SOL-492-14-000004-E-PESO.pdf

E-PESO SOL-492-14-000004

RFP Issuance Date : 28 April 2014 RFP Closing Date : 13 June 2014 RFP Closing Time : 9am, Manila Time Questions closing date : 12 May 2014 Questions closing time : 3pm, Manila Time

SUBJECT: Request for Proposal (RFP) No. SOL-492-14-000004 (E-PESO)

Dear Prospective Offerors:

The United States Government, represented by the U.S. Agency for International Development (USAID) Mission to the Philippines, is soliciting proposals from eligible organizations interested in providing the services detailed in the attached RFP for an activity that will be administered by USAID Philippines’ Office of Economic Development and Governance (OEDG). The RFP incorporates comments received on the special notice (Request for Comments on the draft Statement of Work) earlier posted in FedBizOpps (dated 20 December 2013).

USAID/Philippines plans to award a Cost-Plus-Fixed-Fee (CPFF) completion type contract. The work envisioned to be performed during the five-year period is estimated to be between a range of US$18.5 Million to US$22.5 Million. The details associated with the submission requirements for Offerors proposals are outlined in Section L of this solicitation. Proposals must include a signed SF-33 (see form attached after this letter) signed by an official who is duly authorized to bind the Offeror’s organization.

Submission of Questions to the RFP and Proposals are to be transmitted electronically to manila-roaa-rfp@usaid.gov (copy furnish fcalixto@usaid.gov, sbame-kum@usaid.gov, and jdulanto-hassenstein@usaid.gov) no later than the date and time indicated above for questions.

Proposals received after the closing date and time, or are incomplete, will not be accepted nor considered unless authorized by the Contracting Officer pursuant to FAR 15.208. Offerors are responsible to ensure that proposals are received at USAID/Philippines by the specified due date and time.

USAID/Philippines reserves the right to reject any and/or all offers if such action is considered to be in the best interest of the US Government. Issuance of this solicitation and receipt of proposals from interested Offerors do not constitute a commitment on the part of the U.S Government or USAID to make an award. Neither does it constitute an obligation to reimburse interested Offerors for any costs they incurred in the preparation and submission of their proposal. Award of a contract will be subject to availability of funds.

Thank you for your interest in working with USAID/Philippines.

Sincerely, Jorge Dulanto-Hassenstein Contracting Officer

U.S. Agency for International Development Annex 2 Building U.S. Embassy 1201 Roxas Boulevard 1000 Ermita, Manilla, Philippines

Tel: (632) 301-6000 Fax (632) 301-6213 http://philippines.usaid.gov mailto:manila-roaa-rfp@usaid.gov mailto:fcalixto@usaid.gov mailto:sbame-kum@usaid.gov mailto:jdulanto-hassenstein@usaid.gov

List of acronyms

ACH Automated Clearing House ADS Automated Directives System AIDAR USAID Acquisition Regulation AML Anti-Money Laundering ATM Automated Teller Machines BEO Bureau Environmental Officer BSP Bangko Sentral ng Pilipinas (Philippine Central Bank) BIR Bureau of Internal Revenue BLGF Bureau of Local Government Finance BTCA Better Than Cash Alliance CCN Cooperating Country National CCT Conditional Cash Transfer CDCS Country Development Cooperation Strategy CDI Cities Development Initiative CFT Combating the Financing of Terrorism CISO USAID Chief Information Security Officer CFR Code of Federal Regulations CO Contracting Officer COA Commission on Audit COMPETE Advancing Philippine Competitiveness Activity COR Contracting Officer’s Representative CPA Certified Public Accountant CST USAID Contractor Salary Threshold DBM Department of Budget and Management DCA-LPG Development Credit Authority - Loan Portfolio Guarantee DEC Development Experience Clearing House DILG Department of Interior and Local Government DOF Department of Finance DoD Department of Defense DOST Department of Science and Technology DSWD Department of Social Welfare and Development DTI Department of Trade and Industry EFT Electronic Funds Transfer FAC Federal Acquisition Certification FAPIIS Federal Awardee Performance and Integrity Information System FAR Federal Acquisition Regulations FATF Financial Action Task Force FIPS PUB Federal Information Processing Standards Publication FPI Facilitating Public Investment FSN Foreign Service National G2P Government to Person GDA Global Development Alliance GPH Government of the Philippines GSIS Government Service Insurance System

I3 Integrity for Investments Initiative IEE Initial Environmental Examination INVEST Investment Enabling Environment Activity LCP Local Compensation Plan LGUs Local Government Units LOE Level of Effort LPA/PIPOS USAID Bureau for Legislative and Public Affairs/Public Information, Production and

Online Services M & E Monitoring and Evaluation MFIs Microfinance institutions MMPs Mobile Money Providers NEDA National Economic and Development Authority OCI Organizational Conflict of Interest OMB Office of Management and Budget OPM Office of Personnel Management P2G Person to Government P2P Person to Person PDP Philippine Development Plan PFG Partnership for Growth PIV Personal Identity Verification PMP Performance Monitoring Plan POS Point-of-sale RFP Request for Proposals SAF Special Activity Fund SAM System for Award Management SIMM Scaling Innovations in Mobile Money SME Small and Medium Enterprise SSS Social Security System STRIDE Science, Technology, Research and Innovation for Development SURGE Strengthening Urban Resilience for Growth with Equity TAPP The Arangkada Philippines (Project) Activity TCN Third Country National TRADE Trade-Related Assistance for Development Activity U.S.C. United States Code USAID United States Agency for International Development USG United States Government VAT Value Added Tax

TABLE OF CONTENTS

SF-33

List of Acronyms

SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTS _____________________________________ 9

B.1 PURPOSE

B.2 CONTRACT TYPE

B.3 ESTIMATED COST, FIXED FEE AND OBLIGATED AMOUNT

B.4 CONTRACT BUDGET AND CEILINGS

B.5 COST REIMBURSABLE

B.6 INDIRECT COST

B.7 CEILING ON INDIRECT COST RATES AND FINAL REIMBURSEMENT FOR INDIRECT COSTS

SECTION C – DESCRIPTION/STATEMENT OF WORK ________________________________________ 11

C.1 TITLE

C.2 OBJECTIVE

C.3 BACKGROUND

C.4 WORK REQUIREMENTS

C.5 OTHER REQUIREMENTS

C.6 WORKS CITED

SECTION D – PACKAGING AND MARKING ________________________________________________ 32

D.1 AIDAR 752.7009 MARKING (JAN 1993)

D.2 BRANDING POLICY AND STRATEGY

D.3 APPROVAL OF CONTRACTOR BRANDING IMPLEMENTATION AND MARKING PLAN

SECTION E – INSPECTION AND ACCEPTANCE _____________________________________________ 34

E.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE

E.2 INSPECTION AND ACCEPTANCE

SECTION F – DELIVERIES OR PERFORMANCE ______________________________________________ 35

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 MANAGEMENT OF CONTRACT

F.6 REPORTS AND OTHER DELIVERABLES

F.7 REPORTING FORMAT

F.8 LANGUAGE OF REPORTS AND OTHER OUTPUTS

F.9 TECHNICAL DIRECTION AND DESIGNATION OF RESPONSIBLE USAID OFFICIALS

F.10 AIDAR 752.7005 SUBMISSION REQUIREMENTS FOR DEVELOPMENT EXPERIENCE DOCUMENTS

(SEPTEMBER 2013)

F.11 EVALUATIONS

SECTION G – CONTRACT ADMINISTRATION DATA _________________________________________ 46

G.1 ADMINISTRATIVE CONTRACTING OFFICE

G.2 CONTRACTING OFFICER

G.3 CONTRACTING OFFICER’S REPRESENTATIVE

G.4 TECHNICAL DIRECTIONS/RELATIONSHIP WITH USAID

G.5 ACCEPTANCE AND APPROVAL

G.6 PAYING OFFICE

G.7 AIDAR 752.7003 DOCUMENTATION FOR PAYMENT (NOV 1998)

G.8 ACCOUNTING AND APPROPRIATION DATA

G.9 FAR 52.232-25 PROMPT PAYMENT (OCT 2008)

SECTION H – SPECIAL CONTRACT REQUIREMENTS _________________________________________ 56

H.1 AUTHORIZED GEOGRAPHIC CODE

H.2 TITLE TO PROPERTY

H.3 REQUESTS FOR CONSENT TO SUBCONTRACT

H.4 KEY PERSONNEL

H.5 PRESS RELATIONS

H.6 ENVIRONMENTAL COMPLIANCE

H.7 REPORTING OF FOREIGN TAXES (JULY 2007)

H.8 HOMELAND SECURITY PRESIDENTIAL DIRECTIVE-12 (HSPD-12) (SEPT 2006)

H.9 CONTRACTOR’S STAFF SUPPORT AND ADMINISTRATIVE AND LOGISTICAL ARRANGEMENTS

H.10 AUTHORIZED WORK DAY/WEEK

H.11 ADDITIONAL REQUIREMENTS FOR PERSONNEL COMPENSATION

H.12 LANGUAGE REQUIREMENTS

H.13 GOVERNMENT FURNISHED FACILITIES OR PROPERTY

H.14 NONDISCRIMINATION (JUNE 2012)

H.15 ACCESS TO USAID FACILITIES AND USAID’S INFORMATION SYSTEMS (AUGUST 2013)

H.16 USAID DISABILITY POLICY – ACQUISITION (DECEMBER 2004)

H.17 LIMITATION ON SUBCONTRACTING TO NON-LOCAL ENTITIES (MAY 2012)

H.18 USAID-FINANCED THIRD-PARTY WEBSITES (AUGUST 2013)

H.19 CONFERENCE PLANNING AND REQUIRED APPROVALS (AUGUST 2013)

H.20 VALUE ADDED TAX (VAT) AND CUSTOM DUTIES

H.21 CONFLICTS OF INTEREST

H.22 FOREIGN GOVERNMENT DELEGATIONS TO INTERNATIONAL CONFERENCES (JAN 2002)

H.23 EXECUTIVE ORDER ON TERRORISM FINANCING

H.24 PERSONAL IDENTITY VERIFICATION OF CONTRACTOR PERSONNEL (JAN 2011)

H.25 AIDAR 752.204-71 PARTNER VETTING (FEB 2012)

H.26 DEFENSE BASE ACT (DBA) INSURANCE

H.27 COMPLIANCE WITH SECTION 508 OF THE REHABILITATION ACT OF 1973, AS AMENDED

SECTION I – CONTRACT CLAUSES _______________________________________________________ 72

I.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE

I.2 FAR 52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)

I.3 FAR 52.203-13 CONTRACTOR CODE OF BUSINESS ETHICS AND CONDUCT (APR 2010)

I.4 FAR 52.209-9 UPDATES OF PUBLICLY AVAILABLE INFORMATION REGARDING RESPONSIBILITY

MATTERS (JUL 2013)

I.5 FAR 52.216-7 ALLOWABLE COST AND PAYMENT (JUN 2013)

I.6 FAR 52.216-24 LIMITATION OF GOVERNMENT LIABILITY (APR 1984)

I.7 FAR 52.217-2 CANCELLATION UNDER MULTIYEAR CONTRACTS (OCT 1997)

I.8 FAR 52.222-50 COMBATING TRAFFICKING IN PERSONS (FEB 2007) ALT. I (AUG 2007)

I.9 FAR 52.227-23 RIGHTS TO PROPOSAL DATA (TECHNICAL) (JUN 1987)

I.10 FAR 52.229-8 TAXES – FOREIGN COST-REIMBURSEMENT CONTRACTS (MAR 1990)

I.11 FAR 52.232-34 PAYMENT BY ELECTRONIC FUNDS TRANSFER – OTHER THAN SYSTEM FOR AWARD

MANAGEMENT (JUL 2013)

I.12 AIDAR 722.170 EMPLOYMENT OF THIRD COUNTRY NATIONALS (TCNs) AND COOPERATING

COUNTRY NATIONALS (CCNs)

I.13 AIDAR 752.225-70 SOURCE AND NATIONALITY REQUIREMENTS (FEB 2012)

I.14 AIDAR 752.227-14 RIGHTS IN DATA – GENERAL (OCT 2007)

I.15 AIDAR 752.231-71 SALARY SUPPLEMENTS FOR HG EMPLOYEES (OCT 1998)

I.16 AIDAR 752.7003 DOCUMENTATION FOR PAYMENT (NOV 1998)

I.17 AIDAR 752.7007 PERSONNEL COMPENSATION (JUL 2007)

I.18 AIDAR 752.7025 APPROVALS (APR 1984)

I.19 AIDAR 752.7032 INTERNATIONAL TRAVEL APPROVAL AND NOTIFICATION REQUIREMENTS (JAN

1990)

I.20 AIDAR 752.7034 ACKNOWLEDGMENT AND DISCLAIMER (DEC 1991)

I.21 AIDAR 752.7101 VOLUNTARY POPULATION PLANNING ACTIVITIES (JUNE 2008)

SECTION J – LIST OF ATTACHMENTS ___________________________________________________ 100

SECTION K – REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS OR

RESPONDENTS ____________________________________________________________________ 101

K.1 NOTICE LISTING SOLICITATION PROVISIONS INCORPORATED BY REFERENCE

K.2 FAR 52.204-8 ANNUAL REPRESENTATIONS AND CERTIFICATIONS (JAN 2014)

K.3 INSURANCE - IMMUNITY FROM TORT LIABILITY

K.4 FAR 52.209-7 INFORMATION REGARDING RESPONSIBILITY MATTERS (JUL 2013)

K.5 AGREEMENT ON, OR EXCEPTIONS TO, TERMS AND CONDITIONS

K.6 SIGNATURE

SECTION L – INSTRUCTIONS, CONDITIONS, AND NOTICES TO OFFERORS OR RESPONDENTS ______ 108

L.1 NOTICE LISTING SOLICITATION PROVISIONS INCORPORATED BY REFERENCE

L.2 52.252-1 SOLICITATION PROVISIONS INCORPORATED BY REFERENCE (FEB 1998)

L.3 FAR 52.215-1 INSTRUCTIONS TO OFFERORS-COMPETITIVE ACQUISITION (JAN 2004)

L.4 ADDITIONAL INSTRUCTIONS TO OFFERORS

L.5 OFFER EXPIRATION DATE

L.6 GOVERNMENT OBLIGATION

L.7 INSTRUCTIONS FOR THE PREPARATION OF VOLUME I – TECHNICAL PROPOSAL

L.8 INSTRUCTIONS FOR THE PREPARATION OF VOLUME II – COST PROPOSAL

L.9 INSTRUCTIONS FOR THE PREPARATION OF BRANDING IMPLEMENTATION AND MARKING PLANS

L.10 DISCLOSURE OF INFORMATION

L.11 AIDAR 752.204-70 PARTNER VETTING PRE-AWARD REQUIREMENTS (FEB 2012)

SECTION M – EVALUATION FACTORS FOR AWARD _______________________________________ 132

M.1 GENERAL INFORMATION

M.2 TECHNICAL EVALUATION CRITERIA

M.3 DETERMINATION OF COMPETITIVE RANGE

M.4 SOURCE SELECTION

ATTACHMENTS ____________________________________________________________________ 137

ATTACHMENT J.1 LOCAL COMPENSATION POSITION DESCRIPTION GUIDELINES

ATTACHMENT J.2 BRANDING IMPLEMENTATION PLAN AND MARKING PLAN FORMAT

ATTACHMENT J.3 USAID FORM 1420-17 CONTRACTOR EMPLOYEE BIOGRAPHICAL DATA SHEET

ATTACHMENT J.4 – USAID STANDARD FORMS 294 SUBCONTRACTING REPORT FOR INDIVIDUAL

CONTRACTS

USAID STANDARD FORMS 295 SUMMARY SUBCONTRACTING REPORT

ATTACHMENT J.5 – USAID Programming Activities ATTACHMENT J.6 – Results Framework

ATTACHMENT J.7 – PARTNER VETTING FORM 500-13

PART I

SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTS

B.1 PURPOSE

To provide services to support USAID’s “E-PESO” as described in Section C of this RFP.

B.2 CONTRACT TYPE

This is a Cost-Plus-Fixed-Fee Completion type contract.

For the consideration set forth below, the Contractor will achieve the performance objectives and deliverables or outputs described in Sections, C, D and F and comply with all contract requirements.

B.3 ESTIMATED COST, FIXED FEE AND OBLIGATED AMOUNT

The Total Estimated Cost plus fixed-fee for this acquisition shall not exceed (ceiling price will be determined upon final award). The Contractor will not be paid any sum in excess of the ceiling price.

The Contractor’s fixed fee is tied to the accomplishment of the deliverables required in Sections C, D and F. Upon successful achievement of the deliverable, the Contractor shall provide evidence of the achievement to the Contracting Officer’s Representative (COR) and the Contracting Officer (CO). Upon acceptance by USAID and receipt of approval from the Contracting Officer, the Contractor shall submit an invoice for the amount of the fee associated with the deliverable.

USAID paying office ordinarily pays the Contractor a percentage of fixed fee that directly corresponds to the percentage of allowable costs being paid. Two exceptions to paying fixed fee in this manner apply:

1) If the CO determines that this method results in paying a disproportionately higher ratio of fixed fee than the percentage of work that the Contractor has completed, then the CO may suspend further payment of any fixed fee until the Contractor has made sufficient progress to justify further payment, up to the agreed percentage. 2) The clauses entitled "Allowable Cost and Payment" (FAR 52.216-7) and "Fixed Fee" (FAR 52.216-8) are incorporated into this contract. The terms and conditions of these clauses apply after total payments of fixed fee reach eighty-five percent (85%) of the total fixed fee.

B.4 CONTRACT BUDGET AND CEILINGS

(a) The contract budget is (Inserted at the time of award).

(b) Without the prior written approval of the contracting officer, the Contractor may not exceed the total estimated cost set forth in the budget hereunder or the obligated amount, whichever is less.

(c) The following budget sets forth the estimates for reimbursement of dollar costs for individual line items of cost, fixed fee (if any), and Special Activity Fund.

Program Costs (to be filled-in at award) Fixed-Fee (to be filled-in at award) Special Activity Fund (SAF) $500,000 (plug-in amount) Total Contract Price (to be filled-in at award)

B.5 COST REIMBURSABLE

The U.S. dollar costs allowable shall be limited to necessary reasonable, allowable and allocable costs determined in accordance with FAR 31 (Contract Cost Principles), OMB A-21 (Cost Principles for Educational Institutions), 2 CFR 230 (Cost Principles for Non-Profit Organizations), FAR 52.216-7 (Allowable Cost and Payment), FAR 52.216-8 (Fixed Fee), if applicable, and AIDAR 752.7003 (Documentation for Payment), in order to be reimbursable under this contract.

B.6 INDIRECT COST

The contract clause entitled “FAR 52.216-7, Allowable Cost and Payment (JUN 2011)”, specifies that the indirect cost rates shall be established for each of the contractor’s accounting periods that apply to this Contract. 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 (to be filled in at award) (to be filled in at award) 1/ 1/ 1/

1/Base of Application:

Type of Rate: (to be filled in at award) Period: (to be filled in at award)

B.7 CEILING ON INDIRECT COST RATES AND FINAL REIMBURSEMENT FOR INDIRECT COSTS

a) Reimbursement for allowable indirect costs shall be at final negotiated rates but not in excess of the following ceiling rates:

Description Rate Base Type Period (to be filled in at award) (to be filled in at award) 1/ 1/ 1/

1/Base of Application:

Type of Rate: (to be filled in at award) Period: (to be filled in at award)

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

c) USAID is not obligated to pay any additional amount on account of indirect costs above the ceiling rates established in the contract.

d) This understanding will not change any monetary ceiling, obligation or cost limitation established in the contract.

[END OF SECTION B]

SECTION C – DESCRIPTION/STATEMENT OF WORK

C.1 TITLE

The activity will be entitled “E-PESO.”

C.2 OBJECTIVE

The goal of the broader Partnership for Growth (PFG) bilateral engagement between the U.S.

Government (USG) and the Government of the Philippines (GPH) is to shift the Philippines to a sustained and more inclusive growth trajectory on par with other high-performing emerging economies.1 A country’s payment system facilitates trade and exchange. Providing the glue to an economy, a well-functioning payment system strengthens a country’s financial infrastructure to promote commercial and market activities. Its efficient operation, allowing transactions to be completed safely and on time, makes an important contribution to overall economic performance. USAID believes that electronic payments (e-Payments) can transform development and facilitate access to economic opportunity that the PFG promises. By facilitating retail e-Payments, USAID will promote the technological advancement of the payment system that smoothen economic exchange and value. In the Philippines, close to 99% of payment transactions takes place through the medium of cash. As such, a huge development dividend exists to shift retail payments from cash to digital.2 In expanding the range of payment options available within a country, e-Payments stimulate local consumption by easing the flow of capital to a larger portion of the population. In line with Mission strategic objectives, E-PESO seeks to accelerate the shift to digital payments for broad-based economic growth by facilitating the critical mass of both supply and demand-side users of the retail e-Payment system.

The GPH sees e-Payments as a solution that will not only introduce efficiency in financial transactions, but will also boost transparency and accountability in government finances and operations once a fully automated and digitized government financial system is in place.

In order for the e-Payment adoption to be self-sustaining, this financial innovation must become popular, widely used, and universally accessible. The tipping point for rapid behavioral change accepting of e-Payments can be measured by the number of non-cash transactions per person per year. As such, E- PESO will expand upon the Mission’s initial mobile money (m-Money) deployment (SIMM and MABS IV) to facilitate the critical mass of e-Payment users that will irreversibly tip the scale towards broad e- Payment usage and widespread adoption. USAID will move from the tactical initiative of its m-Money

1 Partnership for Growth (PFG) is a signature inter-agency effort of President Barack Obama’s Presidential Policy Directive on Global Development, which advances economic growth in countries committed to good governance. PFG will provide USG assistance and non-assistance resources over the next five years to assist the Philippines overcome binding constraints to investment expansion and capital formation for increased employment and higher incomes. For more information on PFG, visit http://www.state.gov/r/pa/prs/ps/2011/11/177225.htm and http://philippines.usaid.gov/newsroom/launch-partnershipgrowth-philippines- 2011-2016.

2 Retail payments refer to the purchase of goods and services by consumers and businesses. An e-Payment system employs cash-substitutes that move beyond traditional, negotiable instruments (such as checks and letters of credit) as a means or arrangement for the transfer, clearing, and settlement of non-cash store of value, funds or securities. Broadly defined, e-Payments comprise payment instruments other than cash and paper-based: debit cards, credit cards, electronic funds transfers, direct cards, direct debits, internet banking, and e-commerce.

Electronic money (e-Money) refers to funds, or stores of value, that are exchanged electronically over computer networks, the internet, and digital stored value systems with pre-paid characteristics.

http://www.state.gov/r/pa/prs/ps/2011/11/177225.htm http://philippines.usaid.gov/newsroom/launch%E2%80%90partnershipgrowth%E2%80%90philippines%E2%80%902011%E2%80%902016 http://philippines.usaid.gov/newsroom/launch%E2%80%90partnershipgrowth%E2%80%90philippines%E2%80%902011%E2%80%902016 activities to a more strategic imperative with E-PESO’s broader deployment towards a cash-lite society.

To accelerate the shift to digital payments, E-PESO will (1) Drive transaction volume of large payment streams; (2) Promote retail and market-level infrastructure; (3) Improve the enabling environment for e- Payments including policies that will promote consumer protection and security measures; and (4) Address gaps in the broader e-Payment ecosystem. These interventions will help scale e-Payment usage towards the threshold of self-sustaining growth, lead to a more efficient, transparent, and inclusive retail e-Payment system, increase the regularity and predictability of financial services to a broader segment of the Philippines population, and eventually open up more economic opportunities for broad-based growth. To fulfill PFG goals and E-PESO objectives, this e-Payment initiative will pursue interventions leading to the following desired results:

• Economic opportunity for broad-based growth increased;

• Efficiency and transparency in retail e-Payment transactions enhanced;

• Financial inclusion deepened;

• Tipping point for scale in e-Payment adoption achieved;

• Growth in the number of active e-Payment users to reach scale;

• Number of active m-Money users threshold for scale attained;

• E-Payments accounting for at least 20% of all retail payment transactions;

• E-Payment infrastructure expanded;

• Predictability and reliability of financial tools for the poor improved;

• Systematic risk of e-Payment growth in financial system mitigated;

• Consumer awareness and trust in retail e-Payment options increased; and

• Security measures in e-Payments strengthened.

The transition to a cash-lite society in the Philippines will result in an efficient, secure and reliable e- Payment system that reduces the cost of exchanging goods and services, promotes transparency in financial transactions, enhances the stability of the financial sector, and expands access to financial services including savings, credit, and retail payment services.

C.3 BACKGROUND

The Contractor3 will provide technical assistance, training, and other services to agencies of the GPH, Local Government Units (LGUs), and the private sector – particularly mobile and technological players in the e-Payment space. The Contract will be the primary implementing mechanism for USAID’s E-PESO activity. This activity will support implementation of the PFG, an enhanced bilateral engagement that focuses on addressing the binding constraints to economic growth in the Philippines.4

(a) Partnership for Growth (PFG)

USAID plays a leading role in implementing the USG-GPH PFG in the Philippines. An inter-agency effort under the US Presidential Policy Directive on Global Development, the PFG advances economic growth in countries committed to good governance. The goal of the PFG bilateral is to shift the Philippines to a higher, sustained and more inclusive growth on par with other high-

3 The term “Contractor” refers to both the offeror and prospective implementer of E-PESO.

4 PFG constraints analysis on the Philippines identifies narrow fiscal space, poor regulatory quality, judicial inefficiency and corruption as the binding constraints to growth.

performing emerging economies. Through the PFG, USG agencies will provide assistance and non-assistance resources in the next five years to assist the Philippines shift from a low growth path to a higher, sustained and more inclusive growth on par with other high-performing emerging economies. The PFG Joint Country Action Plan summarizes the goal, objectives and scope of the enhanced engagement.5

In an effort to localize and provide a geographical focus to the PFG and to disperse economic opportunity, USAID will support economic growth interventions through the PFG Cities Development Initiative (CDI). USAID/Philippines’ concept of the PFG CDI recognizes that growth prospects of countries depend on the urban environment, with cities serving as the economically vibrant core. This urban approach holds the key to lifting up the socio-economic conditions in the surrounding rural areas that remain economically linked to their neighboring dense human settlements. Activities support PFG objectives by:

• Fostering a more open and enabling business environment less encumbered by corruption and regulatory burdens;

• Improving local capacity for more effective and transparent public service delivery; and

• Enhancing human capacity resources to take advantage of emerging economic opportunities.

To maximize USAID’s contribution and impact, Mission resources from across the technical offices will be leveraged and directed to support economic development in priority cities ripe for higher growth. USAID and partner cities are expected to mobilize a wide range of assistance instruments to increase impact, including using assistance to leverage private capital, partnering with the public and private sectors to improve investment climate, and more fully engaging academia and civil society in development programs.

Three pilot cities (Batangas, Cagayan de Oro, and Iloilo) have been chosen to test this innovative approach to USAID programming. The CDI will be scaled-up and expanded to additional cities in subsequent years of the PFG, with the intention of assisting a sufficient number of cities and their surrounding regions (outside Metro Manila) that can rebalance regional economic disparities.

(b) GPH Development Priorities

Both the PFG and E-PESO align with the goals of the 2011-2016 Philippine Development Plan (PDP) to promote sustained, broad-based, and inclusive growth.6 Underpinning this economic agenda is the GPH’s commitment to sound institutions that promote transparency, accountability, and effective and impartial performance of the regulatory role of government. The GPH recognizes that bank density (at five banking offices per city) leaves about 37% of the country’s municipalities either un-served or underserved. E-PESO seeks to fulfill the goal of the PDP by fostering a more open and conducive business environment, a more cost-effective and transparent public service delivery system, promoting financial inclusion and its resultant access to economic opportunity. The PDP

5 The Joint Country Action Plan for Implementing the PFG is a public document available on the USAID website:

http://philippines.usaid.gov/sites/all/themes/sample/docs/Philippines-PFG-JCAP_public-final_11-29-11.pdf.

6 Government of the Philippines, Philippine Development Plan, 2011.

http://philippines.usaid.gov/sites/all/themes/sample/docs/Philippines-PFG-JCAP_public-final_11-29-11.pdf calls for the promotion of a regionally responsive and inclusive financial system, conducive regulatory environment for financial inclusion, and the use of alternative products and delivery of financial services in underserved and unserved areas of the country. In June 2012, Philippine President Aquino and USAID Administrator Rajiv Shah officially launched the SIMM Activity to empower Filipinos by providing easier and more efficient access to banking and payment services through mobile phones. In addition, E-PESO aligns with the GPH Department of Science and Technology’s (DOST) Smarter Cities Initiative, its trade mark program to work towards more efficient and reliable services in several sectors through the use of Information and Communications Technology. The e-Payment Gateway of the DOST, tagged as e-Bayad, is an internet-enabled payment portal that makes available electronic payment to government agencies through the use of different delivery channels to include debit instructions, credit cards and mobile wallets.

(c) Problem Statement

While serving as a store and measure of value, cash also functions as a medium of exchange, providing simplicity, anonymity, immediacy and finality in the transfer, clearing, and settlement of retail payments. However, the use of cash for frequent transactions can be risky, costly and inefficient for consumers and businesses.7 Nonetheless, cash remains the most widely used payment instrument around the world.8

By all accounts, the Philippine e-Payment penetration rate remains low. According to some estimates, cash accounts for close to 99% of all retail payment transactions in the country. Yet around the world, there is a growing use of electronic instruments for payment transactions.

Reaching $283 billion in 2010, the global volume of non-cash transactions grew by 7.1%, dominated by developing markets (growth of 16.9%).9 In high income countries, for example, people use an equivalent of five e-Payment transactions per week. In a developing country like South Africa, this figure reduces to only one per week.10 In the Philippines, comparable figures are difficult to come

by. Without a doubt, the country’s retail payment system remains highly paper-based and inefficient.

By far, cash still remains the most popular retail payment instrument in the country, despite the increase of e-Payment options (debit cards, credit cards, electronic funds transfers, direct debits, and internet banking). The predominant use of cash in the Philippine payment system points to

7 Payment uses fall broadly into one of four categories: (1) point of sale for retail purchases (e.g., food, clothing, transportation, entertainment);

(2) bill payments for household needs (e.g., rent, mortgage, utilities, insurance, credit cards); (3) Disbursements for a variety of economic purposes (e.g., payroll, retirement, social benefits); and (4) Financial payments (e.g., inter-business transactions, bank funding, government securities, foreign exchange, stock and commodity market transactions).

8 Based on 2007 data, the use of cash in more advanced economies ranges from 47 percent of payment transactions (not value) in Finland to 88 percent in Japan. In the US, cash accounts for 57 percent of total payment volumes; 55 percent in France; 61 percent in the UK, Australia and Hong Kong; and 75 percent in Germany. Emerging economies are much more dependent on cash, accounting for 99 percent of payment transactions in India, Indonesia and Colombia; 98 percent in China, Mexico and Russia; and 93 percent in Brazil. See http://blog.irvingwb.com/blog/2011/01/the-evolution-of-the-worlds-digital-payments-infrastructure.html .

9 See World Payments Report 2012. Total non-cash circulation refers to the sum of check, debit card, credit card, credit transfer, and direct debit transactions. Cards, particularly debit cards, account for the biggest driver of global non-cash payment volumes. Weighed down by the global financial and economic crisis, developed markets in 2010 recorded a modest 4.9% growth in non-cash payments.

10 Data from Bankable Frontiers Associates.

http://blog.irvingwb.com/blog/2011/01/the-evolution-of-the-worlds-digital-payments-infrastructure.html limitations in operational efficiency of economic activity, opportunity cost redirected from more productive pursuits, higher transaction costs in both public and private spheres, sub-optimal transparency of financial administration, market “leakages” and corruption diverting undeserved benefits, and a large informal sector outside the socio-economic mainstream.

Outside the urban core, long queues, long distance traveling, and time wasting characterize the predominant payment for goods and services in the Philippines, as elsewhere in developing countries. The opportunity cost of using cash versus electronic means has real economic consequences, in terms of lost business activities and overall economic development. Given the predominance of the cash society, many Filipinos have yet to realize the optimal benefits of the technological advances in the formal bank sector. An expanding e-Payment infrastructure would allow for a greater penetration into the rural Philippines, where traditional payment systems remain inadequate, lacking reliability, convenience, and accessibility.

Financial services provide the means for the poor and unbanked to build assets, prepare for financial emergencies, and participate more broadly in the formal economy. However, the poor have limited access financial instruments to manage their low, uneven cash-flows.11 As such, e-Payment systems have the potential to help the Philippines reach development goals faster and make those gains sustainable. With just 26% of Filipinos enjoying access to formal financial channels, a latent demand remains largely untapped. In the Philippines, 610 out of 1635 municipalities do not have banks. 12 Moreover, as much as one-half of mobile users in the Philippines are unbanked.13 To the extent financial inclusion plays any role in addressing development challenges in the Philippines, interventions in e-Payments and m-Money provide additional means to reach the poor and financially under-served.

E-Payments present forward-changing innovations with the potential to “leapfrog” not only conventional banking models but also development challenges of financial and economic inclusion.

Serving a public good, an expanded e-Payment ecosystem shifting from cash to digital payments provides lasting socio-economic benefits, such as:

1. Cost savings: by decreasing the direct and indirect costs associated with physical cash or distribution of in-kind goods;

2. Transparency: by increasing the immediate accountability and tracking of financial flows, leading to less corruption and outright theft;

3. Security: by contributing to safer and speedier payment delivery;

4. Financial inclusion: by extending financial services to the un- and under-banked;

5. Access to new markets: by opening doors to fee-for-service business models in previously un- and under-served areas with lower transactions costs.14

11 For the seminal study on financial assets on the poor, see Portfolios of the Poor: How the World’s Poor Live on $2 a Day.

12 Data from Bangko Sentral ng Pilipinas.

13 Pickens, Mark. “Window on the Unbanked: Mobile Money in the Philippines.” CGAP Brief, December 2009.

14 See the Better than Cash Alliance, available at http://betterthancash.org.

http://betterthancash.org/

As a founding member of the Better Than Cash Alliance (BTCA), USAID supports the use of e- Payments that provide a superior medium of exchange over cash. A growing body of evidence points to the lasting benefits of digitizing payments for people, communities and economies.15 Case studies suggest that digitizing cash payments could result in cost savings of as much as 50-90%. Research from USAID/Philippines on the rural banking sector indicates a cost savings of approximately 75% in transitioning from cash to mobile money for collection of loan amortizations. Added to this cost savings is the additional benefit of more secure transactions, better ability to reach clients in hard-to-reach areas, greater transaction transparency since mobile money is easier to track than cash payments.

A country’s payment system facilitates trade and exchange. By addressing issues in the settlement and payment process, broader usage of retail e-Payments has the potential to boost economic output. Research indicates that the growth of e-Payments can substantially reduce the social and resource costs of a country’s payment system.16 In fact, wider adoption of non-cash instruments correlates with economic prosperity. As economies become more prosperous, their use of electronic instruments increases. In turn, the availability of non-cash instruments helps to facilitate new commercial activity. Increased use of non-cash instruments characterizes more efficient, transparent and prosperous markets.17

(d) USAID PFG Programming

The E-PESO Activity – along with various USAID PFG technical assistance across areas of economic growth, governance, and higher education – will assist the Philippines achieve the goal of sustaining a high and inclusive growth trajectory on par with other high-performing emerging economies. E- PESO will contribute to Development Objective 1 of the Mission’s Country Development Cooperation Strategy (CDCS) 2012-2016: “Broad Based and Inclusive Growth Accelerated and Sustained.”

The Contractor for the E-PESO activity will have considerable interaction and coordination with implementers of other parts of the PFG, including implementers of the other USAID-managed projects and other USG agencies participating in the PFG. As one of several implementing mechanisms, the E-PESO Activity will directly support USAID’s efforts to achieve the unifying goal of the PFG. For an overview of the USAID PFG programming, see Attachment J.5. Specifically, E-PESO will build upon the ongoing deployment of the SIMM activity and its SIMM Cities programming, expanding coverage from the initial focus on mobile money to a wider scope that will cover all forms of electronic payment systems.

To expand m-Money usage, the Scaling Innovations in Mobile Money (SIMM) activity continues to target four broad areas of strategic intervention: (i) the payment system, (ii) government services, 15 See http://betterthancash.org/. These benefits include: cost savings, transparency, security, financial inclusion, and access to new markets.

16 The cost of a country’s payment system can account for about 3% of GDP. E-Payments cost roughly one-third to one-half as much as paper-based transactions. See Humphrey, D. B., Kim, M., & Vale, B. (Vol. 33, No. 2 (May 2001)). “Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice.” Journal of Money, Credit, and Banking, 216-234. In the U.S., e-Payments costs an estimated 45% of a paper payment.

17 See The Mckinsey Global Payments Map: a Global Eye on Local Opportunities, October, 2010.

http://betterthancash.org/

(iii) electronic payroll (e-Payroll) distribution; and (iv) the agent network distribution. Cutting across these strategic areas, the activities of SIMM also addresses both (a) supply and (b) demand constraints to broader adoption of m-Money in the Philippines and (c) promote global knowledge sharing. Working with local partners, the SIMM Cities approach assists in building the local area components of the m-Money ecosystem. Current SIMM Cities include Batangas, Valenzuela, Pulilan, and Quezon City.

As a founding member of the Better than Cash Alliance (BTCA), USAID provides program partners with the expertise and resources they need to make the transition from cash to electronic payments and achieve the shared goals of empowering people and growing emerging economies. USAID also established a global partnership with Citibank to broaden financial inclusion by fostering the rapid adoption of m-Money technology in developing countries. USAID and Citi will work with governments, donors, industry and other participants in the payments system. USAID expects to continue to support local m-Money platforms and Citi will integrate its core banking services with mobile money platforms to provide seamless integration between banking and the “last-mile”, mobile-based payments services. The partnership will expand current USAID efforts in mobile solutions and focus on implementing a set of principles in nine countries, with an initial emphasis on: Colombia, Haiti, Indonesia, Kenya, and the Philippines. Collaboration with BTCA and its member organizations will be explored to promote the objectives of E-PESO.

(e) Relationship to Other Donor Activities

Within the donor and development communities, e-Payments continue to generate excitement.

Currently, some donors are active in promoting m-Money and e-Payments in the Philippines. To increase the chances of activity success and use scarce development resources wisely, E-PESO will coordinate with the various development interventions in Philippine m-money, in order to reduce duplication, share experiences, and build a body of knowledge towards mutual development objectives.

The BTCA is implementing a 15-month Development Results Focused Research Programme in the Philippines (and two other countries: Colombia and Nigeria). Two additional countries (Malawi and Mexico) have also been identified for research to develop additional case studies. Current activities in m-Money include SMART’s Island Activation Project, which partners with targeted MFIs and cooperatives in remote islands to operate SMART Money Centers in their branches. BanKo has a project with the Gates foundation to reach 1 million m-money customers. Grameen Foundation, with support from the Gates Foundation, carries out the Micro savings Initiative, which works with microfinance institutions in Ethiopia, India and the Philippines to test and refine models (including m-Money) that can be used by other institutions to provide savings options for people living at the bottom of the economic ladder.

C.4 WORK REQUIREMENTS

(a) Expected Outcomes and Indicators

E-PESO will promote more efficient, transparent, and inclusive retail payment solutions for consumers and businesses alike. In line with Mission strategic objectives, E-PESO seeks to accelerate the shift to digital payments for broad-based economic growth by facilitating the critical mass of both supply and demand side users of the retail e-Payment system. This work requires a multi-pronged approach, targeting transaction volume, digital infrastructure, enabling environment, and behavioral change across the broad e-Payment ecosystem. The performance of E-PESO will be measured at various levels (impact and outcome). Achievement of these desired results will be measured by a minimum set of corresponding indicators, as detailed below.

Desired Impact: Efficient, Transparent, and Inclusive Retail e-Payment System Contributes to Broad-based Growth

• Indicator 1: Increased economic opportunity

• Indicator 2: Financial inclusion deepened

• Indicator 3: Transparency and efficiency of retail payment system improved

• Indicator 4: More predictable and reliable financial tools for the poor

Desired Purpose: Scope of e-Payment Usage Reaches Tipping Point for Scale

• Indicator 1: e-Payments accounting for at least 20% of all retail payment transactions

• Indicator 2: Growth in the number of active e-Payment users to reach scale

Desired Outcome 1: Rapid Adoption of e-Payment in Financial System

• Indicator 1: Adoption of e-Payments as monetary transaction option in five (5) GPH agencies

• Indicator 2: Adoption of m-Money as payment option in all cities of the PFG CDI

• Indicator 3: Increased e-Payment implementation and adoption to 500 (small, medium, and large) businesses

• Indicator 4: Over 25,000 people trained (via financial education and literacy on the uses of e-Payments and m-Money services) for improved household financial management

Desired Outcome 2: Infrastructure for e-Payments Expanded

• Indicator 1: Growth of front-end e-Payment infrastructure expanded

• Indicator 2: Back-end e-Payment infrastructure strengthened

• Indicator 3: E-Payment infrastructure gaps identified

Desired Outcome 3: Enabling Environment for e-Payments Improved

• Indicator 1: Financial regulation refined to manage growth of e-Payments

• Indicator 2: Increased competition among m-Money and e-Payment platforms

• Indicator 3: Interoperability in the national payment system achieved

• Indicator 4: Increased consumer awareness and trust in e-Payments

• Indicator 5: Security measures in e-Payments strengthened

It can be noted from the listing above that some components contribute to the same indicators/targets.

There are indicators that are highly specific (e.g. indicator 1 of desired impact). The Contractor must implement its strategy and development interventions leading to the achievement of these desired results. The E-PESO results framework is presented in Attachment J.6.

The Contractor shall, as approved by USAID’s Contracting Officer’s Representative (COR), formulate and adopt a strategic framework that identifies priority activities necessary to achieve planned objectives and outcomes in the most cost-effective manner. The strategic framework should identify challenges and opportunities, both internal and domestic, which can influence the probability of success in achieving the results of E-PESO. USAID recognizes the need for flexibility and creativity in the Contractor’s approach to achieve meaningful and sustainable results.

(b) Component and GPH Counterparts

The E-PESO Activity will address drivers of local economic growth, either directly with various local partners or in close coordination with other USAID interventions at the local level. Under the technical direction of the COR, the Contractor will work with the GPH counterparts and stakeholders relevant to each component and deliverable to achieve the desired results. The Contractor shall interface with a diverse group of public, private sector, and civil society organizations. The GPH counterparts for the program will include:

• Bangko Sentral ng Pilipinas (BSP);

• Department of Budget and Management (DBM);

• Local Government Units (LGUs) of the SIMM Cities and CDI regions;

• Department of Finance (DOF);

• Bureau of Local Government Finance (BLGF);

• Bureau of Internal Revenue (BIR);

• Commission on Audit (COA);

• Department of Trade and Industry (DTI);

• Department of Interior and Local Government (DILG);

• National Economic and Development Authority (NEDA);

• Department of Social Welfare and Development (DSWD);

• Department of Science and Technology (DOST); and

• Other relevant agencies.

The Contractor shall coordinate closely with the PFG Joint Steering Committee and related technical working groups. The Contractor shall also coordinate closely with all other USAID-funded projects working in the CDI regions. In addition, the Contractor must coordinate and collaborate with other offices in the US Mission (including the Embassy Economic Section, the U.S .Foreign Commercial Service, and the US Foreign Agricultural Service); and other USG partners to ensure synergies and complementarity of U.S. inter-agency objectives. Likewise, the Contractor shall assist USAID and the GPH in collaborating with bilateral and multilateral donors including the ADB, World Bank, International Finance Corporation, Japan International Cooperation Agency, the European Commission delegation, and other donors in similar activities. This donor coordination role will take place primarily, but not exclusively, through the Philippines Development Forum.

Collaboration with other USAID activities, USG partners, and other donors not only ensures the optimal use of funds, but also helps avoid duplication of efforts, while complementing donor activities to reach similar objectives. Coordination may entail participation in working group meetings as well as formal and informal information exchange with other bilateral and multilateral organizations. The E-PESO activity’s time-horizon heightens the importance of leveraging donor coordination to maximize results.

The success of E-PESO depends heavily on close collaboration with financial regulatory body, e- Payment service providers, banks, and m-Money players (Smart, Globe, BanKo, and others). Any development intervention in e-Payments needs to build on existing payment and mobile infrastructures. Given the capabilities required to offer to expand the e-Payment ecosystem, E-PESO can be delivered only through strategic partnerships.

(c) Detailed Work Requirements

Through E-PESO, USAID will provide tailored assistance to drive transaction volume; spur the growth of e-Payment infrastructure; improve the enabling environment for e-Payments and promote consumer protection and e-Payment security measures; and address gaps in the broader e-Payment ecosystem. To accomplish these E-PESO tasks, the Contractor will undertake four parallel and complementary areas of interventions: Transaction Drivers; Infrastructure; Enabling Environment and Consumer Protection; and Cross-cutting Actions. The e-Payment tasks of the Contractor are listed below by activity component.

While the primary focus of Contractor’s efforts is on facilitating the growth of the retail e-Payment system and consumer adoption, the four activity components are intended to be mutually reinforcing and should be managed in an integrated manner. The Contractor shall propose an overall strategy with corresponding activities for achieving the E-PESO purpose. Specific metrics for reaching the tipping point of scale in e-Payment adoption and usage must be defined and analytically justified for the Philippines. The Contractor must also propose intermediate results/outcomes in achieving the E-PESO objectives, including indicators to track the achievement of such intermediate targets.

Componen…