RFP 294-2011-204 Amendment No. One.pdf

RFP 294-2011-204, Enterprise Development for Global Competitiveness Project – (The Competitiveness Project) Amendment No. One (1)

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), Office of Private Enterprise (PEO), supports the goal of establishing a sovereign, independent, viable, democratic, and contiguous Palestinian state, living side by side in peace and security with Israel. The development of a prosperous private sector, economically integrated into the global economy, is a vital component of that effort.

The purpose of this contract is to improve access of small and medium-sized Palestinian firms to the global economy through strengthening the competitiveness and export potential of at least four sectors essential to the future prosperity of the Palestinian economy.

The following represents the four priority sectors:

1. Agriculture and Agribusiness

2. Stone and Marble

3. Tourism

4. Information Technology

The contractor shall provide technical assistance and grants within these sectors and to business support organizations to improve exports, income, and employment in these sectors and in the overall Palestinian economy.

B.2 CONTRACT TYPE

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

B.3 ESTIMATED COST, FEE, AND OBLIGATED AMOUNT

(a) The estimated cost for the performance of the work required hereunder for the base period , exclusive of fixed fee, if any, is $TBD. The fixed fee, if any, is $TBD. The estimated cost plus fixed fee, if any, is $TBD.

(b) The estimated cost for the performance of the work required hereunder for the option period

(if exercised), exclusive of fixed fee, if any, is $TBD. The fixed fee, if any, is $TBD. The estimated cost plus fixed fee, if any, is $TBD.

(c) Within the estimated cost plus fixed fee (if any) 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 $TBD. The Contractor shall not exceed the aforesaid obligated amount.

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

B.4 BUDGET LINE ITEMS

Cost Element: Base (36 months) Option (24 months)

Salaries and Wages $________ $ _______

Fringe Benefits $________ $ _______

Consultants $________ $ _______

Subcontracts $________ $ _______

Travel, Transportation, and Per Diem $________ $ _______

Equipment and Supplies $________ $ _______

Allowances $________ $ _______

Other Direct Costs $________ $ _______

*Renovations/Rehabilitation $ 6,000,000 $ 4,000,000

*Program Costs (trade shows, workshops, etc.) $ 5,600,000 $ 3,400,000

*Grants Funds $ 3,500,000.00 $ 2,500,000.00

Indirect Costs $________ $ _______

Total Estimated Cost $________ $ _______

Fee $________ $ _______

Total Est. Cost plus Fee $________ $ _______

*The Contractor may not reduce the amount associated with the three designated costs elements without the prior written approval of the Contracting Officer.

B.5 INDIRECT COSTS

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:

3/Base of Application:

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:

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 shall 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. The application of the following clauses (incorporated by reference in Section I) is as follows:

B.8 PAYMENT OF FIXED FEE

Subject to FAR 52.216-8, Fixed Fee, if applicable, payment of fixed fee shall be allocated based upon the proportion of the level of effort (LOE) specified in Section F.5 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.5, the total amount of fixed fee will be reduced in similar proportion.

[END OF SECTION B]

SECTION C

DESCRIPTION/SPECIFICATIONS/STATEMENT OF OBJECTIVES

Enterprise Development for Global Competitiveness (EDGC) Project – The

Competitiveness Project

ACRONYMS

ADS Automated Directives System

BIP Branding Implementation Plan

BSO Business Support Organization

BSP Business Service Providers

CCN Cooperating Country National

CO Contracting Officer

COB Close of Business

COP Chief of Party

COTR Contracting Officer’s Technical Representative

DCOP Deputy Chief of Party

EDIP Enterprise Development and Investment Promotion project

ESAF Expanded and Sustained Access to Financial Services project

Geo-MIS Geographic Management Information System

ICI Investment Climate Improvement project

ICT Information, Communication and Technology

IDF Israeli Defense Force

IT Information Technology

LOE Level of Effort

M&E Monitoring and Evaluation

MP Marking Plan

MSME Micro, Small, and Medium Enterprises

NIH National Institutes for Health

PA Palestinian Authority

PAPA Palestinian Agriculture Partnership Activity

PEO Private Enterprise Office

PMEP Performance Monitoring and Evaluation Plan

PPIRS Past Performance Information Retrieval System

PSA Public Service Announcement

RMP Rapid Mobilization Plan

SME Small and Medium Enterprises

SOW Statement of Work

TA Technical Assistance

TCN Third Country National

TFP Trade Facilitation Project

U.K. United Kingdom

U.S. United States

USAID United States Agency for International Development

WBG West Bank and Gaza

I. PURPOSE

The United States Agency for International Development in West Bank and Gaza

(USAID/WBG) supports the goal of establishing a sovereign, independent, viable, and democratic Palestinian state, living side by side in peace and security with Israel. The development of a prosperous private sector, economically integrated into the global economy, is a vital component of that effort.

The project aims to strengthen the competitiveness and export potential of at least four sectors essential to the future prosperity of the Palestinian economy. The Contractor shall provide technical assistance and grants within these sectors and to business service organizations that support these sectors to improve sales, income, and employment in these sectors and in the overall Palestinian economy.

The following represents the four priority sectors:

1. Agriculture and Agribusiness

2. Stone and Marble

3. Tourism

4. Information Technology

II. BACKGROUND AND CONTEXT

Relationship of Enterprise Development and Global Competitiveness (the Competitiveness

Project) to other USAID Activities:

USAID’s Private Enterprise Office (PEO) is currently implementing four major projects.

Assistance to the Palestinian Authority to improve the investment climate, particularly in the area of international trade, is provided by the Investment Climate Improvement (ICI) Project. PEO develops the financial system and improves access to financial services, especially for small and medium enterprises, through the Expanded and Sustained Access to Financial Services (ESAF)

Project, which is scheduled to end in September 2011. The Trade Facilitation Project (TFP) works with Israeli and Palestinian authorities to ease the movement of goods and people. In addition, USAID is currently implementing a three-year project to develop a broad range of

Palestinian enterprises through the Enterprise Development and Investment Promotion (EDIP)

Project, scheduled to end in September 2011. The Enterprise Development and Global

Competitiveness Project (The Competitiveness Project) will coordinate closely with all continuing projects.

The continuing major projects in PEO’s portfolio are as follows:

1. Trade Facilitation Project (TFP) Trade and movement restrictions are among the most critical constraints on Palestinian competitiveness, international investment, and overall economic development. Checkpoints and other obstacles within the West Bank restrict movement and result in transfer delays and higher transaction costs which affect the economic vitality of the entire private sector. Cargo flows between the West Bank and Israel face extensive delays and high transport costs because goods must be transferred from Israeli to Palestinian trucks at the crossings.

2. Investment Climate Improvement Project (ICI) The Investment Climate

Improvement Project (ICI) works with the Ministry of National Economy, the

Ministry of Finance, and other ministries, as appropriate, as well as with governorate and municipal officials and private-sector associations to analyze reforms, to identify obstacles to reform, and to develop a multi-year strategy to improve the enabling environment for business, investment, and trade.

III. STATEMENT OF WORK

A. Background and Rationale

The Palestinian economy stands on the threshold of an enormous opportunity for integration into world markets. The disruptions of the second Palestinian Intifada (uprising) and the Israeli

Defense Force’s (IDF) imposition of security closures seriously hampered the ability of

Palestinian producers to realize gains from trade. With the advent of the Fayyad government in

2007 and the relaxation of Israeli security constraints, the business environment improved considerably. The revamped Palestinian security forces have successfully improved security in the West Bank. Israeli authorities have lifted a number of internal barriers to movement and access, and the Israeli Crossing Points Authority has accepted a ―known trader‖ program to facilitate international trade. All of these contributed to a more positive environment for the

Palestinian economy. The Palestinian Authority (PA) is moving to improve its position vis-à-vis the international economy by undertaking--with USAID assistance--the necessary reforms to achieve observer status in the World Trade Organization. Reflecting this improved business climate, equity and debt financing are now more readily available. In short, the preconditions for an economic ―take off‖ in the West Bank are now in place. Assuming that the political climate remains stable, there exists an important opportunity to improve the Palestinian economy.

A limited number of larger Palestinian firms have taken advantage of these new prospects in the international market. However, small and medium enterprises (SMEs), which employ many more Palestinians, have been less able to benefit. Long isolated by closures and permit restrictions, with limited first-hand knowledge of and contacts in international markets, these firms relied on servicing the small, domestic Palestinian market (and since 2007, the even smaller West Bank market) and on direct sales, often of raw materials and semi-finished products, to Israeli purchasers.

The Competitiveness Project intends to accelerate the process of linking Palestinian SMEs to international markets to take advantage of emerging global market opportunities.

B. Input from the Private Sector and Government Counterparts

USAID hosted an Economic Development Conference in Jericho on December 7, 2010 to solicit a broad range of input from public and private sector stakeholders for future USAID enterprise development activities. Both private and public sector participants noted the leading role of

USAID in private sector development. While the conference elicited a large number of suggested activities for each sector, the following are among the most important broad recommendations (see attachment J-6 for the Jericho conference report):

Sector strategies shall be developed in coordination with principal counterparts.

Conference participants expressed the view that USAID strategies have been insufficiently coordinated with the sector associations and other knowledgeable counterparts.

Capacity building and training shall play a more prominent role in sector development programs. Participants in several areas noted the shortage of appropriately trained professional and skilled workers. The need to tailor skills training to the needs of industry is especially important in a small open economy, such as Palestine.

Donor coordination shall be more proactive and organized.

USAID commissioned an assessment of the current business environment and previous enterprise development projects. This assessment and its recommendations are included as

Attachment J-1.

C. Design and Approach

The proposed Competitiveness Project is designed to build on the strengths of previous PEO enterprise development projects, with due consideration to input received from the PA and the private sector, and addressing the concerns raised by the assessment team. It will be a three-year project with an option to extend for two additional years that will provide a combination of market information, innovative solutions to unique constraints on Palestinian businesses, technical assistance, and training to Palestinian SMEs and business associations. The primary objective is to address sectorial gaps and that will enable Palestinian enterprises to identify and exploit significant economic opportunities, primarily in the international market. The contractor shall target Palestinian firms with good potential for growth that can expand the country’s export revenues and increase employment, particularly of young people.

In order to be effective, the new project must utilize a strategic approach to the development of enterprise in the West Bank and Gaza. From the beginning, the project implementer must work closely with sectorial associations to develop a compelling strategy for how Palestinian enterprises in identified subsectors will be transformed into global competitors during the life of the project. A comprehensive approach to the development of specific industries must be used along with targeting firms that have good potential to be competitive in the short run.

It is particularly important that each sub-activity have specific targets and bench-marks against which progress can be measured on a continuous basis. Continuous monitoring of a limited number of key indicators will be used to develop implementation tactics and strategies. For all subsectors indicated below, sales and employment data will be monitored, as will other indicators that measure project impacts specific to each subsector (e.g., exports, production levels, costs, employment of youth, product quality, and new providers of business services).

Approaches to developing new markets will be evaluated on a quarterly basis against anticipated results to ensure that approaches are fundamentally sound. Failure to hit bench-marks will trigger a standardized review process to validate approaches, lead to corrective actions, as necessary, and will inform the decision as to whether or not to exercise the two-year option period. Implementation decisions must reflect best practices, and determinations must be made as to the success of methodologies being used so that corrections identified by the contractor and approved by USAID can be made to assure success.

The primary focus of the Competitiveness Project will be to improve access to markets for

Palestinian SMEs and enable these firms to better meet market requirements through improved design, quality, packaging, etc. A secondary focus will be to improve access to services through the development of local business associations and business service providers. Finally, as long as Gaza remains isolated from world markets, the Competitiveness Project will work with firms in Gaza to enable them to restore and maintain their ability to remain in business and, ultimately, to return to the international market. However, in cases such as in Information Technology (IT), where firms in Gaza can participate in and benefit from the program, the project framework will be structured to include firms in Gaza and address the unique challenges of supporting them.

Since the Investment Climate Improvement (ICI) project is charged with improving the enabling environment, any work done by the Competitiveness Project on the enabling environment vis-à-vis Palestinian enterprises will be coordinated with that project. Accordingly, the

Competitiveness Project will consist of two interrelated components, as described below.

1. Component A: Assistance to Palestinian Enterprises to become Competitive in

Global Markets

Component A will focus on at least the four most important economic sectors in the West Bank and Gaza. The purpose is to help small and medium enterprises in these sectors to become more competitive, to increase their exports in regional and international markets, and for Palestinian businesses to serve a larger share of the local market.

The West Bank and Gaza has a small population of four million people (2.5 million in West

Bank and 1.5 million in Gaza), so its prospects for economic growth require that Palestinians look to export products and services outside its borders. Some of this is taking place already, but on a relatively small scale and confined to a small number of enterprises. The Competitiveness

Project will accelerate this global engagement in order to maximize the benefits of increased trade to a larger number of Palestinian workers and firms.

The assessment team found that the four priority sectors of the EDIP project, agriculture and agribusiness, stone and marble, tourism, and information technology, continue to be the most promising sectors for engagement in the global economy, although each presents unique challenges (please see Attachment J-3 for the quarterly reports of the EDIP project). The

Competitiveness Project will differ from previous PEO enterprise development efforts in the following ways:

Sub-activities to improve specific value chains will be developed in close coordination with sector associations and, where appropriate, PA agencies, based on their potential to increase export revenues and youth employment.

Before undertaking a sub-activity, the contractor shall articulate to USAID and the associations a specific ―development hypothesis,‖ setting out the results to be anticipated, the periodic bench-marks that will be used to ensure that the hypothesis and its assumptions are correct, and the timing within which those results are expected to be achieved.

Activities within each sector will be led by a sector leader with broad and high-level international expertise in production, logistics, and marketing in that sector.

The contractor shall place much less emphasis on equipment procurement, although the introduction of equipment embodying new and innovative technologies may still be a part of specific sub-activities, particularly in cases where these investments are viewed as high-risk by the private sector.

In all sectors, the contractor shall place a heavy emphasis on coordinating sector skill needs with Palestinian training institutions, to assure that the current labor force and new entrants have the skills necessary to meet the needs of the sector. The contractor shall work with sector associations to assess skills needed by the sectors and the adequacy of the skills of recent graduates. It will organize meetings between sector associations and the relevant educational and training institutions and help them present their requirements.

a. Agriculture and Agribusiness

The Jericho private sector conference produced numerous recommendations for USAID programming in agriculture. Although many of these greatly exceed USAID's resources, some are particularly relevant to the new project. These include requests that USAID improve its consultation and coordination with local stakeholders, a concern about excessive grants to large producers, a concern that donors have placed excessive emphasis on food security rather than commercial agriculture, and a specific concern that USAID help address the problem of wide fluctuations in the prices of fresh produce produced for export.

Despite Palestine's relatively high labor costs, a combination of climate and good transportation links uniquely position Palestine to export fresh fruits and vegetables to European markets.

Since the Palestinian Agriculture Partnership Activity (PAPA) project from 2005-2009, the promotion of fresh produce exports has been a central focus of PEO’s agricultural strategy.

Despite problems discussed in the private sector assessment, chiefly with achieving export quality and dealing with export price fluctuations, the export of fresh produce still appears to be a promising area for further Palestinian development.

Five impediments to increased exports of fresh produce have been identified:

Lack of market information and logistical problems.

Use of older and less efficient production techniques.

Absence of personnel with needed technical skills.

Problems meeting export quality standards, leading to a lack of export-quality supply.

Uncertain and fluctuating prices for export products, combined with a strong risk aversion among Palestinian agricultural producers.

At this point, the last two appear to be the most binding constraints. The Contractor will continue to work with farmers and associations to provide technical assistance to bring production consistently up to export standards. The contractor shall also continue the work of

EDIP with the Ministry of Agriculture to address producers’ concern about price fluctuations.

The project, under the direction of its agriculture technical lead, will continue to identify fresh products that may find a profitable market abroad.

In addition to fresh produce exports, the contractor will work with associations to identify other areas, such as processed foods, with a potential for export. The recent growth of processed foods exports indicates a higher potential for this segment than had been anticipated under prior projects. Processed foods are less sensitive to quality variation in their inputs and have more stable export prices. However, price competitiveness for these products is a more critical issue, given Palestine’s relatively high labor costs.

Activities targeting agriculture and agribusiness will result in the following during the base period:

Pilot projects initiated to show demonstration effects are being replicated at equal or higher levels without further project support.

Palestinian exports of fresh vegetables, fruit, and herbs to non-Israel destinations have increased significantly. By way of comparison, there are currently about 200 dunums

(about 50 acres) of vegetables exported; about half of this is from USAID’s current enterprise development project. There are currently about 250 dunums of herbs exported.

It is estimated that 3,000 of the 50,000 dunums under cultivation in the Jordan Valley have good export potential. The political environment permitting, project interventions shall substantially increase these exports by several-fold the current amounts.

Palestinian exports of processed foods (e.g., dates, olive oil, and pickles) to non-Israel destinations have increased significantly. By way of comparison, currently one company alone exports about 50 percent of Palestinian olive oil (total exports valued at about $10 million).

Palestinian food processors have increased domestic market share significantly.

Currently, over 70 percent of the local market is supplied by Israel. By the end of the base period, and the political environment permitting, significant inroads will have been made by Palestinian agribusiness in capturing the local market.

Should the two-year option period be exercised, and with the momentum generated from activities during the base period, USAID anticipates an approximate doubling of the results from the base period.

b. Stone and Marble

Exports of rough-cut Palestinian stone and other stone products have long been an important source of employment and income in the West Bank. The stone sector currently contributes $100 million to the Palestinian economy, a substantial decrease from 2001, when the sector had sales of $600 million. The stone sector employs 15 percent of the West Bank labor force and has among the highest wage rates for unskilled labor in the Palestinian economy.

The contractor shall work with the sector association to develop and market new, value-added products, as well as to address environmental issues (primarily water use) associated with stone production. As with the other sectors, sub-activities will be developed in coordination with the sector association to develop new products that will increase export revenue and employment for young Palestinians.

Project activities in the stone and marble sector will consist of a combination of product development and product promotion activities. Although the situation has changed somewhat recently, a large part of the output of the sector consists of rough-cut stone, which is finished either in Israel or abroad. The strategy for the sector will likely be to increase the proportion of finished product produced in Palestine. This will require a ―value chain‖ analysis to identify products that can be produced profitably in Palestine, leading to a plan to produce such products.

An important element of such a plan is likely to be the identification of skills requirements for producing new products. As in the other sectors, the contractor shall work with Palestinian training institutions to mold curricula in order to meet industry requirements.

The stone and marble industry faces particular environmental constraints related to water uses and wastewater disposal. At each stage the contractor shall be sensitive to these constraints and will work with the industry association and the Palestinian Authority to address them.

Activities targeting the stone and marble sector will result in the following during the base period:

Value-added exports per unit to Israel have increased significantly.

Exports to non-Israel destinations have increased significantly.

activities during the base period, USAID anticipates an approximate doubling of the results achieved during the base period.

c. Tourism

Palestine receives over one million visitors each year. However, many of these stay for only a few hours and the revenue and employment benefit to the Palestinian economy is correspondingly lower than for regional counterparts. The Jericho conference produced recommendations that USAID help the sector develop a coherent, unified tourism strategy, that joint tourism activities be developed with Jordan, that tourism efforts in the West Bank and East

Jerusalem be more closely coordinated, and that less emphasis in the future should be placed on visitors from the U.S. and the U.K.

Palestine currently receives two large streams of foreign visitors: religious tourists visiting

Christian sites, and Israeli Arabs and Palestinians residing abroad visiting Palestine for a variety of family and other reasons. Neither of these streams generates large amounts of tourism employment and revenue. The objective of the project will be to expand the value added from these two existing streams of visitors, while engaging in strategic tourism promotion and site development to expand the number of visitors and the money that they spend in Palestine.

One obstacle to tourism development is the absence of a unified institutional voice for the tourism private sector. Rather, the sector has four private associations, representing hoteliers, tour guides, tour operators, and alternative tourism operators. Not surprisingly, each of these associations advocates for the particular needs of its members, rather than for the development of the tourism sector as a whole.

In developing its tourism strategy, the contractor will look to the lessons to be learned from

Jordan in developing and implementing its tourism strategy. One focus of the project, under the leadership of an internationally qualified tourism sector leader, will be to attempt to organize public and private-sector actors in the sector behind a unified tourism strategy. Ultimately, this should take the form of a national tourism promotion agency, which would be responsible for marketing the Palestinian tourism brand. However, the development of such an agency, which must be led by the private sector, will depend on the support for it within the private and public sectors.

Successful development of the tourism sector will require a major effort to improve skills at all levels of the sector. This will require a cooperative effort involving the Ministry of Tourism and

Antiquities, educational and training institutions, and the private sector to expand the supply of appropriately trained personnel with the full range of skills required by the tourism and hospitality sector, including for hotels and other lodging establishments, restaurants and other eating establishments, and touring and tour guide professionals .

Another essential element of the tourism development approach will be the development of additional tourism sites. Currently, the vast majority of religious tourists confine their visits to brief visits to the religious sites in Bethlehem. Since tourists often visit Bethlehem and then return to Jerusalem, they often spend little or no money in Palestine. The tourism strategy must be to induce these visitors to spend more time in Palestine, visiting alternative sites, eating in local restaurants, staying overnight in Palestinian hotels, hiring Palestinian guides, and buying

Palestinian souvenirs. Much site development under the project will take the form of non-infrastructure development (interpretive plaques, brochures, illustrations of the site at various dates, new technologies for information display at sites, and minor site renovation). Longer tourism stays will also result from leveraging Palestinian culture and presenting it in ways that attract tourists.

Site development will also extend beyond religious sites to nature areas and areas of archeological interest, in order to expand the range of Palestinian tourism. It must be recognized, however, that the numbers of these ―new‖ tourists will likely be small, at least initially.

However, the numbers of nontraditional tourists could grow rapidly, particularly if linkages can be established with Jordanian tourism.

Site development efforts include the development of minor infrastructure (access roads, parking lots, visitor centers with restroom facilities, perimeter fences, walkways, etc.) which are discussed and elaborated in Attachment J-2. Two types of infrastructure activity are anticipated.

Most will consist of ―light‖ infrastructure, such as archeological interpretation, shade and shelter of sensitive sites, and other installations necessary to improve the tourism experience at high priority sites. Additional infrastructure needs, such as access roads, parking lots, and waste water management, if identified by the project’s contractor during implementation and endorsed by USAID, will be designed and implemented under one of the Mission’s infrastructure contracts.

The Palestinian National Plan 2011-2013 emphasizes the rehabilitation of archeological and cultural heritage sites, and the establishment of information centers. USAID/WBG has consulted the Ministry of Tourism, tour operators, and hoteliers and considered the number of visitors to each site in the period before the first Intifada. Based on these consultations, a list of ten potential tourism sites was compiled and is included as Attachment J-2.

By the end of the base period, activities targeting the tourism sector will result in the following:

In 2010 there were about 900,000 overnights in Palestinian hotels, an increase from about

800,000 in 2009. With a conducive political environment, project interventions must be able to give a significant boost to this growth.

Tourism revenues in Palestine have increased substantially.

Average expenditures per visitor are currently about $1,530. In addition, many tourists visit Bethlehem, which is by far the leading tourist site, spending only a few hours in

Bethlehem, and spending little in the local economy. By increasing the length and diversity of tourist stays, per tourist spending shall increase significantly by project end.

Tourist visits have increased substantially at sites other than Bethlehem and Jericho.

activities during the base period, USAID anticipates an approximate doubling of the results from the base period.

d. Information Technology

The Jericho Economic Development Conference identified numerous priorities for the information technologies (IT) sector. Previous PEO projects have been addressing some of these, and have been successful in expanding the foreign sales of the Palestinian IT sector.

Under the leadership of a technically qualified sector leader, the contractor shall continue the successes of prior projects in developing the Palestinian IT sector. Chiefly, this will require a three-pronged effort, with involvement of the Palestinian IT association. The first will foster contacts between international and Palestinian IT firms. USAID has been particularly successful in developing business relationships between Palestinian firms and Israeli branches of U.S. IT firms. In addition, USAID has had some success in promoting contacts between Palestinian IT firms and U.S. firms directly through participation in trade shows. The contractor will continue to promote international market connections through both of these avenues, working with the industry association.

The second prong is the expansion of the capabilities of second-tier IT firms to enable them to compete successfully in international markets. This will involve assistance in the technical and business requirements needed to compete in the global IT environment.

The third prong will be to assure that personnel with the requisite technical skills are available to enable Palestinian firms to be internationally competitive. This will involve working with

Palestinian universities and technical training organizations to upgrade the skills of the existing workforce and to insure an adequate preparation of new labor-force entrants. It will also involve developing close collaboration between the private sector, including the industry association, and these institutions so that the curriculum reflects the rapidly changing market for IT services.

The Jordan experience is instructive, where revenues grew by 150 percent between 2001 and

2004. In 2000 IT employment in Jordan was just over 2,000 jobs, which rose to almost 11,000 jobs by 2010. Although the Palestinian IT sector is relatively small, in absolute terms its potential for expansion is considerable, given the growth of the global IT market. The IT sector is especially important as a potential employer of young university graduates.

Activities targeting the IT sector will result in the following during the base period:

In 2010 Palestinian technology companies had about $12 million in exports. By the end of the project, revenues of Palestinian small- and medium-sized technology companies and their exports have increased substantially.

e. Activities envisioned under this component include the following:

1. During the first 60 days of project implementation, conduct a review an assessment in coordination with the appropriate sectorial associations and government agencies as appropriate, of those subsectors (―value chains‖) in the four priority sectors (agriculture and agribusiness, tourism, information technologies, and stone and marble) that have the most potential for export and employment growth and propose value chains for inclusion in the program in each of the four sectorial areas. USAID and the project implementer will agree both on specific value chains and on results to be achieved. This process will benefit from analyses conducted by previous USAID and other donor projects as well as project implementation documents and will permit this initial phase of project implementation to be conducted in an expeditious manner.

2. Potential interventions to implement the project may include the following. From prior experience, USAID anticipates that many of these interventions will be required.

However, the contractor will identify the appropriate mix of these, and possibly other interventions, to achieve anticipated results.

a. Hiring short-term technical experts with international marketing experience in specific industries and local specialist in order to provide technology transfer of expertise to both project implementers and Palestinian businesses.

b. Facilitating market linkages between Palestinian businesses and buyers in international markets through marketing contacts and market information.

c. Assist individual firms to update product designs, improve quality, improve packaging and labeling, and take other measures to make their products more competitive globally.

d. Conducting seminars and workshops on meeting international standards required to export to global markets.

e. Providing intensive training through study tours for a select number of Palestinian business persons to acquaint them with international markets in targeted products or services.

f. Organization of participation in select trade fairs on a cost-share basis in order to increase the knowledge of Palestinian business persons in international markets of targeted industries.

g. Promotion of partnerships between Palestinian and Israeli businesses where feasible for their mutual benefit.

h. Promotion of partnerships between Palestinian and multinational corporations to promote linkages and contracts.

i. Increased use of information technology by Palestinian SMEs to enhance efficiency and quality of products and services.

j. Assistance to Palestinian firms in obtaining finance through credit or equity capital to permit them to grow and expand.

k. Assistance to workforce development programs to link curriculum and graduates to jobs in Palestinian companies after graduation.

l. Direct grants to individual firms to acquire innovative equipment necessary for the introduction of new products or processes. Each grant must be justified based on employment impact, revenue generation potential, gains in technology transfer, and other development criteria. In each such case, the grantee must agree in writing to share the experience with such equipment with other producers and to freely allow other producers access to view the operation of such equipment.

3. For each value chain at least once each quarter, the implementer will meet with USAID to compare results being achieved compared to expectations when the value chain was selected. Agreement will be reached with USAID on appropriate adjustments to be made to the activity. This review will consider not only the implementer’s progress in carrying out its efforts, but the degree to which beneficiary firms, associations, and government agencies are acting as anticipated and achieving the results anticipated.

Expected results

Results expected to be achieved under this component are indicated for each sector above. In addition to these, the following indicators will be tracked through the

Performance Monitoring Plan of the project:

a. Increased revenues for Palestinian firms.

b. Increased employment of youth (under 30 years).

c. Increase in both new and improved Palestinian products and services.

d. Increase in quality of Palestinian products.

e. Increased added value by Palestinian firms for products exported to Israel and beyond.

f. Increased market share of Palestinian products and services in West Bank and

Gaza.

g. Improved image of Palestinian products and services in the local and global marketplace.

h. Increased number, reliability, and dependability of relationships between

Palestinian firms and Israeli and international buyers.

i. Increased number of international markets for Palestinian products and services.

j. Increased employment in firms targeted by the Competitiveness Project disaggregated by gender and age.

2. Component B: Assistance in the Development of Palestinian Business Support

Organizations

Component B aims to strengthen Palestinian business associations and to expand the local provision of business services to Palestinian enterprises.

Business Support Organizations (BSOs) are an important part of any economy. They serve a variety of roles and include a broad array of public and private sector entities. They include business associations, business service providers (BSPs) of all types, educational institutes, and others. Through Component B, the contractor will work to improve the capacity of those businesses and associations critical to the sectors and subsectors that are the focus of the activities in Component A.

By the end of the project, activities targeting BSOs will have achieved the following:

Business associations representing the Palestinian private sector in general and the four sectors identified in this statement of work in particular are more responsive to members’ needs and more self-sufficient;

Increase in the provision of business services to local businesses.

a. Business Associations

Component A describes how the contractor will work with sector associations as a means to identify and then exploit business opportunities in each sector. To be effective in this role, however, many of these associations will require general support to improve their capacity and management. In the tourism sector, in particular, the contractor will seek to promote a

Palestinian Tourism Board to coordinate public and private sector efforts to promote the

Palestinian tourism product.

USAID experience in many other countries, however, has indicated that it is essential that business associations have a high level of support from the private sector itself. The contractor will, therefore, confine its institutional support to associations where this requisite level of support is evident.

b. Business Service Providers

Business service providers, although often outside the ―sectors‖ as usually defined, constitute an essential element of every export-oriented value chain. As with business associations, business service providers, such as transport companies, accounting service providers, packaging companies, printing companies, information technologies services directed toward the domestic market, and others, are essential to the development of export industries, and collectively may provide the majority of the employment and value added. In the analysis of the value chains in each of the four sectors of Component A, the contractor will examine the need for and opportunities in the development of these ancillary business services.

c. Illustrative activities envisioned under this component include the following:

i. As project implementation of the workplan for Component A progresses, the project implementer will determine which BSOs have potential value in maximizing the returns from project efforts. Decisions on this issue must be directly related to the usefulness and viability of providing support to those BSOs. When the decision is affirmative, the project implementer will determine whether to help support an existing BSO or if the potential exists to create such a BSO that currently does not exist in WBG. The support to these BSOs will be light and shall only be tied to specific deliverables.

ii. Potential interventions to implement the project may include the following:

a. Support business associations that are viable and can add value to the efforts to increase global competitiveness, through targeted grants to provide specific services and deliverables.

b. Provide short-term and targeted technical assistance and training on improving the operations of business associations and BSPs that are directly relevant to Component A, based on an assessment of needs and realistic potential for overcoming shortcomings.

c. Assist a local, private BSP to develop specific services that are needed to address a specific constraint to global competitiveness and to provide a commercially viable method to deliver those services.

Expected results:

The results expected to be achieved under this component will be tracked through the

Performance Monitoring Plan for the base period as follows:

i. Increased use of BSOs by Palestinian firms to resolve constraints to global competitiveness of specific products and services targeted by the project.

ii. Increased use of BSPs by Palestinian firms in acquiring needed services to improve such things as packaging, branding, and marketing of products and services.

iii. Increased use of business-to-business services in the areas of accounting, transport, ICT, and other services.

iv. Increased financial viability of BSOs providing needed services for Palestinian firms competing in the global marketplace.

2. Assistance to Firms and Associations in Gaza

The enterprise development problem in Gaza is very different from that in the West Bank.

While the West Bank faces numerous opportunities in the global market, the private sector in

Gaza continues to struggle with hampered access to international markets. With the recent Israeli relaxation of export restrictions, some opportunity for engagement with the world economy will again become possible. However, many Gaza firms are in weak financial condition and face seriously deteriorated plant and equipment. Under Component A, it will be necessary to provide more intensive financial and technical support to firms in Gaza than in the West Bank, until Gaza firms are again able to compete effectively in global markets, as they did with considerable success in the past. Assistance to Gaza business support organizations will be largely the same as that provided to firms and associations in the West Bank.

All activities to assist firms and associations in Gaza must be approved by the USAID/West

Bank and Gaza Mission.

3. Grants under Contracts

It is anticipated that the contractor will award grants under the two components of the project.

Grants will be awarded to support the achievement of project objectives, including the following purposes:

a. To acquire innovative equipment necessary for the introduction of new products or processes to individual firms (Each potential grantee must be selected based on important developmental criteria, such as employment generation, revenue impact, potential for demonstration effects and other criteria).

b. To support business associations that are viable and can add value to the efforts to increase global competitiveness through targeted direct grants to provide specific services and deliverables.

For Gaza direct grants will be awarded to purchase or renovate equipment to restore firms to the competitive position that they had before the cutoff from international markets and before the disruptions of the first and second intifada.

Most grants are anticipated to be less than $500,000 each; however, no grant may exceed $1 million. Grants to individual firms will focus for the most part on assistance to firms in Gaza.

Grants will be also directed towards business support organizations, such as business associations and business service providers that support the four priority sectors of Component

A. No grant shall exceed $100,000 for U.S. grantees.

KEY PERSONNEL AND LONG-TERM EXPATRIATE STAFF

A core team of seven in-country experts is to be proposed by the contactor, of whom five (as indicated below) will be considered ―Key Personnel‖ subject to USAID approval. These are as follows:

Chief of Party (COP) ( Key Personnel)

The COP must be a qualified development professional with relevant experience and hold at least a master’s degree in agriculture, economics, law, business, or a related field. The criteria for ranking a proposed COP will include a demonstrated ability to implement enterprise development activities in a difficult country environment. Candidates must have a high level of interpersonal and diplomatic skills. He/she must possess a deep understanding of and experience in enterprise development issues. A sound understanding of development, political, and business climate issues in the West Bank and Gaza, and knowledge of Palestinian counterparts, individuals, and organizations active or interested in private sector issues are also highly desirable. Previous resident work experience in WBG or the Middle East is very useful.

However, a high level of technical skills and an ability to manage complex projects are essential.

Fluent English is required. Arabic is highly desired. The COP will be responsible for overall leadership and will manage the implementation of core project activities. The COP will be the principal liaison for the contract with USAID, will be responsible for conforming contract activities to the USAID/West Bank and Gaza Mission strategy, and will ensure that all reporting requirements are met fully and in a timely manner.