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Patricia Baquero pbaquero@worldbank.org
The National Conference Center
Lansdowne, Virginia
March 25, 2008

 Addressed in para. 3.14 of Procurement Guidelines
 Procurement process resulting in contractual relationship with private service provider where
 Technical specifications
• Describe requirements in terms of functionality, quality & standards
• Define desired results ( i.e., CuM of water, KWh, reliability results, etc .), outputs to be measured, and way to measure
• Do not prescribe inputs nor work methods
 Bidders free to propose innovative solutions through costeffective ways to improve outputs
 Payments tied to measurable outputs meeting pre-set performance standards
 Payment reductions made or premiums paid, respectively, for achievement of lower or higher quality levels
 Contractor bears commercial and performance risk

 Non-consultant services paid on the basis of outputs ( i.e., primary health care )
 Facilities where contractor is responsible for design, supply, construction (or rehab), & commissioning, & where
 Employer takes O&M after commissioning, or
 Contractor takes O&M for some years after commissioning
 Borrowers’ use of PBP decided after analysis of available options and agreed in advance with the Bank

PBP processes for Bank-financed installations
Payment
Selection
Prequalification of interested bidders
Award
Scenario 1 – O&M by Employer
Award based on lowest lump sum price for facility
Alt. 1
Full payment upon commissioning/ acceptance (Turn-key approach)
Alt. 2
Advance/milestones payments against substantial security *
Two-Stage Bidding based on functional requirements (onestage for simpler projects)
Scenario 2 – O&M by Contractor
Award based on lowest total life cycle cost (NPV of facility +
O&M costs)
Final payment upon commissioning/ acceptance
Final facility payment upon commissioning/ acceptance
* 30% Service Performance
Security suggested Advance/milestones payments against substantial security *
Performance-based
O&M payments

 Although PBP firstly referenced in May 2004,
Guidelines historically encouraged borrower’s use of performance requirements and allowed resultslinked payments
 Other Bank approaches using PBP concepts:
 Management contracts
 Roads rehabilitation, maintenance & management contracts (OPRC)
 Design-Build-Operate (DBO) contracts
 Concessions with Output-Based Aid (OBA) schemes
 Investment lending projects with Output-Based
Disbursement (OBD) mechanisms

 Aimed to make more efficient use of resources in providing infrastructure and other basic services
 Bank-financed funds are disbursed/paid against delivered outputs
 Disbursement/payment associated with the promised outputs based in efficient & reliable unit price/costs
 Procurement methods for procuring the services or inputs needed to generate the outputs must be fully acceptable to the Bank

Aspect
Use of Bank-financed funds
OBA
Payments:
• Made by a government entity to a third party service provider (SP) upon delivery of outputs promised under a service provision contract
• Consist of pre-agreed subsidy amounts to cover gap in investment or recurrent cost incurred by SP that user fees cannot recoup due to beneficiary constraints
OBD
Disbursements:
• Go to the government upon delivery of pre-agreed outputs
• May involve more than one underlying supply contract or direct governmentsupplied services; and
• Need not be linked to a government subsidy element under a contract executed by a third party
Target countries All countries MICs and select IDA countries with reliable implementation capacity
Unit price/cost associated with outputs on which basis payment or disbursement is made
Procurement of inputs required to produce outputs
• If SP selected under Bank-acceptable procurement procedures, unit price associated with the output deemed reasonable, economic & efficient
• If SP not selected competitively, efficient
& reliable unit costs to be determined
•SP’s own procedures if SP selected under a Bank-acceptable procedure
• SP not selected competitively required to use Bank ICB but if certain conditions are met * , Bank may approve SP’s own procedures
Efficient & reliable unit costs to be determined for disbursements
Bank –approved government procedures
* See OPCS OM of Nov. 7, 2005