International development association project appraisal document

Figure A2.5: Illustration of Potential Aggregation Model for Technical Support for Rural Water Supply Systems

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Figure A2.5: Illustration of Potential Aggregation Model for Technical Support for Rural Water Supply Systems

    1. Aggregation reforms are likely to become increasingly needed, for factors internal or external to the water sector. Policy guidance will be required to explain the potential benefits of aggregation, warn about the potential constraints, and accompany such processes. Aggregation of water and sanitation services is well in place or on the rise in countries where the concept is well understood, such as in France and The Netherlands, where groupings are created to meet large and rising investment requirements.

    1. Within the current legal context of the Kyrgyz Republic, an implementation of such an approach would need to be on a voluntary basis i.e. where the participating Ayil Okmotus fully understand the costs and benefits from aggregation and decide by themselves, that the benefits outweigh the costs. To support and encourage voluntary aggregation, DDWSWD will need to provide guidance about potential forms for aggregated structures, basic rules for internal management, governance structures, tariff-setting arrangements or entry and exit rules. A specific element of such guidance could be the development of model legal frameworks for aggregation, or model Articles of Association for aggregated entities. Another specific element could be the elaboration of a clear framework for evaluating the costs and benefits of a proposed aggregation.

    1. Aggregation can take many forms and is not static over time

    2. Aggregation can take many forms and without a detailed analysis of the options available, this is why pilot projects are preferred in order to gather the evidence and experience required for formal policy implementation. An aggregated structure may incorporate a small number of towns or an entire region. It may be temporary or permanent; involve the aggregation of all WSS services, or only a subset of those; involve all functions or only a subset, such as securing financing for example Every form of aggregation has its own characteristics and it is unlikely that a solution applied in one situation can be applied elsewhere without tailoring it to suit the needs of the specific situation to be addressed.

    3. One form of aggregation can be used to test the cooperation of several municipalities before moving into deeper forms of aggregation, either in the WSS sector or in other areas of public service under municipal responsibilities. Clear entry and exit rules can provide such flexibility, although it is usually preferable to limit exit possibilities in order to not destabilize an existing aggregated structure.

    1. The reform and regulation process will require independent studies that will need to ensure that DDWSWD and providers have:

    • Understanding of achievable economies of scale due to aggregation

    • Understanding of relationship between investment planning and improvements in Levels of Service

    • Understanding of utility business planning process

    • Understanding tariff setting methodologies (costs and revenues)

    • Understanding of achievable quality and customer levels of service, and performance benchmarks

    • Understanding of asset renewal/replacement processes and needs

    • Understanding of use of consultants for independent auditing

    1. The improvement of regulatory processes is likely to be an important feature of the modernization process and will cover some essential objectives of water sector regulation - to regulate prices, quality and access to services in a way that encourages efficiency and enables the long-term sustainability of the service systems. It is expected that support will be required and will need to cover:

    • Review of existing regulatory arrangements

    • Recommendations for regulatory approach and strategy

      • Possible alternative arrangements, including examples from other countries

      • Discussions of feasible options with stakeholders

      • Recommendations for change: proposed broad framework and strategy

    • Review of legal constraints and opportunities related to the proposed system

    • Detailed proposal for new (or modified) regulatory arrangements

      • Outline of the new system in a form that can be used as drafting instructions for preparing new (or amended) primary legislation

      • Seminar for relevant stakeholders and decision makers

      • Timetable for creation of the regulator

    • The establishment and update of a national database (building on the work undertaken in RWSSP-2) on rural water supply and sanitation where information on covering: access; infrastructure conditions; level of service; customer satisfaction; and management aspects, amongst others. This data is to be made available for every community in the country to view and will allow for better estimation and prioritization of sector developments.

    1. Annex 3: Implementation Arrangements

    2. kyrgyz republic: Sustainable Rural Water Supply and

    3. Sanitation Development Project

    4. Project Institutional and Implementation Arrangements

    1. Specific instructions covering all aspects of project implementation management are to be found in the Project Operations Manual (POM), which will be prepared and adopted prior to effectiveness.

    1. Implementation period. The SRWSSDP will be implemented over a period of five years, commencing 28 January, 2017, the planned date of effectiveness of the IDA Grant and IDA Credit. The Mid-Term Review (MTR) will be conducted no later than December, 2019. The implementation support plan is detailed further in Annex 4.

    1. Institutions involved in project implementation. The key institutions involved in the implementation of the proposed project are the Department of Drinking Water Supply and Wastewater Disposal (under the State Agency for Architecture, Construction and Communal Services (GOSSTROY)), the Community Development and Investment Agency (ARIS) and Ayil Okmotus in the participating areas of Osh, Chui and Issyk-Kul Oblasts; and the Community Drinking Water User Unions (CDWUUs) at the community level. The Ministry of Health and Ministry of Education will also be involved as key stakeholders during the implementation of component 2 activities.

    1. ARIS will be responsible for the overall implementation, including fiduciary and safeguards compliance, of the proposed project. Institutional arrangements and responsibilities of the different institutions are outlined below.

    1. ARIS was created by Decree of the President of the Kyrgyz Republic in October 2003 as a legally and operationally autonomous institution for the purpose of managing the implementation of the IDA-supported First Village Investment Project (VIP I). It operates under the oversight of a Supervisory Board comprised of twenty-one representatives of the State administration, the local government sector, and the civil society,20 and is headed by an Executive Director. It has been or is currently responsible for management of other Bank projects.21

    1. For purposes of the SRWSSDP, ARIS will maintain a core team and support staff as follows: a project coordinator, an institutional development specialist, sanitation specialist, two international civil engineers, two senior national civil engineers, a procurement specialist, a financial management/disbursement specialist, a safeguards specialist (on half-time basis), a monitoring and evaluation specialist (on half-time basis), a project assistant, and an interpreter. ARIS will also engage site supervisors for each sub-project as part of the construction supervision team and contract an individual international expert on a Lump-Sum basis to support the engineering design review process. ARIS will also engage necessary support staff for the social and institutional support activities planned under component 2 and 3. An organogram is presented below:

    1. Project Coordinator

    2. Procurement Specialist

      Engineer - 2 no.s (National)

    3. Financial Management Specialist

      Engineer 2 no.s (International)

    4. Institutional Dev. Specialist

      Safeguard Specialist (Half time)

    5. M&E Specialist (Half time)

      Sanitation Specialist

    6. Support Staff 1: Interpreter

      Support Staff 2: Project Assistant

    7. Figure A3.1: Organogram of ARIS Implementation Team

    1. The SRWSSDP’s project team will work under the management of ARIS’s Executive Director, and ARIS’ Administrative pool will provide backstopping support, as needed.

    1. In its position as the implementing agency for the SRWSSDP, ARIS will be responsible for and carry out all project implementation in accordance with the POM, including procurement, financial management and accounting, social and environmental safeguards, and citizen communication as well as routine communications with the Association. The DDWSWD and participating Ayil Okmotus and CDWUUs at community level will be closely associated with all decisions regarding procurement, contract execution, site supervision, and authorization of payments to contractors. Relations between ARIS and participating villages and assignment of project implementation responsibilities will be governed by an Agreement into which ARIS will enter with each Ayil Okmotu. A model of the Agreement will be included in the Operational Manual. The format for the Agreement must be approved by the Association.

    1. Participating Ayil Okmotus (AOs): The heads of AOs, will take the lead on behalf of the participating AO in project implementation. The AO’s will be engaged in review of all technical aspects under the SRWSSDP within their prerogatives. Specifically, they will review and comment on all technical specifications and terms of reference, join evaluation panels, review and comment on technical reports and deliverables, exercise supervision oversight, and participate at key points such as testing or commissioning of assets. The AO’s office will be responsible for obtaining any required approvals. The AO’s office will also be responsible for holding annual public engagement meetings in order to ensure pro-active communication with the population and explain to beneficiaries and the public at large the benefits from the project, report on implementation progress, and disseminate a robust grievance redress process spanning beyond safeguards-related issues. The AO’s office will ensure a minimum participation of women in these community consultations.

    1. AO’s will play an important role to facilitate achievement of the development objectives, to ensure sustainability of investments, and in particular the requirement for service providers to collect revenues which exceed costs (so that CDWUU’s are self-sustaining). Specifically, AO’s with support from ARIS will ensure tariffs are increased, water meters are installed, billing and collection systems are improved, and connection fees are collected in a timely manner from each household to enable individual connections to be installed in the project areas during the construction periods (aiming for maximum possible coverage). The specific responsibilities of the AO will be outlined in the Agreement which will be signed with ARIS. Obtaining AO’s willingness to cooperate in these areas of support will be considered pre-condition for commencement of works.

    1. Department for Drinking Water Supply and Wastewater Disposal (DDWSWD) in the State Agency for Architecture, Construction and Communal Services (GOSSTROY). This department is responsible for development of both rural and urban water supply and sanitation sector, including policy, planning and sector coordination. The Department has a relatively low level of authority and capacity, however over recent years it has demonstrated stability and its ownership of the new sector strategy represents significant progress. DDWSWD’s role in the project is the overall executing agency which includes (amongst other activities); overall sector coordination and policy support; Government and donor liaison; participation in all procurement activities (for example evaluation member); identification and prioritization of sector interventions (including infrastructure investments and institutional support); and as responsible agency of the Government; and provision of support to ARIS for implementation (as required). DDWSWD will coordinate the national level institutional support activities and will be the primary beneficiary of the expected outputs from this sub-component.

    1. Ministry of Finance (MoF): is the Recipient’s representative for all World Bank financed projects, including SRWSSDP. As such, the MoF declares its commitments to the objectives of the project and will cause the project to be carried out in accordance with the financing agreement and other relevant documents. In addition, the MoF will be responsible for providing timely co-financing for the project in accordance with the Financing Agreement.

    1. Technical supervision. Construction supervision for Bank-financed projects implemented by ARIS is usually done by individual consultants hired by ARIS. While most works seems to have been delivered with satisfactory quality, there have been some cases of quality control deficiencies under RWSSP-2. Alternatively however, the capacity of local engineering consulting companies in the Kyrgyz Republic is low and they are not accustomed to perform construction supervision (or act as the “Engineer” in accordance with FIDIC conditions of contract). Typically, Kyrgyz regulations require design (i.e., author) supervision, but this supervision is not coupled with construction supervision by site engineers. Therefore the notion of construction supervision exercised under Bank projects is a new concept for the local consulting industry. During the SRWSSDP’s preparation, the Bank organized a consultation workshop for the local construction, design, and supervision industry and confirmed that existing capacity, especially in terms of construction supervision and contract management, remains low and there is a need to build capacity and develop the local industry.

    1. In principle, using individual consultants as construction supervisors is not considered best practice, but considering the low capacity of the local consulting industry it has been agreed that construction supervision will be carried out by ARIS, with additional external support. Specifically, after a detailed review of possible construction supervision arrangements for the SRWSSDP including extensive consultations with Government and industry representatives, and in order to enhance quality control, the following arrangements will be followed. ARIS will be assigned as the “Project Manager” or “Engineer” under the civil works contracts, with overall responsibility for construction supervision and contract management. ARIS will enter into an agreement with the Ayil Okmotus (the Employer) who will sign the Civil Works contracts. This will ensure the roles and responsibilities of both parties are clearly defined and the arrangements are legally robust. ARIS will engage necessary international expertise (Individual Consultant(s)), to reinforce their capacity for engineering design review, technical supervision and contract management (including establishment of systems for document control etc).

    1. This will include two full time international civil engineers, who will be based within each province, one in Osh and one in Chui. On behalf of ARIS, the international engineers will be responsible for establishing and overseeing systems of quality, time and cost controls to ensure civil works are appropriately supervised and managed in accordance with the conditions of contract and drawing from best international practice. In addition, the international civil engineers will support ARIS’s engineering / supervision team through training and capacity building activities. They will also be responsible for preparing monthly progress reports, copies of which shall be furnished to the Association.

    1. Two full time, national civil engineers (or resident engineers) will also be engaged by ARIS for each Oblast, along with site supervisors for each of the sub-project areas. These staff will work under the guidance and with support from the two international engineers. The roles and responsibilities of the international and national engineers (who will be certified registered professional within Kyrgyz republic) will be formalized through an official delegation of authorities for each contract. These details will be outlined in the POM, but it is envisaged that the national civil engineers (resident engineers) will be assigned as the Project Manager’s or Engineer’s representative under the contract, due to national legislative requirements. The proposed arrangements, which combine both national and international inputs, will satisfy both national regulations and the projects internal quality assurance requirements.

    1. A pool of qualified experts (i.e. hydro-geologist, electrical and mechanical engineer etc.) will also engaged for a short period of time on an ‘as-needed’ basis to support the resolution of specific technical issues if they arise.

    1. Financial Management

    1. Implementing entity. The Community Development and Investment Agency (ARIS) will be responsible for implementing the financial management (FM) function of the Project, including the flow of funds, budgeting, accounting, reporting, internal controls, and external audit. A FM assessment was carried out to determine the FM implementation risk and the FM arrangements at the implementing agency, including accounting, reporting, planning, budgeting, internal controls, and staffing. FM arrangements were assessed to be satisfactory to the Bank. The inherent risk of the project after applying risk mitigation measures is rated as Moderate; the Control Risk and the overall residual FM Risk are also considered to be Moderate.

    1. Strengths and weaknesses. Significant strengths provide a basis for reliance on the project financial management system including the following: (i) significant experience of ARIS FM staff in implementing Bank-financed projects over the past several years; (ii) adequate accounting software utilized by ARIS; (iii) FM arrangements under active projects are satisfactory; and (iv) unmodified audit reports issued on ongoing projects’ financial statements confirm this fact. No significant weaknesses were identified at ARIS. The following capacity building actions have been agreed to be implemented:

      1. Actions

      1. Responsible

      1. Completion date

      1. Prepare FM Chapter of the Project Operations Manual (OM)22 to reflect SRWSSDP-related internal control, budgeting, external auditing, financial reporting, and accounting policies and procedures

      1. ARIS

      1. Agreed by effectiveness

      1. Modify the existing accounting software for its accounting and financial reporting purposes acceptable to the Association, with capacity to, inter alia, generate IFRs, attachments to withdrawal applications including, statement of expenditures, and annual financial statements, in a manner acceptable to the Association.

      1. ARIS

      1. 30 days after effectiveness

    1. Budgeting and planning. ARIS has acceptable budgeting and planning capacity under the SRWSSDP. The annual budget of the SRWSSDP will be based on the final procurement plan that is to be discussed and agreed with the ARIS Executive Director and cleared by the World Bank. All changes to the procurement plan will be reviewed by the Executive Director and cleared by the World Bank. The project coordinator, the FM specialist, technical specialists of the project, and the procurement specialist will be involved in preparation of the annual budget for their respective components. The budget will be cleared by the MoF and the Bank and approved by the Executive Director of ARIS. The budget will form a basis for allocating funds to project activities and for requesting counterpart funds from the Government where appropriate. Such a budget is not suitable for the planned figures of IFR. Therefore, it was agreed that ARIS will prepare a Disbursement Plan based on the approved Procurement Plan. The Disbursement Plan will be prepared according to the IFR format (disbursement categories, components and activities, account codes, and broken down by quarter) and will be used for calculation of IFR planned figures.

    1. Accounting and Reporting. Cash basis accounting will be applied for the projects’ accounting. ARIS will maintain its current accounting system. Project management-oriented Interim unaudited Financial Reports (IFRs) will be prepared under the SRWSSDP. ARIS will produce and submit to the Association a full set of IFRs every calendar quarter throughout the life of the SRWSSDP. The format of IFRs will be agreed before negotiations and will include (i) Project Sources and Uses of Funds; (ii) Uses of Funds by Project Activities; (iii) DA Statement; (iv) Project Balance Sheet; and (v) Statements of Expenditure Withdrawal Schedule. IFRs will be produced by the accounting software. These financial reports will be submitted to the Association within 45 days of the end of each calendar quarter. The annual audited project’s financial statements and audit report together with the management letter will be provided to the Association within six months of the end of each fiscal year and also at the closing of the SRWSSDP.

    1. Internal Controls. ARIS’ internal control system was assessed to be capable of providing timely information and reporting on the SRWSSDP. The FM chapter of the draft OM is well-prepared and provides for full document accounting and financial reporting policies and procedures such as internal control procedures, including authorization of expenditures and approval of the payments; bank reconciliations; verification of expenditures eligibility by the Financial Manager; description of financial documents flow/circulation; indication of eligible cash transactions, budgeting procedures, formal reconciliation procedures of project records with Client Connection and XDR/USD reconciliation; and safeguards for assets. Expenditures incurred by ARIS will be authorized by the director and verified for the eligibility and accuracy by the financial manager. The final Operational Manual will reflect the specific activities of the SRWSSDP, including Chart of Accounts, Audit TOR, frequency of submission, and format of IFRs.

    1. Staffing. ARIS has experienced FM staff, consisting of the Financial Manager responsible for overall FM arrangements of all projects implemented by the agency. The Financial Manager has extensive experience working on the Bank-financed projects. The Financial Manager will be in charge of the overall FM arrangements of the SRWSSDP as well. There are also four experienced disbursement specialists at ARIS, a specialist of financial literacy, and one assistant to the Financial Manager. Such arrangements are considered adequate; no further actions are required.

    1. External Audit. External audit of the SRWSSDP will be conducted (i) by independent private auditors acceptable to the Association, pursuant to TORs acceptable to the Association, and selected by ARIS, and (ii) according to the ISA issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The TOR will include (i) audits of financial statements; (ii) assessments of the accounting system; and (iii) a review of the internal control mechanisms. The following table identifies the required audit reports that will be submitted by the PIU together with the due date for submission. The audited financial statements will be disclosed to the public in a manner acceptable to the World Bank. Following the Association’s formal receipt of these statements from the borrower, the Association makes them available to the public in accordance with the World Bank Policy on Access to Information.

      1. Audit Report

      1. Due date

      1. SRWSSDP Financial Statements include Project Sources and Uses of Funds, Uses of Funds by Project Activities, Project Balance Sheet, SOE Withdrawal Schedule, DA Statement, Notes to the Financial Statements, and Reconciliation Statement.

      1. Within 6 months of the end of each fiscal year and also at the closing of the SRWSSDP.

    1. Disbursements

    1. Disbursements from the IDA Credit and Grant Accounts will follow the transaction-based method, i.e., traditional Bank procedures including advances to designated accounts, direct payments, Special Commitments and reimbursement (with full documentation and against Statements of Expenditures - SOEs). Two separate (Credit and Grant) designated accounts will be opened in a commercial bank acceptable to the Association. For payments above the minimum application size, as will be specified in the Disbursement Letter, ARIS may submit withdrawal applications to the Association for payments to suppliers and consultants directly from the Credit and Grant Accounts. Disbursement arrangements will be detailed in the Disbursement Letter.

    1. The project will have two disbursement categories as follows:

    1. Category

    1. Amount of the Credit Allocated (expressed in USD)

    1. Amount of the Grant Allocated (expressed in USD)

    1. Percentage of Expenditures to be Financed (inclusive of Taxes)

    1. (1) Works under Components 1 and 2

    1. 12.92

    1. 3.28

    1. 78%

    1. (2) Goods, consulting services, training and incremental operating costs under Components 1, 2, 3 and 4

    1. -

    1. 7.30

    1. 100%

    1. The Government contribution of US$4.50 million will finance the remaining 22 percent for Works under component 1 and 2. Since the Government contribution under this category is significant (over 20%) it should be ensured that timely availability will not impede project implementation. Therefore, the Government should commit itself through a letter to make available the needed contributions right at the beginning of the year.

    1. Procurement. Overall, the public procurement environment in the country is improving as the Public Procurement Department (PPD) under the Ministry of Finance has revised the Public Procurement Law (PPL) and the new PPL has been recently adopted by the Parliament and signed by the President. The new PPL will create an independent complaint review commission and PPD will become a regulatory body for public procurement. The Association is supporting the institutional development of PPD and the complaint review commission, as well as capacity building of all stakeholders. The Government is developing e-GP with the Association TA and ADB financing.

    1. Applicable Procurement Guidelines. Procurement for the proposed Project will be carried out in accordance with both “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,” dated January 2011 (revised July 2014) and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,” dated January 2011 (revised July 2014). The World Bank “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credit and Grants” dated October 15, 2006 and revised on January 2011, will also apply. For each contract to be financed by the Association, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between ARIS and the Association task team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect actual project implementation needs and improvements in institutional capacity.

    1. Procurement Risk Assessment. The Bank staff conducted a procurement capacity and risks assessment using the Procurement Risk Assessment and Management System (PRAMS). Procurement activities will be carried out by ARIS, which has been effectively managing procurement activities under BOUIP, VIP3, and the RWSSP-2. ARIS will have overall responsibility for procurement under the project. ARIS has a main office in Bishkek and seven oblast offices. The main office of ARIS is staffed by four well-qualified and experienced procurement specialists, of which one will be dedicated to the SRWSSDP team. Ten small oblast-level liaison offices ensure adequate coverage of the country and will provide administrative and logistical support for ARIS field staff.

    1. The Procurement Capacity Assessment Report, including the risks and risk mitigation plan, has been filed in the World Bank’s PRAMS. The key issues and risks include: (i) potential risk of delays in the implementation of the project due to the complexity of procurement processes and decision-making that involves local governments and (ii) insufficient contract monitoring and contract management skills. Given the findings of the assessments, the initial overall procurement risk under the project is assessed as “substantial.” Mitigation measures include:

    • Ensure the publication of procurement notices and contract award information as required by the Bank Procurement and Consultant Guidelines, including publication on the E-GP website

    • Prepare project Operational Manual that will include a procurement section detailing procurement arrangements and an independent complaint-handling mechanism, including for contract management.

    • To bring to the Association’s notice each and every complaint received from any supplier or consultant relating to the procurement and contract management process, and to record and address of these complaints promptly and diligently.

    • To maintain up-to-date procurement records and to make these available to the Association’s staff, auditors, etc., as required.

    1. Procurement of Works. Works procured under this project would include rehabilitation of the water supply system and sanitation facilities in the target rural communities.

    1. Procurement of Goods. Goods contracts equal and above US$ 1,000,000 equivalent will be procured under ICB procedures using the Bank’s SBD for procurement of goods. The NCB method will be applicable for procurement of goods contracts with estimated budget of less than US$ 1,000,000. The ECA Sample NCB bidding documents shall be used taking into account the NCB conditions set forth in the Financing Agreements. Goods contracts with an estimated budget less than US$ 100,000 equivalent may be procured using Shopping procedures on the basis of at least three written price quotations obtained from qualified suppliers.

    1. Selection of Consultants. Consulting services will include development of detailed designs; various engineering services related to technical supervision of the civil works and project audit; and various contracts under component 3 to strengthen the institutional capacity of project beneficiaries. The methods for selection of consultants will include Quality and Cost Based Selections (QCBS), Quality Based Selections (QBS), Fixed Budget Selection (FBS), Least Cost Selection (LCS), Selection based on Consultants Qualifications (up to US$ 300,000), Single Source Selection in compliance with Paragraph 3.8 of the Bank’s Consultant Guidelines, and Individual Consultants (IC). Contracts estimated to cost above US$ 300,000 equivalent will be advertised through United Nations Development Business (UNDB), the Bank’s website, and local media (one newspaper of national circulation or the official gazette, and IA’s website). Short-lists of consultants for services estimated to cost less than US$ 300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. The Bank's Standard Request for Proposal Document would be used as a basis for all procurement of consultancy services to be procured under the Project. Some ARIS staff hired under previous projects would continue working for implementation of the project.

    1. Training. Training includes expenditures (other than those included in the consulting category) in connection with study tours, training courses, seminars, workshops and other training activities, including cost of training materials, space and equipment rental, travel, per diem costs of trainees and trainers, and trainers’ fees (as applicable) based on an annual budget found satisfactory by IDA.

    1. Operating Costs. The credit/grant will finance incremental expenses incurred by ARIS on account of the project implementation, management and monitoring, including operation and maintenance of vehicles, office equipment operation and supplies, communication costs, support for information systems, translation costs, bank charges, travel and per diem costs, salaries of contractual staff (excluding consultants’ services and salaries of officials of the Recipient’s civil service), social charge, office administration costs, and other reasonable expenditures directly associated with the carrying out of the project as agreed by the Association; all based on an annual budget acceptable to the Association.

    1. Assessment of the agencies’ capacity to implement procurement. Responsibility for actual implementation of the project will rest with ARIS, which was designated as the Project Implementation Agency. Participating Ayil Okmotus will retain authority to sign contracts and their representative will be closely associated with all decisions regarding contract execution, site supervision, and authorization of payments to contractors.

    1. Procurement Thresholds and Methods of Procurement. It has been agreed that if a particular invitation for a bid is comprised of several packages, lots or slices, and invited in the same invitation for bid, then the aggregate value of the whole package determines the applicable threshold amount for procurement and also for the review by the Association. The national competitive bidding (NCB) conditions will be part of the Financing Agreement. The following methods of procurement shall be used for procurement under the project.

      1. Expenditure Category

      1. Contract Value (USD)

      1. Procurement Method

      1. Bank Prior Review

      1. Civil Works

      1. >= 5,000,000

      1. ICB

      1. All ICB contracts

      1. < 5,000,000

      1. NCB

      1. First contract

      1. <50,000

      1. Shopping

      1. First contract

      1. NA

      1. DC

      1. All

      1. Goods

      1. >= 1,000,000

      1. ICB

      1. All ICB contracts

      1. <1,000,000

      1. NCB

      1. First contract

      1. <100,000

      1. Shopping

      1. First contract

      1. NA

      1. DC

      1. All DC contracts

      1. Consultant Services

      1. NA

      1. QCBS, QBS, FBS, LCS and CQS*

      1. All contracts >= USD 300,000 for firms; all contracts >= USD 200,000 for individuals; and all SSS contracts above 5,000.

      1. NA

      1. SSS

      1. NA

      1. IC

      1. Notes:

      1. ICB – International Competitive Bidding

      2. NCB – National Competitive Bidding

      3. DC – Direct Contracting

      4. QCBS – Quality and Cost Based Selection

      5. QBS – Quality Based Selection

      6. FBS – Fixed Budget Selection

      7. LCS – Least Cost Selection

      8. *CQS – Selection Based on Consultants’ Qualification below $300,000 depending on the nature of assignment

      9. SSS – Single (or Sole) Source Selection

      10. IC – Individual Consultant selection procedure

      11. NA – Not Applicable

    1. The Procurement Plan sets forth those contracts which shall be subject to prior review by the Bank. All other contracts shall be subject to post review by the Bank. The Bank may, at its own discretion, require that a sample of contracts below the threshold be subject to prior review, at any time or when the Procurement Plan is updated. The prior review thresholds will be periodically reviewed and revised as needed during the Project implementation period based on implementation of risk mitigation measures, reports from procurement post-reviews, and improved capacity of the implementing agency.

    1. Procurement plan. ARIS in consultation with DDWSWD, has developed a Procurement Plan for the first 18 months of project implementation. This plan is dated August 17, 2016. The plan will be made available in the project database, and in the Bank’s external website after approval of the project. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

    1. The frequency of procurement supervision missions will be once every six months. Special procurement supervision for post procurement reviews will be carried out at least once every twelve months.

    1. Advance procurement. To facilitate implementation of the project, all new procurement activities will be advanced as feasible in line with the agreed procurement plan.

    1. Retroactive financing. There will be a provision for retroactive financing up to an aggregate amount not to exceed SDR 500,000 equivalent. This will cover eligible expenditures procured in accordance with World Bank guidelines and implemented in accordance with other relevant operational policies for executing project activities incurred prior to effectiveness. Retroactive financing will finance the relevant project expenditures incurred and payments made on or after November 1, 2016.

    1. Monitoring & Evaluation. ARIS will also be in charge of continuous monitoring and evaluation (M&E) of project implementation. Accordingly, M&E activities will focus on (i) ensuring that project activities are implemented in accordance with procedures outlined in the OM; (ii) providing information on project performance in terms of project benefits and institutional capacity development; (iii) alerting the Kyrgyz authorities and the Bank to actual and/or potential problems in implementation so that adjustments can be made in a timely fashion; and (iv) providing a mechanism for ARIS to continuously self-evaluate its performance and explore possible improvements. ARIS will prepare semi-annual progress reports and submit them to the Association, with copies to DDWSWD and the MoF. Semi-annual results will be consolidated in an Annual Report.

    1. Annex 4: Implementation Support Plan

    2. kyrgyz republic: Sustainable Rural Water Supply and

    3. Sanitation Development Project

    4. Strategy and Approach for Implementation Support

    1. The Implementation Support Plan (ISP) describes how the Association will assist the client in achieving the PDO of the project. In particular, the ISP puts emphasis on accomplishing the following objectives: (i) provide necessary technical advice to the client and bring international experiences and good practices to ensure that the project meets the Association’s technical standards; (ii) ensure that the Implementing agency’s measures meet the standards approved by the Association in terms of construction supervision; (iii) ensure that the required fiduciary, social, and environmental safeguards are put in place and implemented per the Financing Agreement and other project documents; and (iv) ensure that the annual training plans and programs benefit exclusively the main project beneficiaries.

    1. Implementation Support Plan

    1. Technical Implementation Support. During the implementation phase, the task team will continue to engage experienced civil engineers to ensure the technical quality of outputs. Specifically, a civil engineer with a specialization in water and sanitation, will be engaged to review all designs prior to tender. Given that earlier Bank-financed projects in the Kyrgyz Republic have experienced issues with sub-optimal designs, and the generally low capacity of the local consulting industry, reviewing designs is required to mitigate existing risks. During the construction phase, the engineer on the team will provide supervision support to ensure the quality of works and safety as well as to advance discussions on the O&M strategies by the recipient participating AO’s. Given the shortcomings in construction supervision observed in other projects implemented by ARIS, particular attention will be placed to ensure that supervision systems are in place and are being followed closely. Among others, weekly planning documentation and daily supervision records will be reviewed regularly. Technical implementation missions will be implemented three times a year during the first 18 months of project implementation, followed by bi-annual supervision missions. The engineer will carry out site visits where works are ongoing or where service has recently commenced.

    2. Institutional Strengthening Support. SRWSSDP has a focus on strengthening the water sector institutions at the local and central level for improved service delivery. The Bank will offer technical support through this process by deploying specialized skill sets relevant to the planned reform activities. This will specifically include an Institutional Specialist, experienced in water sector reforms (planning and implementation) and a Financial Specialist, with extensive experience in utility finances, tariff structuring, investment planning and financial regulation. Institutional strengthening support will be implemented two times a year for the full project period.

    3. Procurement Supervision and Ex-post Review. Routine procurement reviews and supervision will be provided by the procurement specialist based in the country office. In addition, two supervision missions are expected to take place per year during which ex-post reviews will be conducted for the contracts that are not subject to Bank prior review on a sample basis (20 percent in terms of number of contracts). One ex-post review report will be prepared per fiscal year, including findings of physical inspections for not less than 10 percent of the contracts awarded during the review period.

    4. Financial Management Implementation Support. During project implementation, the project team will supervise the project’s financial management arrangements in the following ways: (i) review the project’s quarterly IFRs as well as the project’s annual financial statements, the auditor’s reports and management letters, and remedial actions recommended in the auditor’s management letters, and (ii) during the Bank Team’s on-site missions, review the following key areas: project accounting and internal control systems; budgeting and financial planning arrangements; disbursement arrangements and financial flows, including counterpart funds, as applicable; and any incidences of corrupt practices involving project resources. As required, a World Bank-accredited financial management specialist will participate in the implementation support and supervision process.

    5. Environmental and Social Safeguards Implementation Support. A Bank Environmental Specialist will review the implementation of the project’s EMPs and provide guidance to the Implementing Agency’s environmental specialist to ensure compliance with the Bank’s environmental safety guidelines. Similarly, a bank Social Specialist will review the implementation of the project’s RAPs (if any) and provide guidance to ARIS to ensure compliance with the Bank’s social safeguards guidelines.

    6. Social Mobilization. The Social Specialist will also review citizen engagement under the project, including the commitment to gender representation, and provide support regarding the implementation of the grievance mechanism in place. Assistance will also be provided towards adopting demand-side management to improve commercial practices of utility operators.

    1. Table 1: Skills mix required for the duration of project implementation

      1. Skills Needed

      1. Number of Staff Weeks

      1. Number of Trips


      1. Task Team leaders

      1. 30

      1. 10

      1. Civil Engineer

      1. 20

      1. 10

      1. Mixed: field and non-field based staff

      1. Institutional Specialist

      1. 10

      1. 5

      1. Financial Specialist

      1. 10

      1. 5

      1. Environmental specialist

      1. 4

      1. 6

      1. Field-based staff

      1. Social specialist

      1. 8

      1. 8

      1. Field-based staff

      1. M&E specialist

      1. 2

      1. 2

      1. At MTR and project end

      1. FM specialist

      1. 4

      1. 4

      1. Field-based staff

      1. Procurement specialist

      1. 8

      1. 8

      1. Field-based staff

    2. Annex 5: Economic Analysis

    3. kyrgyz republic: Sustainable Rural Water Supply and

    4. Sanitation Development Project

    1. The economic benefits from the project will be mirrored from improved quality of water supply services and improved sanitation services in schools, pre-schools and other public buildings. Investments in rural water supply systems are expected to result in improved water quality, expanded access to improved water sources, increase duration of water supply and reduced seasonal variation. Improving these services will enhance welfare by reducing coping costs (for example, time saved from water collection, reduced need for in-house drinking water treatment). Improving the quality of water supply, sanitation services and practices – through the WASH educational program - are also expected to have welfare effects through improved health.

    1. The project is expected to deliver substantial benefits by improving water supply services for approximately 100,000 residents in 38 villages. Currently, around 60-70 percent of households do not have in-house or in-yard water connections and spend 1-1.5 hours per day collecting water. Many households, due to intermittent supply or distant standpipes, still rely on unprotected standing water sources such as rivers, irrigation canals and shallow wells. Number of hours of water supplied varies from 2-3 hours to 24 hours in some of the villages. As a result they have important coping costs. Overall beneficiary villages in the Chui and Issyk-Kul Oblasts seem to have better quality of water supply services (both in terms of duration and access) when compared to beneficiary villages in Osh Oblast. A household survey is expected to be conducted shortly and will provide additional evidence of baseline conditions prior to project interventions. A follow-up survey is expected to be conducted prior to project closing to assess end-of project conditions and benefits.

    1. The project’s economic analysis relies on activities identified during project preparation to assess benefit and cost streams. It includes (i) the cost of all project components, including estimated O&M costs and project implementation costs and (ii) all measurable benefits, including decreases in the time spent collecting water; and welfare gains at household level associated with reduced need for in-house treatment (i.e., boiling of water) and reduced incidence of water-related diseases such as infectious hepatitis and acute enteric infections as a result of improved access to quality water and decline in the reliability on standing water sources. Expected benefits are based on results observed from similar projects in the country, namely the STICBP and the Rural Water Supply and Sanitation Projects (RWSSP1 & 2) and the Bishkek and Osh Urban Infrastructure Project and Additional Financing (BOUIP and BOUIP-AF). As with all economic analyses, the costs are perfectly observed while the benefits are not.

    1. The economic analysis assumes 20 years of asset life in the case of water supply systems, including the project implementation period, with corresponding benefits to be realized starting in 2021. The adopted social discount rate is 5 percent23 and the standard conversion factor for the cost is assessed at 0.85. All assumptions and key results are outlined below.

    1. The detailed list of benefits and main assumptions can be found below:

    • Reduced time in collecting water: Based on results obtained from similar operations in the country (STIBCP, RWSSP1 & 2), a reduction to around 30 minutes of time for collecting water has been assumed (this is considered a conservative assumption as most households will actually benefit from in-yard or in-house water connection by the project and time savings will therefore be greater). A rural average hourly wage of US$0.6624 is used as a conservative measurement of the opportunity cost of this time savings. Under these assumptions, the project is generating annual benefits of US$2,556,619 from economic gains of saving time to collect water.

    • Reduced coping costs from boiling water: It is common practice in the country for households to boil water prior to consuming it. Energy savings associated with reduced need to boil water due to improved water quality are estimated based on a 10 liters/day per capita benchmark. We estimate that by the end of the project only 20 percent of households will boil water (bringing boiling practices to similar levels as observed in other projects). Well-established benchmarks for the region are used in terms of energy requirements to boil water (0.09 kWh per liter of water) and an economic cost of US$0.27 per kWh.25 Under these assumptions, the project is expected to generate annual benefits of US$3,454,169 from energy savings linked to boiling water.

    • Benefits from reduced incidence of water-borne diseases. Data on incidence of water-borne diseases had not be collected in all beneficiary villages. Villages in Chui and Osh Oblast reporting data revealed 179 cases of infectious hepatitis over the past year and 3 cases of acute enteric infections. No data was available for Issyk-Kul and as such benefits estimated below are likely underestimated. Assuming that people lose around 10 days of work/school due to these illnesses and treatment costs of around KGS 5,300/person (US$88/person) we find that a reduction in water-borne diseases could lead to annual savings of around US$8,796 in reduced costs for treatment and US$6,798 in reduce losses of days of work.

    1. All project costs, including components 1, 2, 3 and 4, Government’s contribution, and expected O&M costs were applied in the economic analysis. Based on these assumptions the total estimated annual benefits of the project are US$6,026,383 yielding an ERR of 13 percent and a NPV of US$19.99 million.

    1. A sensitivity analysis was conducted to assess the impacts of (i) a reduction of expected benefits, (ii) an increase in expected costs and (iii) an increase in implementation time. Results can be found in the table below. As can be observed ERR rates remain above the recommended 5 percent which support the economic rationale for the proposed project.

      1. Economic Rate of Return

      1. Reduction of expected benefits

      1. 12 percent

      2. Reduction benefits by 20 percent

      1. 7 percent

      2. Reduction benefits by 40 percent

      1. 5 percent

      2. Reduction benefits by 50 percent

      1. Increase in expected costs

      1. 12 percent

      2. Cost overrun by 10 percent

      1. 10 percent

      2. Cost overrun by 25 percent

      1. 9 percent

      2. Cost overrun by 45 percent

      1. Increase in implementation time

      1. 11 percent

      2. Increased impl. Time by 1 year

      1. 10 percent

      2. Increased impl. Time by 2 year

    1. Annex 6: Map of Project Areas

    2. kyrgyz republic: Sustainable Rural Water Supply and

    3. Sanitation Development Project

    1 The Kyrgyz Republic: Poverty Profile for 2013, published by the Bank in May, 2015

    2 State program for development of water supply and wastewater disposal in settlements of the Kyrgyz Republic for the period of 2014-2024, GoKR, 2014.

    3 The Kyrgyz Republic: Insights on household access to water supply and sanitation

    4 Central Asia Water Series – Volume 2: Economic Impact Assessment of Inadequate Water Supply and Sanitation Services in Central Asia, World Bank, June 2016 (unpublished analytical report).

    5 Global Water Solidarity: Improving Water and Sanitation through Decentralized Cooperation in the Republic of Kyrgyzstan, UNDP, March 2014.

    6 RWSSP - 1 & 2 focused on Naryn, Talas and Issykul oblasts. ADB financed CBISSP included Osh, Jalalabad, Bakten and Chui.

    7 In parallel, in 2004 the Bank approved a project to support the rehabilitation of water supply and other municipal service systems in small towns (STICBP US$15 million), followed by a 2008 operation supporting the rehabilitation of water supply systems in the cities of Bishkek and Osh (BOUIP US$12 million). More recently, the European Bank for Reconstruction and Development (EBRD), together with the Swiss State Secretariat for Economic Affairs (SECO), commenced an urban water supply rehabilitation program for Bishkek, Osh, and a number of other larger towns for a total of about US$35 million equivalent.

    8 FY16 allocations to the DDWSWD increased by 100% from previous year to 200 million Kgs som.

    9 Surveys carried out under previous project in the series (RWSSP-2), indicated that some 80 percent of those who were tasked with collecting household water for household needs were women.

    10 A metered connection serving a household yard standpipe.

    11 First, Second and Third Village Investment Projects (VIP I, II and III), STICBP, BOUIP, RWSSP-2 and recently approved Urban Development Project.

    12 Willingness-to-Pay assessments have been carried out that indicate that a move towards cost reflective tariffs is feasible without exceeding affordability thresholds (Willingness-to-Pay for Water and Sanitation Services, June 2015 – prepared by DHInfrastructure, financed by ADB TA-8375 KGZ)

    13 The project has also been designed with mitigation measures to address potential risks associated with climate change and natural disasters, supported by the application of the Climate and Disaster Risk Screening Tools (for IDA 17 projects). Specifically, potential issues associated with water security will be addressed through detailed assessments of water source options and through introducing demand side measures to support efficient use of the water resources.

    14 Chelpek and Darkhan in Issyk-Kul Oblast

    15 As per new Guidelines a 5 percent Discount Rate is recommended for project evaluation - Discounting Costs and Benefits in Economic Analysis of World Bank Projects, May 2016.

    16 ICG, 2008. Kyrgyzstan: the challenge of judicial reform. Asia Report #150.

    17 WDR, 2013. Gender Equality and Development. Background Paper: Kyrgyz Republic Country Case Study.

    18 Participatory Hygiene and Sanitation Transformation, a method used by Center of Health and Promotion

    • 19 Aggregation” is defined as the grouping of several municipalities into a single administrative structure for the provision of a particular service. Such aggregated structures can vary widely, generally along three dimensions: Scale: aggregated structures can group two neighboring municipalities, or several ones in a single region or across a broader territory;

    • Scope: aggregated structures can provide a single service (for example, bulk water supply) or all services, from raw water abstraction to sewerage treatment. For each of these services, they may carry out certain functions only (such as procurement or maintenance) or be responsible for all functions, from operations and maintenance to investment and financing;

    • Process: municipalities may form aggregated structures voluntarily based on mutual interests or alternatively, a higher level of government, driven by the overall public interest, may impose or incentivize the aggregation process. The aggregation may be temporary (for a short term specific purpose) or permanent.

    The main driver for aggregation is usually the potential to realize economies of scale by providing services to a larger customer base, and therefore, to render services more efficiently and at a lower cost. Despite the case for aggregation being relatively easy to construct, aggregation does not take place as often as one may think and it has a relatively high risk of failure because political will is lacking, or the potential benefits are not clearly understood, or the aggregation process is perceived as too complex.

    20 The Supervisory Board is composed of the following members: seven representatives of state bodies of the Kyrgyz Republic, representing, respectively, the President of the Kyrgyz Republic; the Prime Minister; the Ministers of Economy and Finance; the Minister of Justice; the Minister of Education, Science and Youth Policy; the Minister of Health Care; and an Oblast Governor appointed by the President of the Kyrgyz Republic; seven representatives of local self-government bodies; and seven representatives of civil society. The responsibilities of the Supervisory Board are to guide and supervise the activities of ARIS; to appoint and, if warranted, dismiss the Executive Director; to approve the policies, modifications, and amendments to ARIS’ Charter, the annual budget, and working plans and any modifications to them, annual reports, reports on special studies, and independent auditors’ reports. The overall responsibility and supervision of ARIS are in the hands of the Supervisory Board, to which both the Executive Director and the Audit Unit report. The Board meets normally once to at most twice a year.

    21 First, Second and Third Village Investment Projects (VIP I, II and III), Small Town Infrastructure and Capacity Building Project (STICBP), Bishkek and Osh Urban Infrastructure Project (BOUIP) and Additional Financing (BOUIP-AF), and the recently approved Urban Development Project.

    22 At time of appraisal, ARIS has prepared a draft OM.

    23 As per new Guidelines a 5 percent Discount Rate is recommended for project evaluation - Technical Note on Discounting Costs and Benefits in Economic Analysis of World Bank Projects

    24 Based on ILO data for the Kyrgyz Republic.

    25 World Bank (2012), Europe and Central Asia Balancing Act; Cutting Subsidies, Protecting Affordability, and Investing in the Energy Sector in Eastern Europe and Central Asia Region

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