Disbursement Procedures - Islamic Development Bank

3.17.4 Insurance and transportation
3.17.5 The tender documents should state precisely the type and extent of insurance to be
provided by the successful bidder. Marine and transport insurance up to the site and
insurance of work and of risks against third party are mandatory. The type and extent of
insurance to be taken out is to be fully covered in the Financing Agreement.
3.18 Indemnification Requirements
3.18.1 It should be clearly stated in all contracts that performance bond(s)/guarantee(s),
advance payment guarantee(s) and any insurance policies entered into by the contractor
under the terms of the contract, shall stipulate that the proceeds of any claim arising
thereof shall be payable to the IDB to the extent of its financial participation for the account
of the Recipient. The IDB, upon receipt of such proceeds, will credit the same to a special
account for the account of the Recipient. Upon reaching agreement, any amount which is
rightly due to the Bank as reimbursement of previous disbursement on any item which is
the subject of the claim, will be deducted and the balance of the amount received under
the claim will become due for payment to the Recipient or the contractor, as the case may
be.
3.19 Liquidated Damages and Bonus Clause
3.19.1 Liquidated damages or similar clauses in an appropriate amount should be included
in bidding documents in view of delays in completion of works or delivery of goods or
failure of the works or goods to meet performance requirements which result in extra cost,
loss of revenues, or loss of other benefits to the Recipient. Liquidated damages should be
limited to 10% of the contract price unless the laws of the Recipient dictate otherwise.
3.19.2 Provision may also be made for a bonus to be paid to contractors for completion of
contracts ahead of the times specified in the contract when such earlier completion would
be of benefit to the Recipient.
3.20 Force Majeure
3.20.1 The conditions of contract included in the bidding documents should stipulate that
failure on the part of the parties to perform any of their obligations under the contract
would not be considered a default if such failure is due to force majeure as defined in the
contract.
3.21 Settlement of Disputes
3.21.1 Whenever possible, the conditions of contract should contain provisions dealing
with the applicable law and the forum for the settlement of disputes. It would usually be
advantageous to consider international commercial arbitration in contracts for the
procurement of goods and services. The Bank, however, should not be named an
arbitrator.
3.22 Document Approval Requirements
3.22.1 The draft tender documents should be submitted to the Bank allowing sufficient time
for its review and comments and shall be issued for bidding only after obtaining approval
of the Bank.