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Annual Report 2002 : Operations
Portfolio management
In 2002, ADB continued to strengthen its ability to monitor and manage its loan and technical assistance portfolio. Improvements were made to ADB’s project performance reporting system—an automated, in-house reporting tool for monitoring ongoing loan projects—based on operational experiences gained in 2001. Work commenced on developing a similar performance reporting system for technical assistance projects. Revised Project Administration Instructions (PAIs) were issued to staff. These incorporate improvements in business processes and changes in the delegation of authority. To complement the revisions, an electronic question-and-answer facility was launched to assist staff with the PAIs. ADB’s portfolio reviews with governments were expanded in 2002, bringing to 17 the number of countries covered by this exercise. Portfolio reviews in several countries now include the participation of other major funding agencies, and are combined with the annual programming exercise. In association with the World Bank, country procurement assessment reviews were undertaken in nine countries to promote sound public procurement policies and practices. Harmonizing procurement: ADB worked toward harmonizing procurement policies and practices by hosting in October a meeting of the heads of procurement (HOP) of the multilateral development banks and public international financial institutions. This meeting confirmed the convergence of procurement policies and practices even as the group broadened its scope to cover anticorruption measures, antiterrorism, and electronic and environmentally responsible procurement. The HOP approved the master prequalification documents for the procurement of works, from which ADB drafted a standard prequalification document for discussion prior to final issuance in early 2003. The working group on the standardization of bidding documents sent to the HOP a first draft of master bidding documents for the procurement of works. Upon approval of the master documents, ADB will prepare its standard bidding document for the procurement of works. Project administration: A total of 89 new loans (85 public and 4 private sector) were approved in 2002. This brought the number of loans under administration to 555, comprising 476 loans in the public sector and 79 in the private sector. Of the 505 ongoing public sector loans, 434 were rated satisfactory (including 5 highly satisfactory) in terms of implementation progress and achievement of development objectives, while 57 loans were rated partly satisfactory and 14 loans were rated unsatisfactory. In 2002, 699 project administration missions, excluding private sector loan reviews, were fielded to assess project progress and discuss problems; improve portfolio performance; and strengthen the linkages between country and sector performance, including joint project reviews with the World Bank and other MDBs. Approximately 10,400 person-days (or an average of 25.5 person-days per project) were spent reviewing projects. ADB’s regional and resident missions continued to play an important role in project implementation, in accordance with ADB’s Resident Mission Policy. Major operational functions such as country programming, project processing, and portfolio management continued to be delegated to the missions. By the end of 2002, the administration of a total of 21 loans for 19 projects had been delegated to the resident missions in Bangladesh, Cambodia, India, Pakistan, Sri Lanka, Uzbekistan, and Viet Nam; and the regional mission for the South Pacific in Vanuatu. For more on the Resident Mission Policy, see http://www.adb.org/Documents/Policies/Resident_Mission/. Ninety-seven projects were completed during the year. Sixty-eight project completion reports were circulated in 2002, bringing to 1,057 the total number of reports prepared as of end-2002. For details, see Table 14 in the Statistical Annex. Contract awards: Contracts totaling $4.3 billion (excluding contracts for technical assistance projects) were awarded in 2002 by executing agencies in DMCs for engaging consulting services and procuring goods, related services, and civil works. Contract awards increased 69% over 2001, but this was still less than the annual projection due to contract awards slippages in a few borrowing countries. Consultancy contracts under loan projects totaled $125.2 million. For details, see tables 15–23 in the Statistical Annex. Loan disbursements: In 2002, loan disbursements of $4.2 billion achieved the projection for the year, and were higher than disbursements of $3.8 billion in 2001, mainly due to an increase in program loan disbursements. Of the total disbursements, $2.0 billion or 48% was for project loans, followed by program, sector, and private sector loans. For 2001 and 2002 disbursements by lending modality, see tables 8 and 15 in the Statistical Annex. Project implementation and administration seminars: ADB continued to conduct seminars in 2002 to help DMCs adapt to ADB’s current project implementation and administration policies, practices, and procedures. Eight seminars highlighted key aspects and specific features, including new developments, the use of consultants, and procurement and disbursement procedures. Each session lasted 2 weeks. Seven of the eight were in-country seminars held in Bangladesh, Cambodia, PRC, India, Indonesia, Mongolia, and Sri Lanka, attracting a total of 258 participants. A regional seminar for the Kyrgyz Republic and Tajikistan, attended by 40 participants, was held in Bishkek, Kyrgyz Republic. Another regional seminar was held at ADB headquarters where 47 DMC representatives and 4 observers participated. In addition, two project implementation seminars were held at ADB headquarters for ADB staff. ADB conducted five seminars for government and executing agency officials in 2002 to explain ADB’s procedures for recruiting consultants under loan projects. These seminars, attended by 156 participants, were held in Bangladesh, India, Lao PDR, Nepal, and Papua New Guinea. Five seminars for DMC consultants explained business opportunities with ADB and the procedures for consultants to register and express interest in assignments. These seminars were conducted in Bhutan, PRC, Nepal, Sri Lanka, and Viet Nam, with a total of 262 participants. Feedback received from participants indicated a high level of satisfaction and noted the relevance of the seminars. Business opportunities seminars: Twenty-seven seminars on business opportunities were conducted in 2002 in 15 countries: Australia; Canada; Denmark; Finland; Germany; Indonesia; Japan; Malaysia; New Zealand; Norway; Portugal; Sweden; Taipei,China; United Kingdom; and United States. The 1,625 participants received an overview of business opportunities under ADB-financed loans and technical assistance, and were given advice on procurement policies and procedures, including evaluation and comparison of bids and consulting proposals. Based on participant feedback, the seminars helped create an awareness of business opportunities from ADB-financed projects. The seminars also helped increase competition among prospective suppliers and consultants in offering ADB DMCs the most appropriate goods and services at the lowest price. Introduction of quality and cost-based selectionIn line with the prevailing practices of other multilateral development banks, the Board of Directors approved in 2002 the introduction of quality and cost-based selection (QCBS) as a method for selecting consulting firms under ADB-funded technical assistance and loan projects. As of 1 April 2002, the QCBS is ADB’s preferred method. While the QCBS requires ADB and borrowers to consider the competing firms’ proposed prices, quality of services remains the most important consideration. The evaluation of a firm’s proposal is weighted at 80% for technical quality and 20% for cost. To support the introduction of the QCBS, ADB conducted five briefings at its headquarters and 14 briefings in resident missions to explain the procedures for using the new method to staff and executing agency officials concerned. Relevant documents were revised, including the handbook for users of consulting services, the PAIs, and the request for proposals. A new guide for preparing terms of reference was developed for staff and executing agencies. The introduction of the QCBS is expected to help ADB use its limited funds for engaging consultants more efficiently. The QCBS also increases the transparency of selections because the shortlisted firms’ financial proposals are opened in public and the firms’ technical scores are read out loud to those attending. The Board of Directors will review the implementation of the QCBS in 2004. For more on the QCBS, see http://www.adb.org/Documents/Guidelines/Consulting/con_selection.asp. Classification of ADB's developing members A revised classification system for ADB’s developing member countries (DMCs), approved by the Board of Directors in December 1998, took effect on 1 January 1999. Two criteria—per capita gross national product and debt repayment capacity—are used to determine the classification of borrowing DMCs1 into Groups A, B1, B2, and C. The classification determines the eligibility of DMCs to borrow from the Asian Development Fund (ADF). Group A (ADF only) includes Afghanistan, Bhutan, Cambodia, Kiribati, Kyrgyz Republic, Lao People’s Democratic Republic, Maldives, Mongolia, Myanmar, Nepal, Samoa, Solomon Islands, Tajikistan, Tuvalu, and Vanuatu. Group B1 (ADF with limited amounts of ordinary capital resources [OCR]) includes Azerbaijan, Bangladesh, Cook Islands,2 Marshall Islands, Federated States of Micronesia, Pakistan, Sri Lanka, Tonga, and Viet Nam. Group B2 (OCR with limited amounts of ADF) includes People’s Republic of China, India, Indonesia,3 Nauru, and Papua New Guinea. Group C (OCR only) includes Fiji Islands, Kazakhstan, Malaysia, Philippines, Thailand, Turkmenistan, and Uzbekistan. In addition, the criteria for graduation from regular ADB assistance were established. Four members—Hong Kong, China; Republic of Korea; Singapore; and Taipei,China—have graduated from regular ADB assistance. The country classification also impacts on operations with regard to cost-sharing limits and domestic preferences. The normal cost-sharing limits for project loans by ADB change for the borrowing DMCs as follows: 80% for Group A, 70% for Group B1, 60% for Group B2, and 40% for Group C. On 28 November 2002, the Board of Directors approved a paper “Review of Cost-Sharing Limits for Project Financing as an Element of ADB’s 1998 Graduation Policy.” Effective 1 January 2003, ADB will apply new cost-sharing limits for project loans as follows: 80% for Group A,4 75% for Group B1, 70% for Group B2, and 65% for Group C. The government contribution to technical assistance should be at least 15% of the total technical assistance costs for Group A, 20% for Groups B1 and B2, and 30% for Group C. The contribution will be subject to the limit of total technical assistance costs minus foreign exchange costs and costs of domestic consultants. For details on ADB’s graduation policy for DMCs, see http://www.adb.org/documents/policies/graduation. ____________________
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