REQUEST FOR APPLICATIONS (RFA)

Strengthening Regulation, Management, and Effectiveness of State Aid in Economic Sphere

Issuance Date: April 26, 2012
Deadline for Receipt of Questions: May 18, 2012 by 5 p.m. CET
Closing Date/Time for Submission of Applications: May 25, 2012 by 3 p.m. CET

SUBJECT: Request for Applications (RFA) Number: RFA-2012-04

The USAID Business Enabling Program in Serbia (Project), a United States Agency for International Development (USAID)-funded contract implemented by Cardno Emerging Markets USA, Ltd., is seeking applications from qualified, legally registered US, Serbian, or a third country non-profit, for-profit, and non-governmental organizations (NGOs) for a grant to strengthen regulation, management, and effectiveness of state aid in economic sphere.

The Successful Applicant will be responsible for ensuring achievement of specified grant objectives.

This RFA consists of the following sections:

  • Section 1 – Funding Opportunity Description
  • Section 2 – Award Information
  • Section 3 – Eligibility Information
  • Section 4 – Application and Submission Information
  • Section 5 – Application Review Information
  • Section 6 – Award and Administration Information
  • Section 7 – Annexes

Pursuant to 22 CFR 226.81, it is USAID policy not to award profit under assistance instruments. However, all reasonable, allocable and allowable expenses, both direct and indirect, which are related to the grant activity and are in accordance with applicable cost standards (22 CFR 226, OMB Circular A-122 for non-profit organizations, the Federal Acquisition Regulation (FAR) Part 31 for for-profit organizations, and OMB Circular A-21 for educational institutions), may be paid under the Award.

Subject to the availability of funds, the Project intends to provide up to 4,600,000 RSD (Serbian dinars) in total funding to be allocated over a seven month period.

The Project reserves the right to fund any or none of the applications submitted. Issuance of this RFA does not constitute an award commitment on the part of the Project, nor does it commit the Project to pay for costs incurred in the preparation and submission of an application. Further, the Project reserves the right to reject any or all applications received if such action is considered to be in the best interest of the US Government. Applications are submitted at the risk of the Applicant; should circumstances prevent making an award, all preparation and submission costs are at the Applicant’s expense.

Applicants should submit any questions concerning this RFA in writing, electronically, via email to grants@bep.rs.  The deadline for receipt of requests for clarifications/explanations is May 18, 2012, by 17:00 hours Local Belgrade Time. No questions will be accepted after this date.

Applicants should submit applications in writing to: Jasmina Debeljak Maljkovic, electronically, via email at grants@bep.rs The Closing Date for submission of applications is May 25, 2012, and the Closing Time for Submission of Applications is 15:00 hours Local Belgrade Time. Late applications will not be considered.

 

Section 1 – Funding Opportunity Description

A. Background

The United States Agency for International Development (USAID) has awarded a contract to Cardno Emerging Markets USA, Ltd. (formerly Emerging Markets Group, Ltd.) for the USAID Business Enabling Project in Serbia. The purpose of the Business Enabling Project is to help the Government of Serbia (GoS) improve the competitiveness of the Serbian economy and its private sector businesses. The overall objective is to assist GoS policy makers, business representatives, experts, and others to improve the business enabling environment and macroeconomic framework. The activity provides technical assistance and training to improve the business enabling environment, support macroeconomic stability, further develop financial markets, and improve and increase business and financial management capacities within government and business. The Business Enabling Project is made up of three components:

  1. Component 1 – Business Regulation and Economic Governance: Assist Serbia to improve its business regulation and economic governance, particularly in those areas where it performs poorly in international competitiveness and business environment rankings, so that it can better stimulate private sector growth and development and attract more foreign and domestic investment resources.
  2. Component 2 – Macroeconomic Policy and Public Financial Management: Assist the GoS and the National Bank of Serbia to improve macroeconomic policy, public financial management, and financial stability. Support efforts to improve GoS capacity to develop and implement fiscal policy.
  3. Component 3 – Financial Market Development: Support means to increase access to finance, including development of non bank financial institutions. Also, to support the development of Serbia’s capital markets through improvements in market governance, accounting and disclosure standards. Support Serbia in its efforts to reform accounting and audit standards and practices and assist it in implementing those reforms.

The Project’s activities in Components 1, 2, and 3 are described in more detail on Project’s website: http://bep.rs/  and www.policycafe.rs

To accomplish reforms in each of these areas the Project helps the Government of Serbia work closely with the private sector and outside experts to make reforms that improve business competitiveness. The purpose of this RFA is to solicit applications to support the Project by providing technical assistance to the Department of State Aid Control (DSAC) of the Ministry of Finance of the Republic of Serbia aimed at strengthening the control of state aid, as well as an assessment of selected state aid programs and recommendations for improving their management and effectiveness.

 

B. Grant activity Description

Problem Statement

Serbia is at economic crossroads: it needs to complete key infrastructure projects and invest in the private sector growth and job creation - but the capacity to borrow and service debt is nearly full. Increasing fiscal pressures without more economic growth could further complicate the process of EU integration.  Fiscal space has to be created from budgetary resources by improving the efficiency and economic usefulness of existing spending, and by saving and eliminating wasteful expenditures. 

There are many areas of government spending that need to be reviewed for efficiency, but in the economic area the use of state aid is one of the most obvious areas in which improvements should be made. Over the past four years state aid in Serbia financed from the budget resources varied between 2.65 and 2.87 percent of GDP. Together with non-budgetary sources of financing, total aid probably exceeds 3 percent of GDP annually during the 2008-2011 period. Similar levels are envisaged in the 2012 budget. This is five times bigger than the EU average for 2010 (0.6 percent of GDP) and it exceeds by a substantial margin the highest recorded individual EU country shares of state aid (Bulgaria with 2.1% and Hungary with 1.5%). Furthermore, Serbia’s state aid figure of 3 percent of GDP should also be considered relative to the total development portion of the budget – which is only about 10 percent.

The Commission for State Aid Control has produced detailed annual reports on the allocated amounts of state aid since the 2006 budget, but limited information is given on whether the money is being well spent, is achieving the intended effects and is justified in terms of stated economic and social goals. State aid should only be used when it is an appropriate instrument for meeting a well-defined objective, when it creates the proper incentives, and when it distorts competition to the least possible extent. Existing research on the status of state aid in Serbia suggests that there is room for a lot of improvement. For example, programs could be targeted more precisely and the policies should be more consistent. Some economists have called for a comprehensive overhaul of the system. Regardless of how wide the need for reform is, a closer examination of state aid is warranted combined with a set of concrete recommendations on how to strengthen the regulation, management, and effectiveness of state aid.

To adequately respond to specific fiscal and economic challenges Serbia is facing, it is of essential importance for the new government to: 1) strengthen its understanding of the efficiency and economic usefulness of existing state aid and 2) strengthen the harmonization and management of state aid programs in line with EU and international standards.

EU and International Standards Harmonization

Serbia has taken significant steps to improve compliance with the principles and the concept of the State aid control as applied in the EU. This is evidenced by the introduction of new and amended legislation on state aid control and management (e.g. the Law on State Aid Control, the Regulation on Rules for Granting Aid, and the Regulation on the Method and Procedure for State Aid Notification) and by the Government having devolved specific responsibility for implementation of the law to the Ministry of Finance (MoF) and the Commission for State Aid Control (CSAC).

However, the reform process is only partially completed. In 2012, the Government of Serbia (GoS) will need to continue its EU harmonization work in three important areas by:

  • Amending and harmonizing subsidiary regulations pertaining to specific state aid programs. These are the regulations that apply to specific line ministries and other branches of the government that are chartered with the authority to develop and implement state aid programs.
  • Performing a cross-check of the impact of new state regulations on other laws in the country and defining amendments as needed to ensure that the whole legislative framework is consistent and harmonized.
  • Strengthening the institutional capacity of public sector staff to develop, administer, and control state aid programs that are consistent with the new legislative framework.

These reforms are in compliance with requirements of the Stabilization and Association Agreement and the Interim Agreement on Trade and Trade-Related Matters.

The Department of State Aid Control (DSAC) within the Ministry of Finance is seeking assistance to implement the reform program that has been identified for 2012. It is also seeking to build capacity among all providers of state aid to ensure effective implementation of EU rules.

Strengthen the Efficiency and Effectiveness of State Aid Programs

While legislative and regulatory reforms on state aid have progressed well, little effort has been made to comprehensively measure and evaluate the efficiency and effectiveness of State Aid. There is some research on specific programs (most of which cover social and agricultural programs) but much of this is high-level work narrowly focused on economic returns in relation to GDP. Nothing to date has been prepared considering state aid in holistic terms, such as its transparency and equity, as well as its economic efficiency in terms of the government’s economic goals and needs.

Recognizing the importance state aid can play in helping to stimulate economic activity in certain sectors, many policymakers, including some in the highest ranks of government, have cited the need for better analysis and external review. But they have also cited challenges in inter-governmental coordination and the availability of data. Improvements made to the legislative framework and the amount of information that is now becoming available on various programs provide an opportunity to undertake new and deeper analysis of how state aid can be better used.

Improvements in this area are also a matter of focus by the Fiscal Council and other international donors that are providing support in the public sector finance reform.

 

Purpose and Objectives

The USAID Business Enabling Project intends to award a grant to a qualified organization to help the government strengthen the regulation, management, and effectiveness of state aid in the economic sphere, and to better utilize it for increasing the competiveness of private sector and reviving the economy. The purpose of the grant is to achieve the following:

  • Assist the GoS in strengthening regulations on the management of state aid in line with EU and international practices
  • Strengthen the management and effectiveness of state aid in promoting economic growth and competitiveness
  • Identify opportunities for public sector cost savings in the dispensation of state aid

The grant is divided into two task areas as follows:

Task Area I – Strengthen the Control of State Aid

The grantee will provide a legal advisor to work with the Department of State Aid Control (DSAC) of the MoF on harmonization of the established state aid schemes (the Inventory) in area of employment with the criteria for state aid granting (Law on State Aid). Expected number of expert days needed to complete all Task Area I activities is between 45 and 55 days. The legal advisor will:

  • Prioritize the pieces of legislation to be amended in area of employment-related state aid and set the timeline for drafting amendments and/or for undertaking other procedures in order to align them with the Law on State aid; draft amendments to the regulations; and provide support to inter-ministerial working groups on the implementation of the new regulations.
  • Provide comprehensive technical assistance, recommendation and training to the staff of the DSAC, the five Commission members, grantors, beneficiaries and judiciary authorities aimed at increasing the understanding of the necessity for and the effects of amending the rules for State aid granting.
  • Provide assistance to DSAC and CCSA on investigating and interpreting up-to-date notifications on granted State aid and in formulating the respective decisions.

Task Area II – Assessment of Selected State Aid Programs and Recommendations for Strengthening their Management and Effectiveness

The grant applicant should propose an approach to assessing the quality and effectiveness of state aid programs in the economic sphere. It is expected that the grantee will cover all major programs that are aimed at job creation, attracting investment (FDI and domestic), improving competitiveness, and SME development, among others.

The assessment should cover the performance of state aid programs according to the following criteria: equity; effectiveness and efficiency; transparency; and management, governance and control. Guidance on the criteria is provided below.

  • Equity: State aid programs should be evaluated in relation to their fairness, consistency, access, neutrality, and overall impact on enterprises. The assessment should consider program features, as well as program implementation that may reveal bias, disfavor among groups of equally qualified recipients, or unsubstantiated allocations of aid to certain groups or jurisdictions.

  • Effectiveness and Efficiency: Effectiveness should be evaluated by the extent to which a program achieves its stated objectives and its relevance to current sectorial development strategies and broad-based economic goals of creating a competitive, export-led economy. Efficiency is analyzed by economic returns provided in relation to the costs. It is expected that the grantee’s approach will examine issues such as: program costs, economic impact, distortions, and the creation of positive and negative externalities, including whether the chosen program is suitable in relation to alternative actions, such as change in policies or use of a different form of aid. Technical efficiency and the suitability of program design should also be considered. The grant applicant should present its approach to any econometric analysis or quantitative assessment that will be used to measure efficiency, in addition to qualitative indicators. The approach should factor in the use of EU or other international benchmarks as may be warranted, as well as any impact assessments that have been done.

  • Transparency: The assessment of transparency should cover issues such as the following: the quality and clarity of public information on each program; each program’s objectives, criteria, and operation; the quality and clarity of information on each program’s performance within the relevant ministry and the government in general; the suitability of the information for measuring performance against stated goals, etc. The grant application should elaborate the criteria and approach that will be used for assessing transparency.

  • Management, Governance, and Control: The grantee should suggest an approach and criteria for assessing the management, governance, and control of state aid programs based on information that may be available both directly and indirectly. Issues that should be examined are: institutional capacity, expertise, quality of program evaluation and monitoring, which authorities should revise and improve specific programs, strategy-setting processes, etc.

The grant applicant should present its approach to synthesizing and presenting the results of its assessment in each of the above areas. It should explain how it will go about formulating detailed policy, operational, and program recommendations for improvement and what information it may use to support these recommendations.

Recommendations for improving state aid programs should be presented along two lines as follows:

  • Cross-cutting recommendations for improving the overall management, governance, and regulations of state aid throughout the government. This will include recommendations for improving rules and regulations as identified by the Legal Advisor under Task Area 1, as well as other policy and operational recommendations that apply to state aid in general.
  • Program-specific recommendations for improving the performance, efficiency and effectiveness of select programs. These recommendations will be based on quantitative and qualitative analysis of each major program. They should be well justified by reference to quantitative analysis, benchmarking, and detailed examination of program implementation.

Recommendations should be viable and must offer sufficient detail to help government counterparts understand the modalities of how they can be effectively implemented.

The results of all assessments, in particular the programmatic recommendations, will be presented to a wide forum of stakeholders, including policymakers, economists, IFI’s, and donors, to raise awareness of the need to reform state aid programs. The results of this work may also be used to catalyze debate about the use of state aid and its economic benefits or costs.

It is USAID BEP’s intention that the assessment work and recommendations cover a large majority of state aid being dispensed for economic development. In their proposals, grant applicants should propose either a set of state aid programs for detailed assessment, or provide details of its approach for screening and identifying a sub-set of programs. All programs should be listed with key information, such as the following:

  • Purpose and objectives of program.
  • Description of the form of aid and the program’s criteria (subsidy, credit, exemption, deduction, concession, etc.).
  • Mechanism by which aid is supposed to achieve intended effect.
  • Modalities and institutional arrangements. For example, how is it working? What are the operational features of aid delivery?
  • Ownership, governance, jurisdiction.
  • Funding arrangements, direct, indirect.
  • Control/audit arrangements.

Deliverables

Under Task Area I, the grantee is expected to:

  • Produce drafted amendments to the regulations on state aid in area of employment in accordance with the Program for adjustment, so that State aid schemes identified in the Inventory would be aligned once the respective Amendments are adopted;
  • Deliver capacity building exercises (trainings and workshops) with a broader range of stakeholders;
  • Produce proposals of decisions upon received notifications issued by the CSAS and/or DSAC.

Under Task Area II, the grantee is expected to:

  • Produce a comprehensive report covering the above topics in Serbian and English that is organized in a logical way and can be comprehended by readers with a basic understanding (undergraduate degree) of economics. The report should be of such a quality that is publishable via hard copy and electronic media.  

In addition, the grantee should provide transcripts and sources of data used for the analysis, as well as any models and analysis that were produced through the report. Notwithstanding any use or disclosure limitations imposed on the grantee by third party data providers, USAID BEP will reserve the right to post the data on its website or use it for other research.

The following are the specific deliverables, which will also serve as milestones for Fixed Obligation Grant disbursements:

Please note that all deliverables need to be provided in Serbian and English language.

Section 2 – Award Information

Subject to the availability of funds, the Project intends to provide up to 4,600,000 RSD (Serbian dinars) in total funding to be allocated over a seven month period. The anticipated period of performance of the grant is expected to begin in June of 2012. The Project anticipates awarding one Fixed Obligation Grant under this RFA. Under a Fixed-Obligation Grant, all payments will be a fixed-sum payable upon completion of deliverables, which will be defined in detail during grant agreement negotiations.

Timeline for activities

Estimated Timing

Task Area I

June 01, 2012 – December 31, 2012

Task Area II

June 01, 2012 – October 01, 2012

- Set of state aid programs proposed by the Grantee and submitted to BEP for review and approval

June 29 , 2012

- Draft findings and recommendations

August 17, 2012

- Final report outlining findings, recommendations,  and other relevant information

October 1, 2012

 

Section 3 – Eligibility Information

Eligible organizations shall be able to comply with and achieve the proposed Program Description, Tasks, and Results and have a satisfactory performance record and record of integrity and business ethics.

Eligible organizations include legally registered US, Serbian, and third country non-for-profit, for-profit, and non-governmental organizations (NGOs).

Prior to the award of grant under this RFA, successful Applicants will be required to sign a Certification Regarding Terrorist Financing certifying that the Applicant’s organization does not provide and has never provided assistance to terrorists for terrorist activities. Successful Applicants may also be required to sign other Certifications as applicable to the award. The Certifications are attached as Annex 2 of this RFA.

Ineligible organizations include:

  • Public International Organizations;
  • Entities that have misused USAID funds in the past, organizations that advocate, promote or espouse anti-democratic policies or illegal activities;
  • Political parties or institutions;
  • Organizations that intend to use the grant for religious objectives;
  • Organizations that are on the list of parties excluded from federal procurement and non-procurement programs or the United Nations Security Sanctions Committee.

 

Section 4 – Application and Submission Information

Applicants should submit applications in writing to: Jasmina Debeljak Maljkovic electronically, via email at grants@bep.rs. The Closing Date for submission of applications is, May 25, 2012, and the Closing Time for Submission of Applications is 15:00 hours Local Belgrade Time. Late applications will not be considered.

All applications in response to this RFA shall consist of a technical proposal and a budget proposal. The technical proposal must not be longer than 15 pages in length. Pages submitted in excess of 15 pages will not be reviewed. In their proposals, the applicants should clearly differentiate description of activities responding to Task Area I and Task Area II.

The cost proposal (budget) shall be submitted as a separate file from the technical proposal. Applicants are advised to fill in the budget form as detailed as possible, differentiating between costs associated with Task Area I and those associated with Task Area II. For the purpose of clarity, applicants are advised to make a clear breakdown of costs per Task Area I and, separately, per Task Area II. Lump sums will not be accepted. In addition, applicants are required to provide a brief narrative clarification of budget items demonstrating the necessity of the costs and how they relate to the proposed activities (e.g. through references to the activities in the point 7 of the Application form “Description of Grant Activities”) in the second sheet of the Budget form.  Applicants are allowed to add new lines and modify the budget lines (not Budget Headings) according to the needs of the proposal’s activities. The required format for applications is included as Annex 12 - Full Application Form and Annex 1A – Budget Form.

 

Section 5 – Application Review Information

Applications will be evaluated in accordance with the criteria set forth below. The criteria have been tailored to the requirements of this RFA. Applications should note that these criteria serve to: (a) identify the significant matters which Applicants should address in their applications; and (b) set the standard against which all applications will be evaluated.

To the extent necessary, the Project may request clarification and supplemental materials from Applicants whose applications have a reasonable chance of being selected for Award. The entry into discussion is to be viewed as part of the evaluation process and shall not be deemed as indicative of a decision or commitment upon the part of the Project to make an award to the Applicants with whom discussions are being held.

Applications will be evaluated by the Grants Selection Committee on the basis of 100 possible points. The weighting of various sections will be as follows:

Category

Maximum Points (100 Total)

Understanding of Key Issues
Grant Activity Goals, Objectives and Methodology
Outcomes / Expected Results   
Proposed Tasks and Activities 
Staffing/Management Plan
Relevant Past Experience and Performance
Cost Effectiveness
Total Possible Points

10
10
20
15
15
10
20
100

  • Understanding of the Key Issues (10 points): Does the applicant demonstrate a clear understanding of the problems/key issues that the proposed grant activity will address?
  • Grant Activity Goals, Objectives and Methodology (10 points): Is the overall goal of the proposed grant activity clearly stated and achievable? Does the applicant list specific objectives that will contribute to achieving the grant’s goal? Is the proposed methodology suitable for this kind of assessment?
  • Outcomes / Expected Results (20 points): Do the expected results of the proposed grant activities relate to the key issues and overall grant objective? Are anticipated results directly linked to a specific objective? Are the results verifiable?
  • Proposed Tasks and Activities (15 points): Does the applicant propose specific activities that are logical, realistic, and relevant to the grant activity’s goal?
  • Staffing/Management Plan (15 points): Does the proposed staffing/management plan reflect the personnel/management needs of the grant activity? Does the applicant propose personnel with experience and skills necessary to successfully implement the proposed activities?
  • Past Experience (10 points): Does the organization have relevant past experience successfully implementing similar activities?
  • Cost Effectiveness (20 points): What resources are provided for the proposed costs? Is the proposed budget realistic, well-though out, and in-line with the proposed activities? Are the proposed costs reasonable, allowable and allocable to the grant? Is the grantee contributing cost-share or providing in-kind support?

The selection of the Applicant for award will be made by the Project’s Grant Selection Committee. Prior to the award of any resultant grant agreement, the Project must obtain prior approval from USAID.

 

Section 6 – Award and Administration Information

Before the applications’ specified expiration date, successful applicant(s) will receive written notice from the Grants Manager informing the applicant(s) that the Project either intends to award a grant to the applicant without negotiation, or that the Project intends to engage the applicant(s) in further negotiations with respect to a potential grant award. Negotiations conducted after the receipt of an application do not constitute an obligation on the part of the Project to award a grant. Unsuccessful applicants will be notified in writing by the Grants Manager.

Any resultant award will be subject to the terms and conditions of the Prime Contract for the USAID Business Enabling Project (for US organizations: 22 CFR 226, OMB Circulars, and the Standard Provisions for U.S. Non-governmental Recipients; for non-US organizations: Standard Provisions for Non-U.S. Non-governmental Recipients).

 

Section 7: Annexes

Annex 1: Full Grant Application Form and Budget Form
Annex 2: Certifications

 

 

 

 

 







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