Amendment 1_RFP_SOL 72016721R00007 Kosovo Municipal Integrity Activity (1).pdf

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72016721R00007 x x copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted ; or (c) By separate letter or electronic communication which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE

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20521

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20521 Washington DC 3820 Pristina Place USAID/Kosovo

06/15/20210001

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Purpose of this amendment is to ensure that the footer links in Section C properly function and are accessible.

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16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)15A. NAME AND TITLE OF SIGNER (Type or print)

15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 15B. CONTRACTOR/OFFEROR 16C. DATE SIGNED

(Signature of person authorized to sign) (Signature of Contracting Officer)

Chad Berkowitz

STANDARD FORM 30 (REV. 11/2016)

Prescribed by GSA FAR (48 CFR) 53.243

Previous edition unusable

Except as provided herein, all terms and conditions of the document referenced in Item 9 A or 10A, as heretofore changed, remains unchanged and in full force and effect .

Request for Proposals (RFP) No.: Amendment 1_SOLICITATION No. 72016721R00007 Issue Date: June 15, 2021 Questions Due Date: June 28, 2021 at 5 p.m., Kosovo local time.

Answers to the questions Due Date: June 30, 2021 Proposals Submission Due Date: July 15, 2021 at 5 p.m., Kosovo local time

SUBJECT: Amendment 1_Request for Proposal (RFP) SOLICITATION No. 72016721R00007 Kosovo Municipal Integrity Activity

Dear Prospective Offeror:

The United States Government, represented by the U.S Agency for International Development (USAID), through the Regional Office for Acquisition and Assistance in Kosovo, is seeking proposals from qualified organizations to implement the Kosovo Municipal Integrity Activity, as described in section C of this solicitation. This activity falls under USAID/Kosovo Democracy and Governance portfolio. The goal of this activity is to address long-standing challenges related to corruption and poor quality service delivery by the Government of Kosovo by enhancing public financial management (PFM), with a focus on municipal procurement, and by reinforcing accountability mechanisms both within government and outside of government through civil society, the private sector, and media.

USAID/Kosovo anticipates awarding one Cost Plus Award Fee (CPAF) contract as a result of this solicitation covering an estimated period of five (5) years from the date of the award. The principal geographic code for this contract is 937. The North American Industry Classification System (NAICS) code for this acquisition is 541990. This requirement is subject to the availability of funds.

Subject to availability of funds, USAID estimates funding available for this contract up to $13.5 million.

USAID’s intent is to maximize the best value obtainable and is in no way obligated to make an award within the maximum estimated amount. Offerors should not strive to meet the maximum amount; rather, offerors should propose the best technical/management solution, and costs that are appropriate, realistic, and reasonable, and in accordance with the proposed approach for achieving the activity objectives.

This procurement will be conducted under full and open competition, pursuant to Part 15 of the Federal Acquisition Regulation (FAR) (48 CFR Chapter 1). All types of organizations are eligible to compete;

USAID encourages the participation to the maximum extent possible of local Kosovar organizations, small business concerns, veteran owned small businesses, service-disabled veteran small businesses, HUB zone small businesses, small disadvantaged businesses, women-owned small business concerns and small business concerns in this activity as the prime contractor or as subcontractors. USAID discourages the use of exclusive agreements as this limits USAID’s and Kosovo’s ability to receive the best services.

This applies to personnel and subcontractors, international and local organizations.

Only electronic proposals will be accepted. Any questions regarding this solicitation and the proposals must be submitted via email to Fiolla Radoniqi at fradoniqi@usaid.gov and Dukagjin Hasani at dhasani@usaid.gov by the date and time specified above. If your organization decides to submit a proposal in response to this solicitation, detailed requirements for Offerors’ proposals are outlined in Section L of this solicitation. Proposals must be signed by an official who is authorized to bind the organization and are to be submitted to USAID no later than the closing date and time stated above.

USAID reserves the right to amend or rescind this solicitation at any time. This solicitation, amendments to this solicitation, and announcement of contract award will be made available through the government mailto:cberkowitz@usaid.gov mailto:dhasani@usaid.gov

SOLICITATION No. 72016721R00007 Kosovo Municipal Integrity Activity point of entry at https://beta.sam.gov/. It is the Offeror’s responsibility to check this site periodically for official updates to this solicitation. Issuance of this solicitation and the submission of a proposal do not constitute a commitment on the part of the U.S. Government nor USAID to make an award; neither does it constitute an obligation for any costs incurred in the preparation and submission of a proposal.

USAID appreciates the time and effort put into preparing proposals in response to this solicitation.

Sincerely

Chad Berkowitz Foreign Service Contracting Officer https://beta.sam.gov/

Contents

PART I – SCHEDULE 8

SECTION B – SUPPLIES OR SERVICES AND PRICE/COSTS 8

PURPOSE 8

CONTRACT TYPE 8

ESTIMATED COST, FEE, AND OBLIGATED AMOUNT 8

PRICE SCHEDULE 8

INDIRECT COST 9

ADVANCE UNDERSTANDINGS ON CEILING INDIRECT COST RATES AND FINAL

REIMBURSEMENT FOR INDIRECT COSTS 9

COST REIMBURSABLE 10

PAYMENT OF FEE 10

SECTION C – STATEMENT OF WORK 12

SECTION D – PACKAGING AND MARKING 30

AIDAR 752.7009 MARKING (JAN 1993) 30

BRANDING 30

SECTION E – INSPECTION AND ACCEPTANCE 32

NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE 32

INSPECTION AND ACCEPTANCE 32

SECTION F – DELIVERIES AND PERFORMANCE 33

NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE 33

PLACE OF PERFORMANCE 33

PERIOD OF PERFORMANCE 33

PERFORMANCE STANDARDS 33

KEY PERSONNEL 34

REPORTS AND DELIVERABLES OR OUTPUTS 34

DISTRIBUTION OF PROJECT MATERIALS, PARTICIPATION PARTNER MEETINGS AND

PUBLIC EVENTS 39

SUBMISSION REQUIREMENTS FOR DEVELOPMENT EXPERIENCE DOCUMENTS (Sept 2013) 40

SECTION G – CONTRACT ADMINISTRATION DATA 42

ADMINISTRATIVE CONTRACTING OFFICE 42

CONTRACTING OFFICER'S AUTHORITY 42

CONTRACTING OFFICER'S REPRESENTATIVE (COR) 42

TECHNICAL DIRECTIONS/RELATIONSHIP WITH USAID 42

PAYMENT AND INVOICES 43

ACCOUNTING AND APPROPRIATED DATA 44

SECTION H – SPECIAL CONTRACT REQUIREMENTS 45

FOREIGN GOVERNMENT DELEGATIONS TO INTERNATIONAL CONFERENCES 45

AIDAR 752.225-70 SOURCE AND NATIONALITY REQUIREMENTS (FEB 2012) 45

AIDAR 752.228-3 WORKERS COMPENSATION INSURANCE (DEFENSE BASE ACT) (DBA)

(DEC 1991) 46

AIDAR 752.228-70 MEDICAL EVACUATION (MEDEVAC) SERVICES (JULY 2007) 48

AUTHORIZED GEOGRAPHIC CODE 48

LOGISTIC SUPPORT 48

EXECUTIVE ORDER ON TERRORISM FINANCING 48

PROHIBITION AND ASSISTANCE TO DRUG TRAFFICKING 49

AIDAR 752.7007 PERSONNEL COMPENSATION (JUL 2007) 49

ADDITIONAL REQUIREMENTS FOR PERSONNEL COMPENSATION 49

LANGUAGE REQUIREMENTS 51

CONFIDENTIALITY AND OWNERSHIP OF INTELLECTUAL PROPERTY 51

CONSENT TO SUBCONTRACTS 51

INTERNATIONAL TRAVEL APPROVAL 51

GOVERNMENT FURNISHED FACILITIES OR PROPERTY 52

ENVIRONMENTAL COMPLIANCE AND REQUIREMENTS 52

USAID IMPLEMENTATION OF SECTION 508 OF THE REHABILITATION ACT OF 1973 AND

FEDERAL ACQUISITION CIRCULAR (FAC) 97-27 "ELECTRONIC AND INFORMATION

TECHNOLOGY ACCESSIBILITY 52

ADS 302.3.5.9 NONDISCRIMINATION (JUNE 2012) 52

AIDAR 752.222-70 USAID DISABILITY POLICY (DECEMBER 2004) 53

ADS 302.3.5.19 USAID-FINANCED THIRD-PARTY WEB SITES (NOV 2017) 53

ADS 302.3.5.21 SUBMISSION OF DATASETS TO DEVELOPMENT DATA LIBRARY (OCT

2014) 54

ELECTRONIC PAYMENTS SYSTEM 56

SEXUAL MISCONDUCT (DECEMBER 2020) 56

FAR 4.21 PROHIBITION ON CONTRACTING FOR CERTAIN COVERED

TELECOMMUNICATIONS AND VIDEO SURVEILLANCE SERVICES OR EQUIPMENT

(SECTION 889) (JANUARY 2021) 57

ADS 302.3.4.13 GRANTS UNDER CONTRACTS (GUCs) 58

ADS 302.3.5.5 REPORTING OF FOREIGN TAXES (JULY 2007) 58

PART II CONTRACT CLAUSES 60

SECTION I – CONTRACT CLAUSES 60

NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE 60

FAR 52.204-1, APPROVAL OF CONTRACT (DEC 1989) 63

FAR 52.217-8 OPTION TO EXTEND SERVICES (NOV 1999) 63

FAR 52.229-8 TAXES – FOREIGN COST-REIMBURSEMENT CONTRACTS (MAR 1990) 63

AIDAR 752.7013 CONTRACTOR-MISSION RELATIONSHIPS (JUNE 2018) 64

AIDAR 752.7037 CHILD SAFEGUARDING STANDARDS (AUG 2016) 65

FAR 52.252-2, CLAUSES INCORPORATED BY REFERENCE (FEB 1998) 67

PART III LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS 68

SECTION J – LIST OF ATTACHMENTS 68

PART IV REPRESENTATIONS AND INSTRUCTIONS 69

SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF

OFFERORS 69

NOTICE LISTING SOLICITATION PROVISIONS INCORPORATED BY REFERENCE 69

FAR 52.204-3, TAXPAYER IDENTIFICATION (OCT 1998) 69

FAR 52.204-8, ANNUAL REPRESENTATIONS AND CERTIFICATIONS (MAR 2020) 70

FAR 52.209-5, CERTIFICATION REGARDING RESPONSIBILITY MATTERS (AUG 2020) 74

FAR 52.209-7, INFORMATION REGARDING RESPONSIBILITY MATTERS (OCT 2018) 76

FAR 52.209-11 REPRESENTATION BY CORPORATIONS REGARDING DELINQUENT TAX

LIABILITY OR A FELONY CONVICTION UNDER ANY FEDERAL LAW (FEB 2016) 77

FAR 52.209-13 VIOLATION OF ARMS CONTROL TREATIES OR

AGREEMENTS-CERTIFICATION (FEB 2021) 78

FAR 52.219-1, SMALL BUSINESS PROGRAM REPRESENTATIONS (NOV 2020) 80

FAR 52.222-22, PREVIOUS CONTRACTS AND COMPLIANCE REPORTS (FEB 1999) 83

FAR 52.222-25, AFFIRMATIVE ACTION COMPLIANCE (APR 1984) 83

FAR 52.230-1, COST ACCOUNTING STANDARDS NOTICES AND CERTIFICATION (JUN

2020) 84

FAR 52.230-7, PROPOSAL DISCLOSURE--COST ACCOUNTING PRACTICE CHANGES (APR

2005) 86

SIGNATURE 90

SECTION L – INSTRUCTIONS TO OFFERORS 91

FAR 52.252-1 SOLICITATION PROVISIONS INCORPORATED BY REFERENCE (FEB 1998) 91

FAR 52.216-1 TYPE OF CONTRACT (APR 1984) 91

FAR 52.233-2 SERVICE OF PROTEST (SEP 2006) 91

GENERAL INSTRUCTIONS TO OFFERORS 91

SUBMISSION/DELIVERY INSTRUCTIONS 92

GENERAL INSTRUCTIONS FOR THE PREPARATION OF THE TECHNICAL PROPOSAL 93

TECHNICAL APPROACH 94

MANAGEMENT APPROACH AND STAFFING PLAN 94

Staffing Plan: 95

INSTRUCTIONS FOR THE PREPARATION OF THE COST PROPOSAL 96

SECTION M – EVALUATION CRITERIA 101

M.1 GENERAL INFORMATION 101

M.2 TECHNICAL EVALUATION CRITERIA 101

M.3 TECHNICAL APPROACH 102

M.4 MANAGEMENT APPROACH AND STAFFING PLAN 102

M.5 EVALUATION OF PAST PERFORMANCE 102

M. 7 EVALUATION OF COST PROPOSALS 104

M.8 DETERMINATION OF COMPETITIVE RANGE 104

M.9 SOURCE SELECTION 104

PART I – SCHEDULE

SECTION B – SUPPLIES OR SERVICES AND PRICE/COSTS

B.1 PURPOSE

The purpose of Kosovo Municipal Integrity Activity is to address long-standing challenges related to corruption and poor quality service delivery by the Government of Kosovo by enhancing public financial management (PFM), with a focus on municipal procurement, and by reinforcing accountability mechanisms both within government and outside of government through civil society, the private sector, and media.

B.2 CONTRACT TYPE

This is a Cost Plus Award Fee (CPAF) type Contract for an estimated period of five (5) years. For the consideration set forth below, the Contractor shall provide the deliverables or outputs described in Sections C, F, and Award Fee Plan, and comply with all contract requirements.

B.3 ESTIMATED COST, FEE, AND OBLIGATED AMOUNT

a) Total Estimated Cost:

The estimated cost for the performance of the work required hereunder in section C and F exclusive of Award Fee, is $ TBD.

b) Award Fee

i. The Base (Fixed) Fee is $ TBD by the offeror.

ii. The maximum award fee pool is $ TBD by the offeror.

c) Obligated amount

1) Within the estimated cost specified in paragraph a) plus base fee specified in paragraph b) i.

above, the amount currently obligated and available for reimbursement of allowable costs incurred by the contractor and payment of base fee, for performance hereunder is $ TBD. The Contractor must not exceed the aforesaid obligated amount.

2) Funds obligated hereunder are anticipated to be sufficient through $ TBD.

B.4 PRICE SCHEDULE

Budget Summary Cost Category Total Total Direct Costs TBD Total Indirect Costs TBD Base (Fixed) Fee TBD Total Estimated Cost Plus Base Fee TBD Estimated Award Fee Pool TBD

Contract Ceiling Price TBD These amounts may not be adjusted without a written modification signed by the Contracting Officer. The contractor will not bill any amounts against this contract in excess of the amounts specified for each line item as illustrated above.

B.5 INDIRECT COST

Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs shall be reimbursed on the basis of the following negotiated provisional or predetermined rates and the appropriate bases:

Description Rate Base Type Period

% 1/ 1/ 1/ % 2/ 2/ 2/ % 3/ 3/ 3/

1/Base of Application:

Type of Rate:

Period:

2/Base of Application:

Type of Rate:

Period:

3/Base of Application:

Type of Rate:

Period:

B.6 ADVANCE UNDERSTANDINGS ON CEILING INDIRECT COST RATES AND FINAL

REIMBURSEMENT FOR INDIRECT COSTS

(a) Reimbursement for indirect costs shall be at the lower of the negotiated final (or predetermined) rates or the following ceiling rates:

Description Rate Base Period

% 1/ 1/ % 2/ 2/ % 3/ 3/

1/ Base of Application:

Period:

2/ Base of Application:

Period:

3/ Base of Application Period

(b) The Government will not be obligated to pay any additional amount should the final indirect cost rates exceed the negotiated ceiling rates. If the final indirect cost rates are less than the negotiated ceiling rates, the negotiated rates will be reduced to conform to the lower rates.

(c) This understanding shall not change any monetary ceiling, obligation, or specific cost allowance or disallowance. Any changes in classifying or allocating indirect costs require the prior written approval of the Contracting Officer.

B.7 COST REIMBURSABLE

The U.S. dollar costs allowable will be limited to reasonable, allocable, and necessary costs determined in accordance with FAR § 52.216-7 “Allowable Cost and Payment,”; FAR § 52.216-8“Fixed Fee”; FAR § 52.232-22 “Limitation of Funds,” if applicable, and AIDAR 752.7003, “Documentation for Payment.”

B.8 PAYMENT OF FEE

1) Base Fee

a) USAID will pay the base fee pursuant to FAR § 52.216-7 and FAR § 52.216-8, upon the receipt of an invoice deemed proper by the USAID/Kosovo Financial Management Office. The Contractor may earn and be paid all or a portion of the total fee based on completed deliverables under this contract.

Payment of the Contractor’s fee is tied to the accomplishment of objectives and deliverables or outputs described in Sections C and F of the contract.

b) Base Fee Payment Schedule TBD:

Deliverables Delivery schedule Percentage of Base

Fee Base Fee Amount for payment Deliverables for Year 1 TBD by the contractor Deliverables for Year 2 TBD by the contractor Deliverables for Year 5 TBD by the contractor

2) Award Fee

a) The maximum award fee pool for this contract is $TBD and it is not part of the total estimated cost plus base fee. The Contractor may earn and be paid all or a portion of an award fee for performance under this contract. The Government's purpose in granting an award fee is to encourage and reward superior contract performance.

b) The award fee shall be made available to the Contractor for each evaluation period; the table below reflects evaluation periods, estimated available award fee and actual earned award fee for each evaluation period.

Period of Performance Evaluation Period*

(Start/End date)

Estimated Percentage of Award Fee Available

Estimated Amount of Award Fee Available

Earned Award Fee Amount

First Evaluation Period (six-months evaluation of Year 1)

/2021 -/2022 TBD TBD

Second Evaluation Period (end of Year 1) /2022 -/2022 TBD TBD Third Evaluation Period (end Year 2) /2022 -/2023 TBD TBD Fourth Evaluation Period (end of Year 3) /2023 -/2024 TBD TBD Fifth Evaluation Period (end of Year 4) /2024 - /2025 TBD TBD Sixth Evaluation Period (end of Year 5) /2025 - /2026 TBD TBD Maximum Award Fee Available 100% TBD

*Exact dates of each Evaluation Period will be determined upon contract award.

c) The determination of the award fee earned by the Contractor and payment of award fee, if any, shall be in accordance with the terms of the Award Fee Plan attached in Section J.

d) At the end of each evaluation period, the contract shall be modified to increase the total estimated cost to add the award fee amount earned for the respective evaluation period and the contractor can invoice for the earned amount as soon as the modification is completed.

e) Unearned award fee cannot rollover from one award fee evaluation period to the next evaluation period.

f) Payment of any award fee earned by the Contractor shall not be subject to the withholding provisions of the clause of this contract entitled "Allowable Cost and Payment" (FAR 52.216-7) clause.

The paying office is USAID/Kosovo, Financial Management Office, as specified in Section G.5.

B.9 MULTI-YEAR CONTRACT AND CANCELLATION CEILING

USAID/Kosovo considers this contract non-severable and is therefore a multi-year contract as defined in FAR 17.103. Therefore, this contract is subject to the requirements of FAR 17.106. However, as a cost-reimbursement contract, USAID/Kosovo will authorize the reimbursement for all allowable costs incurred by the Contractor pursuant to FAR 52.216-7, “Allowable Costs and Payment.” The Contractor will not incur any costs that require amortization or substantial upfront investment over the contract’s period of performance if the Contracting Officer cancels the contract pursuant to FAR 52.217-2. Thus, $0 will serve as the cancellation ceiling for each cancellation date. Accordingly, no requirement to include cancellation dates in the contract exists.

[END OF SECTION B]

SECTION C – STATEMENT OF WORK

ACTIVITY TITLE: Kosovo Municipal Integrity

C.1. PURPOSE

USAID’s new Kosovo Municipal Integrity activity will address long-standing challenges related to corruption and poor quality service delivery by the Government of Kosovo by enhancing public financial management (PFM), with a focus on municipal procurement, and by reinforcing accountability mechanisms both within government and outside of government through civil society, the private sector, and media.

This activity fits into the broader efforts of USAID/Kosovo to advance self-reliance by promoting more accountable and citizen-responsive local governance. Through work with local governments, national accountability bodies, the private sector, civil society and media, the new Kosovo Municipal Integrity activity aims to contribute to Development Objective 1 of USAID’s new Country Development Cooperation Strategy (May 2020 - May 2025), namely, “Citizens are better served by accountable and effective governance institutions.”

C.2. DEVELOPMENT CONTEXT AND CHALLENGE

Poor municipal budget and project planning, procurement irregularities, weak contract management and lack of implementation of external and internal audit findings at the municipal and national level create significant opportunities for corruption. This, in turn, threatens public trust in government, hinders the efficient delivery of critical public services and infrastructure, and further perpetuates and sanctions lawless behavior.1 The weakness of national oversight bodies engaging on local government finances compounds the problem. Public procurement has been a major source of waste, fraud and abuse, with public funds used to reward political cronies and politically-connected businesses at the local and central levels. Corruption in procurement is particularly salient as government procurement accounts for almost 40% of total public expenditures in Kosovo, compared with 24% regionally.

USAID’s Transparent Effective and Accountable Municipalities (TEAM) (2017-2021) is supporting Kosovar institutions in public procurement, internal audit, PFM, and human resources to ensure processes are more efficient and standardized, limiting discretion, and increasing transparency.

TEAM works to: 1) Develop, refine and roll out models for transparent and accountable municipalities; 2) Engage the central level in addressing municipal corruption in procurement; and 3) Enable civil society to track and expose corruption.

In the past four years, with USAID assistance, Kosovo has significantly improved systems and increased transparency in public procurement. Kosovo has moved to a fully electronic procurement process (including an appeals process) and has become a leader in open contracting, by mandating all contracting authorities to publish all government contracts (over 1,000 EUR or about $1,200) on the

1 https://www.oecd.org/gov/goverment-at-a-glance-kosovo.pdf https://www.oecd.org/gov/goverment-at-a-glance-kosovo.pdf e-procurement platform in line with the Open Contracting Data Standards.2 Increased transparency has enabled citizens and civil society to increase scrutiny and oversight of public expenditures.3

However, increased transparency has shown additional weaknesses and limitations of the accountability mechanisms, especially for public procurement and PFM in Kosovo. For example, the Auditor General states that most “red flags” in municipal audits are related to public procurement.4 Moreover, a lack of internal institutional accountability and enforcement allows many irregularities to go unchecked and for officials at various levels to operate without being held accountable. As a result, corruption reduces public resources, worsens service delivery outcomes, and undermines public confidence in government. Hence, the new Municipal Integrity Activity will focus on further advancing corruption prevention, build on the success achieved in increased transparency and concentrate on addressing the major weakness identified, such as accountability in the process.

Enhanced accountability in public finance management and the procurement process will be achieved by strengthening municipal internal control mechanisms that ensure oversight, monitoring and sanctioning malfeasance and non-compliance, and increasing capacities of the central level institutions mandated to ensure that municipalities are in full compliance with the public finance and the public procurement legislation.

The Government of Kosovo (GOK) has pledged to reduce corruption at all levels of government.5 Unlike many other countries in which USAID operates, the GOK has an additional incentive to address corruption, as implementing anti-corruption measures are part of the prerequisites for EU integration and the visa liberalization process.

C.3. PROGRAM APPROACH

Theory of Change/Development Hypothesis

IF national accountability agencies provide more effective and coordinated municipal finance oversight, AND spending units, particularly municipal governments, increase use of good practices and norms in budget planning, public procurement, contract management, and internal audit, AND civil society, media, and the private sector are better equipped to improve the integrity of both public and private sector actors in public procurement, THEN accountability over the use of public resources will improve and corruption will abate, AND public services and infrastructure will be provided at a lower long-term cost and higher quality to the public, AND the social contract will be strengthened.

Key assumptions underlying this Theory of Change include:

● Political will to improve procurement practices continues

● Independence of central level oversight and monitoring agencies preserved

● Civil society actors continue to have space to voice concerns

2 https://www.open-contracting.org/data-standard/ 3For a more complete set of improvements in procurement and municipal finance transparency, please see (https://e-prokurimi.rks-gov.net/HOME/ClanakItemNew.aspx 4 For more details, please refer to the Auditor General's reports: NAO: ANNUAL AUDIT REPORT FOR YEAR 2018 5 For more details, please refer to the Kosovo Anti-Corruption Strategy 2021 - 2023 in the share drive Anti-Corruption Strategy draft 2021-2023 https://drive.google.com/file/d/1MgEOOz_vNSfC76TEX3HeyNYJDfQF1JZj/view?usp=sharing https://www.zka-rks.org/wp-content/uploads/2019/08/RVA-2018-Eng-2.pdf https://e-prokurimi.rks-gov.net/HOME/ClanakItemNew.aspx https://www.open-contracting.org/data-standard/

● Private sector sees interest in improving integrity in public procurement and contracting

C.4. DEVELOPMENT CHALLENGE

USAID’s new Kosovo Municipal Integrity activity will address long-standing challenges related to corruption and poor quality service delivery by the Government of Kosovo by enhancing public financial management (PFM), with a focus on municipal procurement, and by reinforcing accountability mechanisms both within government and outside of government through civil society, the private sector, and media. The Kosovo Municipal Integrity activity will focus on the following four program objectives:

National accountability agencies provide more effective and coordinated financial oversight

1. Governments increase use of good practices in budget planning, public procurement and contract management

2. Government advances norms and practices that support internal audit and accountability

3. Civil society, media, & the private sector improve the integrity of public and private sector actors in public procurement

The public procurement process is a very complex process that requires input and involvement of many stakeholders, starting with the contracting authorities, several central level institutions that are responsible for the oversight and monitoring of this process and the private sector. As a result, corruption vulnerabilities within the process are not easily identifiable and very resilient. Any weakness, at any stage of this process, increases the corruption vulnerability of the entire process.

Corruption vulnerability identified and addressed today in one part of the public procurement process, is only a momentary gain, since it intends to find weaknesses in other parts of the process and involved institutions, to appear again tomorrow. Therefore, in this existing fluid environment, the Contractor should consider activities expected to be performed, identified within all four objectives of this SOW, as only a starting place and adaptive management is strongly encouraged to identify and propose additional, innovative approaches, interventions, and sub-objectives to advance activity objectives through the period of performance of the activity.

C.5. OBJECTIVES

The new Kosovo Municipal Integrity activity will contribute to the following objectives and sub objectives:

Objective 1: National accountability agencies provide more effective and coordinated financial oversight

National level agencies involved in oversight of municipal government finance struggle to fully execute their mandates due to limited budgets and staff, overlapping mandates, and a lack of standardized processes, which leads some to suspect politicization in decision-making. To date, the National Assembly has played a fairly limited role.

The Kosovo Municipal Integrity activity will work with national level accountability agencies including, but not limited to, the Public Procurement Regulatory Commission (PPRC), Kosovo Institution for Public Administration (KIPA), Procurement Review Board (PRB), Ministry of Finance Central Harmonization Unit (CHU), and National Audit Office (NAO). The contractor must adapt to take advantage of new opportunities to engage at the national level to strengthen the accountability ecosystem, and may consider including other institutions and shifting the level of support for any one of these agencies in consultation with USAID. The activity must effectively engage with other complementary actors such as the Committee for the Oversight of Public Finance within the National Assembly.

Sub-objective 1.1: Regulation, Oversight and Complaints Resolution of Procurement Strengthened The PPRC has worked to establish a strong legal and regulatory framework for procurement, but frequent revisions over the past several years have led to inconsistencies between the primary and secondary legislation, and between the legal framework and operational guidelines. This is particularly problematic with respect to contract management and switching to an e-procurement environment. Adaptation of the new Public Procurement Law (PPL), that will address the weaknesses, is anticipated in 2021. In addition, the PPRC’s monitoring function remains largely underdeveloped and requires support to adequately identify gaps in implementation of the new legal and regulatory framework and in applying sanctions on procurement officers when serious breaches occur.

The PPRC, working with KIPA, also helped advance the professionalization of public procurement.

With support from USAID, the PPRC and KIPA introduced both a basic and an advanced public procurement certification program. The training program, however, does not yet provide for in-service training that could equip procurement experts with more specialized skills. Mechanisms for peer-to-peer learning among procurement experts also remain under-developed.

The PRB, the main procurement complaints review body, is perceived to be arbitrary in how it reaches its rulings, and some fear it is subject to undue political influence. The introduction of a USAID-funded portal to livestream deliberations of PRB cases has increased the transparency of decision making, but has not yet led to standardization. Due to an increasing workload and staffing gaps, the PRB has frequently exceeded the legal time limit to decide cases. The PRB relies heavily on external experts, but the quality of the advice has been questioned and in some cases the PRB goes against the expert opinion without clear justification.6 Moreover, the PRB struggles to implement some aspects of its mandate, such as adding companies to the blacklist for submitting fraudulent data or forged documents, or for engaging in corrupt behavior. Weak monitoring of the blacklist allows firms to simply register under a new name with a new authorized representative and to continue to bid on government contracts.

Lack of clear policies and procedures on prohibited practices, combined with weak enforcement and disclosure, create a high-risk environment for private sector fraud, corruption and misconduct in public procurement. Kosovo institutions need to raise the bar of good corporate governance, high integrity and ethical standards within the private sector when dealing with public procurement.

The contractor will support the PPRC in enhancing its monitoring capacities and ensuring accountability in the public procurement process. The contractor will, in coordination with other engaged donors, support the PRB to further advance transparency, fulfill its mandate, and increase the quality of its decisions. The contractor will also work with the private sector, business associations and central level institutions to improve private sector integrity in public procurement, 6 “The Role of Procurement Review Body in Public Procurement Inefficiency.” DemocracyPlus, USAID TEAM Project, May 31, 2019:THE ROLE OF PROCUREMENT REVIEW BODY IN PUBLIC PROCUREMENT

INEFFICIENCY

https://dplus.org/wp-content/uploads/2019/11/2019-06-The-role-of-PRB-in-public-procurement-inefficiency.pdf https://dplus.org/wp-content/uploads/2019/11/2019-06-The-role-of-PRB-in-public-procurement-inefficiency.pdf especially by utilizing digital technologies, such as developing platforms for sharing and analyzing procurement and financial data produced at the national and municipal level.

The contractor must support, but is not limited to, the following activities: work with the PPRC in updating procurement templates, guidelines and procedures in line with the new Public Procurement Law and provide them to the municipalities to use; expand KIPA and PPRC training programs to include more advanced training; and continue professional education for procurement officers and other stakeholders such as municipal staff, CSOs, and the private sector, among others. The contractor must support the PPRC in the implementation of the e-Procurement Contract Management and Contractor Performance Management Modules, including interoperability with other systems, help the PPRC’s Monitoring Department develop and implement a strategy for enhanced monitoring and oversight of municipal procurement, and support reforms to make the blacklist of the unperforming companies more enforceable. In addition, the contractor must promote improved coordination between PPRC, PRB, NAO, and other relevant bodies and stakeholders.

Sub-objective 1.2: National Support for Internal and External Audit of Municipal Finances Improved Kosovo has made some improvements to the national framework for internal and external audit, such as the adoption of the public internal financial control (PIFC) law, though these improvements are not yet fully implemented.7 Further, while the Ministry of Finance’s Central Harmonisation Unit (CHU) has undertaken quality reviews of both internal control and internal audit, the recommendations from these reports similarly, are not yet systematically implemented.

The National Audit Office (NAO) has made significant progress on improving the quality and coverage of external audits as a part of their national strategic plan for audit (2018-2021). With USAID support, the NAO also launched a new anti-fraud unit that, in its first two years, identified 141 cases of potential procurement related fraud. Implementation of NAO audit recommendations is low at the municipal level though improved slightly between 2017 and 2018 from 25% to 31%, according to the NAO 2019 annual report.

The NAO reports annually to the National Assembly’s Committee on Oversight of Public Finances (COPF). The National Assembly, however, generally does not track budget execution outside of annual NAO reporting, and does not follow-up to ensure implementation of audit recommendations.

The contractor must support the National Audit Office (NAO) and the Ministry of Finance’s Central Harmonization Unit (CHU) to improve internal and external audits of municipal finances. The contractor must support, but is not limited to, the following activities: further strengthen the functionality of the NAO anti-fraud unit and support improved coordination between internal and external audit bodies. The contractor must also strengthen mechanisms for greater accountability for the implementation of internal and external audit findings and explore enforcement incentives and/or sanctions mechanisms for non-implementation of external and internal audit recommendations.

7 For more see: An Overview on the Development of Internal Control in Public Sector Entities: Evidence from Kosovo https://drive.google.com/file/d/10fwGH4qxTGEexegtQ2zK4G7ghlZj_AIY/view?usp=sharing https://drive.google.com/file/d/10fwGH4qxTGEexegtQ2zK4G7ghlZj_AIY/view?usp=sharing fradoniqi Highlight

Objective 2: Government increases use of good practices in budget planning, public procurement and contract management

With USAID support, all national ministries and municipalities now fully use e-Procurement, and most municipalities now publish awarded contracts and financial reports on their websites. Despite improved transparency, audit reports note the same weaknesses in municipal procurement and financial management. Poor design of technical specifications coupled with over-reliance on lowest-cost procurement methods contributes to bidders significantly underbidding realistic costs and reinforces the use of contract modifications to increase contract ceilings. Contract management is often an afterthought. Recent audits noting cases where final payments were issued to contractors who did not complete the contracted work and other cases where municipalities accumulated significant payment arrears to contractors.8

The Kosovo Municipal Integrity activity will work with selected and targeted municipal governments to improve budget planning and project planning, public procurement, and contract management. The contractor must propose an approach (coaching and on-the-job training) to focus on target municipal governments, but is encouraged to complement that approach with efforts that scale successful efforts across all 38 municipal governments in Kosovo, including through working with the Association of Kosovo Municipalities and the Ministry of Local Government Administration. Depending on need, and in close coordination with USAID, the contractor may also be asked to replicate successful efforts, in the areas covered by this objective, to support improved PFM practices in select national-level line ministries.

Sub-objective 2.1: Planning of municipal budgets (especially in capital investments) improved The current PPL requires that each contracting authority, including municipalities, prepare a procurement plan that identifies, in reasonable detail, all supplies, services, and works that the contracting authority intends to procure during the fiscal year. Consultations note, however, that the quality of these procurement plans tends to be poor, particularly with respect to costing. One reason costing of capital projects is inaccurate is that projects generally do not have adequate project designs in place prior to procurement planning and budgeting.

There are several other specific challenges related to the quality of public investment. Project evaluation and selection are opaque and not based on objective criteria, leading to concerns over politicization. Capacity to conduct cost-benefit analysis of proposed projects is weak. Further, due to lack of coordination between the national and municipal levels, capital projects funded through national line ministries are not always considered in recurrent budgets. A lack of coordination between municipalities and utilities has contributed to preventable costs, such as new roads being torn up to make way for water pipes.9

The contractor must support targeted municipalities to improve budget and project planning, especially capital investment projects, and prepare reasonably detailed procurement plans with the adequate costing that are informed in advance by the qualitative projects designs for each of the capital investment projects. The contractor’s support must include, but is not limited to, the following activities: provide coaching to improve procurement planning, link procurement planning with budgeting, and increase the rigor of the selection process for public investment projects. In

9 Kosovo TEAM Mid-Term Evaluation: TEAM Mid-Term Evaluation 8 For more see NAO’s 2019 National Audit Report: NAO: ANNUAL AUDIT REPORT FOR YEAR 2019 https://drive.google.com/file/d/1iWoCb3zsATFRo4rAHEyWotUO9ee9aXkG/view?usp=sharing https://www.zka-rks.org/wp-content/uploads/2020/09/RaportiVjetor_ENG_PRESS_01.pdf addition, the contractor must improve the costing of public investment projects and support the finance offices to ensure audit findings are corrected so they are not repeated the following year.

Sub-objective 2.2: Integrity and Efficiency of Municipal Procurement Enhanced As noted above, municipal governments have significantly improved the transparency of public procurement. The TEAM activity mid-term evaluation noted, in fact, that a transparency competition had emerged among municipalities. Moreover, roll-out of practical procurement templates and tools in municipalities targeted by TEAM has helped standardize core procurement processes.

Despite this progress, the NAO has found notable weaknesses in municipal procurement, for example, finding that municipal authorities avoid full and open competition procedures and frequently use “Negotiated Procedures after Publication of a Contract Notice” (Kosovo Public Procurement Law; article 1.35.2 - Negotiated Procedures) that limits competition to one or more offerors, when not appropriate. Further, the NAO notes that municipalities’ final awarded contracts often exceed the estimates for projects in the budget framework, in part because of the use of contract amendments. Civil society organizations (CSOs) report that technical specifications and bidder requirements are written so narrowly that only one bidder can qualify. Technical specifications also lead to challenges during contract management because they do not sufficiently detail the quality and timeliness requirements needed.

The contractor must support municipal procurement units, and other related municipal units, in the targeted municipalities to increase the integrity and effectiveness of the procurement process. The contractor must support, but is not limited to, the following activities: provide coaching to improve the quality of procurement planning and the development of technical specifications; support increased use of best value evaluation techniques;10 and improve coordination between the requesting unit and the procurement unit.

Sub-objective 2.3: Management of Public Contracts and Expenses Strengthened Weaknesses in contract management are contributing to bad outcomes from public procurement efforts. Contract Management is perceived as the part of the procurement process that is most vulnerable to corruption. The NAO notes that municipal authorities often do not assign specific contract managers, lack contract management plans, and exhibit poor contract management.

Municipal authorities have accepted goods, services, and works that do not comply with technical specifications or are incomplete, paid for goods, services and works after the contract deadline specified in the contract, and have issued payments exceeding the contract ceiling. These challenges are particularly problematic with respect to capital projects, where municipal authorities have failed to apply penalties for delays, even in case of massive delays by the economic operator.11 These challenges are coupled with conflicting elements of the legal and regulatory framework for contract management raised in 1.1 above, necessitating significant strengthening of standard operating procedures at the contracting authority level to enhance the lack capacities, integrity and accountability of those managing contracts.12

12See also TEAM Contract Management Assessment: TEAM Contract Management Assessment

11 2019 PFMRAF Assessment: 2019 PFMRAF assessment 10 E.g., Most economically advantageous tender https://drive.google.com/file/d/1cso2AkhDvdqEhTXjjwavgCrRC5mdCUoC/view?usp=sharing https://drive.google.com/file/d/1J73lzxXPQp3XaC3aQUKVqU_MogcUgiAA/view?usp=sharing

Under the TEAM project, USAID introduced new contract management and contractor performance management modules within the e-Procurement system, and has prepared a contract management manual for use at the local level. Municipal governments must now establish robust processes, and provide staff skills and roles that support effective contract management in practice.

The contractor must support targeted municipalities in addressing Contract Management, which is part of the procurement process that is constantly perceived as most vulnerable to corruption. The contractor must work with the GoK in ensuring that the comprehensive reform in the Contract Management area is undertaken and fully implemented, especially since it requires the revision of conflicting pieces of existing legislation and regulations which affect Contract Management. The contractor must work with the GoK and targeted municipalities in identifying and proposing the best model of the Contract Management units, within the municipality and other institutions, that are more efficient and effective in order to fulfill their role and mandate.

In addition, the contractor must support, but is not limited to, the following activities: support the GoK efforts in undertaking needed reform in the Contract Management process; and support the implementation of the new contract management and contractors performance management modules, which are included within the e-Procurement system, at the municipal level. The contractor must also provide on the job training for contract managers and develop practical tools for contract management as well as support improved performance reporting on contractors.

Objective 3: Government advances norms and practices that support internal audit and accountability

Effective and accountable use of public resources requires commitment of management and monitoring by elected bodies. Many mayors have shown a willingness to advance fiscal transparency, mirroring efforts of other mayors to publicly disclose financial documentation. Leadership has been less effective in pushing an accountability agenda that would affirmatively reinforce integrity in the use of public funds.

The Kosovo Municipal Integrity Activity will work with municipal government leadership, elected officials, audit committees and internal audit staff to strengthen systems, norms and practices that support accountability and integrity. As with Objective 2, the contractor must focus on a select set of municipal governments, but must also propose approaches to scale successful approaches across all 38 municipal governments and potentially with national-level line ministries.

Sub-objective 3.1: Government adopts improved internal audit and control measures As noted in Objective 1, the legal and regulatory framework for internal audit provides for a solid basis for public internal control and audit, but challenges remain for its implementation. Almost 30% of relevant municipalities do not have the required number of internal auditors and several only have one auditor. As a result, internal audit offices struggle to fully implement their planned audits and are not able to audit high risk units such as procurement and human resources annually. While CHU has worked to improve training for internal auditors, many internal auditors lack critical skills - including gaps in the new e-procurement system, reporting irregularities, and modern risk management practices for internal audit.13

13 http://sigmaweb.org/publications/Monitoring-Report-2017-Kosovo.pdf http://sigmaweb.org/publications/Monitoring-Report-2017-Kosovo.pdf

Municipal audit committees are critical to ensuring that irregularities and management weaknesses highlighted through internal audit activities are recognized by management and addressed. Many municipalities, however, lack functional audit committees and where they exist they meet infrequently and their members are not well-equipped to fulfil their role.

The contractor must support target municipalities’ internal audit units, audit committees and other relevant actors within the municipality that are responsible for ensuring internal finance control and accountability, especially in the area of municipal public finance management. To achieve this sub-objective, the contractor must support, but is not limited to, the following activities: coach internal auditors on modern audit techniques and effective reporting approaches, develop and roll-out tools for improved internal audits, including case management, and support peer-to-peer learning among internal auditors and audit committee members. In addition, the contractor must advise municipalities on the importance of fully staffing internal audit units with qualified personnel and work with municipal authorities to establish regular and productive engagement of audit committees.

Sub-objective 3.2: Leadership and elected officials promote integrity and efficiency in municipal finance Mayors and other municipal executive officers, must…