Ext Opmanual - OpMemo - The Provision of Fee-based Services

1. This memorandum is intended to help Bank units respond appropriately and consistently to requests for fee-based services—that is, services provided as a direct response to requests from, and partly or fully paid for by, the recipient of the service, under a legal agreement.^[1]

2. The principles set out in this memorandum apply to fee-based services provided by Regions and Sectors.^[2]

3. In providing fee-based services, the Bank’s purpose is to expand the options and services available to clients beyond those that it can fully fund through the administrative budget. A client’s request for fee-based services does not affect the administrative budget for work in that country.^[3]

4. Strategic Objectives. Fee-based services, like any services provided by the Bank, must fall within the purposes of the Bank as set out in its Articles of Agreement and must contribute to achieving the Bank’s mission of poverty reduction and sustainable economic growth. Fee-based services must be consistent with the Bank’s strategic priorities, including—for borrowing countries—those set out in the Bank’s Country Assistance Strategy (CAS) or Country Partnership Strategy (CPS).

5. Alignment with Institutional Mandate. The Bank provides only fee-based services that Management considers to be fully aligned with the Bank’s development mandate. In providing such services, the Bank does not enter into competitive bidding.

6. Types of Services. The fee-based services the Bank may provide are analytic and advisory activities (AAA) that the client requests and that the Bank cannot fund in full within the existing administrative budget envelope. This includes economic and sector work, non-lending technical assistance, donor aid coordination, impact evaluation, research services and external training. Subject to appropriate safeguards and risk management, the Bank may provide technical assistance directly in support of project preparation, implementation, or supervision—except for advice directly related to engineering or final design.

7. Role of the Bank. Staff ensure that the provision of fee-based services does not involve a conflict of interest for the Bank or associate the Bank with any activity inconsistent with its operational policies.^[4] The Bank does not provide services to assist one member country in advancing its interests over those of another member country. Before taking on the provision of any fee-based service, staff and management explicitly consider the risks, including liability or reputational risks, and judge whether they are acceptable by the Bank, taking into consideration any risk mitigation measures to be put in place.

8. Clients. The Bank may provide fee-based services to the following types of clients, all subject to legal due diligence and the agreement of the country director concerned:

The Bank does not provide fee-based services to commercial entities,^[6]except in the context of training programs.

9. Quality Control. Fee-based tasks are subject to all applicable Bank operational policies and to the same quality control practices as AAA handled through the administrative budget. The applicable safeguards policies and procedures provide guidance to Bank staff involved in providing fee-based services. Bank staff ensure that the client’s rules and procedures are consistent with the Bank’s operational policies, not just for the fee-based service itself, but also for the underlying projects on which the client is seeking the Bank’s advice. If the recipient of Bank advice fails to respect important safeguards, the Bank reserves the right to terminate the agreement.

10. Costing. For all clients, the costs of fee-based services are calculated using the methodology of uniform pricing—that is, the recovery of direct and indirect costs (salary and associated benefits, travel, and subsistence) as well as overhead costs associated with providing the service.^[7]Indirect and overhead costs are represented by a markup factor derived from data for previous years^[8]and reconsidered every two years; for FY09-FY10, the factor is set at 50 percent.

11. Sources of Funds. To meet the cost of fee-based advisory services, clients may use their own budgetary resources or third-party resources. Under some circumstances, the Bank may also contribute, via its own budget, to funding some percentage of the cost of the services delivered to the client under the fee-based umbrella.^[9]

13. Proposal. For each fee-based task, the task manager (TM), in consultation with the assigned lawyer, prepares a brief proposal that sets out (a) the kinds of services to be provided, (b) the proposed area of analysis or advice, (c) the link with the Bank’s mandate and strategic priorities (including the CAS/CPS, if applicable) and the value-added of providing the services, (d) risks to be considered and any mitigation measures to be put in place,^[10] (e) consistency with the other requirements of this Op Memo, (f) the names of the staff who will provide the services, (g) the length and value of the contract, and (h) the expected outcome of the task. The relevant country director and sector director both approve the proposal.^[11]

14. When the provision of services to subnational entities is proposed, staff seek the endorsement of the central government, either on a case-by-case basis or via a general agreement for subnational entities to contract such services^[12]. Proposals for the provision of fee-based services to subnational and other nonsovereign entities are subject to legal due diligence.^[13]

15. Contracting. Once the proposal is approved, the lawyer will prepare the agreement or, if the TM and lawyer agree, the TM can prepare and submit it for clearance by the lawyer. The contract negotiated with the client serves as the legal basis for providing the services. The decision authority rests with the country director once clearance by the lawyer has been obtained. OPCS can provide guidance on request.

16. Budgeting and Accounting. After negotiating the contract with the client, the TM submits to the Region’s chief administrative officer (CAO) a billing information form that gives the essential details of the contract: the name of the providing unit and the billing address of the client. The CAO then sends a copy of the form to Accounting (ACTBC). At the intervals agreed with the client in the contract, but at least once each quarter, the providing unit bills the client for services and sends details of such billing to Accounting. As part of the normal budget monitoring process, the providing unit requests a budget transfer, based on the fees it has billed for its services as shown in its quarterly progress report to Corporate Resource Management (CSRRM).

17. Activity Completion. Within six months after the close of the task, the TM prepares an Activity Completion Summary (ACS) including feedback from the client. As part of the ACS, the sector leader assesses the quality of the services, and the lead economist or resident representative evaluates their impact.

18. The TM sends a copy of the approved proposal, the contract, and the ACS—as each document is completed—to OPCOS.

19. General questions about this memorandum may be addressed to the Corporate Strategy Group, Strategy and Resource Management, or to the Operations Services Department in OPCS; questions that arise during the preparation or provision of fee-based services may be addressed to opmanual@worldbank.org; questions about the legal aspects of providing fee-based services may be addressed to the chief counsel concerned or to LEGOP (Frank Fariello, ext.87782); questions about costing and budgeting arrangements may be addressed to CSRRM (Marie Bakker, ext. 39285); and questions about billing and accounting may be addressed to ACTRT.

[1] The Bank will continue to provide existing fee-based programs under the original terms agreed upon with the client; however, as these programs move toward renewal over time, they must move into alignment with the principles outlined in this memorandum as soon as possible.

[2] The World Bank Institute and Treasury provide other fee-based services, but they have their own pricing and processing arrangements.

[3] Country budget allocations are determined by such factors as country performance, GDP per capita, population, and lending levels.

[4] In providing fee-based services, the Bank does not accept any responsibility related to implementation of a Bank-financed project. “Implementation” is used here in a broad sense to include such activities as detailed engineering, final design, exploratory drilling for petroleum and water resources, aerial photography, and procurement implementation (e.g., preparation of bidding documents, bid evaluation), regardless of the stage of the Bank’s project cycle in which they are carried out.

[5] When providing services to entities other than the government or its institutions, staff obtain necessary government approval in accordance with the provisions of GP 14.70, Involving Nongovernmental Organizations in Bank-Supported Activities.

[6] The Bank may provide fee-based services to state-owned enterprises so long as the other requirements of the Op Memo, in particular consistency with the Bank’s mandate and strategic objectives, are met.

[7] This defines the costing for services under fee-based arrangements, but does not prohibit the Bank from contributing to financing such costs (see para. 11).

[8] CSRRM: “Fee-based services costing methodology for indirect and sustaining costs”

[9] OPCS “A revised framework for the provision of fee-based knowledge services”

[10] If the risks are deemed substantial or the project presents novel features, the lawyer or the country director may refer the proposal to LEGOP and OPCOS.

[11] In addition, when services are to be provided to a multilateral institution, the proposal is also approved by the Regional vice president or the Network head who manages the Bank’s relationship with the institution. The regional or sector director may hold a decision meeting if recommended by the TM and the lawyer, or if they otherwise decide the proposal merits discussion.

[12] This approval may take the form of a simple written no-objection.

[13] This legal due diligence includes, among other things, verification of the capacity of the subnational to enter into and perform the contract and the potential impact of domestic law on the transaction, including any liability or other legal risks that may arise in connection with the services.