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Loan Aid-related Operations (ODA Loans)
(Primary Checks, Ex-Post Procurement Audits, Dispatch of Experts, Geothermal-related Activities)

April 6, 2016

With regard to loan aid (ODA loans), JICS carries out primary checks of procurement-related documentation prepared by recipient countries, as well as performs Ex-Post procurement audits and dispatches experts. In recent years, JICS has made use of its experience in appropriate procurement procedures for ODA loans into involvement in projects that address problems on a global scale, such as promoting geothermal power generation projects, which require huge amounts of funding and time.

Mieko Ishii

Mieko Ishii

Grant and Loan Cooperation Support Division
Third Management Department

Mieko Ishii

Keizo Inoue

Second Special Project Management Division
Second Management Department

Primary Check of Procurement-related Documents under Japanese ODA Loans (Lot B)

Counterpart of Contract: Japan International Cooperation Agency (JICA)

With regard to loan aid-related operations (ODA loans)*1, JICS has been engaged in primary checks of procurement-related documentation for JICA since winning a proposal-based competitive tender in FY2004. In these operations, JICS examines procurement-related documentation prepared and submitted by recipient governments whether they conform with the Guidelines for procurement under Japanese ODA Loans and standard bidding documents. JICS identifies any problems, unclear items or insufficient information and questions and submits them to JICA as English reports. As recipient governments include French- and Spanish-speaking countries, JICS staff proficient in English, French, and Spanish and familiar with procurement procedures check these documents swiftly within the allotted period, usually within three to seven days per case.

To date, JICS has handled projects from Southwest Asia, Central and South America, Africa, the Middle East, and Eastern Europe. In FY2014, we conducted primary checks on procurement-related documentation for a total of 361 cases.

*1 Until September 2008, handled by the Japan Bank for International Cooperation (JBIC)

Ex-Post Procurement Audits Related to ODA Loan Projects in FY2012 and FY2013

Counterpart of Contract: Japan International Cooperation Agency (JICA)

Ex-Post Procurement Audits are conducted by independent auditors for the purpose of confirming that the finished selection and procurement process for consultants and contractors required for project implementation were appropriately performed in compliance with the agreements of both countries.

These tend to be projects under STEP*2 conditions and to be contracts involving large contract amounts.

Having won a proposal-based competitive tender for this work, JICS conducted these document auditing works for JICA headquarters. For five projects selected on a random basis, we have also visited five countries (Sri Lanka, Bangladesh, Nepal, Indonesia, and Uganda) to conduct on-site audits of executing agencies of recipient countries. Following these works, we submitted audit reports to JICA outlining audit results and any issues that were identified. Although JICS is rarely involving in this kind of activity, since FY2011 we have continued to perform these services, which play an important role in ensuring appropriateness in procurement process.

*2 STEP (Special Terms for Economic Partnership): A condition for the use of Japanese technology, this system of ODA loan involves the utilization of technologies and expertise in areas where Japan excels, transferring technologies to developing countries as “visible aid.”

Assistance for Implementation of Toamasina Port Development Project in the Republic of Madagascar (JICA's Technical Assistance)

Counterpart of Contract: The Overseas Coastal Area Development Institute of Japan (OCDI)

Feasibility Studies (F/S) are typically conducted to confirm project configuration, efficiency, and other characteristics prior to the extension of an ODA loan. JICA conducted a feasibility study on a project for the development of the Toamasina Port in the Republic of Madagascar in 2009, but the project was discontinued due to political instability, and a decision was made to review the project. Despite the project being a prime candidate for an ODA loan, no new loans have been extended to the Government of the Republic of Madagascar since 1988.

In addition, the executing agency, the Toamasina Autonomous Port Company, has no history of receiving ODA loans, and is not familiar with Japanese ODA Loans procedures, JICA therefore considered that, in addition to promoting project development, to ensure smooth project management following the provision of an ODA loan it would be essential to reinforce the executing institution's capabilities. JICA decided to dispatch consultants to provide the executing institution with technical support, including the collection and analysis of information based on the previous feasibility study and conducting seminars related to ODA loan procedures.

Commissioned by the Overseas Coastal Area Development Institute of Japan to undertake this work, to reinforce its cooperation JICS dispatched as a member of the study team a native speaker of French—the language spoken in Madagascar—who also has some 10 years of experience related to ODA loans.

Applying the operational experience gained to date, this staff member provided explanations and instruction on ODA loan procedures and prepared a procedural manual.

Procurement of Drilling Contractor under Consulting Works of the Geothermal Resource Evaluation for the Construction of Tulehu Geothermal Power Plant

Counterpart of Contract: West Japan Engineering Consultants, Inc.

The Government of the Republic of Indonesia is promoting the development of renewable energy in response to growing national demand for electricity and as a climate change countermeasure. As surveys have indicated promising geothermal resources in the city of Ambon, in Malaku Province, plans have been drawn up to build a geothermal power plant there to replace aging diesel-powered generators. Accordingly, JICA has entered into a Loan Agreement with the Government of the Republic of Indonesia for an Engineering Service Loan of the Geothermal Development Acceleration Program (Tulehu Geothermal Power Plant Project <E/S>).

Before building the geothermal power plant, the project calls for the drilling of four geothermal wells*3 on the construction site. As part of this process, JICS cooperated with geothermal development consultants for drawing up tender documents for the selection of a drilling firm and contract negotiations after appointment.

JICS played a role of selecting a drilling company for this project, which had to drill to a depth of 2,000 meters of underground wells to locate geothermal power. As we can't expect what happens in such deep subterranean construction, contract conditions differed from those of typical construction and civil engineering projects. The agreement therefore contained conditions specific to drilling work. For example, if construction has to be halted due to drill bits falling off or the emission of noxious gases, the contract has to include such stipulation as compensation would be borne not by the drilling company but by the contractor. This was a lesson for JICS, as contractual conditions for above-ground and subterranean work differ substantially.

Having substantial experience in vetting procurement-related documentation on ODA loans, staff familiar with ODA loan guidelines and standard documentation for tenders were able to provide guidance based on their know-how on appropriate procurement for ODA loans and detailed procedural explanations to the local executing agency in Indonesia. As a result, project procurement proceeded smoothly. We realized that this is going to be also one of JICS' strengths.

In addition to ODA loans, JICS is involved in technical cooperation geothermal projects in Indonesia (other than Tulehu) and Kenya, and grant aid project in Ethiopia. Each of these operations is different in scope, but by pooling the expertise gained through such projects, we believe JICS will be able to provide a broad-based response on future geothermal-related activities.

*3 Geothermal well: A well to obtain or survey the steam and hot water contained in geothermal sources

Ex-Post Procurement Audit: Audit at the Bangladesh Telegraph and Telephone Board

Ex-Post Procurement Audit: Construction site of a project to be audited in Uganda

Madagascar: Toamasina Port, the project site, facing the Indian Ocean

Madagascar: JICS staff member (right) explaining ODA loan procedures

Excerpts from the Japan International Cooperation System Annual Report 2015