Overview of Multilateral Development Banks (MDB)

In many parts of the world, multilateral development banks (MDBs) play a major role in the social and economic development programs of nations with developing or transitional economies. This role includes advising on development projects, funding them and assisting in their implementation.

Characterized by AAA-credit ratings and a broad membership of borrowing and donor countries, each of these institutions operates independently. All however, share the following goals and objectives:

• to reduce global poverty and improve people's living conditions and standards;
• to support sustainable economic, social and institutional development; and
• to promote regional cooperation and integration.

MDBs achieve these objectives through loans, credits and grants to national governments. Such funding is usually tied to specific projects that focus on economic and socially sustainable development. In addition to their lending programs, these institutions also provide technical and advisory assistance to their borrowers and conduct extensive research on development issues.

Canada is a partner and shareholder in the World Bank, which is the major global MDB, and in several regional development banks. This membership permits Canadian firms and individuals to compete for procurement opportunities in bank-funded projects and programs.

Canada's Offices of Liaison with International Financial Institutions (OLIFIs) can help you learn about MDBs, including information on where and how funds are spent, and how to find and pursue these opportunities. To find out more, refer to OLIFI.

Working with MDBs

During recent years, MDBs have made considerable progress in harmonizing the way they procure goods and services. In many cases, they are now using similar policies and procedures, although the interpretation of these approaches may still vary at the level of the individual institution. In the sections that follow, we'll look at the common features of MDB procurement and how it works.

• Country Strategies
• The Project Cycle
• The Procurement Process
• Project and Procurement Information
• Suppliers of Goods, Works, Equipment and Non-Consulting Services
• Consultants and Consulting Services
• Corporate and Institutional Procurement
• Trust Funds
• Business Approach

All MDBs use country strategy documents, as these are fundamental to establishing an MDB's lending priorities for a particular country. Based on the country's own vision for its long-term development and written by the MDB, the document lays out the MDB's support program for the nation.

A country strategy begins by analyzing the causes of poverty within the population and identifying key areas where the MDB's assistance can reduce it most effectively. This establishes a foundation for the MDB's future activities in the country, which can range across the entire spectrum of economic and social needs.

The development of the country strategy involves extensive discussions with many stakeholders, including government authorities, representatives of civil society, non-government organizations, development agencies and the private sector. These discussions are crucial to the success of the strategy because they promote collaboration and coordination among the various national partners.

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The Project Cycle

All MDB-funded projects are implemented by the borrowing countries, not by the MDB providing the funds. However, all borrowers must follow the MDB's rules and procedures throughout the entire project cycle. This is intended to guarantee efficiency and transparency in the use of MDB funds.

The project cycle, which has similar stages for all MDBs, is the framework for the design, preparation, implementation, completion and evaluation of a project. Business opportunities occur throughout the cycle, so becoming familiar with it will increase your chances of identifying an opportunity and securing a contract.

You should be aware, though, that project cycles can often last for several years, so being involved in a project from start to finish can require a substantial long-term investment on your part. However, the smaller components within a given project cycle can provide many shorter-term opportunities.

In general, the project cycle consists of the following stages:

Identification: The MDB and the borrowing country identify projects that are appropriate for the country's development strategy and suitable for MDB support. Pre-feasibility studies are often required at this stage.

Preparation: Once a proposed project has entered the project pipeline, the borrower and MDB technical staff study and define it further. The actual design and preparation of the project are the borrowing country's responsibility. During this stage, the borrower and/or the MDB frequently hire consultants to help with feasibility studies, detailed project design and the assessment of the project's environmental and social effects.

Appraisal: MDB staff conduct in-depth assessments of the technical, financial and economic elements of the project. The appraisal phase is the MDB's responsibility and culminates in a project plan.

Negotiation: The MDB and the borrower negotiate the funding agreement and the project implementation plans. Negotiations result in a loan or funding document that is presented to the appropriate MDB board(s) for approval. The funding becomes effective after board approval and after the country has signed the documents. Funds can now be disbursed, thus commencing the implementation stage of the project.

Implementation and Supervision: Implementation of the project, including procurement, is the responsibility of the borrower and is carried out with minimal MDB assistance. However, the MDB does oversee all major procurement decisions made by the borrower. Most of the funds are spent during this phase, which provides the bulk of the procurement opportunities for contractors.

Evaluation: This final phase is an assessment of the project and of the results achieved. It is performed after the project has been completed and all funds have been disbursed.

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The Procurement Process

Before you pursue a contract related to an MDB-funded project, be sure you understand the respective responsibilities of the MDB and the project's executing agency. The MDB and the executing agency do share some of the work of project preparation but the executing agency is responsible for all phases of project execution and procurement, which must comply with MDB regulations. These regulations and their related procedures are similar for all MDBs.

The best sources of project information are contacts, partners and MDB staff in the donor and borrowing countries. Often, however, project-related documents, procurement notices and contract awards are available as well on MDB websites. Reviewing this information in the context of the country strategy document will help you monitor the progress of active projects and assess future developments (and therefore opportunities) in the borrowing country.

Procurement notices represent the actual business opportunities in MDB-financed projects. These are generally posted on the MDB's website, and on independent websites that consolidate project information from major MDBs, UN agencies and foreign governments. These websites offer advanced search features and some will automatically notify you of opportunities that match your interests. Some are by subscription only, but most are free.

For the procurement of goods, equipment, civil works and non-consulting services such as transportation and maintenance, most opportunities occur during the implementation stage of the project.

Most MDBs require the borrower to draft a procurement plan, which states in general terms what products and services will be needed, when they will be required, their approximate costs and the procurement methods to be used. The procurement plan is published on the MDB's website and is updated regularly.

International competitive bidding (ICB) is the preferred method when procurement involves large monetary values and/or complex needs. The objective of ICB is to provide all eligible firms with timely notification so that they all have an equal opportunity to bid. Borrowers must issue bid invitations or prequalification invitations in at least one local publication and in UN Development Business Online. In some cases, invitations will also appear on the MDB's website.

Before bidding, always familiarize yourself with the procurement guidelines of the MDB that is providing the loan. These guidelines define the policies, procedures and procurement methods that have been agreed on by the borrower and the MDB.

Be aware, however, that the relationship between the supplier (you) and the borrower is governed by the bidding documents and your contract with the borrower, not by the MDB's procurement guidelines.

Prequalification

Prequalification of bidders is often required if:

• procurement is for large and complex civil contracts;
• procurement is for custom-designed equipment, specialized services or technologies;
• the anticipated cost of preparing a bid would be very high or would discourage competition; or
• goods of an inferior quality would have an unfavourable impact on the project (for instance, in pharmaceutical procurements).

All firms that prequalify by meeting the specified criteria for eligibility, financial capacity and experience are then invited to bid. Interested firms can obtain bidding documents from the borrower. These documents contain:

• instructions to bidders;
• the form of the bid;
• the form and condition of contract;
• specifications and relevant technical data;
• a list of goods or bill of quantities;
• delivery times or schedules of completion;
• the amount and form of bid security; and
• the basis for bid evaluation and selection.

Bid evaluation

Contracts are awarded to the lowest-evaluated bid, based on the evaluation criteria. Note that the lowest-evaluated bid may not be the lowest-priced bid, since other factors such as performance, after-sales service, training, maintenance and operating costs are often taken into account. Additionally, a margin of preference may be granted to bidders from the borrowing country, or for manufactured goods with a minimum percentage of domestic content.

Other bidding methods

When ICB is not the most appropriate method, other methods may be used; among these are national competitive bidding (NCB), shopping and direct contracting. The option chosen will depend on the scope, nature and complexity of the contract in question. NCB is considered the appropriate method for contracts that are not expected to attract foreign bidders.

Invitations for such bidding may be limited to domestic publications, and bidding documents may be only in the national language. However, the process is not restricted to domestic firms; if foreign companies want to bid, they can do so.

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Consultants and Consulting Services

MDBs use the term "consultant" for a wide variety of public and private entities that provide consulting services. These include consulting firms, engineering firms, management firms, procurement agents, auditors, commercial banks, universities, research institutions, governmental agencies, NGOs and individuals. Note that MDBs distinguish consulting services from non-consulting services such as maintenance, the latter being procured in the same way as goods and equipment.

Opportunities for consultants occur during most of the project cycle. The following list provides some examples and the points at which they occur:

• The preparation stage can include sector studies, master plans, (pre)feasibility studies, project design and environmental and social assessments.
• The implementation stage can include procurement assistance, project management, training and construction supervision.
• Advisory services, which can be required throughout the project cycle, can include strategy and policy, regulation, institutional reform, capacity building, information technology and technical assistance.

Selection of Consultants

To select consultants for an assignment, the borrower publishes a procurement notice on UN Development Business Online, dgMarket and/or the MDB's website. The notice will ask suitable firms to submit Expressions of Interest (EOIs).

Using the EOIs received, the borrower prepares a shortlist of six companies or individuals and sends a Request for Proposal (RFP) to them. The RFP includes the instructions to consultants, the Terms of Reference (ToR) for the project and the proposed contract. Technical and financial proposals may be requested at that time, but will be evaluated separately using a two-envelope system, in which the financial proposals are opened only after the technical scores have been assessed.

Before submitting an EOI, always familiarize yourself with the selection guidelines of the MDB that is disbursing the loan. These guidelines define the policies, procedures and selection methods that have been agreed on by the borrower and the MDB.

Be aware, however, that the relationship between the supplier (you) and the borrower is governed by the RFP and the contract, not by the MDB's procurement guidelines.

The heaviest emphasis in selecting a consultant is on the quality of the services to be provided, and the most common selection method is Quality- and Cost-Based Selection (QCBS). The weight given to quality and cost will depend on the complexity and nature of the assignment although is usually around 80 percent for quality and 20 percent for cost.

However, the borrower may also use Quality-Based Selection (QBS) if the scope and complexity of the assignment is highly specialized and/or difficult to define, or the assignment will have a major impact on the later stages of the project. In QBS, technical proposals are submitted for evaluation first, and financial proposals submitted only after the technical evaluation has taken place.

MDBs also generate business opportunities through corporate or institutional procurement, when they purchase goods or services for their own internal needs. They buy a wide variety of goods and services including:

• information technology;
• communications equipment and services;
• office equipment and supplies;
• graphic design and publications; and
• printing services.

MDBs also hire a broad variety of individual consultants and consultancy firms to provide technical expertise that they do not have in-house.

Procurement over a certain threshold is carried out competitively and is advertised on the MDB's website and/or on UN Development Business Online and dgMarket. Some MDBs have developed electronic notification and procurement systems for their corporate procurement, which enables potential suppliers to receive notifications, express their interest and bid electronically. Most MDBs require suppliers and consultants to register as a vendor.

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Trust Funds

MDBs complement their resources through trust funds. These funds are financial and administrative arrangements with external donors, and are intended to finance high-priority development needs such as research, technical assistance, advisory services, debt relief and post-conflict transition. The funds come from donor countries, foundations, the private sector and sometimes the MDB's own grant resources. The MDB is responsible for administering and allocating the funds.

Until recently, many consultant trust funds (CTFs) were donor-based and tied, which meant that they could only be used to hire consultants who were nationals of the donor country. Currently, however, almost all MDBs have phased out tied trust funds or are doing so. Most new trust funds are untied, are sector- or theme-specific, and are either multi- or single-donor funds. Their main purpose is to advance international development by providing targeted grants for key strategic needs.

For Canadian consultants, the loss of the tied Canadian CTFs is far outweighed by the dramatic increase in the number of funds they can access worldwide, and the large amount of available financing that has resulted from untying the funds.

You should consider MDB-funded business opportunities as just one element of your larger international marketing strategy, rather than an entry point into a new market. That said, if you have already exported successfully to a particular market, you can expect that your strategy would adapt well to MDB project opportunities there.

All MDBs assign project officers to each project and these individuals serve as the managers and supervisors who implement the project on behalf of the MDB. They are key contacts for seeking opportunities, and they will be much more interested in your company if you can offer them expertise or technologies that will help them solve problems and contribute to their projects' success.

As soon as you identify a project, you should review the project documents to identify the key decision makers and contact them to express your interest in participating. Visits to the borrowing country are essential for consulting and engineering firms, and can be very fruitful for exporters of goods and equipment as well.

Whether you are meeting with MDB staff or with representatives of the executing agency, be well prepared and have specific topics to discuss; making general inquiries about business opportunities or asking for readily available information will be seen as a waste of time. You should be prepared to clearly demonstrate what you or your company can do to help the project officers advance their project, and provide appropriate information about your experience, capabilities and the solutions you intend to propose.

Working with a local partner is usually advisable. Such partnerships can give you the local presence and expertise that will help with any necessary follow-up and having someone on the spot may help you reduce costs. In most cases, moreover, local content is one of the evaluation criteria for a contract, and demonstrating that your bid has such content can make the difference between winning and losing a contract.

Some of the subscription services that provide procurement notices also provide databases of local firms interested in MDB projects. There are also opportunities to participate in MDB-funded projects by subcontracting with prime contractors that have been awarded contracts in a project. Subcontracts are not governed by MDB procurement regulations and interested firms should contact prime contractors directly.