Official Development Assistance (ODA)
Introducing Anti-Corruption Measures Related to Japanese ODA Loan Projects
In light of the bribery case of Pacific Consultants International Co., Ltd. (hereinafter referred to as 'PCI') revealed in connection with a Japanese ODA loan project in Viet Nam (Saigon East-West Highway Construction Project), the Japanese side will take the following measures to prevent corruption and fraudulent practices. These measures will be steadily implemented for all Japanese ODA loan projects in all countries including Viet Nam. Meanwhile, Japan will request the Governments of the recipient countries to introduce more transparent and stricter procurement procedures for Japanese ODA loan projects and to strengthen mechanisms for preventing corruption and fraudulent practices, in its endeavor to prevent their reoccurrence.
1. Introduction of Quality and Cost Based Selection (QCBS)
Japan has introduced aspects of cost based evaluation to the selection of consultants for ODA loan projects. Previously, only Quality Based Selection (QBS) was applied when evaluating proposals in the selection process of consultants, but from now on QCBS will be applied as a rule. A specific calculation method for QCBS evaluation will be as follows, based on the operation of the World Bank and other examples, which is set from the perspective that technical evaluation should remain the core of the evaluation in order to give enough consideration to the quality and safety of Japanese ODA loan projects.
- (1) Consultants not meeting the minimum technical score should be ruled out;
- (2) As a rule, the relative weighting of technical score to financial score should be 80:20;
- (3) Proposals will be ranked depending on the weighted total of technical score and the financial score.
In addition, it was clearly written in JICA's Guidelines for the Employment of Consultants under Japanese ODA Loans that application of QBS will be limited to the following types of assignments.
- (1) Complex or highly specialized assignments for which it is difficult to define precise Terms of Reference (TOR) and the required input from the consultants;
- (2) Assignments where the downstream impact is so large that the quality of the service is of overriding importance for the outcome of the project (for example, engineering design of major infrastructure);
- (3) Assignments that can be carried out in substantially different ways such that financial proposals may be difficult to compare;
- (4) Assignments including supervision of large and complex construction works for which it is particularly important to take safety measures.
2. Limitations on Single-Source Selection (SSS)
Previously, SSS was basically applied for selecting consultants for Japanese ODA loan projects when the recipient country requested, for reasons such as satisfactory performance of the said consultant engaged in related works. JICA's Guidelines have now clarified that SSS will be allowed only in exceptional cases and, based on the operation of the World Bank and other examples, have established that SSS will be acceptable only under the following conditions.
- (1) For tasks that represent a natural continuation of previous work carried out by the firm (See Note);
- (2) In emergency cases, such as in response to disasters;
- (3) For very small assignments;
- (4) When only one firm is qualified or has experience of exceptional worth for the assignment.
(Note) Except when downstream assignment is substantially larger in value than previous work.
3. Establishment of the mechanism for handling information, fair treatment of sources of information, and accountability of the Governments of the recipient countries
To uniformly handle information related to corruption such as bribery in ODA projects, the Government's contact points are consolidated into the Aid Policy and Management Division of the International Cooperation Bureau of the Ministry of Foreign Affairs (MOFA) and into the General Coordination Division of the General Affairs Department of JICA. Japanese embassies and JICA overseas offices in the recipient countries will also receive information related to corruption.
Also, the Government of Japan will be promptly advancing negotiations with the Governments of the recipient countries to the effect that the recipient countries to treat informers fairly so that they should not receive unfair treatment for reporting corruption, and when the Government of Japan and JICA are informed about Japanese ODA loan-related corruption, recipient countries will provide relevant information to the Japanese side. With the Government of Viet Nam, the Government of Japan signed an Exchange of Notes (E/N) with the following stipulations.
While ensuring fair treatment of sources of information and data, the Government of the Socialist Republic of Viet Nam shall, upon request, furnish the Government of Japan and JICA with:
- (a) [omitted];
- (b) Any other information, including information on corrupt practice, related to the projects enumerated in Column 1 of the Annex (See Note).
(Note) The name of Japanese ODA loan projects provided by this agreement will be inserted.
Furthermore, based on the above principles, the General Terms and Conditions (GTC) of the Loan Agreement for Japanese ODA Loans were agreed between JICA and the Government of the Socialist Republic of Viet Nam, which stipulated the following.
- If JICA receives information related to suspected corrupt or fraudulent practices in the competition for, or in the execution of, contracts to be financed out of the proceeds of the Loan, the Borrower shall provide JICA with such information as JICA may reasonably request, including information related to any concerned official of the government and/or public organizations of the Borrower's country.
- The Borrower shall not, and shall cause the Executing Agency not to, unfairly or unfavorably treat the person and/or company which provided the information related to suspected corrupt or fraudulent practices in the competition for, or in the execution of, contracts to be financed out of the proceeds of the Loan to JICA and/or the Borrower/Executing Agency.
4. Introduction of debriefing
Japan has stipulated that a "debriefing" must be carried out in JICA's Guidelines for Procurement and Guidelines for the Employment of Consultants to clarify the accountability of executing agencies. Accordingly, executing agencies of the recipient country should disclose the final results of the evaluation to those bidders not selected for the ODA loan project after proposal evaluation, and offer explanation on the evaluation results upon request by the bidder. JICA, based on the Guidelines, will provide appropriate instructions to executing agencies when they fail to respond to a bidder's request.
5. Enhancement of JICA's concurrence procedures
When recipient countries' executing agencies employ consultants, JICA has required the recipient countries to obtain JICA's concurrence at each stage, such as when (a) sending letters of invitation, (b) evaluating proposals, and (c) concluding contracts. Furthermore, JICA, in its Loan Agreement, has required executing agencies of the recipient country to submit documents which JICA regards necessary. Going forward, Loan Agreement between JICA and the Government of a recipient country shall stipulate the obligation for the recipient country to submit documents which JICA regards necessary to check thoroughly for concurrence, in order to further strengthen the said concurrence procedures.
6. Expansion of ex-post audits
When the Government of Japan and JICA have an agreement with the Government of a recipient country, JICA has previously executed ex-post audits on procurement procedures only for employing contractors by outsourcing the task to external experts for checking the fairness of the said procedures. From now on, the Government of Japan and JICA will seek agreement with the Government of a recipient country to allow JICA to execute the said audit not only for employing contractors but also for employing consultants of the projects JICA regards necessary, which shall be stipulated in Loan Agreement between JICA and the Government of a recipient country. As for on-going projects initiated without a stipulation of ex-post audits in their agreements, JICA will seek the cooperation of recipient countries with a view to execute ex-post audits.
7. Reinforcement of support for the employment of consultants
Regarding large amount of consultancy contracts to be opened for tender hereafter, JICA will send external experts for technical assistance to recipient countries in order to ensure fairness of the procedures for employing consultants and to speed up the process.
8. Enhancement of punishments
(1) Conditions for disqualifying bidders
Previously, bidders that took part in fraudulent actions in connection with Japanese ODA loan projects were disqualified from future bidding only when "either a final judgment was passed by the judicial body or a final disposition was made by the administrative body of the recipient country," and similar cases. JICA's rulebook on provisions added conditions for invoking disqualification so that such measures can be promptly applied even when bidders are arrested or prosecuted for violating Japanese laws.
(2) Periods for disqualification
Among the conditions above, "misstatement," which includes bill-padding for salaries by using a false CV (curriculum vitae), is ordinarily subject to disqualification of longer than one month, and up to 6 months. However, in the case of malicious intent, it may be considered a "fraudulent or dishonest action," which is liable for disqualification of up to 9 months, or 18 months if highly malicious. JICA's rulebook on provisions will be applied to take a stricter response to fraudulent actions.
9. Enforcement of compliance by the consultants' community in Japan
The Government of Japan has held meetings with the consultants' community and urged them to further strengthen their compliance. The Government will continue monitoring their effort in terms of compliance.