Winning Aid-Funded Business

1. Winning Aid-Funded Business A training course delivered by Nigel Peters, Director of the UKTI Aid-Funded Business Service UKCDS & UUK London 5 November 2012

2. AFBS Presentations • What is Aid-Funded Business? • Why do it? • Who are the major potential clients? • Where and in what sectors do they work? • What sort of companies win work for them? • An overview of all the main international financial institutions (IFIs) and the United Nations agencies (UN) • Lunch break • Sector case-study : Education • The Bureaucratic Bits: • Where is the Project Information? • Registration Requirements, • Getting Shortlisted • Bidding • Follow-up support from UKTI in your region

3. What is Aid-Funded Business? Commercial Opportunities created by development & humanitarian aid programmes funded through the multilateral & bilateral development agencies, and the United Nations WORTH APPROX US$70-100 BILLIONPER YEAR The UKTI Aid-Funded Business Service is a dedicated UKTI service to help UK companies win aid-funded business

4. Broken down by IFI/Agency

5. So which Sectors are important? World Bank Group Example

6. Who are the organisations? United Nations Peacekeeping, Famine, Natural Disasters, Emergency Aid World Bank Long term loans for development projects such as Bridges, Dams, Hospitals, Consultancy in areas such as Good Governance, Security, Healthcare reform etc (Similar to the Asian, African, Inter-American and Caribbean Development Banks) EC EuropeAid: similar function as World Bank but grants not loans EIB: ta and long term loans Aid/Development Assistance for Developing Countries EBRD Investments in private sector (transition economies) Bilateral Donors DFID, MCC, GIZ, AusAID, SIDA etc

7. Where do I fit in? • Tenders and contracts are generally broken down into three distinct areas: • Consultants (services) – for all stages of the project cycle, but if getting in early beware conflict of interest rules. Consortium/sub-contracts. Firms can supply individuals. • Contractors (works) - gradual move to project management fee based contracts for large projects. For traditional works contracting: project broken into small packages, no short-listing, lowest price wins. • Suppliers of goods - cheapest bid according to specification. Procurement agents sometimes used. Need to ensure your product is known to project consultant, especially if innovative

8. Does the size of my company matter? • No, but it is horses for courses! • You can win business as an individual, up to a multinational • But it is very different business: e.g. in consultancy: an individual consultant is frequently appointed by the Development Banks to undertake project identification and evaluation Price Waterhouse Coopers run a multi-million pound construction transparency project for DFID and in supplies: a small company in Somerset supplies vehicle spare parts to the UN in Sudan Pearson supply educational textbooks for EuropeAid projects across Africa

9. The 70:30 Guideline for UK Companies For Development Aid (Multilateral Development Banks, EuropeAid, EBRD, Bilaterals): • Roughly 70% of the business opportunities for UK companies will be for consultancy • The other 30% will be for the supply of goods For Humanitarian Aid (mainly the UN): • Roughly 30% of the business opportunities for UK companies will be for consultancy (especially for individuals) • The other 70% will be for the supply of goods And overall very little for works contractors, but there is the trend towards project management for a fee...

10. The 70:30 rule for consultants • Consultancy tenders are normally evaluated according to a technical: price matrix based on a two envelope system • The first envelope that is opened is the technical offer • 70% of the marks are awarded for the technical quality of the tender • Only those reaching a certain threshold then have their price envelopes opened • The prices are combined with the technical marks such that the overall weighting of the bid is 70:30 technical: price (80:20 is also commonly used) • Although price is the minor component, you will still not win the bid if your price is outside of the project budget (some agencies tell you this budget, others do not!)

11. How the Banks work • Provide loans and grants to Developing countries • REMEMBER – Beneficiary Government is normally your client, not the Bank itself • Though the Banks employ Consultants directly for feasibility studies, project evaluation etc • Capitalisation was increased as a response to the global financial crisis leading to record levels of loans, but this will decrease…

12. Role of the Bank in procurement “Your Client” Loan/Credit The Lender e.g. World Bank The Borrower E.g. Ministry of Finance • Who is responsible for the award of contracts? Implementation Procurement Interface Suppliers Implementing Unit Implementation Assistance Reporting Relationships Consultants Contractual Relationships

13. The Project Cycle

14. So, Why should I do it? • Springboard into new markets or regions and it offers opportunity to internationalise your business • Test a new, difficult market whilst cash is coming in • You are being paid, though you need to understand the cash flow/invoicing arrangements which will vary by agency • You can take control of this business stream (planning, planning, planning) • Allows you to build local contacts and establish a local presence • It’s a good reference

15. ...and the points to remember • Development projects often have long lead times • Payment while guaranteed can sometimes be slow • Most contracts are subject to competitive tendering on a fairly global basis • For consultants especially early information is essential • If the first you see of a project is the tender notice you are normally too late! • Companies based in developing countries will sometimes have a preference (price based for goods, experience based for consultants) • It is important to work out where the purchasing decision is being taken and market accordingly. The trend is for decision making to be devolved to the recipient country and/or IFI country office

16. Am I ready for Aid-Funded Business? Do you have: • An international track record and a commitment to international growth • Management capability • Marketing skills • Good Financial standing, and normally a minimum of 3 years audited accounts • Market knowledge • Operational capabilities – skills in delivering products or services and working in cross-border partnerships.................... ?????? • Experience of working for other large clients If you don’t have all of these, but the will is there...UKTI can provide help in many of these areas

17. Tips for SMEs new to Aid-Funded Business (AFB) • Find out who is winning AFB projects and look for sub-contracting opportunities. Most IFIs have lists of awarded contracts on their websites. • For consultants, identify the Framework consortia and offer your services to them. • Both DFID and EBRD are based in UK and offer easy access. • Both EBRD and CDB offer a good range of small contract sizes which are often below the limit for ICB • ADB advertise small value staff consultancies and other TA on their website and procure from HQ in Manila • For goods and equipment, the UN offer small contract sizes often below $30,000, which means they can negotiate with 3 preferred suppliers. • Contact the 3 procurement agents listed on the DFID website , who will also be procuring goods and equipment for other IFIs. • AFBS missions are a very cost-effective way of starting off!

18. The World & Regional Development Banks • World Bank Group • Asian • Inter-American • African • Caribbean

19. Regional Donors EBRD ADB CDB AfDB IADB ADB

20. Does the size of the client matter? Bank Disbursements (US$ billion) World Bank Group 43 Asian 16 Inter-American 16 African 12 European (EBRD) 10 Caribbean 0.4

21. WBG & RDB’s: some general points • Project Cycle is the same • Loans not grants • Borrowing Country will be your client and will procure according to guidelines (main exception is ADB Technical Assistance which is procured by ADB) • Websites will have a 3 year country lending plan (slightly different names for each Bank) • Typically 2-3 project documents growing in information as the project develops (again slightly different names) • Tender notices on their website • 70:30 consultancy/goods for UK companies • 70:30 technical/price matrix consultancy evaluation • Registration: DACON useful but not obligatory for WBG, not used by IDB. Others have their own systems

22. World Bank • HQ in Washington D.C. (www.worldbank.org) • Committed US$35.3 billion in loans, credits and grants to its members in FY2011 • Majority of opportunity for Consultants however most projects have a requirement to procure equipment • Works in all the developing and transitional economies • Project Information & Advice available from British Embassy on a bi-weekly basis including procurement notices • UKTI Liaison Officers, Stuart Baird & Justin Kersey, based at the British Embassy in Washington D.C.

23. World Bank • The World Bank Group (WBG) comprises 5 organisations of which IDA and IBRD offer the main procurement opportunities: • PROCUREMENT • IDA: International Development Association, very concessional loans to the least developed countries (e.g. Bangladesh, Tanzania). 35-40 year repayment period, 10 year grace period. Funds from donors such as the UK (DFID). • IBRD: International Bank for Reconstruction & Development, market based loans to middle income countries (such as Brazil, Mexico). Funds from the international capital markets (AAA rated). • However, for INVESTORS…………………. • IFC: International Finance Corporation, loan and equity financing for private sector projects. Investment maximum of 25% of project cost. Limited due diligence type consultancy opportunities, identification of private sector investors as clients. • MIGA: Multilateral Investment Guarantee Agency, insures investors against non-commercial risk (similar to ECGD) and ICSID:International Centre for the Settlement of Investment Disputes

24. IBRD Top 10 Borrowers Fiscal 2011 The World Bank Annual Report 2011 $ Billions

25. IDA Top 10 Borrowers Fiscal 2011 The World Bank Annual Report 2011 $ Millions

26. IBRD and IDA Lending by Region Fiscal 2011 The World Bank Annual Report 2011 Share of Total lending of $43 Billion

27. UK Performance on WB Procurement Contracts

28. Asian DevelopmentBank • HQ in Manila, Philippines (www.adb.org) • Last year the ADB approved $17.5 billion in loans. • Working Language is English • All procurement notices posted on ADB website and you can receive email alerts • New Consultant Management System • Goods/Equipment often bought locally – companies should check ‘Opportunities’ section of ADB website • UKTI Liaison Officer, Fidel Ventura, based at the British Embassy in Manila

29. Asian Development Bank Commitments 2011

30. Asian DevelopmentBank • The ADB long-term plan: Strategy 2020, lists 5 core specialisations for ADB to focus on: • Infrastructure • Environment & Climate Change • Regional Cooperation & Integration • Financial Sector Development • Education & Training • By 2020 the aim is for 50% of investments to be in the private sector, often by PPPs, where there are very good consultancy opportunities

31. Asian DevelopmentBank

32. Asian DevelopmentBank Consultancy tenders Consultancy winners by country of origin Loan Projects Technical Assistance India USA Indonesia India Australia Australia Vietnam UK Bangladesh Philippines

33. Asian DevelopmentBank • Consultancy Summary • Tenders open to companies from ADB member countries only. Companies must also only employ nationals from member countries • ADB want more competition in the Pacific islands (will accept Caribbean experience), Afghanistan, Cambodia & Pakistan • Newly introduced Indefinate Delivery Contracts (similar to Framework Contracts) • Companies can also be awarded individual consultancies

34. Inter-AmericanDevelopment Bank • HQ in Washington D.C. www.iadb.org • The IADB Group approved a record $15.5 billion in new financing operations. • Covers Central and South America and the Caribbean islands (including The Bahamas, Barbados, Dominican Republic, Haiti, Jamaica and Trinidad and Tobago) • UKTI Liaison Officers, Stuart Baird & Justin Kersey, based at the British Embassy in Washington D.C.

35. 48 IDB member countries Finland Norway Sweden Canada United Kingdom Denmark Netherlands Germany Belgium Austria France Switzerland Croatia Slovenia Italy Spain Portugal Japan United States South Korea Israel China Bahamas Mexico Dominican Republic Jamaica Haiti Trinidad and Tobago Belize Guatemala Honduras Barbados El Salvador Nicaragua Venezuela Panama Costa Rica Guyana Columbia Suriname Ecuador Peru Brazil Bolivia Paraguay Argentina • 26 Borrowers • 22 Non-Borrowers (China, South Korea are new members) Uruguay Chile

36. Five strategy pillars for high development impact focus

37. Priority areas • Poverty reduction • Opportunities for the Majority • Education and Innovation • Water and Sanitation Initiative • Sustainable Energy and Climate Change Initiative (SECCI)

38. IADB Loans & Guarantees Approved 2011

39. AfricanDevelopment Bank • HQ in Tunis, Tunisia (www.afdb.org) • In 2011, Bank Group loan, grant, and other approvals totalled approx UA 5.72 billion. The UK, through DFID committed £567 million for 2011-2013 • UK holds a 1.7% share in the Bank • Working Languages are English and French • All procurement notices posted on AfDB website in the Business Bulletin. • Consultants: Register on AfDB DACON Database • UKTI Liaison Officer, Alan Morrison, based at the British Embassy in Tunis

40. African Development Bank Group Loans & Grant Approvals 2010

41. Medium Term Strategy Stronger Sectoral Emphasis on: • Governance • Infrastructure • Private sector development • Higher education Special Applicability to: • Fragile States • Regional Integration • Agriculture Better integration of: • Gender • Environment • Climate Change New Long-Term Strategy to 2020 under preparation, but for 2012-2014 the above will be still be prioritised but with a greater focus on inclusive growth, including promotion of entrepreneurship and job creation

42. AfDB: % Lending by Sector 2011

43. Caribbean Development Bank

44. Caribbean Development Bank • HQ in Barbados (www.caribank.org) • In 2011 the CDB approved $165.0 million in loans, a decrease of 40% on the previous year reflecting concerns over regional debt levels • Borrowing-member countries: Anguilla, Antiqua and Barbuda, The Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago and the Turks and Caicos Islands • Consultants Register on CDB Website • UKTI Liaison Officer, Hadford Howell, based at the British High Commission

45. Caribbean Development Bank • Exclusive focus on the Caribbean (only IADB lends more to the region) • Largest projects in 2011 were in Barbados $35m (education sector), and in St Kitts & Nevis $12m (debt restructuring) • Clear understanding of the problems and dynamics of the region • 2010 increase in CDB’s capital by US$1billion, will enable a doubling of lending during 2010-19 if the economic situation allows • New strategy 2010-14, priority sectors: Education & Training; Agriculture & RD; Economic & Social Infrastructure; Private Sector Development; Social protection; Environmental Sustainability & Disaster Management; Climate Change; Good Governance

46. EU external aid (i.e. outside of the EU) • Grants delivered by DG DEVCO “EuropeAid” • Loans delivered by the European Investment Bank (EIB) • Both also deliver technical assistance

47. EuropeAid • HQ in Brussels, Missions Worldwide (http://ec.europa.eu/europeaid/index_en.htm) • Procurement totaled almost €11 billion in 2011 and will increase to €13 billion by 2013 • Approx 80/20 split between procurement of Services/Goods & Works • UKTI Liaison team based at UKREP (i.e. the British Embassy to the EU) in Brussels can provide information on upcoming projects, project pipelines, assistance with finding consortium partners, help with bidding tactics and strategy, project/procurement design and management and assistance with dispute settlements

48. About EuropeAid Size & Scope • The EU (27+1 donors) accounts for 60% of all development aid • The European Commission is the third largest donor in the world • Disbursements and commitments will continue to grow at least until 2013, the figures below show procurement by programme in 2010 • Aid provided to 150 countries and territories on a grant basis • IPA : Turkey, Western Balkans; €1.4 b • ENPI: Neighbours of the enlarged EU; €1.5b • DCI: Asia and Latin America; €2.4 b • EDF: Africa, Caribbean, Pacific; €3.65 b

49. EuropeAid 2014-20 Size & Scope for the next budgetary period of 2014-20: • Subject to Parliamentary and Council approval the following budgets are proposed: • IPA : Turkey, Western Balkans; €14.1 b • ENPI: Neighbours of the enlarged EU; €18.2 b • DCI: Asia and Latin America; €23.3 b • EDF: Africa, Caribbean, Pacific; €34.27 b

50. EuropeAid: Priority Sectors Priority sectors of EU Aid-Funded business: - Infrastructure and transport - Private sector development - Institutional, administrative reform - Education and training - Environment - Water - Health - Social sector / employment