery of an annually approved budget on 31 December.
Feasibility studies and implementation planning must be completed before
proposed project listings can be compiled. Cost estimates and deliverable
schedules which are important parts of determining project costs must be
defined in advance in order to prepare the project listing which represents the
annual Investment Budget request. This is not confined to CG ministries but
applies to ARDP projects as well.
B. Budget Formulation – Central Government Ministries
1.
2.
April – July: The CG ministry spending units formulate their draft budget
proposals for O&M and Investment Budgets. They consult with the MoF
and MoPDC regarding funding priorities, estimates, and preparation of the
investment spending plans.
August – The CG ministries submit their final draft annual budget
requests for O&M and Investment Budget to MoF and the MoPDC with
specific information on each of the planned capital investment projects.
GoI Federal Budget Process – Investment Budget
21
C. Budget Formulation – Ministry of Finance
1.
2.
April – May: The MoF to the CoM for approval the draft annual budgetary
and fiscal guidelines and policies for the budget year including spending
limits.
June: Following the approval from the CoM, the MoF officially issues the
approved guidelines, polices, and spending limits for budget formulation
requests.
3.
July – August: The MoF, MoPDC, and spending units consult with each
other on draft budget allocation requests. A final draft budget is prepared
for submission to the CoM by September.
4.
September: The MoF submits the draft O&M, Investment, and ARDP
budgets to the CoM for approval. The CoM reviews the draft budget and
consults with the MoF and MoPDC on modifications to the proposed
allocations. The CoM approves the final draft budget and returns it to the
MoF for submission to the CoR.
5.
October: The MoF presents the amended final draft budget to the CoR for
consideration and approval by 10 October.
6.
December: The MoF issues the annual Instructions for Implementation of
the General Federal Budget following the issuance of the annual Budget
Law by the Presidency Council.
D. Budget Formulation –
Development Cooperation
1.
Ministry
of
Planning
and
July - August: The MoPDC along with the MoF and CG ministry spending
units consult with each other on draft budget allocation requests.
a)
Governors forward their ARDP Proposed Project Listings (PPL) to
the MoPDC by the end of August.
GoI Federal Budget Process – Investment Budget
2.
3.
22
September: The MoPDC approves the PPL and includes it in the draft
budget proposal as the ARDP budget.
September: The CoM reviews the draft budget and consults with the MoF
and MoPDC on modifications to the proposed allocations.
E. Budget Formulation - Provincial CG Ministries
1.
April – June: The provincial CG ministry Directors Generals (DGs) collects
budget requests from the spending units, district offices, and sub-district
offices.
a)
b)
c)
d)
e)
F.
The DGs submit their budget requests to the PC
Review Committee for evaluation.
The PC Review Committee makes recommendations to DGs for
modifications to their requests.
The PC eventually votes to approve the CG ministerial budget
requests and forwards their approval to the DGs.
The DGs submit their provincial budget requests by the end of June
to the applicable main ministry office in Baghdad.
Their requests are combined with the official budget requests of the
ministry and submitted to the MoF and MoPDC for approval and
inclusion in the draft budget presented to the CoM in September.
Budget Formulation - ARDP
1.
January – July: The provincial CG ministry spending units at the subdistrict level prepare a Proposed Project Listing (PPL) for review and
submit it to the district councils.
a)
b)
2.
The district councils review the PPL, add their comments and then
forward it to the spending units in the applicable provincial CG
ministry.
The spending unit reviews the PPL from the districts and subdistricts, add their comments, and then submit it to the Governor’s
Office.
July - August: The Governor reviews the PPL, adds comments, and then
submits it to the PC.
a)
b)
The PC reviews, amends, and eventually approves the PPL and then
returns it to the Governor’s Office.
The Governor forwards the approved PPL to the MoPDC by the end
of August.
GoI Federal Budget Process – Investment Budget
3.
23
September: The MoPDC approves the PPL and includes it in the draft
budget proposal as the ARDP budget.
G. Budget Formulation - Council of Ministers
1.
2.
3.
April – May: The CoM debates and approves the suggested MoF fiscal
policies and budgetary spending limits.
September – October: The MoF submits the draft O&M and Investment
Budgets to the CoM for review, modification, and approval. The CoM
consults with the MoF regarding the modifications to the proposed budget
requests.
October: The CoM submits the approved draft budget to the CoR for
approval by the 10th of October.
H. Budget Formulation - Council of Representatives
1.
2.
I.
October – December: Between October and the end of December, the CoR
considers the draft budget and consults with the MoF on recommended
reallocations or modifications of the planned expenditures.
December: The CoR is expected to approve the annual budget by the 31st of
December. The Presidency Council issues the annual Budget Law at the
recommendation from the CoR. The final approved General Federal
Budget is published in the Official Gazette.
Continuing Resolution
1.
January - Continuing Resolution: If the General Federal Budget is not
approved by 31 December, a Continuing Resolution (CR) is passed by the
CoR to keep the government operational until the budget can be approved.
a)
b)
c)
d)
This is a common occurrence and generally takes place each fiscal
year.
During a CR, the MoF allocates funds to the spending units on a
monthly basis equal to 1/12 of the allocation for the spending unit in
the previous budget year until the new budget is approved.
This funding is for operational purposes only and cannot be extended
to new investment capital project spending.
Implementation continues on capital investment projects which are
utilizing their funding for the budget year that has just ended but
new investment projects for the pending budget period cannot begin
until the budget is approved.
GoI Federal Budget Process – Investment Budget
J.
24
Supplemental Budget Process
1.
Mid-Year Review – A mid-year review is normally conducted about half
way through the budget implementation period around May – June.
Reviews of the budget are not limited to only the mid-year review.
Significant and expected changes in the economic circumstances or to the
national priorities can and often do lead to re-evaluation of previously
approved budget allocations.
a)
b)
c)
Within eight weeks of an internal review of ministry budgets the MoF
submits proposed recommendations for changes to the CoM to include
a summary of current expenditures and revenue receipts. This is
called a Supplemental Budget.
Within two weeks, the CoM reviews the Supplemental Budget, adds
any modifications, and submits the draft supplemental to the CoR for
review and approval.
The CoR approves the Supplemental Budget and it is published in the
Official Gazette. The fiscal budget year is not modified; all funds still
expire on 31 December unless otherwise stated in the annual budget
law for the following year.
GoI Federal Budget Process – Investment Budget
25
VI. Federal Budget Execution
A. Budget Execution – O&M Budget
Operations & Maintenance Budget execution is the recurring process of paying
salaries and purchasing goods and services, which allows the government to
function. The O&M budget reflects the recurring expenditures that are needed
to keep the government in business.
Recurring refers to expenditures that are repeated and expected and do not add
capital value to the assets of the government. Salaries, for example, are not
capitalized assets except for when they are included in the cost of an investment
project. Expenditures for fuel and office supplies are consumable goods that
must be replaced on a regular basis.
O&M expenditure levels have a tendency to remain historically similar from one
period to the next but must still be vigorously evaluated to ensure the proper
amounts are being budgeted. If more or less people are hired from one budget
period to the next then the recurring expenditure estimates for salaries must be
adjusted accordingly. If more vehicles are purchased by a spending unit, then
more fuel and maintenance recurring expenditures will be needed to support
those vehicles. It cannot be assumed that the O&M budget requirements are
static and require only a cursory review even though the expenditures are based
on historical performance.
B. Federal Budget Execution – Investment Budget
Investment budget execution is the implementation of projects that were
developed during the budget formulation process. It is a form of measurement
that can be considered an indicator of a strong or weak budget process.
1.
Commitments
It is often misunderstood when budget execution begins and ends which
leads to inconsistent and inaccurate reporting. Signing a contract is not
budget execution. Signing a contract represents a commitment of
budgeted funds but does not indicate how much of that project has been
implemented.
2.
Measurement
Execution of capital investment projects is measured by the progress
payments paid to the contractor as they implement the project. If 50% of
the funds committed to a project have been disbursed to the contractor,
then it indicates 50% of the project has been implemented. The
combination of all projects and their implementation progression leads to
the average budget execution percentage for that ministry or province, and
eventually for the GoI as a whole.
GoI Federal Budget Process – Investment Budget
3.
26
Contributing Factors
Problems within the budget process, from budget formulation through
project implementation, procurement, and payments are reflected in
budget execution percentages. Poor budget execution performance is often
blamed on the end process. In reality many of the factors that lead to poor
performance are the result of events or influences that occur long before the
project is implemented and essentially cannot be corrected or influenced by
the end process.
Below is a list of contributing factors that influence, directly and
indirectly, the budget process and consequently impact budget execution
results.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
Security situation
Political power struggles
Delayed CoR approval of the annual budget
Intergovernmental discourse between Baghdad CG ministries and
provinces
Lack of a functional national banking system
Lack of public confidence in the bank system
Inconsistent application of the budget process
Inconsistent and poor O&M and investment planning and
implementation
Immature strategic planning
Poor project planning and coordination between CG ministries,
governorates, and donors
Complicated and lengthy procurement process
Inconsistent and inaccurate budgetary reports
Conflicting and incomplete laws and regulations
GoI Federal Budget Process – Investment Budget
27
VII.Federal Investment Budget
A. Defining the Federal Investment Budget
1.
What is the Investment Budget?
The Investment Budget is part of the comprehensive financial plan of the
government. It is also described as a multi-year plan of projects and
funding commitments that will result in long-term government
improvements. The long-term nature of the projects confers long-term
spending authority. Projects included in the first year of the investment
plan will constitute the Investment Budget for that budget year. However,
there is no single definition of the types of projects that are included in an
Investment Budget.
Some governments narrowly define what is included in an Investment
Budget to be only capital assets of long-term value, for example
construction of buildings or transportation infrastructure. Other
governments may include all multi-year projects above a defined cost level
to be included in the Investment Budget, for example technology
infrastructure.
Military weapons, weapons systems, or associated support equipment such
as tanks, planes, ships, missiles, etc are not included in an Investment
Budget. This is due to the uncertain time that these items will remain in
service and their rapid replacement. These are included in the O&M
Budget.
Original equipment for placement in an investment project should be
included in the cost of the project and the Investment Budget. This does
not apply to purchases of replacement equipment or equipment for an
existing operational facility. These requirements are funded through the
Operations & Maintenance budget.
2.
Investment Budget
Relationship
and
Operations
&
Maintenance
Budget
There is a strong relationship between the O&M budget and the
Investment Budget. Investment projects require financial support from the
O&M Budget when the project is completed. New buildings will require
utility expenditures and other operating and maintenance costs. Schools
will require fuel, new staff, furniture, and fixtures. These costs must be
anticipated and planned at the time an investment project is being
considered for funding. The Investment Budget must be an integrated part
of the budget process not operated separately or independently of the O&M
budget.
GoI Federal Budget Process – Investment Budget
B.
28
Federal Investment Budget Planning Process
The Investment Budget planning process is a multi-step process that normally
begins with an inventory and evaluation of the condition of the existing capital
assets. After this is done, the government can begin to develop a multi-year plan
of improvement projects to address the investment needs of the country. The
government must prioritize the projects according to the availability of
financing.
1.
Inventory of Investment Assets
Each spending unit should conduct an inventory of capital investment
assets. The inventory should include specific details about each asset such
as age, condition, location, and value. The MoF should collect the
inventories and compile a comprehensive government-wide capital
investment inventory. Following the consolidation and verification of the
inventory, a government-wide inventory inspection should be conducted
annually.
2.
Investment Budget Plan
A government should develop an Investment Budget Plan that identifies
its priorities and time frame for undertaking the investment projects and
provides a financing plan for those projects. Developing an Investment
Budget Plan begins with the government’s strategic goals and priorities
contained in the National Development Strategy (NDS) and Provincial
Development Strategies (PDS). Investment projects should be linked to
achieving a specific strategic goal. Plans should be developed over a three
to five year period. The multi-year planning process recognizes that major
investment projects span several years from start to finish. The MoF
should determine the schedule and format for submitting the Investment
Budget Plan.
Investment projects can be land acquisition/improvements, major
construction, structural improvements, equipment purchase, minor works,
and deferred maintenance.
a)
Land Acquisition/Improvements
Acquisition includes purchasing land and/or improvements to land.
b)
Major Construction
Major construction is a single undertaking involving construction of
one or more facilities. It includes all work necessary to accomplish a
specific purpose and produce a complete and usable new structure and
includes the installation of equipment.
c)
Structural Improvements
GoI Federal Budget Process – Investment Budget
29
A structural improvement is all work necessary to produce a complete
and usable change to an existing facility or structure, including the
installation of equipment.
d)
Equipment Purchase
Equipment associated with investment projects, defined as new
construction or improvements can be funded through the Investment
Budget for these projects. This applies only to the purchase and
installation of new equipment directly related to the specific
investment project. Replacement equipment for existing structures is
funded through the O&M budget.
e)
Minor Works
Construction for repairs, one-time maintenance, or replacement of
capital equipment for existing structures, that do not qualify as
acquisition, major construction or improvements, are grouped
together and classified as minor works. These can be funded through
the Investment Budget but each minor work project must be justified
based on the same criteria used for major projects.
f)
Deferred Maintenance
Funding of deferred maintenance through the Investment Budget is
considered a one-time project to remove the backlog over a relatively
short time period. Common, recurring maintenance activities are to
be included in each spending unit’s O&M Budget.
Deciding the overall allocation among sectors is largely a political decision.
Criteria should be developed to prioritize the investment projects. There are
several ways that this can be done. One way is using functional categories or
sectors to establish the criteria. If education is the highest priority, its
investment projects are also ranked high.
The nature of the investment project can be used to develop the priority, for
example emergency, life-safety, new construction, and rehabilitation.
Regardless of the criteria used to prioritize a project, the most important
consideration is to develop an investment plan that achieves the government’s
priorities and meets the needs of the public. Chapter XI, Project Preparation
and Approval, Paragraph B of this manual provides additional guidance on
project selection.
C. Investment Bank Account
Each ministry, province, and agency not connected to a ministry must pay
Investment Budget project costs from an Investment Bank Account. This
account is separate and independent from the bank account used for the O&M
Budget. The MoF is notified when the Investment Bank Account is established
and provided with the pertinent information regarding the account.
GoI Federal Budget Process – Investment Budget
30
When new projects are approved, spending units within the ministry create
additional Investment Bank Accounts for each investment project. Activity
cannot be commingled between accounts and projects. All the expenses for each
project will be paid through the appropriate and corresponding Investment
Bank Account, including the administrative expenses of the agency employees.
D. Allocation Releases
Before making payments on projects, funds must be deposited in the Investment
Bank Account of the spending unit. This is accomplished through allocation
release requests submitted to the MoPDC, approved by the MoF, and issued by
the Central Bank of Iraq (CBI).
1.
Allocation Release Distribution
All spending units receive 10% of their Investment Budget allocations
when the CoR initially approves the budget. Additional allocation releases
are approved based upon submission of Allocation Release Requests to the
MoPDC. Approval is based upon budget execution performance which is
determined by how much of the previous allocation release has been spent,
as indicated by how much money remains in the Investment Bank
Account. Consideration is given as well for future funding needs as
indicated in the commitments documentation submitted with the
allocation release request.
In the second half of the year, the MoF in coordination with MoPDC may
reallocate the approved projects allocations within the budget if a ministry
has executed less than 25% of its allocations during the first half of the
fiscal year. Exceptions to this rule may apply for areas in which budget
execution was delayed because of security reasons.
Annex A of the CPA Order 95 - Financial Management Law and Public
Debt Law -2004 provides that funds may only be used up until December
31, except to the extent those goods have been validly ordered and may or
may not have been received. Funds are forfeited if they are not obligated to
pay for goods and services not already received. The 2008 provincial
appropriations provided for carry forward of unspent funds in 2007. This
is not the case with the 2009.
According to the draft budget
recommendations for 2009, unspent 2008 funds will be forfeited if not
obligated by 31 December 2008.
2.
Spending Unit Requests Allocation
The spending unit submits a written request to the appropriate sectoral
unit of MoPDC with the allocation request, indicating the total contract
amount, payment amount and purpose of the allocation request.
GoI Federal Budget Process – Investment Budget
3.
31
Allocation Release Request
An Allocation Release Request consists of the following:
a)
b)
c)
d)
4.
Spending Unit’s most recent monthly reviewed trial balance report
Copies of commitments which support the allocation request, if any
Copies of invoices which support the allocation request, if any
The most recent certified Investment Bank Account statement with
current balance
Allocation Release - MoPDC
The sectoral unit of MoPDC reviews the Allocation Release Request as to
whether:
a)
b)
c)
d)
The required technical reports have been submitted;
The project is in the budget;
The proposed payment is valid under the contract; and
The proposed payments are proportionate to the work accomplished.
Following the successful review of the documentation submitted with the
Allocation Release Request, the MoPDC issues a release approval letter
which recommends the MoF release a specific amount for each project.
5.
Allocation Release - MoF
The MoF Budget Directorate reviews the MoPDC approved Allocation
Release Request. The project must be included in the applicable ministry
or provincial budget. The requested amount must be within the approved
budget allocation for each project.
The Budget Directorate issues an instruction to the Cash Department of
the Accounting Directorate to release the funds. The Accounting
Directorate reviews the proposed Allocation Release Request and checks to
make sure the monthly project investment expense reports have been
submitted. The spending unit must have a liquidity requirement and the
Allocation Release Request is consistent with the government’s overall
cash position.
The Accounting Directorate issues an instruction to the Central Bank of
Iraq (CBI) to transfer the funds from the MoF Treasury Account to the
Investment Bank Account for each project of the spending unit.
6.
Allocation Release - Central Bank of Iraq
a)
b)
Central Government Ministries - In the case of the CG ministries, the
CBI transfers funds as authorized by MoF into the designated
Investment Bank Account of the executing agency.
Provinces/ARDP - For provincial projects, CBI transfers funds to an
account controlled by the Provincial Treasurer. The Provincial
GoI Federal Budget Process – Investment Budget
32
Treasurer then deposits the funds into the appropriate Investment
Bank Account of the provincial government.
E. Multi-Year Considerations
1.
Multi-Year Projects
Multi-year projects are permissible, but the GoI budget laws authorize only
single year appropriations which mean that new funding is needed each
year of multi-year projects. MoPDC incorporates a different review
structure for multi-year projects than it does for single year projects.
2.
Multi-year Contracts
Multi-year contracts are permissible, but the overall contract amount may
not exceed the total project amount in the MoPDC five-year plan. The
contract amount paid in the budget year may not exceed the allocation for
that year.
GoI Federal Budget Process – Investment Budget
33
VIII. Project Management
A. Project Management Phases
Project management activities are grouped into phases so that the project
manager can efficiently plan and organize resources for each activity. Dividing
project management into phases also contributes to measuring achievement of
goals objectively, justifying decisions to move ahead, making reasonable
modifications, or perhaps evaluating termination of the project.
Regardless of their scope or complexity, all projects go through a series of stages
during the project management lifecycle. There is the Initiation Phase, in which
the outputs and critical success factors are defined. Next is the Planning Phase,
characterized by breaking down the project into smaller tasks and deliverables.
The third step is the Execution Phase, which is where the project plan is
executed. Finally, the Closure Phase of the project and final acceptance by the
buyer from the contractor. This marks the total completion of the project.
B. Initiation Phase
During the Initiation Phase of the project lifecycle, the scope of the project is
defined along with the approach to be taken to deliver the desired outputs.
Detailed plans are prepared for the construction of the asset. For large and
complex projects, it is not unusual to have a design developed by an
architectural-engineering firm under a separate contract before proceeding with
the Planning Phase. In some cases projects will follow a design-build approach
in which the chosen contractor would develop a design as part of the overall
contract. Sometimes this approach is taken to save time.
For simpler projects the design work maybe done by in-house staff, or for
common projects like schools, there may be a standard design that is used.
The Initiation Phase is where the technical specifications included in the tender
solicitation announcement are developed and the tender evaluation criteria
determined. The following information is needed in order to prepare an accurate
tender solicitation and fairly evaluate tenders submitted from eligible bidders:
1. An accurate study of the estimated project cost for work and supplies;
2. Review the Technical Feasibility Study associated with the project;
3. Preparation and review of all terms, specifications, quantity schedules, and
maps that are necessary for implementation; and
4. Verification and approval of the building site and land acquisition.
During the Initiation Phase, the project manager is appointed and the project
team members selected based on their skills and experience. Employing or hiring
professional consultants such as architects, engineers, designers, and other
GoI Federal Budget Process – Investment Budget
34
specialists may be necessary. In the case of acquisition of land or buildings,
attorneys and real estate professionals will be required.
In order to determine if the project can be completed within the budgetary
allocation, it is necessary to have a cost estimate. This is prescribed by Article 3
of the Instructions for Government Contract Execution - 2008.
C. Planning Phase
The Planning Phase should include a detailed identification and assignment of
each task until the end of the project. It should also include a risk analysis and a
definition of criteria for the successful completion of each deliverable. The
governance process is defined, stake holders identified and reporting frequency
and channels agreed.
The plans and specifications must be in sufficient detail to proceed with the
construction of the project. Inadequate plans and specifications are among the
most common reasons for project failure.
A final review of the compilation of plans, specifications, and tender solicitation
documents is important. If the review is positive, subsequent funding for the
Execution Phase will be released as authorized in the Investment Budget.
D. Execution Phase
The most important aspect of the Execution Phase is to ensure project activities
are properly executed and controlled. During the Execution Phase, the tasks
identified in the Planning Phase are implemented according to the project
specifications and requirements. As the Execution Phase progresses, deliverables
are produced, progress payments made to the contractor, and groups across the
organization become more deeply involved in planning for the final testing and
acceptance of the project.
It is during this phase that special attention must be paid to project
modifications. Frequently, situations occur that result in recommended changes
to the initial design. Buyers should approach these recommendations cautiously
because changes or modifications usually add time and cost to the project. If
good analysis and design was applied during the Initiation Phase, the need for
modifications will be limited but can never be eliminated.
The Execution Phase begins following the signing of a contract by both the
spending unit, commonly referred to as the buyer, and the contractor. At this
point, the buyer is responsible for managing the project, ensuring all
specifications are met, and that the project is completed within the contracted
time frame.
The MoF determines the reporting requirements for each project to ensure
effective management and control. There should be clear and regular
communications between the project manager and the budget department of the
GoI Federal Budget Process – Investment Budget
35
spending unit. Reporting on the financial execution of the project will occur
through the established accounting system.
E. Closure Phase
In the last stage, the Closure Phase, the project manager must ensure that the
project is brought to its proper completion. It is also when staff resources are
reduced, redistributed or reallocated to other projects or duties. Often this can
mean the termination of temporary employment and product supply contracts.
It is a critical time for collection and preservation of all project related
documentation to be used for future reviews and evaluations. It is necessary to
carefully archive the project records, safe from damage, theft, or manipulation.
This phase is characterized by a written formal Project Evaluation containing
all information that would be useful in evaluating the contractor’s performance
and character of the project. The list below contains many of the components of
a Project Evaluation but it should not be limited to only these suggestions.
a)
b)
c)
d)
Documenting conflicts and issues faced during project
implementation and the resolutions applied to those situations. This
helps other projects to plan for such type of issues in the Project
Initiation Phase.
Record lessons learned and conduct a review session with the project
team to get their insights on the project. This helps in the
productivity improvement of the team and helps identify the dos and
don’ts of future projects.
Review the criteria for preliminary and final acceptance as stipulated
in the contract.
The buyer’s spending unit and the project manager review all project
implementation materials and documentation prior to giving a
Preliminary Acceptance Certificate and before granting the Final
Acceptance Certificate.
See Chapter XIV. Audit and Evaluation, Paragraph D – Types of Evaluations
for further guidance on the Project Evaluation report.
F.
Project Manager Responsibilities
Project management refers to the technical supervision, performed by buyer’s
Project Manager (PM), to make sure that all the requirements of the contract
are properly met, that the project stays on schedule, and that unforeseen
circumstances are promptly and properly addressed. The PM is designated as
the buyer’s representative to address any contractual issues and provide
instructions to the contractor.
GoI Federal Budget Process – Investment Budget
1.
36
Reviews Project Implementation Plan
The PM reviews the contractor’s project implementation plan to verify it is
consistent with the agreed upon contract and periodically track execution.
The PM identifies if any steps are missing from the plan or out of sequence.
2.
Monitors Daily Construction
The PM visits the construction site daily to monitor progress. During this
daily visit the PM should:
a)
b)
3.
Meet with the contractor’s representative to resolve any current
issues.
Review the construction materials and methods to verify compliance
with the contract requirements. This includes proper standards for
concrete, steel, electrical wiring and other materials. These materials
and methods are also subject to inspection by authorized Iraqi
government officials regarding compliance with Iraqi building and
safety regulations.
Contractor Performance Reviews
At least monthly and when the contractor presents an invoice for payment,
the PM reviews the performance of the project against the contractor’s
project plan with regard to the overall time permitted under the contract.
If delays or issues of contract non-conformance are detected the
contractor’s representative and the executing agency Minister or
authorized representative is notified.
G. Project Reporting
1.
Reporting to MoF
Spending units submit trial balances and investment budget execution
reports to the MoF Accounting Directorate within 14 days following the
end of the monthly reporting period. Reports must follow the project
sequence that was included in the annual Investment Budget.
The MoF can withhold budget allocations for spending units whose reports
are absent or submitted late for two consecutive months.
Provincial Governments are required to provide monthly trial balances to
their regional treasury offices.
2.
Reporting to MoPDC
Central ministries and the Governor of the provinces submit economic and
technical reports to their appropriate sectoral office within MoPDC. These
reports are due within 14 days following the monthly reporting period.
GoI Federal Budget Process – Investment Budget
3.
37
Project Implementation Card
A Project Implementation Card is used for Investment Budget execution
reporting. The purpose of this reporting requirement is to provide timely
and useful information about key budget execution measurements so that
bottlenecks and other problems can be identified and corrective actions
taken. The Project Implementation Card is submitted in monthly and
quarterly versions and tracks project execution details, including:
a)
b)
c)
d)
e)
f)
g)
Annual and cumulative allocations;
Annual and cumulative expenditures;
Contract status;
Method of execution;
Project start and completion dates - target and actual;
Project milestones; and
Justifications and reasons for project delays
GoI Federal Budget Process – Investment Budget
38
IX. Project Preparation and Approval
A. Feasibility Studies
The phases of Project Initiation and Planning must be accomplished before the
project can be included in the Proposed Project Listing for the Investment
Budget. This is where the supporting documentation is developed for the budget
request.
A project idea must be evaluated for its feasibility and potential benefit to the
public. Another factor for consideration is the cost in relation to the State cash
position. Can the country afford to build the project? Who will benefit from it?
Is there enough qualified and competent staff in the government to implement
the project? All of these factors must be considered when choosing a project.
Feasibility studies are required for all proposed investment projects. The
purpose of the studies is to develop technical specifications to determine the
economic impact of the project. From the feasibility studies, estimated costs for
research, materials, labor, and implementation can be derived.
The regulation governing feasibility studies is Instruction # 1 / 1984 Modified,
Fundamentals of Technical Feasibility and Economic Studies. This regulation
sets the criteria for selecting investment projects the process.
1.
Project Feasibility Categories
a)
b)
Measurable Quantitative Economic Output: These are industrial and
production projects. These projects are evaluated according to
foreign currency usage, the investment equalization point, and the
period of capital recovery.
Immeasurable Quantitative Economic Output: These are public
services related projects. These projects are evaluated according to
the impact on the population and cost effectiveness.
B. Project Selection
Decisions about project selection, priorities, and sequencing are made during the
budget formulation and approval process. The Investment Budget allocates
revenue resources among the CG ministries and provinces. Project listings come
from all sectors and, depending on whether it is ministerial or provincial; the
planning and approval process is slightly different. The Investment Budget
formulation process is discussed in Chapter V, Federal Budget Formulation of
this manual.
Projects are selected based on a number of factors and in the provinces project
selection is guided by the PDS and PDP which are discussed in Chapter IV,
Federal Budget Components - Paragraph D. While the PDS and PDP are
development guides for implementation of projects to meet public service needs,
GoI Federal Budget Process – Investment Budget
39
other contributing factors must be considered in order to confine the list within
the budget estimates as mandated by the MoF during the early budget
formulation period. Below is a summary list of competing potential selection
criteria.
1.
Government Political Priorities
The government usually identifies key political priorities each year which
should be the initial focus of the ministries’ and provinces planning effort.
Projects which address these key priorities should move ahead at a faster
pace and take precedence where reasonable.
2.
Project Readiness
Project readiness is determined by whether the preconditions for the
project have been met, and there are no serious obstacles to implementing
the project. Preconditions are such things as site availability, design
completion, specialized staff requirements, and regulatory approvals.
3.
Project Simplicity
The simplicity of a project is judged by the expected swiftness and ease of
implementation. Simplicity is usually found in small projects with short
lead time preparation and no extraordinary technical issues.
These
projects offer immediate public satisfaction and can improve civic
confidence in the government’s ability to meet public service needs.
4.
Impact
Consideration should be given to projects that have a greater impact by
benefiting the lives of the largest number of people. Where possible, it is
logical to implement projects which reach larger numbers of people before
pursuing others which deliver less impact or benefit to a limited number of
the population.
5.
Logical
This relates to the logical sequence of completing a project. The
foundation for a house must be built before the walls or roof. A canal is
useless without a water source. Normally within a list of potential projects
there will probably be some that should logically occur before others.
Dependencies are important. Perhaps some projects must be implemented
prior to others due the dependency of the latter. An example would be
building a project heavily dependent on reliable electricity such as a
hospital, prior to implementing the electrical projects that are needed to
support the equipment and environmental climate control so essential to
the hospital operations.
GoI Federal Budget Process – Investment Budget
6.
40
Equity
Equity means equal consideration for all sectors and regions of Iraq. An
example would be doing only water resource projects in on sector to the
exclusion of all others. The Investment Budget formulation process should
take this into consideration and it must also be considered at the time
individual projects are being evaluated.
Some projects provide broad benefits throughout the country.
Improvements to seaport or airport facilities can help the movement of
goods in and out of the country, improving the economic well-being of all
people; therefore geography is not the only consideration in equity.
7.
Staff Capacity
The ministry staff responsible for the implementing the Investment
Budget projects requires those with many different skills. Different types
of projects will place demands on different staff, depending on what skills
are needed for the project. Therefore, managers need to select projects in a
way that the staff workload is balanced. Care should be taken not to
localize an abundance of projects that require specialized technical skills in
an area that is not sufficiently staffed. The availability of specialized
equipment or the ability to obtain the equipment may create an
unfavorable lead time.
8.
Security Environment
The security environment in Iraq has improved but continues to be a
factor in project implementation. Projects may be indefinitely delayed
until security in a particular area or region is stabilized. Assistance from
security forces may be required which may impact lead time and
dependencies.
C. Project Technical Specifications
Accurate project specifications are important for the most obvious reasons of
defining the nature and scope of the project. Specification development is where
all the components, materials and supplies needed to construct the project are
identified and estimated.
Later in the procurement process, accurate
specifications will be necessary for preparing the tender solicitation and
contract.
The largest contributing factor to poor project development and implementation
is inaccurate or incomplete specifications. Modifications are generally
accompanied by an increase in cost due to additional materials and labor.
Modifications that lead to extending the delivery date of the contract will
certainly generate additional costs and can place unexpected demands on the
contractor who had not planned for the extension and may not have the
resources.
GoI Federal Budget Process – Investment Budget
41
In the body of the tender solicitation, the spending unit, referred to as the
buyer, describes in graphic detail, the proposed contract technical specifications.
The following list defines technical specifications, provides the level of detail
expected, and explains why competent specifications are critical to both the
buyer and bidder.
a)
b)
c)
d)
e)
f)
g)
h)
The technical specifications constitute clear indicators enabling the
buyer to ensure compliance with the contract and the bidder to
submit an accurate tender.
Comprehensive technical specifications facilitate the process of tender
preparation for the bidder and later, the testing, analysis and
evaluation for the buyer.
Technical specifications normally require that all goods and related
services be new, unused, of modern styles, and include upgraded
designs and materials unless otherwise indicated in the solicitation.
Specifications are expected to utilize best practices.
Setting fixed standards for technical specifications may be useful.
This will depend on the complexity of the project and repetition of
the operations.
The standards of equipment, materials, and workmanship in the
tender solicitation documents should be of specified quality and the
measurement of those standards clearly defined. Consequences to the
failure to meet those standards should also be clearly defined.
Where possible, indication of trade marks, numbers of photographed
manuals, or any other details determining the materials and required
items manufactured at a specific factory must be avoided. If it is
impossible to avoid, then the description of these items must be
followed with a statement of "or equivalent".
The technical specifications should also indicate the following in
general detail and without limitation:
i.
ii.
iii.
i)
2.
Details of required tests by the buyer such as type, volume, and
frequency;
Overtime and/or related services authorized to achieve the full
and best delivery/completion;
Activities which will be performed by the bidder and extent of
the buyer’s involvement
The specifications are not limited to technical details but must also
include expected performance specifications with the expected values.
Materials Schedule
The Materials Schedule is used for estimating the cost of the project. The
same schedule should be used by bidders when developing their tender
offers. All terms, specifications, bills of quantities, maps and any other
information required for implementation of the project must be included in
the Materials Schedules. The costs listed on the Materials Schedule must
GoI Federal Budget Process – Investment Budget
42
be in agreement with the funding allocated for the project in the
Investment Budget.
D. Site Acquisition
For many projects the implementation site is already under the control of the
spending unit. However it is important to verify that the site can be used for
the purpose intended.
If the site is not already under the control of the spending unit then a separate
effort will be needed to acquire the site. This could occur as follows:
1.
Site Acquisition Contracts
The site could be acquired as a separate contract. The site acquisition
might even be a separate project in the Investment Budget. Even if the
cost of site acquisition has been included along with project design and
construction costs within a single project, it might be addressed in a
separate stage. In this case, specifications for the size and general location
of the site need to be developed. The land owner would submit a proposal
for either a negotiated sale or leasing of the land.
2.
Site Acquisition with Construction
In limited cases, the project may be solicited where the bidder proposes the
site and includes the cost of the site in their tender offer. This is unusual,
but may be a way to accelerate the implementation of the project by
avoiding a separate stage to locate and acquire a site.
E. Site Preparation
Building sites are not always ready to accept new construction. Site preparation
can be done through the use of existing employees of the ministry, by issuing a
separate contract solely for this purpose or as part of the overall construction
contract.
Site preparation includes many tasks. All or a combination of a few is listed
below:
ƒ
ƒ
ƒ
ƒ
ƒ
Demolition and removal of existing structures
Grading and filling to establish a usable surface
Proper drainage/flood hazard
Utilities connections for electricity, water and sewage
Roads and accessibility
GoI Federal Budget Process – Investment Budget
43
X. Procurement
A. Procurement Components
Procurement for public contracts follows one of several methods permitted
under the Instructions for Government Contracts Execution - 2008. The process
begins with the selection of a procurement method. Selection is dependent upon
the size, complexity, and urgency of the project. The five authorized
procurement methods are Public Tender, Limited Tender, Direct Invitation,
Sole Bid, and Purchasing Committee.
Following the selection of a procurement method, a tender solicitation document
is prepared from the detailed plans and specifications of each project that was
developed during the project planning period. The tender solicitation is
announced and tenders from bidders are gathered until the submission deadline.
Tenders from bidders submitted by the submission deadline are opened and read
in public. Valid tenders from eligible bidders are subjected to vigorous
examination by an Analysis and Evaluation Committee. During the tender
analysis and evaluation process, the spending unit develops the contract
language for executing the project. The contract should be carefully prepared to
provide for completion of the project according to the plans and specifications
within the accepted timeframe and cost structure.
Once the tender solicitation is awarded, the selection is formalized with a signed
contract. The winning bidder is notified with a Letter of Acceptance which
serves as the binding document until the contract is signed by both parties.
Depending on the complexity of the project and the procurement rules, this can
be a lengthy process, taking several months to complete.
Iraqi contractors are given preference over foreign bidders by 10% in public
works and consultation contracts and 5% for goods and services contracts.
B. Procurement Methods
The approved methods of tender solicitations are set forth in Article 4 of the
Instructions for Governmental Contracts Execution – 2008. The following are
the only authorized methods of solicitation methods allowed to contract for
public services and infrastructure contracts.
1.
Public Tender – Public Tender Solicitations can solicit either national or
international tenders which are determined according to the head of the
contracting entity authority with consideration given to the contract
nature and amount.
This method is performed by issuing a public announcement for
participation in biding for contracts of all kinds and for those who qualify
to participate in amounts no less than 50,000,000 ID or any other amount
specified by relevant entities.
GoI Federal Budget Process – Investment Budget
2.
44
Limited Tender (1) – This tender solicitation is performed by issuing a
public announcement to all interested bidders who qualify to compete for
public contracts with amounts no less than 50,000,000 ID or any other
specified amount. The solicitation is conducted in two stages:
a)
b)
First Stage – A specialized committee evaluates the technical and
financial qualifications of the bidders based on documents submitted
by the bidder as verification of their eligibility. Those who qualify
are referred to the Second Stage.
Second Stage - In this stage, at least three Direct Invitations will be
sent to participants who qualified in the First Stage, inviting them to
submit commercial offers according to the announced public tender
solicitation specifications and instructions.
3.
Limited Tender (2) – This method is used to achieve the best solution for
solicitations of a complicated nature or in cases where there is no need to
specify details of technical specifications. It is also used for services where
it is not initially necessary to specify project characteristics.
As with Limited Tender (1) this tender solicitation is conducted in two
stages. The process requires the same procedures as described in the First
and Second Stage above in Sub-Paragraphs 2.a and 2.b.
4.
Direct Invitation – A Direct Invitation is used for executing tender
solicitations for many types of contracts. The MoPDC issued Official
Memorandum Number 1/1/412, dated 15 October 2008 which modified the
Instructions for Government Contract Execution – 2008 regarding Direct
Invitation tender solicitations.
Instead of requiring five bids from
contractors, companies, or institutions, under the new guidance only three
are required. These entities are selected on the basis of technical abilities
and financial efficiency. There is no charge to suppliers or contractors for
the tender solicitation documents. A Direct Invitation is used when:
a)
b)
c)
The public work requires specialization and\or requires confidentiality
in contracting or implementation for security purposes.
The objective is achieving speed and efficiency in implementation due
to emergencies and natural disasters.
After a solicitation has been advertised at least twice and no valid
bids were submitted. Meaning that, eligible contractors have
refrained from participating in a specific public tender solicitation
announcement after two separate advertising events have lapsed.
GoI Federal Budget Process – Investment Budget
5.
45
Sole Bid – A Sole Bid solicitation is used for contracts where one eligible
bidder is invited to provide supplies, implement construction or
manufacturing works, or supply consultation services. The Sole Bid is used
only when it can be justified and according to the following procedures:
a)
b)
The spending unit’s contracting office submits a request with
justifying reasons to use the Sole Bid Method of solicitation to the
Central Contracts Committee (CCC) in the General Secretariat of the
CoM. The request essentially asks the Committee to authorize the
Tender Analysis and Evaluation Committee to accept the Sole Bid.
If the CCC does not respond to the request within 14 days of the
registered receipt date, then the Committee’s approval is considered
given and the process of the Sole Bid Method can proceed.
According to the Official Memorandum Number 1/1/412, dated 15 October
2008 these bidders are not required to pay deposits.
6.
Purchasing Committees – A Purchasing Committee is used to supply
goods and services amounting to less than 50,000,000 ID (fifty million
Iraqi dinars) or any other amount specified in the current General Federal
Budget Law with consideration to terms and conditions that will be issued
by the Office of Government Public Contract Policy in the MoPDC and in
coordination with related entities.
Procurement Threshold Table
Procurement Methods Requirements
Additional
Information
Threshold
Procurement Method
Special Approvals
+50 M ID
Public Tender
None
- 10 M ID
Public Tender
Provincial Governor
ARDP Contracts
+150 M – 2.5 B ID
Public Tender
None
Review – BSA
+2.5 B ID
Public Tender
HCC Approval - Provinces
Review – BSA
+12.6 – 25.2 B ID
Public Tender
HCC Approval
Review – BSA
+25.2 B ID
Public Tender
HCC Approval
Review – BSA/Line Minister
+50 M ID
Limited Tender
None
- 10 M ID
Limited Tender
Provincial Governor
Specialization Committee
At least 3 Bids
ARDP Contracts
NONE
Direct Invitation
None
At least 3 bids
- 10 M ID
Direct Invitation
Provincial Governor
ARDP Contracts
NONE
Sole Bid
Central Contracts Committee
- 50 M ID
Purchasing Committee
OGPCP
GoI Federal Budget Process – Investment Budget
46
C. Contract Preparation
Contract preparation begins during the tender evaluation period so that the
contract will be completed and ready for signature when the contract is
awarded. Contract preparation is in accordance with the MoPDC guiding
regulations Part 3 – Unified Tender Instructions.
The Unified Tender Instructions standardizes contract conditions and promotes
uniformity in the procedures. The use of this model contract simplifies the
process of preparing a contract by providing a template to fill in the specific
data as it relates to the tender solicitation specifications and according to the
information specific to the winning bidder.
D. Contract Conditions
There are numerous contract condition and stipulations that vary widely
depending on the nature of the contract. Below is a summary list of contract
conditions and should not be considered the only conditions that apply or that
could be found in a contract.
ƒ
Definitions
ƒ
Governing Legislation
ƒ
Risks
ƒ
Insurance
ƒ
Timeliness
ƒ
Safety
ƒ
Contract Extensions
ƒ
Approved delays
ƒ
Structural Defects
ƒ
Structural Changes
ƒ
Advance Payments
ƒ
Taxes
ƒ
Project Completion
ƒ
Final Acceptance
ƒ
Accountability
ƒ
Dispute Settlements
E. Contractor Payments:
Contractor payments begin with an advance or mobilization payment, if
authorized in the contract. Progress payments continue over the life of the
GoI Federal Budget Process – Investment Budget
47
contract with reserve amounts withheld during the preliminary acceptance
period and paid following the final acceptance of the project by the buyer.
1.
Advance/Mobilization Payments
Contracts may allow an advance or mobilization payment prior to the
onset of the project implementation. The purpose of this payment is to
provide the financial means for the contractor to purchase and transfer
goods and equipment to the project site in order to begin work. The
advance payment is amortized proportionally to progress payments made
as the project is completed.
a)
b)
c)
d)
This payment cannot exceed 20% of the total contract amount.
The amount should be reasonably associated with the contractor’s
cost of mobilization.
The advance payment must be recovered at each periodic progress
payment specified in the contract.
Advances must be recovered within the following:
i.
ii.
2.
Two months prior to the end of the contract period of
performance; or
Half of the contract period of performance
Contractor Progress Payments
Contractor payments are contingent upon a satisfactory Project Manager’s
Performance Review and invoice payment approval. Payments are made
monthly upon submission of the contractor’s invoice of the estimated value
of the work accomplished.
Contractor invoices approved by the Project Manager are submitted to the
Accounting Directorate spending unit for payment. The spending unit
verifies the invoice, confirms that the payment is allowed under the
contract, and that adequate funds remain in the project. Payment to the
contractor is made by check. There are limits on the amount of a single
payment that can be authorized by different officials.
Payment Authorization Tables
Threshold
Approving Authority
Up to 500 million ID
Minister or Head of Agency
Greater than 500 million ID
Minister of Finance
Great than 1 billion ID
High Contracts Committee
GoI Federal Budget Process – Investment Budget
48
Payments should be made within 30 days of delivery of the invoice and
acceptance by the government.
Copies of payment documents and the Project Manager’s certification are
placed in the official documents file for the project. The documents serve
as official evidence of the project implementation historical record. These
documents will be reviewed during the final acceptance review and for
determining dispute resolutions, if any.
F.
Contract Modifications
Increases in the cost of the project may be approved by the concerned minister
up to 7% above the budgeted amount. For greater increases, up to 15% above
the budgeted amount, further approval from the MoPDC is required. Funds for
the increase must be transferred from the amounts budgeted for other projects
within the concerned ministry’s budget, or may be transferred from another
ministry if that ministry consents.
Once the change in project cost is approved, the executing ministry indicates to
the appropriate sectoral unit within the MoPDC which project or projects will
be reduced to fund the approved increase.
G. Contract Extensions
Many times even the best managed contract will encounter unexpected
circumstances that cause implementation delays and therefore often require
contract extensions. Article 13 of the Instructions for Government Contracts
Execution – 2008 states that the contractor should execute the contract during
the period stated in the contract. This period begins on the contract signing
date or any other date that may be stipulated. Extension periods should not
exceed 25% of the original contract period. All changes to the contract must be
approved by the MoPDC.
A delay penalty may be assessed in the event the contractor is unable to
complete the project within the time permitted. This penalty is limited to a
maximum 10% of the amount of the contract. It is prorated on a daily basis and
must be mentioned in the tender announcement and contracts.
1.
Authorized Contract Delays
a)
b)
c)
d)
Changes to other contracts that affect the implementation such as
with suppliers which are out of the control of the contractor;
Changes requested by the buyer that affect the ability of the
contractor to meet the deadlines;
Circumstances that occur outside the control of the contracting
parties;
Government of Iraq actions that cause delays;
GoI Federal Budget Process – Investment Budget
2.
Authorized Delay Procedures:
a)
Requests for an authorized delay must be submitted to the buyer in
writing by the contractor. The request must explain the reasons for
the delay in complete and accurate detail and state a proposed period
of delay. This request must be submitted:
i.
ii.
b)
Within 15 days of the condition that caused the delay for supply
contracts; and
Within 30 days of the condition that caused the delay for public
works and consulting contracts.
After receiving this request the buyer must respond:
i.
ii.
3.
49
Within 30 days of the receipt of the extension request for supply
contracts; and
Within 60 days for public works and consultancy contracts.
Extension limits
The buyer alone cannot approve extensions longer than 25% of the
contractual period of performance. Longer delays require the appointment
of an Implementation Committee, which would chart a course of action to
speed execution of the project. The Implementation Committee includes
representatives from both the buyer and the contractor.
H. Contract Cancellations
Contract cancellations initiated by the buyer or the contractor are serious and
all the legal consequences must be clearly defined and considered before
finalizing the decision.
1.
Cancellation - Due to Contractor Dereliction
The buyer can cancel all or part of the contract through a written memo
sent to the contractor provided that this will not constitute a violation or
breach of the conditions of the contract:
a)
b)
c)
In case of the contractor's failure to deliver the goods during the
period indicated in the contract, or during the extension period given
by the buyer;
If the contractor fails to carry out tasks assigned according to the
contract; and
If the contractor has been involved in any practice of fraud or
corruption through competing for the contract award
Following the cancellation of the contract, the buyer may complete the
process of supplying the goods and related services which have not been
delivered. The suspended contractor will bear any increase in costs
associated with supplying the goods needed to continue the
implementation of the contract.
GoI Federal Budget Process – Investment Budget
2.
Cancellation - Due to Contractor Bankruptcy
a)
3.
50
If the contractor becomes bankrupt or insolvent, the buyer can cancel
the contract by sending a written memo to the contractor. The
contract will be officially canceled without compensation to the
contractor provided that this will not affect any right to work which
has taken place or which may take place on the part of the buyer.
Cancellation - Due to Contract Inappropriateness:
a)
b)
c)
If the contract becomes inappropriate or obsolete prior to completion,
the buyer can cancel all or part of the contract through a written
memo to the contractor citing the circumstances. The memo must
describe the problem, identify items/tasks cancelled, and the date on
which the contract cancellation goes into effect.
Goods shipped 28 days from the date of cancellation notification must
be accepted by the buyer according to the conditions and prices of the
contract.
With regard to the remaining goods, the buyer may choose to:
i. Accept part or all of the goods according to the conditions and prices
of the contract, and/or
ii. Cancel the remaining goods.
I.
Contract Administrative Expenses
Spending units can request that MoPDC monitor one or more of their
projects. This is sometimes done by provinces that lack the technical
expertise to adequately monitor a project. The MoPDC may collect
administrative fees for project auditing and supervision expenses up to 5%,
however, the MoF regulations place limits on those expenses.
Administrative costs are narrowly defined and include the following:
a)
Project funds can be used for auditing and supervision expenses, as
follows:
i.
ii.
iii.
b)
c)
d)
e)
f)
g)
h)
Up to 5% for projects with a value of less than 1 billion ID
Up to 4% for projects with a value between 1 and 10 billion ID
Up to 3% for projects with a value that exceeds 10 billion ID
Salaries for personnel involved in project execution
Training
Vehicles
Equipment - computers and cameras
Incentives and bonus payments
Media announcements and advertisement
Bonus payments up to 250,000 ID
GoI Federal Budget Process – Investment Budget
J.
51
Performance Bonds
The contractor is required to produce a contract performance bond in the value
of ID as stipulated in the tender solicitation within 28 days following the receipt
of the Letter of Acceptance. Foreign bank guarantees may be used and will be
accepted for that purpose by the Trade Bank of Iraq (TBI).
Twenty-five percent of the Performance Bond value is retained during the
preliminary acceptance maintenance period and returned following successful
completion of that period. The final payment is made to the contractor within
28 days after the final acceptance of the project. Chapter XII, Tender
Preparation for Bidders, Paragraph E – Performance Bonds provides a sample
Performance Bond agreement format.
K. Letters of Credit
Letters of Credit (LoC) relate to contracts which purchase foreign materials or
services for implementation of public works projects. These contracts require
supporting LoCs to cover the cost of the imported goods.
Following the contract award and signing, the buyer begins the process of
opening an irrevocable LoC which must be issued by an accredited banking
institution. The LoC should include the financial terms of the contract and any
other agreed upon conditions of the contract between the buyer and contractor.
The LoC must specify the payment conditions and how the payments will be
released according to the conditions of the contract.
Extensions or modifications to LoCs must be approved by both parties of the
contract. Cancellation is authorized only in written form from the party who
opened the LoC and with the approval of the beneficiary.
The buyer bears the cost of opening LoCs within the boundaries of Iraq;
however, costs associated with opening LoCs outside Iraq are the responsibility
of the contractor.
The contractor informs the buyer of the shipping method and expected delivery
dates. It is the responsibility of the buyer to complete the necessary custom
forms and comply with the custom clearance procedures.
ƒ
Specify the name of the beneficiary and their complete address;
ƒ
Describe goods and services of the contract;
ƒ
Delivery date of goods and services;
ƒ
Contract number and date;
ƒ
Credit amount in number and word form;
ƒ
Shipping terms (FOB/CIF/CIP)
ƒ
Shipping method such as land, sea, or air and final destination;
ƒ
State partial shipment acceptance terms; and
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L.
52
LoC validity period according to the contract
Dispute Resolution
Article 10 of the Instructions for Government Contract Execution – 2008 defines
the parameters of conflict resolution and the multi-layered system to be used for
resolving the conflict. Conflict resolution choices and procedures vary
depending on whether the dispute arises before or after the award of the
contract.
1.
•
Central Contracts Committee – Bidder Complaints
•
MoPDC Government Court – Contract Awards
•
Joint Committee
•
Arbitration
•
Specialized Courts
•
International Arbitration
Central Committee – Bidder Complaints
Each ministry appoints a Central Contracts Committee to resolve
complaints and contracting claims resulting prior to finalizing contracts.
The Committee reports to the minister and is staffed with experts,
specialists, and a Committee Manager with a job title of supervisor or
higher.
The Central Contracts Committee reviews bidder complaints and objections
regarding disputes before contracts are awarded.
a)
b)
c)
d)
2.
Committee recommendations must be submitted to the minister or
authority within 15 days from the date of the complaint’s submission.
The authorized minister or authority must give a decision on the
complaint within seven days of receiving the Committee
recommendation.
The bidder complaint will be considered rejected if the minister or
authority does not respond to the Committee’s recommendation
within the seven day period.
Bidder disputes should be resolved prior to signing contracts;
however, the bidder must submit an official commitment to pay for
all damages that result from delaying the contract signing for false or
unjustified reasons.
MoPDC Government Court – Contract Awards
Bidders may object at a Government Court in the MoPDC on decisions of
contract awards. The objection must be made in writing within seven days
of the contract award. The MoPDC forms a specialized Government Court
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that is chaired by a Supreme Judicial Council Judge. Court membership
also includes a MoPDC General Manager or higher, representatives of the
Iraqi Contractors Union, and representatives from the Chambers of
Commerce Union.
The Government Court is authorized under CPA Order 87 – Public
Contracts – 2004 and is guided by the Civil Pleadings Law – Number 83 –
1969.
a)
b)
c)
3.
The Government Court should issue a decision within 120 days from
the date of the complaint and paying of legal fees.
Court decisions are considered final if not appealed to the Supreme
Federal Court within 30 days of the decision.
The Office of Government Contract Policy within the MoPDC will
follow up on the decisions of the Court.
Joint Committee
To resolve disputes that occur after a contract is signed a Joint Committee
is formed between the two parties of the dispute in order to perhaps obtain
a conciliation resolution. The Joint Committee reviews the complaint and
recommends a solution or solutions according to the governing regulations.
If the dispute cannot be resolved at this level, then the dispute moves to a
higher level.
4.
Arbitration Committee
Arbitration is another option for disputes regarding contracts that have
been signed. Each party selects an arbitrator to represent them in the
negotiations. A third arbitrator is selected through agreement of both
parties to lead the Arbitration Committee. The Arbitration Committee
reviews the dispute and issues a final decision on the resolution of the
dispute. The Arbitration Committee decision is final and not subject to
appeal. The party who loses the dispute is responsible for the cost of the
arbitration and is committed to the Committee decision.
5.
Specialized Courts
Disputes that cannot be resolved through a Joint Committee or for those
where the parties chose not to select arbitration as a mechanism can be
referred to Specialized Courts. These Specialized Courts are subject matter
expert courts which implement the applicable Iraqi laws to resolve the
dispute.
6.
International Arbitration
Disputes may be resolved through international arbitration if one of the
disputing parties is foreign depending on the terms of the contract. The
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arbitration must be performed by an accredited international arbitration
organization.
M. Transfer of Rights/Obligations
Neither the buyer nor the contractor can transfer totally or partially their rights
or obligations agreed to in the contract without prior consent of both parties
being obtained in writing.
N. Contracting Ethics
A commitment to ethics in government contracting is imperative. Many times
the appearance of an ethics violation is just as troublesome as the commission of
a violation. Government employees at all levels must work to eliminate both
the actual and perceived abuse of position in order to remain clear of any focus
on unethical conduct. This means that government employees should:
1.
2.
Avoid conflicts of interest by maintaining an appropriate relationship with
contractors;
Avoid relationships that could be or perceived to be exploited for personal
gain by either party;
3.
4.
5.
6.
Do not offer or accept gifts or gratuities;
Refuse bribes, kickbacks or unlawful payments;
Do not discuss employment or business opportunities with contractors;
Not reveal proprietary or competition sensitive information about bids to
outside parties; and
7.
Not, for a reasonable time, be employed by contractors to whom they have
awarded a contract or been responsible for managing the contract.
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XI. Tender Solicitations
A. Tender Solicitation Scope
The scope of the tender solicitation defines the nature of the works required and
specific boundaries to the interpretation of the stated specifications. Without
strict scope discipline and where requirements are not completely defined and
described there is no effective change control in a project. This is called scope
creep and this is how projects expand into something that was never intended.
An example would be where the project was originally intended to build a
parking lot with small vehicle storage structures and it ballooned into a full
service, three-level parking garage complete with elevators and child day care.
Simply stated, scope means the totality of work needed to complete a project. It
is the total of all of a project’s products and their requirements or features. It
defines the broad parameters of the project and provides the foundation for all
subsequent steps in the project management cycle. A clear and concise project
scope helps the project management team focus on where the final outcomes will
be measured.
B. Tender Solicitation Requirements
A tender solicitation is the contracting mechanism used to gather offers from
eligible bidders who wish to provide services requiring technical and professional
skills for public works, supplies, and consultative services. The statement of
work within the solicitation contains as much detail as possible or may include
only the needs, goals, and objectives. This is dependent upon the complexity of
the project. The tender solicitation states to the bidder what the buyer wants
accomplished, how it should be done, when it should be finished, and where it is
to be delivered.
The components of tender solicitation instruments used by the GoI are defined
in the MoPDC’s Unified Tender Instructions. If the bidder has any questions
about the information in the tender solicitation, they should send their inquiries
to the address of the buyer, which is stated in the solicitation. Questions from
the bidder must arrive to the buyer no later than 21 days before the closing date.
The buyer responds with the answer to the question(s) and distributes the
answer to all bidders who have submitted offers without disclosing the name of
the party that made the inquiry. Based on the inquiries, the buyer can amend
the tender solicitation and would do so in accordance with the procedures stated
in Part 1, Chapter 1 - Paragraph 8 of the Unified Tender Instructions.
1.
Tender Solicitation Components
The following is a list of components recommended for tender solicitations.
While this list is lengthy, it does not prohibit the inclusion of additional
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information that would benefit the buyer and the bidder in meeting the
needs of the contract.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
p)
q)
r)
s)
t)
u)
v)
w)
x)
y)
z)
Solicitation Bank Guarantee requirements
Contract Performance Bond requirements
Tender language/currency – Arabic or Kurdish/Iraqi Dinar
Work site address
Whether site acquisition or site preparation is required
Applicable work days, holidays, and overtime allowed
Required tender validity period
Bidder eligibility requirements and accepted qualifying documents
Required grade and classification of bidder
Buyer name, address, and point of contact
Tender submission address, deadline date and time
Solicitation modifications and cancellations authority and policy
Require bidder name, headquarters address, branch address, and
alternate representative
Statement that the GoI owns all designs, maps, and specifications
that accompany the tender
Specialized equipment and staff requirement
Date, time, and place of a Public Tender Opening, which must be
within 7 days of the closing date of the tender solicitation.
State delay penalties
State that GoI is not required to accept the lowest priced offer
State optional delivery options such as CIF, CIP, or FOB
Requirement for submission of project implementation plan
Evaluation criteria and weighting for both financial and technical
aspects that will be used to evaluate offers.
List of Goods and Delivery Schedule (column H completed by the
bidder)
List of Related Services Schedule
Technical Specifications Table
Layouts and Drawings Table
Testing and Evaluations Table
C. Tender Solicitation Technical Specifications
The objective of the tender solicitation technical specifications is to determine
the technical characteristics of the public works or goods and services requested
by the buyer. Technical specifications are developed during the project
development period which is covered in this manual in Chapter IX. Paragraph C
– Project Technical Specifications.
Accurate technical specifications are critical to the bidder since that is the
reference point where cost estimates are developed. The bidder’s tender price
will be dependent on the accuracy of the tender specifications. Bidders are
sometimes reluctant or refuse to compete for public contracts if the expectations
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for the project are not in agreement with the estimation of works and materials.
Inaccurate specifications will cause either a bad project to be implemented or
the specifications be revised and the tender solicitation re-advertised.
D. Tender Solicitation Announcement
As stated in Section B above, the tender solicitation is the mechanism by which
the GoI communicates to perspective bidders regarding the availability of public
works contracts. The Instructions for Government Contract Execution issued in
2008 by the MoPDC lays out in detail the requirements for competitive tender
solicitation announcements.
In addition, the MoPDC issued Official
Memorandum Number 1/1/412, dated 15 October 2008 which modified a few
sections of the Instructions. Those modifications have been inserted in the
appropriate sections below that were affected.
1.
Tender Solicitation Advertising
According to Article 5, the summary content and initial required period of
announcing tender solicitations is as follows:
a)
Summary Solicitation Content
i.
ii.
iii.
iv.
b)
c)
d)
e)
Tender submission address and point of contact
Tender submission deadline date and time
Bank Guarantee requirements
Non-refundable price of tender documents
Public Works – The Official Memorandum Number 1/1/412, dated 15
October 2008 modified the Instructions for Government Contract
Execution – 2008 regarding the duration of advertising solicitation
announcements. According to the new guidance, public works
solicitations should be advertised from 10-60 days, depending on the
complexity, importance, and urgency of the required work. The
advertising period begins following the final publishing date of the
announcement
Supply and Consultative Services – Normally, these solicitations are
advertised from 15-60 days. This is dependent on the nature and
requirements of the solicitation and also begin following the final
publishing date of the announcement
Direct Invitation and Sole Bid Contracts – Also according to the new
guidance referenced in Sub-Paragraph b) above, the duration period
for advertising Direct Invitation and Sole Bid contracts is left to the
discretion of the spending unit’s contracting authority.
Food and Drug Supply – According to the new guidance referenced in
Sub-Paragraph b) above, food and drug supply contracts are exempt
from the advertising requirements.
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Extending Tender Solicitation Advertising
The contracting authority may extend the initial advertisement period if
the response to the solicitation announcement has been unsatisfactory.
Extension of the advertising period requires the approval of the
contracting authority chairman. The MoPDC must also be informed. The
announcement must be re-advertised in the same newspapers and media as
it was originally published. All participants who have submitted tenders
must be notified of the advertising extension and re-advertisement of the
solicitation prior to the tender submission deadline date.
Prevailing conditions with compelling reasons for extending the
advertising period or choosing to re-announce the solicitation must be
present and would conform to the following:
a)
b)
c)
3.
No tenders were submitted during the announcement period;
The minimum number of tenders was not submitted to meet the
invitation requirements; and
The amount of the best qualified tender exceeds the estimated cost by
10% or more.
Tender Solicitation Advertising Channels
Tender solicitation announcements are widely advertised to the public in
order to provide maximum exposure and opportunity for competition. The
channels in which solicitations are advertised include:
a)
b)
c)
d)
e)
The Official Gazette
Announced three times in three newspapers of general circulation
Ministry/Governorate Website
Iraq Embassies and Consulates
United Nations Development Program Website – International
Tender Solicitation
E. Tender Solicitation Closing Date
The tender solicitation closing date and time must be specified in the solicitation
document and announcement to include the submission address. The buyer can
extend the closing date of the tender solicitation for the submission of the
tenders by modifying the solicitation documents in accordance with Chapter 1 Paragraph 8 of the Unified Tender Instructions. In such case, all rights and
obligations required of both the buyer and the bidder must be adjusted and
extended in correspondence with the new closing date.
F.
Late Tender Submission
The buyer cannot accept tenders from bidders that are delivered after the
appointed closing date and time. Tenders that are submitted after the closing
date and time are considered late, will be refused, and will be returned to the
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bidder without opening the envelope.
requirement.
There are no exceptions to this
G. Tender Solicitation Confidentiality
Information regarding the analysis and evaluation process, and/or
recommendations submitted to award the tender solicitation, cannot be
disclosed to any person. The tender solicitation award announcement will be
made by the buyer’s contracting office.
H. Tender Submission Acceptance
Unless otherwise stated, bidders must deliver tenders either by hand or by mail
to the tender submission address listed in the tender solicitation documents.
Tenders can be sent by email only if stated in the tender solicitation and only to
the email address listed in the solicitation. The bidder is responsible for ensuring
that their tender is submitted to the correct address and by the designated
submission deadline period. Special instructions regarding the preparation of the
contents of the tender submission are described below:
1.
Initial Tender Submissions
a)
b)
c)
d)
e)
f)
g)
2.
The envelope containing the tender offer from the bidder must have
one original document, marked on the front with the word
“ORIGINAL”, and include the full name and address of the bidder.
The bidder must also submit the number of copies required according
to the tender solicitation and mark the pages with the word “COPY”,
and include the full name and address of the bidder.
If there are any differences between the original document and the
copy, the original will be adopted and controlling.
All envelopes must bear the warning not to be opened prior to the
appointed Public Tender Opening Ceremony on the specified date.
The tender documents inside the envelope must also include the
tender solicitation Reference Number.
Both the original and the copies of the Price List and Quantity Tables
should be written in permanent ink and signed by the bidder or
official authorized to sign on behalf of the bidder.
Any traces of erasing or re-writing between the lines will be accepted
with initialing by bidder or the official authorized to sign on behalf of
the bidder.
Replacement Tender Submissions
a)
Replacement tenders are acceptable providing they arrive prior to the
tender submission deadline. The replacement tenders and
authorization letter should be delivered in a separate envelope and
marked with the word “REPLACEMENT”. Upon delivery, both the
initial tender and replacement tender envelopes should be put
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b)
3.
b)
Alternative tenders are acceptable, providing they arrive prior to the
tender submission deadline. The alternative tender and authorization
letter should be delivered in a separate envelope and marked with the
word “ALTERNATIVE”. Upon delivery, the initial tender and any
replacement tender envelops should be put together with the
alternative tender in one envelope and marked with the bidder’s full
name and address.
Requirements regarding envelopes and content markings should
follow the instructions in Section H, Sub-Paragraph 1, (b) – (g)
above.
Cancelling Tender Submissions
a)
b)
c)
I.
together in one envelope and marked with the bidder’s full name and
address.
Requirements regarding envelopes and content markings should
follow the instructions in Section H, Sub-Paragraph 1, (b) – (g)
above.
Alternative Tender Submissions
a)
4.
60
Bidders can cancel their tenders prior to the submission deadline
without penalty. The tender cancellation authorization request is
delivered in a separate envelope marked with the word
“CANCELLATION” and signed by the bidder or official authorized
to sign on behalf of the bidder. Upon delivery, the initial tender, any
replacement and/or alternative tender envelops should be put
together with the cancellation authorization in one envelope and
marked with the bidder’s full name and address. The original bid and
amendments will be returned to the bidder unopened following the
Public Tender Opening Ceremony.
It is important to understand that failure to comply with the
cancellation requirements will result in rejection of the cancellation
request and the bid will continue to be legally binding on the bidder.
Requirements regarding envelopes and content markings should
follow the instructions in Section H, Sub-Paragraph 1, (b) – (g)
above.
Public Tender Opening Committee
Each ministry, agency not related to a ministry or province must create a Public
Tender Opening Committee. This Committee is chaired by an official of at least
the Director General level. It is composed of the chief of the concerned
directorates including department representatives from legal, financial, and
engineering. Support and administrative staff include a secretary and two
reserve members.
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Tender Recording
a)
b)
c)
d)
2.
61
Tenders received by the tender solicitation deadline must remain
sealed and kept in a secure location. On the date of the Public Tender
Opening Ceremony, designated in the tender solicitation documents,
all tenders received by the deadline are opened and read in public.
The tenders are logged in a register where detailed information about
each tender is recorded.
The register records the full name of bidder and whether the tender
submitted was an unmodified initial, replacement, alternative, or
cancellation. Tables of prices and discounts and performance bonds
are also recorded.
The bidder and/or authorized representatives will sign the guest book.
A copy of the tender record with the date of the opening and the
information regarding the session will be distributed to all the bidders
who submitted tenders. It will be posted online and published in the
Official Gazette.
Public Tender Opening Ceremony
The tender envelopes submitted by the submission deadline are opened and read
in public during the Public Tender Opening Ceremony at the date, time and
place stated in the tenders solicitation document and announcement. A Tender
Opening Checklist is provided in the MoPDC guiding regulation, Part 8 –
Standard Tender Assessment Forms
Envelopes will be opened one after another, and the name of the bidder
announced. Replacement, Alternative, and Cancellation tenders, if any, will be
identified. The tender prices and discounts tables will be identified and
announced. The bank guarantees will be announced along with any other
details which the buyer may deem proper to be stated.
The buyer cannot refuse any tenders which were examined during the Public
Tender Opening Ceremony, except those which arrived after the tender
solicitation submission deadline date.
a)
b)
Envelopes labeled “CANCELLATION” will be opened and recorded
first and the cancellation authorization request read in public. The
cancellation request will be deemed invalid if it was not enclosed with
the required authorization letter and signed by the bidder or official
authorized to sign on behalf of the bidder. The initial tender
submission and any replacement or alternative tender submissions
will be returned unopened to the bid owner.
Envelopes labeled “REPLACEMENT” will be opened and recorded
next and the replacement request read in public. The replacement
request will be deemed invalid if it was not enclosed with the required
authorization letter and signed by the bidder or official authorized to
sign on behalf of the bidder. These tenders and accompanying
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c)
d)
e)
f)
g)
h)
3.
62
documents will replace the initial tender submitted by the bidder. The
initial tender will be returned to the bid owner without being opened.
It is unauthorized to make any modifications to the bids without an
official replacement or alternative tender.
Envelopes labeled “ALTERNATIVE” are opened and the
alternative request read in public. The alternative request will be
deemed invalid if it was not enclosed with the required authorization
letter and signed by the bidder or official authorized to sign on behalf
of the bidder. It is unauthorized to make any modifications to the
bids without an official replacement or alternative tender.
Envelopes labeled “ORIGINAL” are opened and read last in public.
It is unauthorized to make any modifications to original bids without
an official replacement or alternative tender submitted by the tender
solicitation deadline.
Tenders without a bank guarantee or those with incorrect ID values
will be rejected. Bank guarantees must be supported by original
documents. Copies of the documents are unacceptable and the tender
will be rejected as not meeting the tender solicitation requirements
and no further consideration will be given.
Tenders without an appropriately signed Tender Submission
Agreement will be rejected since the bidder has not agreed to the
terms of the solicitation and given no further consideration.
Only tender envelopes which were opened, recorded, and read during
the Public Tender Opening Ceremony will be allowed to enter the
competition for the tender solicitation award.
Bidders wanting to inquire about the status of their bid should
address the buyer in writing during the period following the public
opening of the tenders until the date of the award of the tender
solicitation.
Bank Guarantee
All tenders must include a bank guarantee, valued in ID, in the amount
that is stipulated in the solicitation instructions. The bond may be in the
form of a bank guarantee or Letter of Credit issued by an authorized
banking institution. If the lowest tender submitted does not contain a
guarantee, the Chair of the Public Tender Opening Committee may or may
not choose to accept it. Chapter XII, Tender Preparation for Bidders,
Paragraph D – Bank Guarantees provides a sample Bidder Bank
Guarantee format.
J.
Tender Analysis and Evaluation
The process of tender analysis and evaluation must be confidential and the final
report and referral submitted only to the authorized contract awarding entity
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during the period specified by the chief of the buyer’s contracting entity with
consideration to the tender’s validity period.
Sending tenders outside Iraq for analysis is normally not permitted. Instead,
foreign consultants may send their representatives to Iraq to conduct the
required analysis, the exception being where the nature of the work requires
outside analysis intervention or the analysis cannot be conducted in Iraq.
Analysis outside Iraq requires extensive approvals as stipulated in Article 7,
Fourth Section, of the Instructions for Government Contract Execution – 2008.
Price negotiations with a bidder are not allowed except in the Sole Bid Method,
when the submitted tender amount is higher than the estimated cost allocated
for the contract.
The Analysis and Evaluation Committee may complete technical data required
from candidates and correct mistakes if any without adding or completing any
data that affects submitted prices by bidders.
Disagreements which may occur among the Committee members should be
included in their final report.
1.
Tender Analysis and Evaluation Committee
Article 7 of the Instructions for Governmental Contract Execution – 2008,
lays out the roles and responsibilities of the Tender Analysis and
Evaluation Committee. It requires that the Committee must be formed by
each buyer contracting entity. The purpose of the Committee is to analyze
and evaluate the eligibility, technical, financial, and legal components of
each tender submitted by the bidders and accepted at the Public Tender
Opening Ceremony.
The Tender Analysis and Evaluation Committee is chaired by an
experienced employee from the buyer’s organization, with the title of
manager, chief engineer or higher. Committee members are comprised of
those specializing in legal and financial fields.
The Committee may seek additional assistance from other specialized
experts with experience related to the needs of the tender. Approval for
additional technical expertise must be authorized by the chief of the
buyer’s contracting office and be in alignment with the financial
limitations of the budget.
2.
Tender Analysis and Evaluation Criteria
Following the Public Tender Opening Ceremony, the Tender Analysis and
Evaluation Committee meets to begin the work of verifying the eligibility,
validity, financial soundness, legal authority, and technical components of
each bidder and the tender they submitted. It is easy to imagine that this
is not only a time consuming process but a critically important element of
the tender solicitation process. Sound judgment and expert technical
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knowledge of the specifications of the solicitation are paramount in
evaluating the fitness of each tender and the bidder’s ability to meet the
deliverables. Failure to evaluate each tender comprehensively could result
in highly qualified bidders being excluded and/or sub-standard bidders
being awarded contracts. Either of those results is unacceptable and could
bring costly consequences. Examples of assessment forms are included in
MoPDC guiding regulation, Part 8 – Standard Tender Assessment Forms.
Any attempt by a bidder to influence the buyer’s decision during the
analysis and evaluation phase in an effort to win the tender solicitation
unfairly will be subject to disqualification from the competition.
Below is a summary checklist of elements that should be applied to the
assessment of the tenders:
a)
b)
c)
d)
e)
f)
3.
Evaluate the skills and abilities of the bidder to meet the technical
specifications of the solicitation with regard to historical performance,
professional certificates, and seasoned staff.
Research claims of prior successful implementation of other State
contracts.
Analyze the financial stability and soundness of the bidder, based on
the certifications of their final accounts from a licensed, qualified
accountant as required in tender solicitation documents.
Evaluate the other commitments of the bidder covering the period of
implementation of this current project and form an opinion as to
whether the bidder can deliver this contract.
Determine from the accompanying documentation, whether the
bidder is competent and legally eligible to compete for State
contracts.
Verify that the tender is a valid offer by identifying that all required
documents, stipulated in the solicitation, are included in the tender
submission, are completed properly, and are signed by the bidder or
authorized representative.
Required Tender Submission Documentation
The tender solicitation describes in detail all the required supporting
documentation that should accompany the tender submission from the
bidder. It is the responsibility of the bidder to ensure that all required
documents are included with the tender submission and are prepared
according to the tender solicitation instructions. Tender submissions found
without the required supporting documents or those incorrectly prepared
can be rejected, and the bidder not afforded the opportunity to correct the
mistake even though it was unintentional. As described in Chapter XI,
Paragraph I - Sub-paragraph – 2 of this manual, tenders cannot be opened
or analyzed prior to the Public Tender Opening Ceremony. Submission of
tenders and other supporting documentation is prohibited following the
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closing deadline of the tender solicitation. The Committee looks for the
following:
a)
b)
c)
d)
e)
f)
4.
Bidder eligibility documentation such as business license
Solicitation Bank Guarantee - ID and accurate amount
Project implementation plan and deliverable schedule
List of Goods and Delivery Schedule – Column H
Price and Quantity Tables
Tender prices were calculated on a uniform basis as indicated in the
solicitation
Finalizing the Tender Selection
Following the analysis and evaluation of the tender submissions, the
Tender Analysis and Evaluation Committee compiles a detailed table that
lists all tender submissions and associated related details. This table is used
in the final comparison and evaluation of the technical, financial, and legal
components of all tender submission.
Minutes from the Committee meetings should include a special field that
shows the final recommendations of the Committee, the names and
nationalities of the top three nominated bidders for award referral, the
accepted tender price and currency, and the project implementation period.
The Committee’s recommendations should show that the accepted tender
price is within the limits of the estimated project cost. Minutes must be
dated and signed by the Committee chairman and members.
5.
Tender Referral and Award
The Tender Analysis and Evaluation Committee submit their referral
recommendations to the chief of the buyer’s contracting office who will
determine the award according to its contracting authority and parameters
of the tender solicitation.
If the decision regarding the award is outside the authority of the buyer’s
contracting office, then the contract will be awarded by the Central
Contracts Committee in the General Secretary’s Office of CoM. The
decision of the Central Contracts Committee is required within 14 days and
approval is considered obtained after that period if no answer is given.
Award decisions are considered valid from the buyer’s contracting office’s
authorization date. The contracting office informs the winning bidder of
the award and a binding contract must be signed within 14 days of the date
of award decision. All those who submitted tenders for consideration
should also be informed of the award decision.
If the winning bidder refuses to sign a binding contract within 14 days of
the award notification, the buyer can take legal action as prescribed in
Article 16 of the Instructions for Government Contract Execution – 2008.
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With regard to the bank guarantees of bidders not selected or who are not
expected to be awarded the tender solicitation, the buyer’s contracting
office can release those guarantees upon written request from the bidders,
prior to the end of the bidding process, and after receiving the Committee’s
referral recommendation. Release of the bank guarantees requires the
signature of the relevant minister or governor. Without exception, bank
guarantees of the top three bidders nominated in the referral cannot be
released until the final contract is signed.
6.
Tender Assessment Report
The Tender Analysis and Evaluation Committee members are required to
prepare and submit a Tender Assessment Report. The report would
contain the following elements:
a)
b)
c)
d)
e)
f)
g)
Tender Analysis and Evaluation Committee meeting minutes;
Findings pertaining to the financial, technical, and legal evaluation of
each tender;
Justification and explanation if the lowest tender is not chosen;
Copies of correspondence between the Committee and bidders;
Explanation of differences between original and amended tender
prices;
Justification for excluding tenders from consideration; and
An Acceptance Letter prepared for signature of the minister or other
authorized official to be delivered to the winning bidder.
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XII. Tender Preparation for Bidders
The process for bidders who want to compete for public works contracts is described
in a number of MoPDC publications. Part 1, Tender Procedures, of the Unified
Tender Instructions describes the tender solicitation and submission process. It lists
the requirements that the bidder must meet to be deemed qualified to submit tenders
for competition.
Preparing tender submissions involves more than preparing a price list and hoping
that it is the lowest bid. Bidders must prove eligibility which requires submitting
official documents substantiating valid business registration and nationality if a
foreign bidder. The bidder must show positive historical performance with the work
being solicited. Poor performance on past public works contracts will likely disqualify
the bidder. Financial soundness and potential to meet the demands of the deliverable
schedule will be heavily evaluated. Many factors are considered by the analysis and
evaluation committees prior to awarding the contract and so it important that the
bidder submits the best bid possible that contains all the required documents which
will hopefully distinguish that bid from all the others.
A. Bidder Information and Eligibility
Being eligible to bid on public works contracts is obviously the most important
factor at the onset of the bidding process. If a bidder is found ineligible to
compete, then the quality of the bid or the depth of the technical expertise the
bidder brings to the table is irrelevant. The tender would be rejected without
review. Instructions to bidders with sample forms can be found in the
MoPDC’s, Unified Tender Instructions, Part 1 - Chapter 4 - Section 1. Below is
the information and eligibility form that bidders complete, attaches the
certifying documentation such as a copy of the business registration, and
submits with the other tender documentation requested in the tender
solicitation.
Bidder Information
Date: Date of the Delivery of Tender __________________ (Day/Month/Year)
Reference Number of the National Competitive Bid: _____________________________
1. Legal name of the bidder:
2. If the bidder is a joint project, the legal name of each partner:
3. Country where the bidder is registered or which intends to register:
4. Registration year of the bidder:
5. Full official address of the bidder - Country of Registration:
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6. Telephone, FAX, and Email of the bidder:
Telephone: (with city code)
FAX: (with city code)
Email address:
7. Authorized representative of the bidder (if applicable):
Full Name:
Full Address:
Telephone: (with city code)
FAX: (with city code)
email address:
8. Indicate enclosed copies of the original documents:
Any registration items or documents showing the Memorandum of Association of the Company stated
in Line 1 above, according to Part 1, Chapter 1, Paragraphs 4.1 and 4.2 of MoPDC - Unified Tender
Instructions.
The bidder is a joint project and enclosed is a letter explaining the intention to establish a joint project
or conduct a joint venture, as per the Part 1, Chapter 1, Paragraph 4.1 of MoPDC - Unified Tender
Instructions.
The bidder is a public institution owned by the Government of Iraq. Enclosed are documents proving
the legal and the financial independency of the institution and compliance with the Commercial Law,
pursuant to the Part 1, Chapter 1, Paragraph 4.4 of MoPDC - Unified Tender Instructions.
Bidders may be of any nationality unless otherwise stipulated in Iraqi law. All
domestic bidders, both private industry and public, are subject to Iraqi
contracting laws. Foreign bidders are likewise subject to Iraqi commerce and
contracting laws as well as the applicable laws of their own country. Foreign
bidders should also have an established working office or agent in Iraq in order
to provide confidence that they can meet the deliverables according to the
specifications in the tender solicitation and the conditions of the contract.
The eligibility criteria listed below applies to all bidders, sub-contractors or
suppliers for any part of the contract, including the related services.
a)
b)
A bidder cannot cause or participate in any conflicts of interest.
Those found involved in any conflicts of interest, will be disqualified
and excluded from the bidding process.
A bidder cannot participate in business relationships with companies
or their affiliates which provide design specification consulting
services to the buyer. This includes preparation of any other
documents which will be used to identify the works, supplies, or goods
and services that will be listed on the tender solicitation document;
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c)
d)
e)
f)
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The bidder can submit only one tender for the same tender
solicitation, with the exception of alternative tenders, as stated in
Part 3 - Unified Tender Instructions, Chapter 1, Section C, Paragraph
13. This condition does not apply to sub-contractors who can take
part in more than one tender solicitation.
Bidders who are suspended by the MoPDC Legal Department will be
excluded from competing.
Public Companies, owned by the GoI, are eligible to take part in the
tender solicitation, provided that it is financially and legally
independent, it works under the Trade Law, and is not owned by the
buyer.
International firms must be registered with the Ministry of Trade.
However, there is no prohibition against qualified contractors, both
Iraqi and international, using unregistered sub-contracting firms.
B. Bidder Tender Content
The bidder’s tender and the related documents must be in either the Arabic or
Kurdish language, as stipulated in the solicitation documents. Supporting
documents can be submitted in alternative languages but must be accompanied
by a translation. The bidder is responsible for providing the translation.
Evaluation of the bid will be based on the translated version of the document.
Tender submission requirements vary according to the nature and technical
specifications of the public works. The tender solicitation will spell out, in detail,
what documents are required and provide specific forms or formats for the
presentation of data. All required forms must be fully completed and without
modification to the standard forms provided. Excluding requested information
or failure to complete the forms totally or accurately could lead to
disqualification due to non-compliance with the instructions in the tender
solicitation.
Below is a summary list of standard tender submission components that could
be expected on a typical public tender solicitation. The list is comprehensive but
by no means all inclusive, and the tender solicitation must be referred to as the
official document and followed accordingly.
1.
Table of Requirements
The buyer must include the forms in the Table of Requirements in the tender
solicitation documents. These tables provide descriptions and estimates of the
materials and supplies needed to build the project enabling the bidders to
prepare their offers in accurate and uniform manner. Samples of the following
forms can be found in Part 3 – Unified Tender Documents. The Table of
Requirements includes the following forms:
a)
b)
List of Goods and Delivery Schedule (column H completed by the bidder)
List of Related Services Schedule
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c)
d)
e)
2.
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Technical Specifications Table
Layouts and Drawings Table
Testing and Evaluations Table
Tender Prices and Discounts
Prices are calculated in ID, and should include applicable taxes and fees.
Prices, quantity, and materials are listed separately on standard price list
tables found in the Unified Tender Instructions Part 1, Chapter 4. The
bidder completes the form(s) Price List - Goods and/or Price List – Related
Services, depending on the instructions in the tender solicitation.
Prices submitted with the tender will be considered the total price for the
entire bid, excluding discounts offered by the bidder. The bidder lists
discounts separately, conditional and unconditional, and explains the
terms and how those discounts will be applied. The prices are fixed once
the contract is signed and cannot be modified.
3.
Tender Validity Period
The prices, discounts, and terms of the offer in the tender submission
package must have a validity period stated in the tender documents. The
validity period or tender expiration date of the tender should extend
sufficiently past the solicitation closing date in order to provide for the
lengthy process of awarding the contract. Tenders with short validity
periods run the risk of being rejected.
In exceptional circumstances, the buyer can request, in writing, to extend
the term of the validity period originally submitted with tender
documents. If the extension is accepted, then the bidder’s bank guarantee
must also be extended.
4.
Tender Delivery
Tender submission delivery instructions and format are discussed in
Chapter XI, Tender Solicitations, Paragraph H, of this document. Specific
instructions for tender submission will be found in the tender solicitation.
Adherence to tender submission deadlines and delivery locations is critical
to competing for the contract. Exceptions will not be granted for late
tender submissions or delivering the tender to the wrong place or office. It
is the responsibility of the bidder to make sure their tender documents are
comprehensive, complete, meet the submission deadline, and are delivered
to the correct location.
5.
Tender Modifications, Replacement and Cancellation
The bidder can modify, replace, and cancel the tender originally submitted,
prior to the solicitation closing date. Delivery and format instructions for
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modifications, replacements, and cancellations are discussed in Chapter XI,
Tender Solicitations, Paragraph H, of this document.
6.
Materials and Services Compliance
Required or expected standards for building materials and related services
will be stipulated in the tender solicitation. Building and safety
compliance will be according to Iraqi laws which govern those standards.
The bidder should include documentation which certifies or explains how
the materials and services comply with the technical and performance
standards as specified in the solicitation.
C. Bidder Tender Submission Agreement
A tender submission is a combination of all the components which constitute the
offer from the buyer. By submitting a tender, the buyer agrees to the terms of
the tender solicitation. Careful consideration must be given by the bidder prior
to submitting an offer since the terms of the tender solicitation agreement are
binding. Should the bidder fail to meet those terms, forfeiture of the bidder’s
bank guarantee is likely as well as whatever other legal action the buyer chooses
to take according to Iraqi law.
Below is the Tender Submission Agreement that must be included as a
coversheet with the bidder’s offer. This is the binding agreement between the
bidder and buyer regarding the solicitation instructions to bidders. All tender
submissions must contain this agreement signed by the bidder or the bidder’s
authorized representative. Excluding the Tender Submission Agreement will
result in the bidder’s tender being rejected at the Public Tender Opening
Ceremony.
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Sample Bidder Tender Submission Agreement
Tender Delivery Date _______________________ (day, month, and year)
Tender Deadline Date _______________________ (day, month, and year)
National Competitive Bid Reference Number: _________________________
National Competitive Bid Invitation to Bid Number: ___________________
Alternative Reference Number: (if applicable) _________________________
To: (Buyer’s Full Name)
WE, THE UNDERSIGNED, HEREBY ACKNOWLEDGE THAT:
a- We have examined this tender solicitation documentation and we have no
reservations regarding any of its parts, including the numbered and dated appendixes
listed below:
(Write the number and date of issuance of each appendix.)
b- We would like to make our offer for the supply of public works and/or goods and
related services as per the documentation of the tender solicitation and the Table of
Delivery stated in the List of Requirements.
(Write a brief description of the goods and their related services.)
c- The total price of our offer, without the discounts stated in Paragraph (d) below, is:
(Total price in number figure and in writing)
d- The offered discounts and the method of applying them is as follows:
1. Discounts: If our tender is accepted, the following discounts will be applied:
(Explain in detail each discount and on which items of the required goods it will be
applied.)
2. Method of Application: The discounts will be applied by the following method:
(Write in detail the method that will be adopted in the application of the discounts.)
e- The price of our tender will not expire for the term of the solicitation, beginning from
the closing date of the solicitation until ___________ (day, month, and year). I
understand this is compulsory and that my tender will be accepted at any time prior
to the date of expiration.
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f- If our tender is accepted, we abide by the submission of a Performance Bond within
28 days of notification of the award and receipt of the Letter of Acceptance.
g- There is no conflict of interests. We have no business relationships with companies or
their affiliates, which provide design specification consulting services for this
solicitation.
h- We have submitted only one offer for this tender solicitation.
i- Our company, or any of our branches or affiliates, including the sub-contractors or
suppliers to any part of this contract, have not lost their eligibility by being
suspended or barred by the Government of Iraq from competing on any public works
contracts.
j- The following fees and commissions were paid to fulfill the tender solicitation
requirements:
(Complete the table below with the full names and addresses of the persons or office which
received these fees and commissions. State the purpose, the amount paid and the currency.)
If no payments were made, write “NONE”.
Name
Address
Purpose
Amount
k- We realize that you are not bound to select the lowest value tender submitted for the
announced solicitation and that you are not bound to select any other tender you
receive.
Bidders Signature: ___________________________________________________
Bidders Position: ____________________________________________________
Bidders Full Name: __________________________________________________
Date: _______________________________ (day, month, and year)
(Complete only if the bidder is not present)
Bidder’s Authorized Representative Signature: ___________________________
Bidder’s Authorized Representative Position: ____________________________
Bidder’s Authorized Representative Full Name: __________________________
Date: _______________________________ (day, month, and year)
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D. Bidder Bank Guarantee
A bank guarantee is normally required from bidders for public works contracts.
The tender solicitation will indicate whether a bank guarantee is required and
the expected amount in ID. Failure to include a bank guarantee with the tender
submission as instructed by the tender solicitation will result in the bidder’s
tender being rejected and no further consideration given. A sample bank
guarantee form can be found below in this document in the Unified Tender
Instructions, Chapter 4. Other forms of bank guarantees are acceptable.
1.
Bank Guarantee Content
The guarantee must be issued by an authorized banking institution and is
not limited to domestic banks. Foreign banks issuing guarantees must
have a branch office in Iraq in order to activate the guarantee. Only
original banking documentation is acceptable.
2.
Bank Guarantee Validity Period
The validity period of the guarantee should extend at least 28 days
following the solicitation closing date. After the solicitation closing period,
the bidder can request, in writing to the buyer, to extend the validity
period of the bank guarantee and provide original documentation from the
banking institution verifying the extension.
3.
Bank Guarantee Confiscation
The bank guarantee of a bidder can be confiscated if the bidder is deemed
in breach of the tender solicitation. The bidder is considered in breach of
the solicitation by failing to sign and return to the buyer the contract and
special conditions within 48 days after receiving the Acceptance Letter. In
doing so, the bidder forfeits the bank guarantee.
4.
Bank Guarantee Release
Bank guarantees will be returned to the bidders who were not awarded the
solicitation as soon as possible following the award decision. Guarantees for
the top three bidders will be held until the final contract is signed by the
bidder who was awarded the solicitation.
Guarantees can be released prior to the solicitation award if a bidder is not
expected to be awarded the solicitation, and makes a request for the release
in writing to the buyer and the banking institution.
Below is a format example of a bank guarantee that must be completed and
issued by the bank. Guarantees are not confined to this format but should
include many of these elements. The issuing bank may impose additional
information or stipulations which must be included on the form.
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Sample Bidder Bank Guarantee Format
Bank Name: ________________________________________
Bank Address: _______________________________________
Bank Branch: ________________________________________
Bank Issuing Office: ___________________________________
Beneficiary: (Buyer full name and address)
Date: ___________________________ (day, month, and year)
Guarantee for Reference Number: ____________________________________
(Tender Solicitation Reference Number)
We have been informed that, (bidder’s full name), who shall be referred to as “the bidder”
has delivered the offer, which shall be referred to as “the tender” on ________________
(day, month, and year) to execute (name of the project) for the beneficiary, who shall be
known as “the buyer”.
We fully understand your conditions and that tenders should be supported by bank
guarantees.
At the request of the buyer, the staff of (full name of the bank) commit ourselves under this
document to pay any amount that does not exceed in total of (amount in figures) (amount in
words) Iraqi Dinar, immediately upon receiving your first written payment request order.
One or more the following conditions must be met, which indicates the bidder has breached
the agreed obligation(s) under the conditions of the tender solicitation.
1. The bank guarantee will be paid to the buyer if:
A) The bidder cancels the tender submission after the tender solicitation closing period
without justification.
B) The bidder was awarded the tender solicitation, received a Letter of Acceptance but
failed or refused to sign the contract within 15 days of receiving the Letter of Acceptance.
C) The bidder was awarded the tender solicitation, received a Letter of Acceptance but
failed or refused to provide the required Performance Bond as stipulated in the
solicitation instructions.
2. The bank guarantee will be considered expired and payment to the buyer will be
unauthorized after the following condition is met by the bidder.
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The bank guarantee will not be paid to the buyer if:
A) If the bidder won the Tender Solicitation, provided a performance bond, and signed
the contract with the buyer within 15 days of receiving the Letter of Acceptance.
3. Under the terms of the tender solicitation and Iraqi law, the bank guarantee can be
released to the bidder under the following conditions.
The bank guarantee will be released to the bidder if:
A) The bidder failed to win the tender solicitation and supplies the notice from the
buyer authorizing release of the guarantee.
B) The bidder cancels the tender submission before the closing date of the tender
solicitation, and supplies a notice from the buyer authorizing release of the guarantee.
C) If the bidder cancels the tender submission after the tender closing date, but the
buyer agrees to release the bank guarantee because the bidder is unlikely to be in the
top three contenders. The bidder must provide the notice from the buyer authorizing
release of the guarantee.
D) The bidder’s tender submission validity period has expired and 28 days have passed
since the expiration.
This Bank Guarantee is governed by the Unified Laws for the Request of Guarantees,
duly issued by the International Chamber of Commerce, Number 458.
Signature – Authorized Bank Official ____________________________________
Signature – Authorized Bidder Signature _________________________________
Date ________________________________________ (day, month, and year)
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E. Bidder Performance Bond
Following the award of the tender solicitation, the contractor is required to
produce a contract performance bond in the value of ID as stipulated in the
tender solicitation within 28 days following the receipt of the Letter of
Acceptance. As with bank guarantees, performance bonds must be issued by an
authorized banking institution and is not limited to domestic banks. Foreign
banks issuing performance bonds must have a branch office in Iraq in order to
activate the bond. Only original banking documentation is acceptable.
Failure or refusal to provide the performance bond will result in contract
disqualification and forfeit of the bidder’s bank guarantee provided with the
tender submission.
Below is a format example of a performance bond that must be completed and
issued by the bank. Other formats are acceptable but should include many of
these elements. There may be additional information or stipulations as imposed
by the issuing bank.
Sample Bidder Performance Bond Format
Bank Name: _______________________________________
Bank Address: ______________________________________
Bank Branch: ______________________________________
Bank Issuing Office: _________________________________
Beneficiary: ________________________________________ (Buyer full name and address)
Date: ___________________________ (day, month, and year)
Performance Bond Number: ___________________________
We have been informed that, (contractor’s full name), who shall be referred to as “the
contractor” has agreed to the terms of contract number ____________ (number on the
contract), to supply ______________________ (description of works or goods and services),
which shall be referred to as “the contract” on ________________ (day, month, and year) to
execute (name of the project) for the beneficiary, who shall be known as “the buyer”.
We fully understand, per contract conditions, that contracts should be supported by
performance bonds.
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At the request of the buyer, the staff of (full name of the bank) commit ourselves under this
document to pay any amount that does not exceed in total of (amount in figures) (amount in
words) Iraqi Dinar, immediately upon receiving your first written payment request order
indicating that the supplier breached the obligation(s) under the contract need not to prove
or clarify the reason for your request.
This performance bond shall expire not before ________________ (day, month, and year),
and any request to pay under this bond, must be received in this office on that date or
before.
This performance bond is governed by the Unified Laws for the Request of Guarantees,
duly issued by the International Chamber of Commerce, Number 458.
Signature – Authorized Bank Official ____________________________________
Signature – Authorized Bidder Signature _________________________________
Date ________________________________________ (day, month, and year)
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XIII. Project Turnover and Final Acceptance
Investment projects are planned, designed, and constructed with an expectation of
years of quality use. The spending unit that will operate the facility should have an
Operating Representative on the Project Team to be included in all investment
project phases. The purpose of this section is to suggest ways to make the
construction completion and turnover of the facility go as smoothly as possible.
A.
Project Turnover
It is important that the spending unit’s Operations Representative be fully
involved in the construction phase.
Their active participation in the
construction phase will include frequent meetings with the Project Manager and
construction team for updates on progress, problems, and proposed change
orders.
A well designed project should have minimal changes during
construction but even the best planning cannot prepare for all possible events
that can impact outcome. Changes should be kept to a minimum but certainly
anticipated.
1.
Operations Representative
The Operations Representative (OR) is the link between the investment
Project Team (planners, designers, and project manager) and the facility’s
operating staff and should be selected from the facility’s operational staff.
The OR is the voice of the operating staff to the investment Project Team
concerning the facility’s functions and operations. The OR should be
experienced in operating the type of facility being constructed and possess
excellent communication skills. It is imperative that the OR be adept at
handling highly stressful situations and the human interaction and
reactions associated with those situations.
As the communications conduit for sharing information between the
teams, the OR should use several communication channels such as staff
meetings, newsletters, posters or flyers to share facility information
regularly and minimize rumors.
2.
Turnover Team
A Turnover Team is likewise assembled from facility staff who will be
occupying the new facility. The OR is the Team Leader of the Turnover
Team. The Turnover Team has a variety of duties and the size of the team
will vary with each facility and the skills of the team members.
The basic duties of the Turnover Team include:
a)
b)
Identify the training needed to operate and maintain the new facility
and its equipment;
Schedule training sessions and arrange for staff participation;
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c)
d)
e)
f)
g)
h)
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Arrange the physical move of the staff, files, and utilities for the new
facility;
Manage administrative requirements for the new facility by alerting
clients to the changes, printing business cards and stationary with
new contact information;
Document the maintenance schedule and all warranties;
For O&M budget purposes, estimate annual cost to operate and
maintain the facility and provide the estimate to the financial officer;
Identify and document deficiencies in the facility, before final
acceptance; and
Plan and implement an opening celebration for the facility.
The timing of the Turnover Team’s appointment depends on the number of
operational staff to be trained, the complexity of the training, and the
complexity of the move. It is important to appoint and train the Turnover
Team staff as far in advance as possible to increase the chances of a timely
and efficient turnover.
B. Preliminary Acceptance
Upon completion of the contract, a Preliminary Acceptance Certificate (PAC)
and 10% contractual payment can be paid but the payment cannot cause the
total payments on the contract to exceed 75% of the contract value. The
spending unit preliminarily accepts the project contingent upon the final results
of the operating period which is normally considered one year. During the
preliminary acceptance period the contractor is required to repair, replace, or
modify any defects in the construction according to the contract terms.
C. Final Acceptance
The Final Acceptance Certificate (FAC) and the final 25% payment is made
normally one year after PAC payment or as otherwise stated in the contract.
Following the preliminary acceptance operating period, the performance of the
project is evaluated to verify that it has met the standards according to the
contract. The contractor must complete all required modifications to the project
identified in the preliminary acceptance operations period before the final
payment will be issued. The final payment may be issued earlier if a bond worth
25% of the contract value is obtained by the contractor. This payment cannot
be made until the contractor has paid all required taxes.
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XIV. Audit and Evaluation
Audits and evaluations vary in type and are conducted both during and after
completion of an investment project. Audits are conducted to assure
accountability and transparency in the use of public funds. Evaluations are
conducted to assure the project is constructed as agreed by the contract in the
most efficient and effective methods.
A. Audit Legislation
The legal basis of audits includes the following documents:
1.
2.
3.
4.
Constitution of Iraq - 2005
Board of Supreme Audit Law No. 6 - 1990
CPA Order 77 – Board of Supreme Audit - 2004
CPA Order 55 – Delegation of Authority of the Iraq Commission on Public
Integrity – 2004
B. Audit Institutions
1.
Board of Supreme Audit
The Board of Supreme Audit institution (BSA) was established by the
Board of Supreme Audit Law, No. 6 of 1990.
CPA Order 77 – Board of Supreme Audit - 2004 affirmed the existence of
the BSA as an independent public institution that is needed to provide the
public and government with objective, accurate information about
government operations and financial conditions. The BSA is tasked with
carrying out a broad range of financial and performance audits and
program evaluations.
According to CPA Order 77 – Board of Supreme Audit – 2004, the BSA:
a)
b)
c)
d)
e)
f)
Is empowered to enhance the economy, efficiency, effectiveness, and
credibility of the Iraqi government
Will work in conjunction with the Commission on Public Integrity
and Inspectors General
Ensures that the Iraqi government remains honest, transparent, and
accountable to the people of Iraq
Promulgates accounting and auditing standards and regulations
Detects through audits and performance evaluations evidence of
corruption, fraud, waste, abuse, and inefficiency in matters related to
the receipt, disbursement, and use of public funds
Refers all allegations or evidence of corruption and inefficiency to the
Inspector General of the relevant ministry or to the Commission on
Public Integrity, where appropriate
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The Constitution of Iraq- 2005, Chapter 4, Article 103, officially recognized
and further affirmed the BSA as a financially and administratively
independent institution which reports to the CoR.
2.
Inspectors General
Internal auditors are responsible for audits within their assigned ministries.
Inspectors General (IG) have the full and unrestricted access to all offices
within their ministry. They have the authority to subpoena witnesses and
compel the production of documents. In addition, they also have the
authority to require employees to report fraud, waste, and abuse. The IG
is an Internal Auditor Representative and Economic Directorate
Representative member.
Their responsibilities include:
a)
b)
c)
d)
3.
Auditing all records and activities within their respective ministries
Auditing samples of signed contracts through field visits to various
ministry locations.
Audit all imported tenders
Audit local tenders that exceed 500 million ID
Commission on Public Integrity
The Commission of Public Integrity (CPI) was created by CPA Order 55 2004 – Delegation of Authority Regarding the Iraq Commission on Public
Integrity to promote the rule of law and the message that no one is above
the law. As an independent unit dedicated to preventing and investigating
cases of corruption on all levels of the government, it has the power to
function as a court investigator and to initiate criminal proceedings. Its
establishment was in recognition of the fact that effective government
depends on the confidence the public has in their leaders, and that
corruption undermines that confidence, reduces investment and foreign
aid, contributes to organized crime, and impairs the development of a free
and prosperous society.
Chapter 4, Article 102 of the Constitution of Iraq - 2005 further established
the CPI which is subject to monitoring by the CoR. The CPI is responsible
for investigating corruption on all levels of government through its own
mandated investigations as well as those referred to it by the BSA, IGs,
other independent commissions, and the public.
C. Types of Audits
An audit is a methodical examination and review, and can occur during all
phases of the investment project process. Many documents will be produced
during the planning, procuring, designing and execution of an investment
project. The processes and the procedures which are used must be documented,
and those documents retained for audit. Construction, financial and compliance
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audits will be discussed in this section, as well as the documentation needed for
an audit. An audit is performed each time progress payments are made to the
contractor throughout the life of the contract. A final audit occurs after the
project has been completed and before final payments are made to the
contractor.
Accurately document the implementation of a project clearly.
Poor
recordkeeping can lead to confusion regarding contractor payments as well as
facilitate fraud, waste, and abuse. An accurate and controlled filing system is
needed which will be the official historical document repository for the project.
This will provide evidence that all procedures and processes were implemented
as legally required. It is far easier and more efficient to save and organize the
documents during the project than to try to recreate them after a project has
been completed. The majority of the documents for the financial audit will be in
the accounting files and accounting system.
1.
Construction Audit
A Construction Audit is conducted to assess if the contract requirements
are being met, before each payment to the contractor is approved. This
review will normally be conducted by the PM, although a separate
arrangement may be made for some projects.
The construction audit verifies and documents whether the project is on
schedule, on budget, the specified material has been used, and the specified
equipment has been installed and any other requirements in the contract.
A payment document is signed by both the contractor and the PM agreeing
that all the contract requirements have been met for each payment. This
document is forwarded to the buyer’s financial officer for payment.
Every construction contract includes contractual requirements, which the
contractor agreed to meet. Some of the basic requirements include a
project schedule and budget, construction materials, ensuring that
materials are used in the correct way, equipment is installed, and a
payment schedule.
There can be additional contractual requirements beyond these basic
requirements. The construction contract payment schedule defines how
over the course of the facility construction payments are to be made. It
defines the schedule and the work to be completed, before the contractor
will be paid a percentage of the total contract award.
2.
Compliance Audit
A Compliance Audit verifies that procurement and contracting procedures
were carried out in accordance with the Instructions for Government
Contract Execution - 2008 as issued by the MoPDC. This is done to assure
that the contact procedures were transparent and the competition was fair.
GoI Federal Budget Process – Investment Budget
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
3.
84
The appropriate type of procurement action was used for the
contract. (Article 4)
Solicitation announcements for bids were done correctly. (Article 5)
The contract was completed on time, or if an extension was required
that it was handled correctly. (Article 13)
Bank Guarantees and Performance bonds were handled properly,
which included all the financial provisions related to the supply
process and other conditions agreed to by both parties to the
contract. (Article 9 and Article 15)
If applicable, contract disputes were resolved according to the
regulations. (Article 10)
The appropriate procurement office executed the contract procedures
in accordance with the law. (Article 11)
The contracting information was kept confidential. (Article 12)
The Public Tender Opening Committee and the Tender Analysis and
Evaluation Committee were correctly formed and performed its
duties in opening and analyzing the tenders. (Article 6 and 7)
The contracting preparation procedures were correctly followed
according to the General Contract Conditions. (Article 8)
The contractual plans were coordinated with the Office of
Government Public Contract Policy within the MoPDC and that of
the Instructions on the Implementation of the General Federal
Budget issued by the MoF. (Article 20 ad 21)
Changes were not made to the contract, which increased its costs
without the appropriate approvals. (Article 14)
Financial Audit
A Financial Audit verifies that funds were used for the purpose for which
they were appropriated or intended. The guiding documents in this audit
are the annual Instructions for Implementation of the General Federal
Budget of 2008 as issued by the Budget Directorate of the MoF and the
annual General Federal Budget Law.
a)
b)
c)
d)
Funds allocated for capital projects were used as authorized and not
used for operational expenditures
Land purchased for the project followed the appropriate procedures
Expenditures for the investment project followed the appropriate
procedures
Internal controls for transactions related to receipts, commitments
and payments were in accordance with the MoF requirements
D. Types of Evaluations
Evaluations are the process of determining whether an item or activity meets
specified criteria. It assesses the effectiveness of the activity and whether or not
it met the expected objectives. Essentially, evaluating the contractor’s
GoI Federal Budget Process – Investment Budget
85
performance and resulting project is an effort to determine the level of success.
The results of the evaluation will influence whether the contractor can compete
for public contracts in the future.
Shortly after a project is completed, two types of evaluations are performed:
1.
•
Contractor Performance Evaluation
•
Project Evaluation
Contractor Performance Evaluation
A Contractor Performance Evaluation is conducted after each project is
finalized. The purpose is to evaluate the level of compliance and
performance by the contractor over the life of the contract. The evaluation
will identify good and bad performances alike with no emphasis on either
as a main objective.
a)
b)
c)
d)
e)
f)
g)
Standards and procedures compliance
Deliverables compliance
Deadlines compliance
Progress payment requests
Materials and workmanship compliance
Building and safety code compliance
Responsive to the directions of the project manager
This evaluation is submitted to the MoPDC and it will be used to
determine if the contractor met the conditions of the contract or should be
suspended from further work on government contracts due to poor
performance.
2.
Project Evaluation
Project Evaluation is conducted at two levels:
a)
Construction Evaluation and Inspection
A final review of the facility is conducted to identify construction
compliance and deficiencies.
Compliance and deficiencies are
sometimes only revealed after the facility is operational for a period of
time. This requires an operational period to pass before an accurate
final evaluation can be conducted.
A list of the deficiencies is provided by the operational staff to the
Project Manager and in turn submitted to the contractor for
resolution. All deficiencies must be resolved before the facility is
accepted and final payment made to the contractor.
b)
Final Acceptance Evaluation
After the facility has been accepted it is wise to compile a list of the
lessons learned during the process. The evaluation process is intended
GoI Federal Budget Process – Investment Budget
86
to document what did and did not work well in the project,
recommend methods for the future, recommend what to avoid, and
explain the reasons for these recommendations.
GoI Federal Budget Process – Investment Budget
XV. Acronyms
•
ARDP
Accelerated Reconstruction Development Program
•
BSA
Board of Supreme Audit
•
CBI
Central Bank of Iraq
•
CIF
Cost, Insurance, and Freight
•
CIP
Carriage and Insurance Paid
•
CG
Central Government
•
CoM
Council of Ministers
•
CoR
Council of Representatives
•
CPA
Coalition Provisional Authority
•
CPI
Commission on Public Integrity
•
CR
Continuing Resolution
•
DG
Director General
•
DoD
Department of Defense (US)
•
FAC
Final Acceptance Certificate
•
FoB
Free on Board
•
GoI
Government of Iraq
•
HCC
High Contracts Committee
•
ID
Iraq Dinars
•
IG
Inspector General
•
KRG
Kurdish Regional Government
87
GoI Federal Budget Process – Investment Budget
•
MoD
Ministry of Defense
•
MoE
Ministry of Education
•
MoF
Ministry of Finance
•
MoO
Ministry of Oil
•
MoT
Ministry of Trade
•
NDS
National Development Strategy
•
OGPCP
Office of Government Public Contract Policy
•
O&M
Operations and Maintenance
•
OR
Operating Representative
•
NGO
Non-Governmental Organization
•
PAC
Preliminary Acceptance Certificate
•
PC
Provincial Council
•
PDS
Provincial Development Strategy
•
PDP
Provincial Development Plan
•
PIC
Project Implementation Card
•
PM
Project Manager
•
PPL
Proposed Project Listing
•
PRT
Provincial Reconstruction Team
•
TBI
Trade Bank of Iraq
•
USD
United States Dollar
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GoI Federal Budget Process – Investment Budget
XVI. Annexes
A. CPA Order 71 – Local Governmental Powers – 2004
B. CPA Order 87 – Public Contracts – 2004
C. CPA Order 95 -Financial Management Law and Pubic Debt Law – 2004
D. Constitution of Iraq – 2005
E. Law of Governorates Not Incorporated into a Region – 2008
F.
General Federal Budget Law – 2008
G. Instructions for the Implementation of the General Federal Budget – 2008
H. Regulations for Implementing Governmental Contracts – 2007
I.
Instructions for Government Contract Execution – 2008
J.
Quick Start Contracting Guide – 2008
K. Part 1 - Direct Invitation – Purchase of Goods
L.
Part 2 – Direct Invitation – Minor Works
M. Part 3 – Unified Tender Instructions
N. Part 8 – Standard Tender Assessment Forms
89