Railway Rehabilitation Project and Railway Modernization Project [Loans 1631/1773]

Loan agreements for projects in Uzbekistan should include a covenant that will avoid unnecessary delays from the contract registration process of the Ministry of Foreign Economic Relations, Investment, and Trade. In each railway project, the ministry’s price verification during the contract registration process unnecessarily delayed procurement. Price verification aims to encourage renegotiation of bid prices when the ministry believes prices are too high. ADB’s guidelines for procurement, however, do not allow renegotiation of bids awarded on a competitive basis, including international competitive bidding. The appropriateness and reliability of the ministry’s method of price verification are also questionable. Hence, the ministry’s price verification has no potential to add value to ADB-financed procurement, and may lead to violations of ADB’s guidelines for procurement, causing ADB to declare misprocurement or cancel part of the loan. A loan covenant requiring the ministry to register ADB- financed contracts without qualification would eliminate the lengthy discussions that inevitably result in registering the contracts without qualification, but with long delays that affect project implementation. Such loan covenants are already allowed under Uzbekistan’s tendering procedures, which allow exemption from following national tendering procedures if different rules apply to loan agreements with international financial institutions. Loan agreements in Uzbekistan could include a covenant that ADB-financed projects are exempt from Clause 62 of General Regulations in the Cabinet of Ministers Resolution No. 456, concerning the requirements for examination of tender results, and that no price verification should be exercised for contracts funded partly or in whole by ADB and awarded on the basis of competitive bidding, including international competitive bidding. ADB’s Office of the General Counsel should determine the specific language of such a covenant in consultation with the Government of Uzbekistan.