SOL-168-17-000001_with_attachments.pdf

April 11, 2017

Reference: SOL-168-17 -000001 (Financial Reform Agenda Activity in Bosnia and Herzegovina) Due Date: 09:00 a.m. Sarajevo Bosnia time, May 10, 2017 Questions Due Date: 15:00 Sarajevo Bosnia time, April 18, 2017 Geographic Code: 935; NAICS Code: 541990

Dear Sir/Madam:

The United States Agency for International Development (USAID), through the Mission in Bosnia and Herzegovina (BiH) contemplates award of a three plus two year option period Cost-Plus-Fixed Fee Completion contract to implement the Financial Reform Agenda Activity in Bosnia and Herzegovina. The anticipated award date is September 2017.

USAID anticipates awarding one contract conducted under full and open competition procedures, pursuant to Part 15 of the FAR (48 CFR Chapter 1). USAID encourages offerors to express interest in this solicitation by submitting a proposal in accordance with the instructions set forth in Section L, “Instructions to Offerors.” USAID will evaluate the responsive proposals in accordance with the evaluation factors provided in Section M, “Evaluation Factors for Award” hereunder.

USAID encourages the participation to the maximum extent possible of U.S. small businesses (SB) in this activity as prime or subcontractors in accordance with Part 19 of the FAR. Also, please note that the geographic code is 935, which allows participation in this procurement from any area or country except from prohibited sources.

Electronic responses to this RFP are mandatory (See Section L). Please submit your proposals to the email address below by 9:00 a.m. Sarajevo Bosnia time, May 10, 2017.

Receipt time is when the proposal is received by AID/Washington internet server. The address for the receipt of proposals is: sarajevooaa@usaid.gov. Hand delivered proposals (including commercial courier) and facsimile transmission will not be accepted.

The Technical Proposal has a strict twenty five (25) page limit. Pages exceeding this limit will not be evaluated. Offerors are reminded that evaluators have to be able to read the proposals, so presentation and legibility are crucial.

This RFP can be viewed and downloaded from Federal Business Opportunities portal at https://www.fbo.gov/. USAID bears no responsibility for data errors resulting from transmission or conversion processes. Further be aware that amendments to solicitations mailto:sarajevooaa@usaid.gov https://www.fbo.gov/

SOL-168-17-000001

SOLICITATION, OFFER AND AWARD

4. TYPE OF SOLICITATION2. CONTRACT NUMBER 3. SOLICITATION NUMBER

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

ORDER UNDER DPAS (15 CFR 700)

6. REQUISITION/PURCHASE NUMBER

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

NEGOTIATED (RFP)

SEALED BID (IFB)

5. DATE ISSUED

1. THIS CONTRACT IS A RATED RATING PAGE OF PAGES

1 189

EXT.NUMBERAREA CODE

B. TELEPHONE (NO COLLECT CALLS)A. NAME

10. FOR

INFORMATION

CALL:

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.

(Date)(Hour) local timeuntildepository located in 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

SOLICITATION

9. Sealed offers in original and

PART IV - REPRESENTATIONS AND INSTRUCTIONS

OTHER STATEMENTS OF OFFERORS

EVALUATION FACTORS FOR AWARD

INSTRS., CONDS., AND NOTICES TO OFFERORS

REPRESENTATIONS, CERTIFICATIONS AND

LIST OF ATTACHMENTS

CONTRACT CLAUSES

PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.

I

J

K

L

M SPECIAL CONTRACT REQUIREMENTS

CONTRACT ADMINISTRATION DATA

DELIVERIES OR PERFORMANCE

INSPECTION AND ACCEPTANCE

PACKAGING AND MARKING

DESCRIPTION/SPECS./WORK STATEMENT

SUPPLIES OR SERVICES AND PRICES/COSTS

SOLICITATION/CONTRACT FORM

PART II - CONTRACT CLAUSESPART I - THE SCHEDULE

H

G

F

E

D

C

B

A

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

11. TABLE OF CONTENTS

18. OFFER DATE17. SIGNATURE

SUCH ADDRESS IN SCHEDULE.

IS DIFFERENT FROM ABOVE - ENTER

15C. CHECK IF REMITTANCE ADDRESS

EXT.NUMBERAREA CODE

15B. TELEPHONE NUMBER

(Type or print)AND

ADDRESS

OF

OFFEROR

CODE FACILITY

16. NAME AND TITLE OF PERSON AUTHORIZED TO SIGN OFFER15A. NAME

DATEAMENDMENT NO.DATEAMENDMENT NO.

and related documents numbered and dated):

amendments to the SOLICITATION for offerors

(The offeror acknowledges receipt of

14. ACKNOWLEDGEMENT OF AMENDMENTS

CALENDAR DAYS (%)30 CALENDAR DAYS (%)20 CALENDAR DAYS (%)10 CALENDAR DAYS (%)

(See Section I, Clause No. 52.232.8)

13. DISCOUNT FOR PROMPT PAYMENT

designated point(s), within the time specified in the schedule.

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

12. In compliance with the above, the undersigned agrees, if this offer is accepted within ______________ calendar days (60 calendar days unless a different period is inserted

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

OFFER (Must be fully completed by offeror)

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

28. AWARD DATE

(Signature of Contracting Officer)

27. UNITED STATES OF AMERICA

25. PAYMENT WILL BE MADE BY

26. NAME OF CONTRACTING OFFICER (Type or print)

CODE 24. ADMINISTERED BY (If other than Item 7)

ITEM

(4 copies unless otherwise specified)

23. SUBMIT INVOICES TO ADDRESS SHOWN IN

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

22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:

21. ACCOUNTING AND APPROPRIATION20. AMOUNT19. ACCEPTED AS TO ITEMS NUMBERED

AWARD (To be completed by government)

CODE

REQ-168-17-00000604/10/2017

X

USAID/BIH

USAID Bosnia-Herzegovina Ambasada SAD-a Roberta C. Frasurea 1 71000 Sarajevo, BiH 71000

0900 ET 05/10/2017

Sarah Bueter

C. E-MAIL ADDRESS

sbueter@usaid.gov

X

X

X

X

X

X

X

X

X

X

X

X

X

PAGE(S)

Sarah R. Bueter

AUTHORIZED FOR LOCAL REPRODUCTION

Previous edition is unusable

STANDARD FORM 33 (Rev. 9-97)

Prescribed by GSA - FAR (48 CFR) 53.214(c)

ITEM NO. SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT

NAME OF OFFEROR OR CONTRACTOR

2 189

CONTINUATION SHEET

REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE OF

SOL-168-17-000001

(A) (B) (C) (D) (E) (F)

Delivery Location Code: USAID/BIH

USAID/Bosnia-Herzegovina

Ambasada SAD-a

Roberta C. Frasurea 1

71000 Sarajevo, BiH

0001 The purpose of the Financial Reform Agenda

Activity (FINRA) is to improve financial sector stability in Bosnia and Herzegovina (BiH). The activity will support financial sector reforms outlined in the IMF Extended Fund Facility (EFF) policy benchmarks, which in turn support the

European Union (EU) Reform Agenda (RA) for BiH to join the EU. FINRA assistance will focus on improving banking supervision, deposit insurance, central banking and audit/quality of government spending.

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (48 CFR) 53.110

NSN 7540-01-152-8067

PART I—THE SCHEDULE

SECTION B – Supplies or services and prices/costs

SECTION C - Description/Specifications Statement of Work for Financial Reform Agenda Activity (FINRA)

SECTION D - Packaging and Marking D.1 Marking D.2 Branding D.3 Branding and marking policy

SECTION E - Inspection and Acceptance E.1 Notice Listing Contract Clauses Incorporated by Reference E.2 Inspection and acceptance

SECTION F - DELIVERIES OR PERFORMANCE

F.1 Notice Listing Contract Clauses Incorporated by Reference F.2 Period of Performance F.3 Place of Performance F.4 Performance Standards F.5 Key Personnel F.6 Authorized Work Day/Week F.7 Periodic Progress Reports F.8 Reports

SECTION G – CONTRACT ADMINISTRATION DATA

G.1 Administrative Contracting Office G.2 Contracting Officer’s Authority G.3 Contracting Officer’s Representative G.4 Technical Direction/Limitations of Contracting Officer’s Representative G.5 Acceptance and Approval G.6 Paying Office G.7 Documentation for payment G.8 Invoicing Instructions G.9 Accounting and Appropriation Data

SECTION H - Special Contract Requirements H.1 Notice Listing Contract Clauses Incorporated by Reference H.2 Language requirements H.3 752.222-70 USAID disability policy (DEC 2004) H.4 752.222-71 Nondiscrimination (JUN 2012) H.5 752.225-70 Source and nationality requirements (FEB 2012) H.6 Authorized geographic code H.7 752.228-3 Worker’s compensation insurance (Defense Base Act) (DEC 1991) ... 51 H.8 752.231-72 Conference planning and required approvals (AUG 2013) H.9 752.7005 Submission requirements for development experience documents (SEP 2013) H.10 752.7007 Personnel compensation (JUL 2007) H.11 Additional requirements for personnel compensation H.12 752.7019 Participant training (JAN 1999) H.13 302.3.5.22 Submission of datasets to the Development Data Library (DDL)

H.14 Nonexpendable property purchases H.15 Government furnished facilities or property H.16 Logistic support H.17 Disclosure of information H.18 Organizational conflicts of interest H.19 Executive order on terrorism financing H.20 Foreign government delegations to international conferences H.21 Environmental compliance H.22 Subcontracting plan and the SF294-Subcontracting report for individual contracts, and SF295-Summary contracting report H.23 Consent to subcontract H.24 Grants under contracts H.25 USAID-financed third-party web sites (AUG 2013) H.26 Electronic payment system

PART II—CONTRACT CLAUSES

SECTION I - Contract Clauses

I.1 52.252-2 Clauses incorporated by reference (FEB 1998) I.2 Notice listing contract clauses incorporated by reference I.3 52.204-1 Approval of contract (DEC 1989) I.4 52.217-8 Option to extend services (NOV 1999) I.5 52.217-9 Option to extend the term of the contract (MAR 2000) I.6 52.222-35 Equal opportunity for veterans (OCT 2015) I.7 52.222-36 Equal opportunity for workers with disabilities (JUL 2014) I.8 52.222-50 Combating trafficking in persons (MAR 2015) I.9 52.232-40 Providing accelerated payments to small business subcontractors (DEC 2013) I.10 752.227-14 Rights in data - General (OCT 2007) I.11 752.229-71 Reporting of foreign taxes (JUL 2007) I.12 752.231-71 Salary supplements for host government employees (MAR 2015) ... 85 I.13 752.7036 USAID implementing partner notices (IPN) portal for acquisition (JUL 2014) I.14 752.7037 Child safeguarding standards (AUG 2016) I.15 752.7038 Nondiscrimination against end-users of supplies or services (OCT 2016)

PART III—LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS 90

SECTION J—LIST OF EXHIBITS AND ATTACHMENTS

SECTION K - REPRESENTATIONS, CERTIFICATIONS, AND OTHER

STATEMENTS OF OFFERORS

K.1 Notice listing contract clauses incorporated by reference K.2 52.204-8 Annual representations and certifications (JAN 2017) K.3 52.204-20 Predecessor of offeror (JUL 2016) K.4 52.209-5 Certification regarding responsibility matters (OCT 2015) K.6 52.209-7 Information regarding responsibility matters (JUL 2013) K.7 52.209-11 Representation by corporations regarding delinquent tax liability or a felony conviction under any federal law (FEB 2016)

K.8 52.222-22 Previous contracts and compliance reports (FEB 1999) K.9 52.222-25 Affirmative action compliance (APR 1984) K.10 52.225-20 Prohibition on conducting restricted business operations in Sudan -- Certification (AUG 2009) K.11 Agreement on, or exceptions to, terms and conditions K.12 Authorized negotiators K.13 Signature

SECTION L - INSTRUCTIONS, CONDITIONS, AND NOTICES TO OFFERORS . 107

L.1 52.252-1 Solicitation Provisions Incorporated by Reference (FEB 1998) L.2 Notice Listing Contract Clauses Incorporated by Reference L.3 52.215-1 Instructions to offerors – Competitive acquisition (JAN 2017) L.4 52.216-1 Type of Contract (APR 1984) L.5 52.233-2 Service of protest (SEP 2006) L.6 Contractor performance information [See Section M.4.3] L.7 Explanation to prospective offerors L.8 Proposal preparation and submission – Special Instructions L.9 Branding implementation strategy and marking plan

SECTION M - Evaluation Factors for Award M.1 Notice listing solicitation provisions incorporated by reference M.2 General information M.3 Method of evaluation M.4 Evaluation factors M.5 Determination of competitive range M.6 Cost/price evaluation M.8 Source Selection

ABBREVIATIONS

AAPD Acquisition & Assistance Policy Directive ADS Automated Directives System AIDAR Agency for International Development Acquisition Regulation AMEP Annual Monitoring & Evaluation Plan AQR Asset Quality Review BARS Banking Agency of Republika Srpska BEO Bureau Environmental Officer BiH Bosnia and Herzegovina BS Branding Strategy BIP Branding Implementation Plan CBBH Central Bank of Bosnia and Herzegovina CDCS Country Development Cooperation Strategy CCN Cooperating Country National CAS Cost Accounting Standards CFR Code of Federal Regulation CO Contracting Officer COP Chief of Party COR Contracting Officer’s Representative CPAR Contractor Performance Assessment Reporting CPARs Contractor Performance Assessment Reporting System CPFF Cost-Plus-Fixed-Fee CPI Contractor Performance Information.

CPII Contractor Performance and Integrity Information CPR Contractor Performance Report CRD Capital Requirements Directives CRR Capital Requirements Regulation D&B Dun and Bradstreet, Inc DBA Defense Base Act DDL Development Data Library DEC Development Experience Clearinghouse DIA Deposit Insurance Agency DO Development Objective DOC Development Outreach Coordinator DUNS Data Universal Numbering System EA Environmental Assessment EDO Economic Development Office EFF Extended Fund Facility EFT Electronic Funds Transfer EU European Union E.O. Executive Order eSRS Electronic Subcontracting Reporting System

FAPIIS Federal Awardee Performance and Integrity Information System FAR Federal Acquisition Regulation FBA Federation Banking Agency FBO Federal Business Opportunities FINRA Financial Reform Agenda Activity FOIA Freedom of Information Act FPRA Forward Pricing Rate Agreement FSAP Financial Sector Assessment Program FSSA Financial System Stability Assessment FY Fiscal Year GAAS Generally Accepted Auditing Standards GAO General Accounting Office GSM Graphic Standards Manual GUC Grants under Contract IEE Initial Environmental Examination IADI Association of Deposit Insurance IMF International Monetary Fund IPN Implementing Partner Notices IR Intermediate Result ISA Insurance Supervision Agencies IT Information Technology LOE Level of Effort MEL Monitoring, Evaluation and Learning MEDEVAC Medical Evacuation MOU Memorandum of Understanding MP Marking Plan NAICS North American Industry Classification System NPLs Non-performing Loans OAA Office of Acquisition and Assistance OFAC Office of Foreign Assets Control ORCA Online Representations and Certifications Application PAD Project Appraisal Document PDF Portable Document Format RA Reform Agenda RCE Request for Categorical Exclusion RFP Request for Proposals RS Republika Srpska SAA Stabilization and Association Agreement SAM System for Award Management SDN Specially Designated Nationals SGIP Strengthening Government Institutions Project SMEs Small and Medium Enterprises SOW Statement of Work TBD To be determined TIN Taxpayer Identification Number

TCN Third Country National US United States of America USAID United States Agency for International Development USAID/W USAID Washington USG United States Government WB World Bank

PART I—THE SCHEDULE

SECTION B – Supplies or services and prices/costs

B.1 Purpose

The purpose of the Financial Reform Agenda Activity (FINRA) is to improve financial sector stability in Bosnia and Herzegovina (BiH). The activity will support financial sector reforms outlined in the IMF Extended Fund Facility (EFF) policy benchmarks, which in turn support the European Union (EU) Reform Agenda (RA) for BiH to join the EU. FINRA assistance will focus on improving banking supervision, deposit insurance, central banking and audit/quality of government spending.

B.2 Contract Type

A Cost-Plus-Fixed-Fee Completion Contract is being contemplated. For the consideration set forth in the contract, the contractor must provide the deliverables and results described in Section C and Section F (to be incorporated at contract award). The contractor must also comply with all other contract requirements.

B.3 Estimated Cost, Ceiling Price, Fixed Fee, and Obligated Amount

a) The estimated cost for the performance of the work required hereunder, exclusive of fixed fee, for the Base Period is $TBD. The fixed fee for the Base Period is TBD. The estimated cost plus fixed fee for the Base Period is $TBD.

b) The estimated cost for the performance of the work required hereunder, exclusive of fixed fee for the Option Period is $TBD. The fixed fee for the Option Period is TBD. The estimated cost plus fixed fee, if any, for the Option Period is $TBD.

The contractor is not restricted from making adjustments between line items (except for Fixed Fee and Grants under Contract budget items), as long as adjustments are within the scope of the Contract.

Obligated Amount:

a) 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) for performance hereunder is $TBD. The contractor cannot exceed the aforesaid obligated amount.

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

B.4 Price Schedule

Item Base Period (3 years) Total

Option Period (2 years)

Total Base + Option Period

Salaries and Wages Fringe Benefits Overhead Travel, Transportation and Per Diem

Allowances Other Direct Costs Subcontractors Subcontractor 1 Subcontractor 2 Subcontractor 3 Total Subcontractors General and Administrative Costs Grants Under Contract Total Estimated Cost Total Fixed Fee

TOTAL ESTIMATED COST &

FIXED FEE

(b) The inclusion of any costs in the above cost categories does not obviate the requirement for prior approval by the contracting officer of cost items designated as requiring prior approval by any of the terms and conditions of this contract, including the applicable cost principles (see FAR § 52.216-07, “Allowable Cost and Payment”); nor does it constitute a determination of allowability by the contracting officer of any item of cost, unless specifically stated elsewhere in this contract. Also, these amounts may not be adjusted without a written modification signed by the contracting officer. The contractor will not bill any amounts against this contract in excess of the amounts specified for each line item.

(c) The contractor agrees to furnish data that the contracting officer may request on costs expended or accrued under this contract in support of the budget information provided herein.

B.5 Option to Extend Services

Pursuant to FAR 37.111 and to the FAR clause incorporated by full text in Section I entitled “52.217-8 OPTION TO EXTEND SERVICES (NOV 1999)”, the Contractor hereby grants to the U.S. Government option to extend services under the contract for six additional one month periods. Such extension options are to be exercisable by issuance of a unilateral modification prior to the expiration of the contract. The six one-month extension options may be combined or exercised individually. Upon exercise of such options by the Government, the costs and fees evaluated at contract award will be increased by the amounts specified below for each option month to extend. TBD

Cost Category 1st Option 2nd Option 3rd Option 4th Option 5th Option

To Extend To Extend To Extend To Extend To Extend

(1 month) (1 month) (1 month) (1 month) (1 month)

Total Estimated Cost

Grants Fund

Fixed Fee

Total Estimated Cost

Plus Fixed Fee

B.6 Indirect Costs

(a) Pending establishment of revised provisional or final indirect cost rates, USAID will reimburse allowable indirect costs on the basis of the following negotiated provisional or predetermined rates and the appropriate bases pursuant to the contractor’s current executed Forward Pricing Rate Agreement (FPRA):

Description Rate Base Type Period % 1/ 1/ 1/

1/Base of Application:

Type of Rate:

Period:

(b) The contractor will make no change in its established method of classifying or allocating indirect costs without the prior written approval of the contracting officer.

B.7 Ceiling on Indirect Cost Rates (if applicable)

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

Description Rate Base Type Period % 1/ 1/ 1/

1/Base of Application:

Type of Rate:

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 will 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.8 Multi-year contract and cancellation ceiling

This contract is subject to the requirements of FAR 17.106.

(a) Performance under this contract during the second and subsequent program years is contingent upon the appropriation of funds. All program years except the first are subject to cancellation. Cancellation shall occur by the dates specified below if the Contracting Officer:

1. Notifies the Contractor that funds are not available for contract performance for any subsequent program year, or

2. Fails to notify the Contractor that funds are available for performance of the succeeding program year.

(b) If cancellation under the clause at FAR 52.217-2, “CANCELLATION UNDER MULTI-YEAR CONTRACTS (OCT 1997)” occurs, the contractor will be paid a cancellation charge not over the cancellation ceiling defined as follows:

Program Year

Cancellation Date

Cancellation Ceiling

Base year 2 September, 2018

Base year 3 September, 2019

Option year 4 September, 2020

Option year 5 September, 2021

The Government’s liability for cancellation charges shall not exceed $TBD. This amount will be reduced accordance with FAR 17.106-1 (c)(1) at the conclusion of each program year as follows:

The cancellation ceiling shall be the amount allotted to this contract under the Limitation of Funds clause (FAR 52.232-22(b)) at the time the cancellation notice is issued by the Contracting Officer.

(c) In accordance with the Cancellation under Multi-year Contracts clause, the cancellation charge will cover only:

1. Costs:

− Incurred by the contractor and/or subcontractor;

− Reasonably necessary for performance of the contract; and − That would have been equitably amortized over the entire multi-year contract period but, because of the cancellation, are not so amortized; and

2. A reasonable profit or fee on the costs.

B.9 Cost Reimbursable

(a) 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,” and FAR § 52-232-22, “Limitation of Funds,” if applicable, and AIDAR 752.7003, “Documentation for Payment.”

B.10 Payment of Fixed Fee

USAID will pay a proportion of the contractor’s fixed fee each month pursuant to FAR § 52.216-8, “Fixed Fee,” upon the receipt of an invoice deemed proper by the Regional Financial Management Center (RFMC) located in USAID/Bosnia and Herzegovina.

END OF SECTION B

SECTION C - Description/Specifications

Statement of Work for Financial Reform Agenda Activity (FINRA)

C.1 Purpose

The purpose of the Financial Reform Agenda Activity (FINRA) is to improve financial sector stability in Bosnia and Herzegovina (BiH). The activity will support financial sector reforms outlined in the IMF Extended Fund Facility (EFF) policy benchmarks, which in turn support the European Union (EU) Reform Agenda (RA) for BiH to join the EU. FINRA assistance will focus on improving banking supervision, deposit insurance, central banking and audit/quality of government spending.

C.2 Funding

FINRA activity budget is $6 million over three plus two option years (2017-2021).

FINRA is a three-year contract with one option of a two-year extension. Prior to exercising the option, USAID/BiH will consult stakeholders, such as IMF and host country partners, and may conduct a performance evaluation. FINRA scope will be flexible and include technical assistance to host country counterparts; however support must also be available for sub-contracts/grants for specialized services or in-kind contributions (i.e. equipment in support of regulation implementation).

Of the US$ 6 million budget for the FINRA activity, up to US$ 2 million (with the floor being US$ 1.5 million), of which US$ 1.5 million in the base period and US$ 500,000 in the option period will be set aside for in kind assistance and/or grants to host country government partners to advance FINRA objectives; illustrative uses are for implementation of banking sector reform, upgrading of Central Bank systems and practices in line with the EU requirements and IMF recommendations and other host country needs and priorities, as approved by the Mission.

C.3 Background

Development Challenge and CDCS Framework

BiH is far from meeting EU accession criteria for economic readiness (or Copenhagen Criteria): “existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union.” In order to make the transition to a market economy and meet EU standards, BiH must address undeveloped economic policies, complex yet weak regulatory systems, and high unemployment.

Private sector growth requires a consistent and competent legal, regulatory, and administrative environment to give incentives to creditors and investors.

The principal economic challenge in the financial services sector mirrors the broader challenges of the economy: to create a facilitating environment for sound business growth through improvement of regulatory systems. Bosnia and Herzegovina is still in an initial phase in the EU accession process and much needs to be done to ensure that all policies, regulations, and practices meet EU standards.

Banking supervision, Deposit Insurance and Insurance - Both entities, supported by the IMF and World Bank, have made progress in preparing new banking laws that are consistent with EU directives and Basel requirements. However, further assistance will be needed in implementation of the comprehensive regulatory framework (once laws are adopted) and also for developing supporting regulations. These laws are expected to strengthen supervisors’ corrective and enforcement powers, introduce consolidated supervision, and improve crisis management and resolution frameworks. Related legislation, such as the Deposit Insurance Agency (DIA) law, is also in the process of being amended, particularly to enable for the resolution process which would deal with any failing systemic banks. Improving the legal and regulatory front in insurance market could greatly improve transparency, efficiency and confidence in the insurance sector.

The “Bosnia and Herzegovina: Financial System Stability Assessment (FSSA)” by the International Monetary Fund (2015) is a highly relevant assessment for this sector. The 2015 Financial Sector Assessment Program (FSAP) found that banking and insurance oversight have improved since the 2006 Financial Sector Assessment Program (FSAP), but also noted that supervisors’ corrective and enforcement powers are weak. According to 2015 FSAP, regulatory and supervisory responsibilities for banking, insurance, and capital markets are fragmented; although the establishment of the Standing Committee on Financial Stability has improved coordination. Cooperation among the various oversight institutions is complex, having potential repercussions in times of stress. According to 2015 FSAP, the current insurance prudential framework, which is based on Solvency I framework, is not risk-sensitive and is ill-suited for supervision as the market develops. In addition, FSAP highlights that the formal assessment of the real-time gross settlement system suggests that many of the principles are observed, but legal and liquidity risks as well as lack of oversight powers are weaknesses.

The IMF FSAP from 2015 identified a comprehensive set of priority recommendations (immediate, near term 1-3 years, and medium term 3-5 years) to enhance the stability and development of the financial system in BiH, all of which fall under the scope of this activity. The Annex A.1 in Section J provides a full list of recommendations; the implementing partner must develop a plan on how to address these within Phase I and Phase II

FINRA is consistent with USAID/BIH/BiH’s CDCS for FY 2010-2016 and supports the achievement of Development Objective 2: “Bosnia and Herzegovina is a competitive, market-oriented economy providing better economic opportunities for all its citizens”, and specifically IR 2.2: Improved economic aspects of governance relevant to business activity, and IR 2.2.1: Regulations and policies foster private sector development and investment. The FINRA activity is included in Project Approval Document (PAD) 2.2.

USAID has been one of the key donors supporting financial sector development in BiH.

Since the closure of USAID projects in this sector, unmet demand for longer term technical assistance within the sector exists. This has been indicated in discussions with host country counterparts and the IMF. FINRA activity will build and improve on previous USAID assistance.

The following web link provides the evaluation report of one of USAID's previous banking assistance projects:

http://pdf.usaid.gov/pdf_docs/PA00JP6T.pdf

A key development issue highlighted in the evaluation of USAID/BIH's previous banking assistance project was counterparts’ lack of will to change banking supervision. The evaluation noted that the USAID/BIH activity addressed this by focusing on technical issues and capacity development. One of the recommendations was that USAID/BIH activities need greater focus on building broad political support for EU-related reforms. These lessons have been incorporated in designing FINRA, which is linked to IMF and EU Reform Agenda levers to push for adoption of laws. However, some of the inherent development challenges will remain even once the laws are adopted, as implementation (core of FINRA assistance) will also depend on the political will and capacity of the host country partners. As noted above, FINRA can provide capacity building and build building blocks, but the leadership and commitment for implementation will have to come from host country partners. This is somewhat mitigated by Memorandum of Understanding (MOU) mechanisms required by the Contractor to implement with host country partners at the outset of FINRA to enlist commitment of counterparts and an award structure with base and option periods.

The EU’s RA guides requirements of the EU Stabilization and Association Agreement (SAA). Following adoption of the RA in June, 2015, the governments (BiH Council of Ministers, Federation BiH Government, RS Government) adopted detailed short-term action plans. Financial sector measures in the three action plans are:

Council of Ministers –Adopt new laws for the finance sector harmonized with EU Directives and the Basel Terms

● Council of Ministers –Adopt new laws for the finance sector harmonized with EU Directives and the Basel Terms http://pdf.usaid.gov/pdf_docs/PA00JP6T.pdf

● Federation BiH Government -Law on Banks, Alignment with the EU and the Basel framework; Resolution on banking

● Federation BiH Government-Strengthen banking supervision by the Banking Agency, continuous oversight of problematic banks

● Republika Srpska Government -Legal framework for the collection and resolution of non-performing loans; establishment and supervision of management companies’ assets and extrajudicial debt restructuring

● Republika Srpska Government-strengthen banking supervision by the entity Banking Agencies.

A key financial and policy lever for RA implementation is the IMF EFF agreement, approved in September 2016. The EFF has a catalytic role in mobilizing additional international financial assistance, tied to meeting EFF benchmarks.

The IMF EFF program is a EURO 550 million economic program, and includes a number of conditionalities/disbursement benchmarks that are tied to implementation of the RA. The IMF program has three explicit objectives, as follows:

Structural Reforms: Raise growth potential and boost private sector employment through structural reforms to improve the business environment and attract investment.

Fiscal Policy: Improve composition and quality of public spending, while gradually lowering public indebtedness.

Financial Sector: Revive bank lending and credit growth while safeguarding financial stability through financial sector reforms.

● Maintaining the currency board arrangement to anchor policies and to safeguard Central Bank independence.

● Developing comprehensive strategies to address vulnerabilities in banks, and strengthening operations and oversight of entity development banks.

● Passing laws to modernize banking legislation, strengthening cooperation among financial sector agencies and addressing the high level of non-performing loans (NPLs).

IMF Structural benchmarks related to FINRA

The BiH governments have agreed to the following structural benchmarks related to the financial sector from the IMF EFF Program (those in bold relevant to FINRA):

1. Continue to adhere to the currency board arrangement as constituted under the law.

2. Refrain from imposing mandatory conversion of foreign currency-denominated loans into local currency.

3. Federation Banking Agency to make final assessment of recapitalization plans for banks that reveal capital shortfalls based on their Asset Quality Review (AQR) results.

4. Federation parliament to adopt new draft Law on Banks and amendments to Banking Agency Law in line with IMF staff recommendations

5. RS parliament to adopt new draft Law on Banks and amendments to Banking Agency Law in line with IMF staff recommendations.

6. State parliament to adopt amendments to the Law on Deposit Insurance in Banks in BiH in line with IMF staff recommendations

7. RS Banking Agency to make final assessment of recapitalization plans for banks that reveal capital shortfalls based on their AQR results.

In December 2016, the two RS banking laws (the RS Law on Banks and the Law on RS Banking Agency) were adopted. The Federation BiH banking laws and the (Amendments to the) BiH level Deposit Insurance law are expected to be adopted in 2017. This set of 5 laws (2 Federation BiH, 2 Republika Srpska, and 1 BiH) are part of the IMF conditionality and the legal basis for implementation of comprehensive banking reforms in BiH and the basis for FINRA.

Once banking laws are adopted, implementation will be the next challenge. IMF is focused on regulatory adoption as a structural benchmark, while the World Bank will provide support for implementation of the banking laws. In designing FINRA, USAID/BIH met the banking regulators and the IMF and WB teams to assess the need and scope of complementary USAID/BIH assistance. The WB team noted that the USAID/BIH assistance would complement their planned assistance. The host country partners, along with the IMF and WB, noted that the previous USAID/BIH assistance in the financial sector were effective building blocks for the comprehensive regulatory reform process.

FINRA activity will rely on the following three IMF benchmarks which create the basis of comprehensive banking sector reform in BiH:

· Federation parliament to adopt a new draft Law on Banks and amendments to Banking Agency Law in line with IMF staff recommendations

· RS parliament to adopt a new draft Law on Banks and amendments to Banking Agency Law in line with IMF staff recommendations.

· State parliament to adopt amendments to the Law on Deposit Insurance in Banks in BiH in line with IMF staff recommendations

The assumption is that prior to the start of FINRA activity, all five laws and/or amendments have been passed or are in final legislative phase. This set of 5 laws (2 Federation BiH, 2 RS, and 1 BiH) represent the legal basis for implementation of comprehensive banking reforms in BiH – are the precondition of effective FINRA assistance.

C.4 Results

To achieve FINRA objectives, the contractor must achieve the following results:

Result One: BiH advances towards compliance with the EU accession requirements, as set out in the Reform Agenda, the EU Progress Report and the IMF program in areas of strengthening financial stability, public audit and quality of government spending.

USAID and the contractor will more precisely define “advances towards compliance” through the development of the activity Monitoring and Evaluation and Learning (MEL) Plan

Result Two: Policies, laws and regulations from the IMF EFF, FSAP, the EU Reform Agenda and those required by the EU SAA process are drafted for adoption and implementation in the financial, audit and quality of government spending areas.

The purpose of the Financial Reform Agenda Activity (FINRA) is to improve financial sector stability in Bosnia and Herzegovina (BiH). This purpose is directly aligned with the Mission’s Project 2.2 sub-purpose that states that “Financial sector (is) in line with international standards, where the Mission will measure progress in meeting this purpose with the “Level of compliance with relevant international financial standards”. This purpose will be achieved by providing targeted, demand-driven assistance to implement specific IMF EFF, FSAP policy benchmarks and meet EU Reform Agenda priorities for BiH, particularly those related to the financial sector regulatory system and the environment for private sector investment and growth.

Financial sector reforms are expected to allocate resources more efficiently, increasing the return on investment and accelerating growth of the real sectors in the economy. A well-regulated financial sector is critical for efficiently allocating capital in the economy, and for the last three consecutive years the private sector has highlighted access to finance as one of the problematic issues for doing business in BiH. Thus, FINRA should improve the enabling environment for private sector investment and growth through increased access to finance. Ensuring greater financial stability will also reduce the risk of bank failings and related public costs of loss of government deposits in failed banks. Greater compliance with prudential banking regulations will help protect the BiH economy, its companies, and its citizens from a financial crisis. In the last year, two banks in the RS have failed. While the effect has been relatively limited, these are BiH's first bank failures over the last decade and public funds have been lost in failed banks. This points to synergies between FINRA and other USAID/BIH activities, especially those related to SME competitiveness and quality of government spending and transparency. In addition, during the adoption of banking laws, USAID/BiH has ensured synergies with other USAID/BiH activities, especially USAID/BiH’s work with Parliaments through closely coordinating with and leveraging Strengthening Government Institutions Project (SGIP) activity. The contractor will pursue opportunities for synergy and coordination with other USAID/BiH activities as they arise.

The FINRA activity is structured to achieve a number of defined activities and results, yet allowing for additional initiatives depending upon windows of opportunity, as the Reform Agenda Action Plans are updated.

The design incorporates: 1) specific areas (two first components listed below are part of the IMF program and the RA action plans), and 2) optional area- where assistance will depend on USAID/BIH’s available budget resources and upon political will for reform:

Component I: Banking Supervision and Insurance

Component II: Central Banking

Component III (optional): Audit of public financial resources and quality of government spending

FINRA is expected to work primarily with the following government institutions- the Central Bank of BiH, the Federation BiH Banking Agency, the RS Banking Agency, the BiH Deposit Insurance Agency. The contractor must, as needed, work with the entity Ministries of Finance, BiH Ministry of Finance and Treasury and insurance regulators and other host country partners in the financial sector.

MOUs will be put in place to engage key partners and ensure their commitment to implementation of reforms. The contractor must enter into MOUs with key host country partners at the beginning of the activity to solidify their commitment to implementation of reforms and assistance.

Activities

Assistance under FINRA must include the following areas, with priority placed on assistance to banking regulators and the Central Bank and all relevant host country partners to ensure the implementation of the IMF benchmarks and the EU Reform Agenda and advance EU SAA accession in the area of financial sector development and audit/quality of government spending.

The list below of activities is subject to further refinement according to host country counterpart needs and subject to USAID/BIH approval.

Component 1- Banking Supervision and Insurance

· The contractor must provide assistance and facilitate operational processes that will lead to full implementation of banking laws and regulations in the Basel II/III bank supervision framework by both entity agencies according to the (to be) adopted new banking Laws and Banking Agency laws and the IMF program. It is expected that these laws will be adopted prior to the beginning of this activity, and thus the contractor’s focus will be placed on full implementation of the legislative framework, per IMF benchmarks and in coordination with the WB assistance program. Based on host country partners (regulators) needs and commitment, assistance must be provided to align banking supervision with the Basel II/III, relevant EU Directives (Capital Requirements Directives IV (CRD IV) and the Capital Requirements Regulation (CRR) areas of assistance to include regulatory framework, supervisory tools and supervision capacities.

· The contractor must provide capacity building, training and in-kind assistance for banking supervision regulators and all other relevant host country partners to implement the new banking regulation framework, in close consultation with the IMF and the WB program. Capacity-building activities and in-kind assistance will directly complement and support the operational plan for implementation of the banking reforms, in close consultation with the IMF and World Bank. The contractor must provide assistance to regulators to advance compliance with the specific IMF FSAP recommendations, based on host country regulators’ needs and priorities.

· The contractor must provide assistance to the DIA BiH to fully implement the new regulatory framework advanced in the respective laws on banks and deposit insurance as part of the IMF EFF, assistance must be provided in coordination with IMF and the WB assistance program. The contractor must provide capacity building and assistance to the DIA BiH to fully implement the core deposit insurance principles as set by the Internal Association of Deposit Insurance (IADI) and meet all relevant EU SAA requirements, based on DIA BiH needs and priorities.

· If host country partners advance reforms in the broader insurance area and USAID/BIH provides approval for assistance in this area in the work plan, the contractor must provide assistance to regulators and ministries in reducing compliance gaps between insurance legislation and the European Directives for insurance while advancing compliance with the specific IMF FSAP recommendations related to insurance regulation.

· If host country partners advance reforms and/or regulatory practices in the non-banking financial area, there is budget availability and USAID/BIH provides approval for assistance in this area in the work plan, the contractor must provide assistance to regulators and relevant host country partners in this area, while advancing and/or maintaining compliance with the relevant IMF and IMF FSAP recommendations.

Component 2- Central Banking

· The contractor must provide demand-driven assistance to the Central Bank of BiH to assist the CB BiH in capacity building and its alignment with EU requirements and best practices. Subject to Central Bank needs and priorities, the contractor must provide assistance to advance compliance with the specific IMF FSAP recommendations.

Component 3 -Audit of public financial resources and quality of government spending

· Subject to available budget resources and need for assistance, the contractor must provide assistance in the area of quality of government spending related to specific RA agenda priorities and the RA action plans (as updated). The contractor must provide assistance that will not be generic capacity building but be prioritized on the basis of meeting specific RA action plan benchmarks. Subject to available budget resources and need for assistance, the contractor must provide assistance in the area of internal and/or external audit and related legislation. This may include supporting systems to increase the effectiveness of auditors and other relevant public bodies in BiH to conduct performance and financial reviews to prevent corruption. The contractor must provide assistance that will not be generic capacity building but be prioritized on the basis that it should result in specific and tangible improvements in the internal control environments (specifically mitigate the risk of corruption and fraud) of various governmental/quasi-governmental institutions and at the same time advance specific reform priorities. This component will be implemented at the Federation, RS, and BiH State level, as determined by USAID/BiH and the contractor based on available resources and existing opportunities.

During the course of FINRA activity, the contractor must be in close coordination and consultation with the IMF on FINRA assistance as it relates to progress on implementation of banking reforms and progress on compliance with 2015 IMF FSAP benchmarks (per Annex A.1).

C.5 Monitoring, Evaluation and Learning

Within the annual work-plan, the contractor must develop a detailed Monitoring and Evaluation and Learning (MEL) Plan that allows for measuring implementation progress against performance indicator(s) and related targets and benchmarks. This MEL plan needs to capture progress on implementation of banking reforms and tie these to the Reform Agenda and the IMF benchmarks, as well as progress on compliance with FSAP benchmarks. The MEL will be approved by USAID/BIH.

USAID/BIH will measure progress against the Reform Agenda milestones, the EU progress report for BiH, the IMF FSAP, as well as other IMF financial sector and country reports.

Recognizing that the final expected result is implementation of laws and at the same time the limitation of the FINRA activity/contractor to actually implement legislation, once the FINRA activity in launched, USAID/BIH will consult with the USAID/BIH M&E contractor (MEASURE), host country partners and possibly IMF to develop an appropriate M&E tool that could include 3rd party verification of the implementation progress.

In addition, the contractor must report on an annual basis on a set Foreign Assistance Standardized Program Structure Element (F) Indicators, illustrative ones listed below.

Number of financial sector supervisors trained with USG assistance

Number of financial sector professionals trained on international standards with USG assistance

Number of Internationally recognized financial sector standards adopted as a result of USG assistance

Number of mechanisms for external oversight of public resource use supported by USG assistance implemented

The contractor must also track a number of contextual indicators, though there are no specific targets for these.

An illustrative list of contextual indicators is:

• Share of credit as GDP

• Credit growth, and especially private sector credit growth

• Share of non-performing loans (NPL)

• Growth of deposits, and especially insured deposits

C.6 Cross-cutting

Gender

USAID/BiH commitment to advance gender equality and purse gender as a key development issue must be fully reflected in FINRA. Gender considerations must be integrated into FINRA activity, ensuring that men and women both benefit from USAID support. To ensure gender equality, FINRA must promote gender balanced representation and participation in policy-making processes, as relevant to the scope of FINRA activity. Also, FINRA contractor shall support gender-balanced participation in all USAID funded capacity building events, training, technical assistance programs, study-tours etc. Additionally, for training and capacity building activities, the contractor must collect and report gender-dis-aggregated data. Such data must be current, readily accessible, and highlighted by the USAID contractor in external and internal quarterly and annual reports. The Contractor must also analyze data to alert USAID to gender issues, identify gaps, and propose solutions.

Anti-corruption and transparency

USAID/BiH commitment to advance anti-corruption and increase transparency as a key development issue in BiH must be fully reflected in FINRA. Anti-corruption and transparency considerations must be integrated into the FINRA activity, and the contractor in its technical approach must document how FINRA will address and reduce corruption in BiH and increase transparency.

OtherThe IMF EFF Letter of Intent signed by BiH governments has stated that BiH is advancing other legislation and regulations that will improve the functioning and transparency of BiH financial system, including by further improving the framework for combating money laundering and financing of terrorism.