VZCZCXRO1854
RR RUEHDBU RUEHIK RUEHYG
DE RUEHBUL #2298/01 1410838
ZNR UUUUU ZZH
R 210838Z MAY 06
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 0338
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEKJCS/OSD WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUCNDT/USMISSION USUN NEW YORK 2560
RUEHGV/USMISSION GENEVA 5970
RUEHUNV/USMISSION UNVIE VIENNA 1382
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 KABUL 002298 
 
SIPDIS 
 
DEPARTMENT FOR SCA/FO, SCA/A, EB 
TREASURY FOR PARAMESWARAN 
NSC FOR AHARRIMAN, KAMEND 
CJTF-76 FOR POLAD, CENTCOM FOR CG CFC-A 
COMMERCE FOR DFONOVICH, JNELHYBEL, SHAMROCK 
USTDA FOR DSTEIN, SGREENIP 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON ETRD EINV EFIN OPIC EAID PGOV AF
SUBJECT: THE ARDS AND GOA PROCUREMENT PROCEDURES 
 
------- 
Summary 
------- 
 
¶1. (SBU) The Afghan Reconstruction Development Service 
(ARDS,) strives to conduct GOA procurement in accordance 
with international standards and the GOA Procurement Law, 
passed in September 2005.  Though not all GOA procurement 
is handled by the ARDS, this office sets a standard to 
which all government Ministries will hopefully adhere when 
their own procurement units are developed over the next 
three years.  Though the ARDS and its director, western- 
educated technocrat Adib Farhadi, win no popularity 
contests in Afghanistan, efforts to undermine its standards 
have been thwarted, in no small part due to support from 
the Minister of Finance.  End summary. 
 
------------------- 
The Procurement Law 
-------------------- 
 
¶2. (U) The GOAQs Procurement Law was passed in September 
¶2005.  The law establishes a transparent, competitive 
procurement system for government tenders.  It outlines 
step by step procurement procedures, including procurement 
planning, preparation of bidding documents, advertising, 
evaluation, requirements for bid, performance and advance 
payment securities, contract award, handling receipt of 
complaints, etc. 
 
¶3. (U) The law requires that available funds be certified 
before procurement is initiated and that bidding documents 
clearly describe requirements.  It established procedures 
to address grievances and created a Procurement Policy Unit 
under the Ministry of Finance for policy and profession 
development and performance monitoring.  It also 
established threshold limits for procurement approvals. 
 
¶4. (U) In general, procurements totaling USD 200,000 or 
more must be carried out in accordance with the principles 
of International Competitive Bidding (ICB.)  Procurements 
for less than this amount are carried out through a 
Qnational shoppingQ procedure whereby government entities 
themselves may solicit a minimum of three local or 
international bidders to provide quotations. 
 
¶5. (U) Single-source procurement may be used only when 
Qonly one contractor can fulfill the requirements within 
the time required, the contract has an exclusive legal 
right to the goods or services required or when there is an 
emergency need for goods or services involving an imminent 
threat to public welfare, health or safety.Q  Single-source 
procurement must be supported by a written justification 
from the Procurement Committee of the entity conducting the 
procurement.  Procurements in excess of USD 100,000 for 
goods or services USD 500,000 for works must be approved by 
a Special Procurement Committee, consisting of the 
Ministers of Finance, Economy and Justice. 
 
------------------------------------ 
The ARDS, ARTF, and Procurement Unit 
------------------------------------ 
 
¶6. (U) The Afghan Reconstruction and Development Services 
(ARDS) was established in 2003 to facilitate implementation 
of development projects and programs for Afghanistan.  It 
is housed in the Ministry of Economy.  The ARDS, through 
its Procurement Unit (PU,) oversees procurement for 
projects over USD 200,000 funded through the Afghan 
Reconstruction Trust Fund (ARTF,) a common fund 
administered by the World Bank to which international 
donors contribute for reconstruction projects.  The ARDS 
 
KABUL 00002298  002 OF 003 
 
 
also handles GOA procurement over this amount funded 
through the core budget. 
 
¶7. (U) The ARDS, with funds from the ARTF, provides 
technical assistance to line Ministries to design programs 
and projects suitable for funding by development partners. 
The PU assists line ministries with tenders, evaluations, 
negotiations and contracting, and provides advice on a 
range of procurement issues.   All procurement is carried 
out in accordance with procedures of the respective donor, 
i.e. the World Bank, the EU and the Asian Development Bank. 
Procurement awards are then signed between the winning 
entity and the individual line ministries, who are 
responsible for monitoring the performance of the contract. 
 
¶8. (U) Tenders are carried out in compliance with norms of 
ICB and in compliance with the Procurement Law.  All 
international tender notices are distributed on the ARDS 
website: www.ards.org.af and the United Nations Development 
Business website: www.devbusiness.com.  Firms can register 
to receive procurement notices through both these sites by 
sending an email to ards.procurement@ards.org.af.    The 
ARDS website is www.ards.org.af. 
 
------------------ 
ARDS AchievementsQ 
------------------ 
 
¶9. (SBU) Adib Farhadi, head of the ARDS, is a western- 
educated technocrat who commands a great deal of respect 
within the donor community for his commitment to 
transparency, efficiency and donor coordination. 
 
¶10. (U) In a recent meeting with commercial officer, 
Farhadi indicated that the ARDS has facilitated procurement 
of 348 projects valuing USD 800 million since its 
inception.  The unit has 15-16 Procurement Liaison 
Officers, all local staff, who oversee each individual 
project, all of whom have undergone a three-month World 
Bank procurement training course.  The PU will be phased 
out over the next three years as line Ministries develop 
their own capacity to handle procurement. 
 
--------------- 
Qand Challenges 
---------------- 
 
¶11. (SBU) Farhadi indicated that institutional capacity at 
the ARDS is an ongoing battle: PU staff are frequently 
poached by other international organizations.  He also 
stated that the ARDS is Qnot the most liked agencyQ because 
of its stance on transparent, competitive tenders.  Farhadi 
stated that he has the support of Minister of Finance Anwar 
Ahadi to ensure that PU tenders are carried out in the most 
transparent way possible, but that his own popularity 
within the GOA was low, noting that he is Qproud to have 
survived.Q 
 
¶12. (U) Farhadi indicated that Minister Ahady has recently 
insisted that the PU handle procurement for all ministry 
projects funded by the GOA core budget.  Previously, 
Ministry of Defense (MOD) and Ministry of Interior 
procurement was handled directly by those Ministries. 
 
¶13. (SBU) The first MOD procurement ARDS handled was in 
February and involved an order for 2 CT scans and an MRI 
machine for an MOD hospital.  General Electric placed a bid 
through a local intermediary, and subsequently filed an 
advocacy request with the Department of CommerceQs Advocacy 
Center because of incomplete bid specifications and 
suspicion that the tender process was not being carried out 
transparently.  Farhadi freely admitted that the PU was 
 
KABUL 00002298  003 OF 003 
 
 
under intense pressure from the MOD to issue project 
details on this particular tender in accordance with the 
MODQs specifications, which Farhadi felt were tailor 
written to ensure that the company that MOD desired would 
win.  Farhadi stated that after one re-tender, and a visit 
to the hospital slated to receive the equipment where he 
discovered not a single staff member capable of operating 
the equipment, the ARDS cancelled the tender. 
 
¶14. (U) With Farhadi tapped as the new director of the 
Afghan National Development Strategy (ANDS), the ARDS will 
move to its natural home in the Ministry of Finance and 
soon be under new leadership, following a three month 
transition phase.  Farhadi will then focus on his pivotal 
role in ensuring the effective implementation of the ANDS 
and establishing successful monitoring of the Afghanistan 
Compact.  In this new position, Farhadi will be employed 
under USAIDQs Bearing Point contract. 
 
------- 
Comment 
------- 
 
¶15. (SBU) Post applauds the efforts of the ARDS in setting 
an example and way forward for GOA procurement in 
accordance with international standards.  Success will go a 
long way in attracting foreign investors interested in 
doing business with the GOA.  It will, however, be 
challenge to preserve this momentum when procurement 
responsibilities are transferred to GOA ministries.  USAID 
is working with the Ministry of Finance to identify a 
strong candidate who will replace Farhadi as head of the 
ARDS and help guide this process. 
 
NEUMANN