FATRAC_RFP_72029418R00003_As_Amended_April_17_2018.pdf

Issuance Date: March 29, 2018 Deadline for Questions: April 10, 2018 Deadline for Receipt of Proposal: May 03, 2018 no later than 10:00 AM (Jerusalem

Time)

Subject: Request for Proposals (RFP) No. 72029418R00003, USAID/ Facilitating

Access for Sustainable Trade, Revenue Mobilization, and Commerce

(FASTRAC).

To all Eligible Offerors:

The United States Government, represented by the U.S. Agency for International Development (USAID) Mission to West Bank and Gaza, is seeking proposals from qualified organizations interested in providing the services as described in the attached solicitation.

This is a full and open competition under which US and non-US other non-governmental organizations within Geographic Code 937 are eligible to participate. The procedures set forth in FAR Part 15 will apply.

The overall goal of the program is to reduce the burden of trade-related restrictions, transaction costs, and policy and institutional weaknesses, including those associated with movement and access, that undermine private sector competitiveness, discourage job creation, contribute to unsustainable trade and fiscal deficits, and threaten the foundations of macroeconomic stability in WBG, a crucial underlying driver of economic growth.

USAID/West Bank and Gaza plans to award one Cost-Plus-Fixed-Fee (CPFF) term-type contract as a result of this solicitation for a period of five years, subject to the availability of funds. Offerors must propose costs that are realistic and reasonable for the proposed work. The Government requires twenty-three thousands three hundred and forty six (23,346) professional technical staff person-days level of effort for this anticipated contract.

This solicitation in no way obligates USAID to award a contract, nor does it commit USAID to pay any cost incurred in the preparation and submission of the proposal.

Furthermore, the Government reserves the right to reject any and all offers, if such action is considered to be in the best interest of the Government.

USAID encourages the participation to the maximum extent possible of small business concerns, small disadvantaged business concerns and women-owned small business concerns in this activity as the prime contractor or as subcontractors in accordance with Part 19 of the FAR.

Sol:72029418R00003 FASTRAC Program

An Interested Vendor List is not included in this solicitation. Offerors can register and use the Interested Vendor List (lVL) on the FedBizOpps page, so that firms can contact one another for consideration of teaming arrangements and/or small business subcontracting opportunities in response to this solicitation.

It is the responsibility of the offeror to ensure that the solicitation and all its subsequent amendments have been received from the Internet in its entirety. USAID bears no responsibility for data errors resulting from download or conversion processes.

The details associated with the submission requirements are outlined under section L of this solicitation. Late proposals will be handled in accordance with FAR 15.208.

Please note that the Taylor Force Act, passed on March 23, 2018 in conjunction with the Consolidated Appropriations Act of 2018. This legislation will have an impact on programming in the West Bank and Gaza Mission, because it restricts assistance that will directly benefit the Palestinian Authority. At this time, it has yet to be determined exactly what that impact will be.

USAID requests that all questions regarding this RFP be submitted in writing via e-mail at WBGFASTRAC@usaid.gov no later than April 10, 2018. Answers to all questions will be provided through an amendment to this solicitation.

If substantive questions are received which affect the response to the solicitation, or if changes are made to the closing date and time, as well as other aspects of the RFP, this solicitation will be amended. Any amendments to this solicitation will be issued and posted on the Federal Business Opportunities (FedBizOpps) website. Offerors are encouraged to check this website (http://www.fedbizopps.gov) periodically.

We extend our best wishes to all and thank you for your interest in USAID/WBG programs.

Sincerely, /S/

Dana H. Rose Contracting Officer USAID/West Bank and Gaza mailto:WBGFASTRAC@usaid.gov http://www.fedbizopps.gov/

1. THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES

UNDER DPAS (15 CFR 700)

2. CONTRACT NUMBER 3. SOLICITATION NUMBER 4. TYPE OF SOLICITATION 5. DATE ISSUED 6. REQUISITION/PURCHASE NUMBER

SEALED BID (IFB)

NEGOTIATED (RFP)

7. ISSUED BY CODE 8. ADDRESS OFFER TO (If other than Item 7)

NOTE: In sealed bid solicitations "offer" and "Contractor" mean "bid" and "bidder".

9. Sealed offers in original and _____________________________ copies for furnishing the supplies or services in the Schedule will be received at the place specified in Item 8, or if hand carried, in the depository located in until local time _______________________ (Hour) (Date)

CAUTION - LATE Submissions, Modifications, and Withdrawals: See Section L, Provision No. 52.214-7 or 52.215-1. All Offers are subject to all terms and conditions contained in this solicitation.

A. NAME B. TELEPHONE (NO COLLECT CALLS) C. E-MAIL ADDRESS

AREA CODE NUMBER EXT.

(X) SEC. DESCRIPTION PAGE(S) (X) SEC. DESCRIPTION PAGE(S)

PART I - THE SCHEDULE PART II - CONTRACT CLAUSES

A SOLICITATION/CONTRACT FORM I CONTRACT CLAUSES

B SUPPLIES OR SERVICES AND PRICES/COSTS PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.

C DESCRIPTION/SPECS./WORK STATEMENT J LIST OF ATTACHMENTS

D PACKAGING AND MARKING PART IV - REPRESENTATIONS AND INSTRUCTIONS

E INSPECTION AND ACCEPTANCE 31 x

F DELIVERIES OR PERFORMANCE

G CONTRACT ADMINISTRATION DATA L INSTR., CONDS., AND NOTICES TO OFFERORCONTRACTORS

H SPECIAL CONTRACT REQUIREMENTS M EVALUATION FACTORS FOR AWARD

K REPRESENTATIONS, CERTIFICATIONS AND OTHER 104-115

STATEMENTS OF OFFERORS

NOTE: Item 12 does not apply if the solicitation includes the provisions at 52.214-16, Minimum Bid Acceptance Period.

12. In compliance with the above, the undersigned agrees, if this offer is accepted within _180_ calendar days (60 calendar days unless a different period is inserted by the Offeror) from the date for receipt of offers specified above, to furnish any or all items upon which prices are offered at the price set opposite each item, delivered at the designated point(s), within the time specified in the schedule.

13. DISCOUNT FOR PROMPT PAYMENT 10 CALENDAR DAYS (%) 20 CALENDAR DAYS (%) 30 CALENDAR DAYS (%) CALENDAR DAYS (%) (See Section I, Clause No. 52-232-8)

14. ACKNOWLEDGEMENT OF AMENDMENTS AMENDMENT NO. DATE AMENDMENT NO. DATE

(The Offeror acknowledges receipt of amendments to the SOLICITATION for and related documents numbered and dated:

CODE FACILITY 16. NAME AND TITLE OF PERSON AUTHORIZED TO SIGN OFFER 15A. NAME AND

ADDRESS

OF OFFEROR

(Type or print)

15B. TELEPHONE NUMBER 17. SIGNATURE 18. OFFER DATE

AREA CODE NUMBER EXT. 15C. CHECK IF REMITTANCE ADDRESS IS DIFFERENT FROM

ABOVE - ENTER SUCH ADDRESS IN SCHEDULE

19. ACCEPTED AS TO ITEMS NUMBERED 20. AMOUNT 21. ACCOUNTING AND APPROPRIATION

22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: 23. SUBMIT INVOICES TO ADDRESS SHOWN IN ITEM (4 copies unless otherwise specified)

10 U.S.C. 2304(a) ( ) 41 U.S.C. 253(c) ( )

24. ADMINISTERED BY (If other than Item 7) 25. PAYMENT WILL BE MADE BY CODE CODE

26. NAME OF CONTRACTING OFFICER (Type or print) 27. UNITED STATES OF AMERICA 28. AWARD DATE

IMPORTANT - Award will be made on this Form, or on Standard Form 26, or by other authorized official written notice.

(Signature of Contracting Officer)

(REV. 9-97)

10. FOR INFORMATION CALL:

11. TABLE OF CONTENTS

STANDARD FORM 33

SOLICITATION, OFFER AND AWARD N/A

SOLICITATION

OFFER (Must be fully completed by Offeror)

AWARD (To be completed by Government)

3 138

(RFP) Sol: 72029418R00003

X REQ-294-18-000022

March 29, 2018

Office of Contracts Management USAID/West Bank and Gaza C/O U. S. Embassy 71 Hayarkon Street Tel Aviv, Israel 63903

Please refer to section L

Linda Maher 972-3 5198670 WBGFASTRAC@usaid.gov

See Attached Table of Contents

X 3

X 6-8

X 9-27

X 28-30

X 32-49 X 50-54

X 55-87

X 88-101

X 102-103

X

X 116-135

X 136-141

72000 Office of Contracts Management USAID/West Bank and Gaza C/O U. S. Embassy 71 Hayarkon Street Tel Aviv, Israel 63903

See section G.7

Dana H. Rose mailto:WBGFASTRAC@usaid.gov

LIST OF ACRONYMS

ADS Automated Directives System AMELP Activity, Monitoring, Evaluation, and learning Plan BIP Branding Implementation Plan B2B Business to business CCN Cooperating Country National CEP Competitiveness Enhancement Project CLDP U.S. Department of Commerce’s Commercial Law Development Program CMM Conflict management and Mitigation CO Contracting Officer COB Close of Business COGAT Coordination of Government Activities in the Territories COP Chief of Party COR Contracting Officer’s Representative CPA Crossing Point Authority DB Doing business DCOP Deputy Chief of Party D2D Door to Door service of transportation EDIP Enterprise Development and Investment Promotion project GDA Global Development Alliance GDP Gross Domestic Product Geo-MIS Geographic Management Information System GOI Government of Israel ICA Israeli Civil Administration ICI Investment Climate Improvement project ICT Information and Communications Technology IDIQ Indefinite Delivery, Indefinite Quantity of contracts IGD Inclusive growth diagnostic IDF Israeli Defense Force IMF International Monetary Fund IZ Industrial zone LOE Level of Effort LTU Large Taxpayers unit M&E Monitoring and Evaluation MEPI Middle East Partnership Initiative (MEPI) MOF Ministry of Finance MONE Ministry of National Economy MP Marking Plan NEP National Economic Plan NES National Export Strategy OECD Organization for Economic Cooperation and Development OQ Office of the Quartet PA Palestinian Authority PFM Public Financial Management PMP Performance Management Plan

PPIRS Past Performance Information Retrieval System PSA Public Service Announcement RMP Rapid Mobilization Plan SII Standards Institute of Israel SMEs Small and Medium sized Enterprises SOW Statement of Work SPS Sanitary and Phytosanitary Standards STIP Science, Technology, innovation, and Partnership TA Technical Assistance TBT Technical Barrier to Trade TCN Third Country National TFA Trade Facilitation Agreement U.K. United Kingdom U.S. United States USAID United States Agency for International Development USG United States Government WBG West Bank and Gaza WTO World Trade Organization

PART I – THE SCHEDULE

SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTS

B.1 PURPOSE

The United States Government (USG) through the U.S. Agency for International Development in West Bank and Gaza (USAID/WBG) will be implementing a five-year program that aims to build a more effective and competent Palestinian economy.

The objective of this program is to reduce the burden of trade-related restrictions, transaction costs, and policy and institutional weaknesses, including those associated with movement and access, that undermine private sector competitiveness, discourage job creation, contribute to unsustainable trade and fiscal deficits, and threaten the foundations of macroeconomic stability in WBG, a crucial underlying driver of economic growth.

B.2 CONTRACT TYPE

This is a Cost-Plus-Fixed-Fee (CPFF) term type contract. For the consideration set forth below, the Contractor will provide the level of effort described in Section F to accomplish the objectives described in Section C.

B.3 ESTIMATED COST, FEE, AND OBLIGATED AMOUNT

(a) The estimated cost for the performance of the work required hereunder for the five year period, exclusive of fixed fee is $[To be inserted at the time of award]. The fixed fee is $[To be inserted at the time of award].The estimated cost plus fixed fee is $[To be inserted at the time of award].

(b) Within the estimated cost plus fixed fee specified in paragraph (a) above, the amount currently obligated and available for reimbursement of allowable costs incurred by the Contractor (and payment of fee, if any) for performance hereunder is $ [To be inserted at the time of award]. The Contractor will not exceed the aforesaid obligated amount.

(c) Funds obligated hereunder are anticipated to be sufficient through [To be inserted at the time of award].

B.4 BUDGET LINE ITEMS

Cost Element: The Contractor is not allowed to exceed any contract cost element nor is authorized to shift funding between cost elements without prior written approval of the Contracting Officer. The fee amount is fixed according to the Contract Level of Effort and the terms of this contract.

Cost Element Amount Total Estimated Cost Fixed Fee Total Estimated Cost Plus Fixed Fee

B.5 LEVEL OF EFFORT (LOE)

[The Offeror is invited to propose LOE allocations to implement the Statement of Work.]

(a) The Contractor must not exceed the total level of effort of [TBD at time of award] person days, which is broken down as follows:

Level of Effort(LOE) Category Total LOE

Long-term Technical Long-term Technical Assistance (LTTA) –

US

Nationals & Third Country Nationals/Cooperating Country Nationals (TCN/CCN)

Short-term Technical Assistance (STTA) - US Nationals &

TCN/CCN

Home Office Technical Support Total LOE 23,346 person-days

Note:

1) The required LOE does not include non-professional support staff (e.g., office managers, administrative assistants, or drivers);

2) “Short term” is defined as employment of less than one year in total over the duration of the Activity.

3) The number of person-days for any labor category may not be used in any other labor category. The Contractor can request a modification to the Contract to reallocate LOE between labor categories (e.g., LTTA, STTA, Home Office). No reallocation of LOE can result in an increase in the total estimated cost of, or exceed the obligated amount in, the Contract without the prior written approval of the Contracting Officer.

B.6 INDIRECT COSTS

Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs will 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.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, if applicable, and AIDAR 752.7003, Documentation for Payment.

B.8 PAYMENT OF FIXED FEE

Payment of fixed fee will be allocated based upon the proportion of the professional -technical level of effort (LOE) specified in Sections B.5 and F.11 that was provided by the contractor in the period covered by the invoice. In the event that the Contractor does not provide the total LOE stipulated in Section F.11, the total amount of fixed fee will be reduced in similar proportion.

[END OF SECTION B]

SECTION C- DESCRIPTION/SPECIFICATIONS/STATEMENT OF

OBJECTIVES

C.1. PURPOSE / DEVELOPMENT HYPOTHESIS

The United States Agency for International Development (USAID) in the West Bank and Gaza (WBG) aims to increase private sector-led economic growth in the West Bank and Gaza. To that end, the objective of the Facilitating Access for Sustainable Trade, Revenue Mobilization, and Commerce (FASTRAC) activity is to reduce the burden of trade-related restrictions, transaction costs, and policy and institutional weaknesses, including those associated with movement and access, that undermine private sector competitiveness, discourage job creation, contribute to unsustainable trade and fiscal deficits, and threaten the foundations of macroeconomic stability in WBG, a crucial underlying driver of economic growth.

FASTRAC consists of three components. Component 1 will work flexibly with the Palestinian Authority (PA), Government of Israel (GOI), the private sector, and civil society partners to reduce barriers to trade, movement, and access by improving trade logistics and building the capacity of Palestinian trade-related institutions. Component 2 will work selectively to identify and ease policy and institutional constraints to the business and investment enabling environment. Finally, Component 3 will support targeted fiscal policy and administration initiatives to help contain fiscal leakages, improve revenue performance, enhance fiscal sustainability and better manage macroeconomic risks.

The theory of change for this activity hypothesizes that systemic reductions in transaction costs, combined with strategic policy or regulatory improvements, will unlock the Palestinian economy’s potential for business, trade, and employment generation. It further hypothesizes that if the PA can achieve greater efficiency and effectiveness in the collection of public revenues, including through exercising greater control over its own customs territory, the private sector will respond by increasing investment, expanding business activity, and hiring more workers. Trade, investment, and job growth, in turn, will broaden the tax base and over time create the fiscal space for greater public investment in critical services and infrastructure. A longer term “governance dividend” can also be expected from this activity, insofar as reforms and improvements in the environment for trade and investment help to legitimize the PA, increase political and economic stability, and give the Palestinian people hope for the future.

C.2 BACKGROUND

Since the signing of the Oslo Accords in 1993, the Palestinian people have struggled through more than two decades of conflict, instability, and internal division. Throughout that time, the WBG economy, increasingly fragmented and heavily constrained by Israeli security controls and restrictions, has moved erratically from periods of rapid expansion and rising employment to periods of contraction or jobless growth, with average GDP growth offset by an equivalent growth in population. As external support declines, the Palestinian economy is failing to generate the employment and incomes that are needed to absorb a growing labor force and improve living standards. The situation is particularly dire in Gaza, where the decade-long blockade has left residents poorer today than they were 25 years ago.

An inclusive growth diagnostic (IGD) conducted by USAID and the Department of State in 2017 found high transaction costs – in particular, those associated with restrictions on movement, access, and trade – to be the most binding constraint to economic growth in WBG. The IGD defined transaction costs broadly as the costs incurred to connect a buyer and a seller, including shipping and transportation costs, the cost of formal financing, administrative fees, regulatory fees, and certification costs associated with complying with standards. In the context of the Palestinian economy, transaction costs include the high costs of transport and storage, long wait times at crossings and security checkpoints, variability in administrative clearance times, and many other factors that result in higher operating costs, lower volumes, and lower operating margins—making private investment less attractive.

Transaction costs arise from factors both internal and external to the Palestinian market.

On the one hand, they are directly linked to the lack of Palestinian control over its borders, customs access, and shipping. Since the Paris Protocol, Israel has maintained full control of all border crossings for West Bank and Gaza, with the exception of the Rafah crossing with Egypt following the Israeli disengagement from Gaza in 2005. Even before reaching a crossing point, all imports destined for the West Bank or Gaza must first go through Israeli Customs for security inspections, standards checks, classification and valuation, and collection of duties and taxes (commonly referred to as “clearance revenues”). Based on security concerns, Israel also imposes a number of direct and indirect restrictions on Palestinian trade, such as limiting the types of goods imported via the dual-use list, restricting Palestinian traders’ access to airports and seaports, limiting working hours at crossings points, and requiring off-loading and on-loading of goods at crossings (known as “back-to-back”). Restrictions and requirements can be arbitrary and change without notice, thus increasing the risk to international traders and their customers.

On the other hand, high and unpredictable transaction costs are exacerbated by constraints imposed “behind the border,” including burdensome procedures for issuing export certificates, an underdeveloped logistics supply chain, and poor local awareness of international quality standards. Moreover, Palestinian national standards are, in some cases, not compatible with the ones adopted by target markets—so as to enable domestic producers to tap into external markets. Additionally, the lack of recognition of conformity assessments with key trading partners is significantly increasing the burden for exporters.

Whatever their source, these transaction costs reduce the profitability of investments, limit access to customers and suppliers, increase the risk of business contracts, and prevent Palestinian firms from pursuing lucrative trade opportunities. Against this backdrop, the Palestinian economy has accumulated an enormous trade deficit and dependence on the Israeli market and has neither been able to develop dynamic export-oriented sectors nor tap into larger overseas markets. The impact has been particularly acute for the large majority of small and medium-sized enterprises (SMEs) that make up nearly 90 percent of the Palestinian business population.

Trade-related restrictions and costs are compounded by a business regulatory environment that discourages both domestic and foreign investment. According to the latest World Bank’s Doing Business (DB) report, the objective indicators related to the most economically constraining issues such as trading across borders and getting electricity remain largely unchanged over the last few years. Israeli political and security controls, and the separation between Fatah-controlled West Bank and Hamas-controlled Gaza, make it difficult to isolate the impact of domestic policies on trade and investment.

However, there are many measures that the PA could pursue to improve the business enabling environment using its own policy authorities. For example, according to DB 2017, it takes 36 days to receive a business license from the Ramallah municipal government and an additional 7 to 21 days to receive human resources approvals from the Ministry of Labor. Fees are also high. The process to obtain a construction permit for a warehouse requires no less than 20 distinct procedures that together cost a company 14.5 percent of the warehouse value. This compares to just 3.3 percent for countries in the Middle East and North Africa and 1.6 percent for high-income OECD countries. All of these administrative burdens and costs are within the control of the PA to address.

Macroeconomic conditions pose additional risks for WBG. In particular, the PA faces a number of long-term fiscal challenges, including a small tax base, dwindling budget support, and a high public-sector wage bill. Despite recent improvement in domestic tax collections, the PA still relies on monthly GOI transfers of clearance revenues for roughly two-thirds of its total revenue and more than 40 percent of its spending, exposing the PA to additional fiscal risks should transfers be withheld or delayed. Moreover, the PA believes that it is losing close to $300 million per year in fiscal leakages from undervaluation of imports, under-reported bilateral trade with Israel, and incomplete information sharing between Israeli and Palestinian customs agencies. This is in addition to an estimated $700 million in pension contributions and deductions for health and social benefits for Palestinians working in Israel that have yet to be transferred to the PA.

While a combination of revenue and expenditure measures have narrowed the fiscal deficit of late, with declining external aid, the PA continues to face budget shortfalls, which it finances through costly bank borrowing and accumulation of arrears to private sector suppliers and the pension fund. This situation has severely hampered the PA’s ability to function, necessitating cash rationing and inhibiting long-term planning and investment. Roughly 85 percent of the budget goes to the wage bill and social assistance, leaving little room for delivery of services or capital investments in critically needed infrastructure and development projects.

The Palestinian economy can only reach its full potential once a resolution on final status is reached. Yet, there is much that can be done now to unlock growth and improve the situation of the Palestinian people. Indeed, finding solutions to mitigate the array of microeconomic and macroeconomic risks described above would have economy-wide benefits. For instance, the International Monetary Fund (IMF) estimates that a significant easing of Israeli restrictions on movement and access would raise projections for annual GDP growth rates from 4 percent to between 7 and 10 percent. Cutting a single day of port storage at Ashdod or Haifa--where containers destined for the Palestinian market can be held up for weeks--would save the Palestinian economy a significant amount of port storage fees per year. Similarly, eliminating fiscal leakages stemming from existing clearance revenue arrangements would have narrowed the PA’s financing gap by more than 50 percent in 2016. In the absence of such measures, the IMF projects a further slowdown in economic growth and, as a result, a continued rise in unemployment.

In addition, with the restricted access to land, industrial zones (IZs) would provide optimal space for developing integrated infrastructure in one place, and would make special logistical arrangements more feasible to apply and control. Not to mention, they would facilitate entry to foreign markets. The projected annual contribution to GDP of existing IZs (once fully operational) exceeds $600 million.

C.3 STRATEGIC LINKAGES AND RATIONALE

C.3.1 Relationship to U.S. Government Priorities

A competitive Palestinian private sector is essential to the USG objective of reaching a peaceful resolution to the conflict between Israelis and Palestinians. USAID’s efforts to develop the economy of the West Bank and Gaza demonstrate the commitment of the USG to providing assistance that helps to improve the lives of Palestinians and contributes to building a more democratic, stable and secure region. Reducing transaction costs related to restrictions on movement and access across WBG will contribute to the development of a more sustainable and vibrant private sector that can readily export, create more employment, and begin to provide the foundations for long-term economic growth and stability for the Palestinian people.

C.3.2 Relationship to Mission Strategy

FASTRAC falls under Development Objective (DO) 2 (“Economic Growth and Infrastructure”) of the USAID/WBG Results Framework,1and contributes directly to Intermediate Results (IR) 2.1 (“Reducing barriers to trade and improving movement and access for people and goods”) and IR 2.3 (“Improving the business and investment enabling environment”) of the mission’s newly approved Economic Growth Project (EGP). To the extent that FASTRAC interventions facilitate reforms that enhance the productivity and competitiveness of Palestinian firms, the contract also reinforces IR 2.2 (“Increasing private sector competitiveness focusing on targeted sectors”).

1 The Results Framework for the USAID/WBG mission includes three Development Objectives (DOs): DO 1: Governance and Civic Engagement; DO 2: Economic Growth and Infrastructure; and DO 3: Human Capital and Social Impact.

C.3.3 Alignment with PA Priorities

FASTRAC represents one of USAID’s core contributions to helping WBG achieve greater economic prosperity and independence, as envisioned in the PA’s National Policy Agenda 2017-2022 (NPA).

FASTRAC is designed to support PA’s 2017-2022 National Economic Plan (NEP). The NEP calls for achieving sustainable economic development by increasing the competitive capacity and productivity of Palestinian productive sectors by furthering the Palestinian economy’s integration into the global economy. The contract particularly supports the following NEP priority interventions:

● Market and trade diversification

● Re-orientation of productive sectors

● Sound public finance

● Macroeconomic policies that foster private sector development

● Legal environment

FASTRAC also aligns with the PA’s National Export Strategy 2014-2018 (NES), whose central aim is to sustainably boost Palestinian exports, tap into new markets, and develop the Palestinian economy. FASTRAC will support each of the NES’s four Strategic Objectives (SO):

● “SO1: To promote a dynamic business environment enabled by a policy and regulatory environment to support innovation and investment in the export sector;

● SO2: To build the capacities of the exporting sector to diversify and penetrate international markets;

● SO3: To maximize the contribution of exports to socio-economic development through enhanced export competitiveness and

● SO4: To build and promote the image of Palestine as a supplier of value-added quality products and services.”

Also important are the Palestinian Industrial Development Strategy 2016-2025 and the Public Finance Management (PFM) Sector Strategy 2017-2022. The former, released by the Ministry of National Economy in November 2016, aims to raise industrial input as a percentage of GDP from less than 14% to 25% by 2025. The latter represents the PA’s roadmap for improving fiscal management, strengthening financial accountability, and enhancing domestic revenue mobilization. In particular, Strategic Objective 3 of the PFM Strategy pinpoints measures and targets for expanding the tax base, improving tax compliance, and reducing tax arrears.

C.3.4 Government of Israel (GOI)

To truly transform the Palestinian economy, existing constraints on movement and access need to be removed or significantly reduced. At the same time, reforms supported through this activity must be designed to reduce risk and build trust with Israeli authorities. In cooperation with USAID, the contractor must coordinate closely, at the technical level, with the GOI, including Coordination of Government Activities in the Territories (COGAT), Israeli Civil Administration (ICA), Israel Customs Administration, Standards Institute of Israel (SII) and other institutions as needed. Areas of coordination with the GOI will likely include issues around import and export restrictions, “dual use” restrictions, crossing points (cargo, labour, vehicles) , permits for Area C access and development, and transfer of customs functions to the PA, among others.

C.3.5 Alignment with Other Donor Assistance

The donor landscape in the West Bank and Gaza is heavily populated, making consultation and coordination essential. Project-specific information can be found at www.ldf.ps. The Contractor must track assistance programs with relevance to FASTRAC. To avoid duplication and to exploit opportunities, the Contractor must coordinate or collaborate with other development partners and USAID activities.

http://www.ldf.ps/

C.3.6 Alignment with other USAID and USG Interventions

FASTRAC will leverage and complement the work of a number of planned and ongoing activities within USAID/WBG’s portfolio. Most notably, the Contractor must work with the pending Accelerated Competitiveness for Enterprises (ACE) to address policy and regulatory issues that raise transaction costs and undermine the economic competitiveness of Palestinian firms. ACE will work primarily through partnership agreements with hundreds of private sector firms -- on a case-by-case basis -- to unlock their economic potential through specific, targeted assistance. ACE and FASTRAC are expected to be awarded within one to three months of one another.

The contractor must work with USAID/WBG’s recently awarded Global Development Alliance (GDA) cooperative agreement with Paltrade, the Palestinian Federation of Industries, the Palestinian Shippers Council, and the Bank of Palestine. The GDA is specifically designed to enhance the Palestinian private sector’s access to information and market intelligence in an effort to raise awareness, reduce trade-related transaction costs and expand opportunities for Palestinian exports. In addition, FASTRAC must work with USAID/WBG’s recently awarded conflict management and mitigation (CMM) cooperative agreement with the Palestinian Shippers Council (PSC). This CMM activity addresses trade facilitation issues and promotes better trade relationships between Israelis and Palestinians.

The contractor must also coordinate with existing or new mechanisms set up by the mission to support the construction or rehabilitation of trade and transport-related infrastructure, including customs and crossing point infrastructure that ease movement and access of goods and people into and out of Palestinian territories. In some cases, USAID/WBG may direct other implementing mechanisms, like the recent Architecture and Engineering Services project implemented by AECOM and the Mission’s construction IDIQs, to procure, design and/or build small-scale infrastructure responding to needs identified by FASTRAC.

Lastly, the contractor may need to coordinate with the U.S. Department of Commerce’s Commercial Law Development Program (CLDP), which is implementing an effort under the Middle East Partnership Initiative (MEPI) to improve intellectual property rights protection and the legal framework for competition.

C.3.7 Previous USAID/WBG Economic Growth Assistance

USAID/WBG has provided dedicated project assistance on trade and economic and fiscal policy issues for more than a decade. FASTRAC’s design draws heavily on lessons learned from several USAID activities—most notably, the Palestinian Integrated Trade Arrangement (2005-2012), the Trade Facilitation Project (2008-2013), the Investment Climate Improvement Project (2010-2014), the Trade Project (2013-2015), COMPETE (2012-2018), the Architecture and Engineering Services Project (2016-2021), the newly awarded GDA programs (2017-2019), and the newly awarded CMM project “Business Without Boundaries” (2017-2020). The Contractor is expected to familiarize itself with these activities - including their achievements and lessons learned. Background information on these activities can be found at the USAID Development Experience Clearinghouse (DEC), at https://dec.usaid.gov. Additional information on these activities and links to other important reports, including the USAID/West Bank-Gaza Mission’s recently completed Inclusive Growth Diagnostic (IGD), are included in an attachment to this solicitation.

C.4 SCOPE OF WORK

The goal of this contract is to reduce commercial and trade-related transaction costs caused by restrictions on movement and access in WBG, thereby removing what represents the most binding constraint to economic growth and job creation in WBG.

Success or progress in reducing these transaction costs is fundamentally linked to the Palestinian private sector and its ability to grow, create jobs, generate revenue, and thereby ensure macroeconomic stability. Therefore, the Contractor will support interventions that enhance trade logistics, reduce the costs of movement and access, create a more conducive enabling environment for trade and investment, improve fiscal sustainability, and support analysis and advocacy efforts that advance reforms and improvements in all of these areas.

The Results to be achieved under this contract are:

● Reduced transaction costs resulting from restrictions on movement and access

● Improved capacity of trade and transport-related infrastructure and services, including customs and trade logistics

● A more conducive enabling environment for business, investment and trade

● Improved fiscal sustainability

In order to achieve these Results, FASTRAC is organized around three components:

1. Barriers to trade, movement and access reduced

2. Business and investment enabling environment improved

3. Fiscal sustainability enhanced

A cross-cutting grants under contract (GUC) facility will support all three components and will be used where the initiative of local organizations and conveners has the potential to extend FASTRAC’s reach or augment its results.

C.4.1 Component 1: Barriers to Trade, Movement and Access Reduced (60%

LOE)

USAID assistance under Component 1 will focus on policy, procedural, technological, and small-scale infrastructure issues that will help to reduce transaction costs, improve trade logistics, and facilitate trade, thereby removing key impediments to private sector investment, growth and job creation.

https://dec.usaid.gov/

Results under this component include:

● Expedited movement of goods and people (e.g. increased cargo traffic and shorter transit time at crossings)

● Improved capacity of the PA to exercise customs functions

Some illustrative tasks are listed below.

● Facilitate the implementation and expansion of D2D to additional crossings and companies

● Improve infrastructure/facilities/efficiency at cargo crossings (e.g., extended working hours; allowing commercial and vehicular traffic at additional crossings;

construction of parking, shaded areas, extra lanes; improved processes/procedures)

● Support the legal, regulatory, and institutional framework for the transfer of customs responsibilities (framework agreement, data interface with Israeli Customs, bonded warehouses, etc.)

● Carry out capacity building for public and private sector stakeholders (e.g.

valuation, classification, standards inspection, professional certification for customs brokers and freight forwarders, support services for “new exporters”)

C.4.1.a Expedited movement of goods and people

Over the past several years, with help from USAID, Israeli authorities have lifted some internal barriers to movement and access and the Israeli Crossing Points Authority (CPA) has taken steps to facilitate trade through the commercial crossing points between WBG and Israel. During the first three years of USAID’s Trade Facilitation Project, efforts to dismantle trade barriers and streamline procedures at the crossing points led to over $70 million in annual cost savings and increased revenues for the private sector. These results were achieved primarily through analysis and advocacy efforts that directly contributed to the easing of specific internal West Bank obstacles, improved access for Israeli shoppers into the West Bank, and improved procedures at the commercial crossing points between the West Bank and Israel. Nevertheless, much remains to be done.

One illustrative task that USAID expects FASTRAC to support is implementation of a successful door-to-door (D2D) shipping program. In June 2017, the Israeli government approved a D2D pilot authorizing three Palestinian exporters to transport goods door-to-door through the Tarqumiya crossing. D2D was intended to eliminate the need for back-to-back transfer of low-risk shipments arriving from low-risk producers into Israel, thus reducing both transport times and the risk of damage to goods from the on- and off-loading process. However, cumbersome GOI procedures for advance registration of trucks and lengthy inspections of D2D consignments have nullified any benefits that the pilot promised. In March 2018, the Israeli government is expected to launch a restructured and improved pilot with fifteen authorized firms.

The U.S. government has placed high priority on resolving any remaining implementation hurdles to D2D and to working with participating firms to comply with the Crossing Points Authority’s (CPA) guidelines. With a D2D arrangement (and the elimination of the B2B process) at Tarqumiya crossing, USAID estimates that the cost to ship a Palestinian container would decrease significantly.

For example, a 50 percent reduction in transportation costs of containers and palletized trucks could save the private sector more than $26 million in a single year. This is a quick estimate provided for illustrative purposes only. In this scenario, the cost of shipping a container is assumed to be $1,360 and the cost for a palletized truck is $550. Commercial traffic through the Tarqumiya crossing is assumed to be 14,400 containerized trucks and 57,600 palletized trucks per year. Actual costs and traffic volume through Tarqumiya crossing may be quite different.

At a minimum, the Contractor will provide analysis, advocacy and technical assistance to support the implementation of D2D in the West Bank and at Allenby Bridge, and to the extent permitted by political and security conditions, in Gaza. As a complement to D2D, the Contractor must develop additional interventions that they believe will contribute to either systemic reductions in transaction costs for Palestinian imports and exports, or substantial cost reductions or benefits for trade in specific goods or services.

C.4.1.b Improved capacity to exercise customs functions

At present, all imports to the West Bank or Gaza passing through Israeli international gateways must first go through Israeli Customs for security inspections, standards checks, classification and valuation, and collection of duties and taxes, which are then transferred, after deductions, to the Palestinian Authority as clearance revenues, sometimes with significant delays. Under the current system, Palestinian importers, while waiting for processing, incur high storage costs at Israeli warehouses without access to their goods.

After years of dialogue, and with broad donor support, a proposal has been made to transfer some customs functions from Israeli Customs to Palestinian Customs. Under the current proposal, following security clearance by Israeli Customs, imports would be released under bond to a Palestinian inland customs point for completion of PA customs processing, including classification and valuation, possible standards checks, and payment of duties and taxes. The proposal is generally referred to as ‘bonded,’ referring to the bonded warehouses that are a key element in the implementation of the transfer of functions, although the term does not encompass the full range of capacities, infrastructure, and legislation that would be required for this handover to succeed.

The transfer of customs functions has the potential to advance progress toward an autonomous WBG trade regime, reduce delays and transaction costs for Palestinian importers, and give Palestinians greater control over both the movement of goods and the majority of their national revenue. It also offers a partial solution to the revenue loss to the PA arising from smuggling, undervaluation, and incomplete information sharing between Israeli and Palestinian customs agencies, as well as handling fees and other charges withheld and retained by Israeli authorities. As an example, in early 2009, the Israeli Customs Department agreed to transfer to the PA the functions of post-clearance valuation and revenue collection for used car imports. This represented the first such transfer of valuation responsibility to the PA.

While customs transfer presents an important opportunity, it could also have devastating consequences for the PA and the private sector if not well designed and properly phased.

The PA has major gaps in capacity, systems, and legislation that would challenge its ability to exercise customs and trade facilitation functions. Among the most immediate risks is the lack of an interface for data exchange between the Automated System for Customs Data World (ASYCUDA World) platform currently used at PA Customs and Israeli Customs’ new computer system (“Global Gate”). Systems deficiencies are compounded by a lack of customs officers with the training and experience to execute the customs functions that will be transferred to them. Without addressing these gaps and working with the PA on a phased and responsible implementation approach, this initiative could lead to reductions in the PA’s most important revenue source and costlier import processes for the private sector.

The Contractor is expected to work with the GOI, the PA, and other stakeholders to advance the dialogue on customs transfer, including negotiations on the terms of a framework agreement and the roles and responsibilities of each side. The Contractor will need to coordinate closely with a number of international community partners --including the Office of the Quartet (OQ), World Bank, European Union, IMF, and the U.K.’s Department for International Development.

C.4.2 Component 2: Business and Investment Enabling Environment Improved

(20% LOE)

The Ministry of National Economy (MONE) has made important strides for economic reform in recent years. These reforms, including the updating of laws, regulations, and procedures, have been credited with creating an environment more conducive to doing business. Nonetheless, while the Ministry has acted on several reforms, regulatory hurdles continue to discourage start-up companies. Administrative burdens and costs remain high; and the time spent to properly register and run a business is excessive.

Foreign direct investment (FDI) is discouraged by a regulatory structure that is inconsistent and confusing. Furthermore, the MONE continues to struggle with implementation, lacking the proper organizational structure and capacities necessary to facilitate trade, investment and commerce.

The PA has been working to strengthen the MONE and other trade-related institutions to perform trade policy responsibilities. However, much remains to be done to bring the Palestinian trade regime into increasing conformity with the requirements of multilateral trade frameworks. This includes reforms to bring customs and trade rules and procedures in line with the World Trade Organization’s (WTO’s) 2013 Trade Facilitation Agreement

(TFA), which encapsulates standards for the movement, release and clearance of imports, exports and goods in transit. By necessity, this will require intensive coordination and engagement with both Palestinian stakeholders and with Israel, which is a party to the TFA. It will also have implications for Palestinian customs and other trade-related institutions, which will need the capacity, technology, infrastructure, and legal basis to execute clearance functions and set and enforce the technical (TBT) as well as sanitary and phytosanitary (SPS) standards necessary to expand WBG’s access to the world market.

This component is anticipated to be smaller than Component 1 and the contractor will engage only when it is clear that USAID assistance can have a demonstrable impact on trade facilitation or improving the business and investment enabling environment. For example, it is expected that most of these efforts will result in legal, institutional, and regulatory changes that improve selected reform areas captured in the World Bank’s annual Doing Business report. The inputs required may include technical assistance delivered by embedded advisors and/or short-term advisors and training.

Results under this component are as follows:

● Greater ease of doing business

● Increased compliance with multilateral trade frameworks

● Support implementation of the TFA and WTO-compatible policies for SPS, TBT, etc.

● Enhance PSI cooperation with Standards Institute of Israel (SII), other standards bodies, and private labs on quality assurance concerns (standardization, testing, certification, etc.)

C.4.3 Component 3: Fiscal Sustainability Enhanced (20%LOE)

Macroeconomic conditions also pose an important potential constraint to the Palestinian business and investment enabling environment. Despite a marked decline in the fiscal deficit in 2016, the PA continues to face persistent financing gaps that limit its ability to pay down arrears and invest in the economy. In the context of declining international support, the PA will be compelled to draw further upon the nearly insolvent pension fund, delay payments to private sector providers of goods and services, and borrow more from local banks to meet fixed costs. Failure to pay 156,000 employees their monthly salary, or fund current purchase levels of Israeli water and electricity, could trigger widespread unrest or a humanitarian disaster.

The PA has made some strides in the right direction, including the establishment of a Large Taxpayers Unit (LTU) in the Ministry of Finance (MOF), the launch of a revenue management system (RMS), and efforts to register professionals and bring other non-filers into the tax net. However, foundations are not complete. The LTU has not been completely formed; risk management principles are understood but not readily embraced;

and integration of tax administration along functional lines has been recognized as a reform direction, but not yet fully adopted. Moreover, despite years of dialogue among the PA, GOI, and the international community, fiscal leakages arising from the Paris Protocol arrangements remain a source of considerable revenue loss for the PA. The PA has outlined several priorities for mitigating these leakages, including electronic sharing of value-added tax (VAT) invoices, reduction of the 3% handling fee, and overall improvement of the revenue clearance process that currently exists between the PA and GoI. Separately, the MOF, in its PFM Sector Strategy 2017-2022, has mapped out an action plan for improving the collection of public revenues, including through measures to expand the tax base, increase tax compliance, and reduce tax arrears.

FASTRAC support under this component will focus on high-impact interventions that will assist the PA’s MOF to improve revenue mobilization, reduce fiscal leakages, and enhance fiscal sustainability, thereby decreasing…