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Corruption in the Telecommunications Sector in Ethiopia: A Preliminary Overview 347
How the Agreement Works
A framework agreement between the ETC and the supplier specified
the commercial terms and conditions under which the nine contracts
would be placed. The supplier committed, under this agreement, that
all technology supplied would be state of the art and all its prices internationally
competitive. For each of the nine equipment packages, the
ETC provides technical specifications, in response to which the supplier
submits a technical proposal to meet those specifications. The
proposals for each package are then agreed on, and the supplier provides
the ETC with its price for the supply and installation of compliant
equipment. The contract for that package is then signed,
incorporating the terms of the financing agreement and framework
agreement. The contract grants the ETC 30 days from the date of signature
to verify whether there are any “big problems with the technical
proposal” and whether the supplier’s prices “far exceed reasonable
industry prices.” If any such problems are identified, the supplier is
required to adjust the technical proposal or price accordingly. During
the 30-day verification period, the ETC (with the help of its consultants)
assesses the supplier’s prices by comparing them with market
prices of comparable equipment.
When agreed-on milestones are reached during execution of the
equipment package contracts, the ETC pays the supplier by issuing a
promissory note that states the amount payable. The promissory note
records a debt due from the ETC to the supplier. The ETC then pays the
capital plus interest due on the promissory note to the supplier under the
terms of the financing agreement.
Key Elements of the Contracting Process
The procurement process for the vendor finance contract was initiated by
the ETC through a request to several suppliers. 16 The equipment to be
supplied under the proposed financing was not specified in detail at that
time, and the process was kept informal for the most part. Interviewees
suggested that some losing bidders may not have been given a genuine
opportunity to compete for the financing package, though this cannot be
fully substantiated and is challenged by the ETC. A number of stakeholders,
however, noted the following:
• The ETC’s financial requirements were not provided in detail to those
suppliers (other than possibly the winning supplier) that had been
approached to consider providing such financing.