Case studies in financial management for work force development funded by idas

Case Studies in Financial Management for Work Force Development funded by IDAs The following cases are provided to evaluate the actions and suggest better methods. The participants can consult the guideline document. It is suggested to form a small group and discuss the views and arrive at a consensus.

Case-1- Part-1.

An elected government of a developing country in South Asia had tough problems in generating needed foreign exchange to meet the essential imports like crude oil. Based on the success stories in Asia, IFC suggested to the government to globalize its economy and permit global leaders to establish manufacturing and service industries through foreign direct investments (FDIs) and allow foreign institutional investors (FIIs) to participate in the finance market.

Based on the advice from IFC, the government opened its economy and planned rapid industrialization.

One of the problems felt by the FDIs is that development is very much constrained by the lack of infrastructures like roads, electric power, rapid transportation system, telecommunication facilities and other infrastructure.

This country possesses large mineral deposits but these were not exploited for development. The construction sector struggled to get raw materials like cement. The production of cement is very low even though the required raw materials are available in plenty this country. Based on the research studies of the consultants hired by IDAs predicted that there is a great demand for infrastructure development to improve the manufacturing, export of finished goods and modernizing service industry.

The government developed a proposal in consultation with Cement Manufacturing Association (CMA) to get soft loan from an IDA for expanding the cement manufacturing capacity. The IDA offered loan for the modernization and establishing new cement companies. 5% of the loan has to be used for training the employees of the cement plants. The existing cement companies lack proper workforce development.

Under this project cement companies established four Regional Training Centers to train the employees.

The CMA later identified the need for training the trainers and to develop training materials that are very much needed to develop skills and competencies to manage high quality cement and reduce pollution.

Based on this, CMA has sent Request for Proposal (RFP) for a set of training programs.

A key faculty in engineering in one of the professional institutes, who possesses doctoral qualification and outstanding accomplishment in planning and developing outstanding programs, planned the best technical proposal for developing training modules in Pump Maintenance for Cement Industry based on the letter of invitation (LOI) from the Borrower.

The CEO of this institute advised this key faculty based on the suggestion from one of the competitors to escalate the project cost in the financial proposal. Accordingly the key faculty did it since he was ordered

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to do so. When the Borrower opened the technical proposal, this bid was given the highest marks. Later the financial proposal was opened but the competitor has quoted very low.

1.1 Analyze the case and suggest your recommendation.

Key issues: 1. Can the key developer accept the suggestions of the competitor?

2. Under what authority, the competitor can suggest such high financial bid?

3. What is the ulterior motive of the competitor?

4. Suppose the institute loses the project due high cost, what can CEO do?

5. Who will be willing to take up the development, since, institute has been rated as the best developer?

6. Can the institute bit for the future project?

7. If so, what type of decisions it can take with respect to financial bid?

Case-1, Part 2 2|Page

The competitor came back to this institute and requested the CEO to take up the development of the program at one fourth of the quoted cost. He also stated that the CEO had signed a Memorandum of Understanding (MoU) for developing the modules with his company. The CEO has called the key faculty member and ordered to take up the development of the module. Further he enquired about the expertise of other senior faculty members.

Analyze the current situation and give your judgement.

Key issues: 1. Whether the institute can take up the development of the modules when they lost due to escalated cost even though their technical proposal stood first.

2. Whether the competitor can demand compliance under MoU? 3. If the Institute is not able to take-up the development, what will happen to the institute?

4. Suppose if the key faculty declines the development, how can the CEO discharge the obligations under MoU? 5. What could be professional standards of the competitor?

Case: 3

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One national institute has been recognized for its outstanding performance in training and development bid for a development project under an IDA. Since, the Institute’s technical proposal was rated highest and also the financial proposal is the lowest among the bids received, the institute has been awarded the contract. The key resource person declined to take the production work.

The CEO nominated a private firm to take up the production and appointed one senior faculty to assist the firm to develop the training modules and collaborate with the private firm.

This firm started sending the bills to the project authority on its own without submitting to the Institute.

The Borrower rejected the bills, since this private firm is only a subcontractor.

The enabling faculty has prepared the bills and got the reimbursement. The COE ordered the full payment to this subcontractor.

Analyze the case.

Key Issues: 1. Why should the key resource person declined to take up the development?

2. How will you complete the project with the assistance of other faculty members?

3. Is there any need to handover the project which was received the highest rating in a stiff competition to any private subcontractor?

4. What is loss to the institute in the long-term?

5. What could be the future status of this subcontractor?

Case-4 4|Page

An International Development Association (IDA) has sent a Request for Proposal (RPF) to develop a training package for training the officers of a State Pollution Control which was based on the previous high performance of the institute. The CEO did not circulate the RPF to any faculty members who completed the previous project, but he decided to handover the RPF to a subcontractor who never had any expertise in these types of projects. The subcontractor developed technical and financial proposals without consulting the institute and submitted directly to the Project Coordinator. However, the project coordinator was called to present the proposal and negotiate.

The CEO and a faculty went for the presentation of the technical and financial proposals even without a copy. The Project manager asked the CEO to sign a document that the institute would take up the development if it is selected. Later it was found that another Institute successfully negotiated and got the project.

Analyze the case Key issues 1. What is the impact of successful completion of the project by the Institute under an IDA? 2. Why did CEO hand over the project to a subcontractor without circulating the RFP to the departments?

3. Can a CEO sign a document without any knowledge of the technical and financial proposal?

4. Whether the reputation of the institute is protected?

5. Whether the CEO protected the institute and led the institute for excellence?

6. What is the long-term impact on the reputation of the institute?

Case- 5 5|Page

The Barrower planned to recruit new faculty members for the proposed new programs under an IDA funded project but the existing teachers were shown against the newly recruited faculty to handle new programs to create human capital in many emerging areas. The Borrower claimed 100% reimbursement of the salary component.

Analyze the case Key Issues 1.

2.

3.

4.

5.

Whether the existing faculty can handle the courses in the emerging programs?

Whether the claim is as per the project agreements?

Whether the Bank would reimburse the claims?

Which rule is violated?

What do you recommend for the reimbursement of the salary?

Case-6 The Borrower constructed ministry’s offices which were not covered in the project. Also, the curricula were not revised to meet the needs of the emerging industries. The faculty members were not trained to handle the new courses. The proposed new institute’s buildings were constructed very near to the rivers but when flash floods came, they were washed away. The project implementation unit was not strengthened by qualified and experienced managers. Two faculty members availed project funds and got long-term training in areas not covered in the project implementation document. The institutes did not attract sufficient students for the new programs. The needed equipment was not procured.

Analyze the case.

Key issues are: 1. Whether the Borrower can get the reimbursement for the construction of the ministry’s buildings which were not included in the project appraisal?

2. Whether the Borrower can get the reimbursement for the expenditure involved in the education of two faculty members which was not part of the project?

3. Can you claim the reimbursement for the washed out buildings?

4. Can you conduct the new programs without appropriately trained faculty members, equipment and new curricula?

5. How will you bring more students for the new programs?

Case-7

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The Borrower wanted to include two more educational institutes in the ongoing project which is funded by an IDA. The remaining period of the project is only two years. One is to be located in a very remote place. About six months there will be more snowfall and the place cannot be livable. There are no industries with 100 kilometers from the proposed institute. There is a great difficulty in recruiting the qualified faculty.

Analyze the case Key issues: 1. Will the Bank accept the inclusion of new proposal for starting two technical institutes during midterm?

2. How will you recruit the faculty in the remote area?

3. How will you plan industrially relevant programs in these institutes?

4. Will there be sufficient students for this program?

5. How can you bring industrial training for the students in this isolated place?

Case- 8 One state wanted to include a new technical institute for women during the midterm based on the demands from the citizens. The state government wanted the new institute to be established with in a short-time. The Borrower included the proposal. The Bank showed reluctance to allocate funds.

Analyze the case Key issues 1.

2.

3.

4.

5.

Can the state plan new buildings, labs and workshops in six months?

Can the state can complete the buildings within one year and start the program?

Are there sufficient students for the proposed new technical institute?

Can the state recruit new teachers within one year for the proposed new courses?

Suppose the Bank stopped funding when the project comes to an end, will the state government can complete the buildings and create needed infrastructure using its fund?

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