FOR OFFICIAL USE ONLY

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY EMERGENCY PROJECT PAPER ON A PROPOSED IDA GRANT THE AMOUNT OF SDR 29.5 MILL 3 (US$44.0 MILLION EQUIVALENT) TO THE REPUBLIC OF LIBERIA FOR AN Report No LR URBAN AND RURAL INFRASTRUCTURE REHABILITATION PROJECT Africa Transport Sector Country Department AFCW 1 Africa Regional Office April 9,2009 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective - March 3 1,2009) Currency Unit = Liberian Dollars (LR$) 1 US$ = LR$ SDR = US$1.495 FISCAL YEAR July 1 - June30 ABBREVIATIONS AND ACRONYMS AC AfDB ADP CAS CPA CQS DB EC EIP EIPSC EMP EPA ESIA ESSAF FBS FDIC FM FPM GDP GEMAP GOL GTZ HIPC IC ICR IDA IFC IFR IIU JICA LCS LRDC Asphalt Concrete African Development Bank Agriculture and Infrastructure Development Project Country Assistance Strategy Comprehensive Peace Agreement Consultant Qualification Selection Design-Build European Commission Emergency Infrastructure Project Emergency Infrastructure Project - Supplemental Component Environmental Mitigation Plan Environment Protection Agency Environmental and Social Impact Assessment Environmental and Social Screening and Assessment Framework Fixed Budget Selection Fide'ration Internationale des Inge'nieurs Conseils (International Federation for Consulting Engineers) Financial Management' Financial Procedures Manual Gross Domestic Product Governance and Economic Management Assistance Program Government of Liberia Deutsche Gesellschaft fur Technische Zusammenarbeit (German Association for Technical Cooperation) Heavily Indebted Poor Countries Individual Consultants Implementation Completion Report International Development Association International Finance Corporation Interim Unaudited Financial Reports Infrastructure Implementation Unit Japan International Cooperation Agency Least Cost Selection Liberia Reconstruction and Development Committee

3 FOR OFFICIAL USE ONLY LRTF MC MOF MOU MPW NCB NPA OPRC PEMFAR PFMU POM PPP PRS RAP QCBS SBD SDR SIDA SIU SOE sss TA TOR UNDP UNMIL URIRP UN us USAID Liberia Reconstruction and Development Trust Fund Management Committee Ministry of Finance Memorandum of Understanding Ministry of Public Works National Competitive Bidding National Port Authority Output Based Performance Roads Contracts Public Expenditure Management and Financial Accountability Review Project Financial Management Unit Project Operational Manual Private Public Partnership Poverty Reduction Strategy Resettlement Action Plan Quality and Cost Based Selection Standard Bidding Document Special Drawing Rights Swedish International Development Cooperation Agency Special Implementation Unit Statement of Expenses Single Source Selection Technical Assistance Terms of Reference United Nations Development Program United Nations Mission in Liberia Urban and Rural Infrastructure Rehabilitation Project United Nations United States United States Agency for International Development Vice President: Obiageli Katryn Ezekwesili Country Director: Ishac Diwan Country Manager Ohene Owusu Nyanin Sector Manager: C. Sanjivi Rajasingham Task Team Leader: Gylfi Palsson This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

4

5 Republic of Liberia Urban and Rural Infrastructure Rehabilitation Project Table of Contents A. Introduction... 1 B. Emergency Challenge: Country Context. Recovery Strategy and Rationale for Proposed Bank Emergency Project... 2 C. D. E. F. G. Bank Response and Strategy: The Project... 7 Appraisal of Project Activities Implementation Arrangements and Financing Plan Project Risks and Mitigating Measures Terms and Conditions for Project Financing Annex 1 : Detailed Description of Project Components Annex 2: Results Framework and Monitoring Annex 3: Summary of Estimated Project Costs Annex 4: Financial Management and Disbursement Arrangements Annex 5: Procurement Arrangements Annex 6: Implementation and Monitoring Arrangements Annex 7: Environmental and Social Screening and Assessment Framework Annex 8: Economic and Financial Analysis Annex 9: Project Preparation and Appraisal Team Members Annex 10: Statement of Loans and Credits Annex 11 : Country at a Glance Annex 12: Map IBRD No

6

7 Republic of Liberia Urban and Rural Infrastructure Rehabilitation Project EMERGENCY PROJECT PAPER DATA SHEET Date: April 9, 2009 Country Director: Ishac Diwan Sector Managermirector: C. Sanjivi Raj asingham - Project ID: P Lending Instrument: Emergency Recovery Loan Team Leader: Gylfi Palsson Sectors: Roads and highways (SO%);General transportation sector (50%) Themes: Infrastructure services for private sector development (P);Rural services and infrastructure (S) Environmental screening category: Partial Screening [ ] Loan [ ] Credit [XI Grant [ ] Guarantee [ 3 Other: For Loans/Credits/Others: Total Bank financing (us$m.): Pmnosed terms: Source Local Foreign Total BORRO WEFURECIPIENT IDA Grant Liberia Reconstruction and Development Trust Fund Total: Borrower: Republic of Liberia Liberia FY Responsible Agency: Special Implementation Unit Ministry of Public Works Liberia Tel: (231) I \ I Estimated disbursements (Bank FY/US$m) O rota1 IDA LRTF 4nnual Cumulative I I Project implementation period: Start April 22,2009 End: June 30,2014 Expected effectiveness date: July 22,2009 Expected closing date: December 3 1, 2014 Does the project require any exceptions from Bank policies? Re$ Section Appraisal of Project Activities Have these been approved by Bank management? [ ]Yes [XINO [ ]Yes [ ]No i

8 Does the project include any critical risks rated substantial or high? Re$ Section Project Risks and Mitigating Measures [XIYes [ ]No Project development objective Re$ Section Bank Response The project supports government s goal of improving road access in Monrovia and targeted rural areas, as well as improving institutional structure for technical management of the road sector. Project description [one-sentence summary of each component] Re$ Section Bank Response The proposed operation will finance several critical components of transport infrastructure around the country, including: (i) resurfacinghehabilitation of city streets in Monrovia and a traffic solution for one major congested city interchange; (ii) rehabilitation of primary road sections in rural area (Cotton Tree-Bokay Town, and Pleebo-Barclayville); (iii) maintenance of primary and secondary roads through collaboration with United Nations Development Program (UNDP) and United Nations Mission in Liberia (UNMIL) peacekeepers, and; (iv) construction of a major bridge and a new fuel unloading facility. The proposed operation also supports the gradual rebuilding of institutions and human capacities to professionally manage the road sector. Which safeguard policies are triggered, if any? Re$ Section Appraisal of Project Activities Safeguard policies OP/BP 4.01 and 4.12 are triggered. The project has been rated as Category B... 11

9 A. Introduction 1. This Emergency Project Paper seeks the approval of the Executive Directors to provide a grant in an amount of US$44.0 million to the Republic of Liberia. The grant is intended to contribute to the cost of a new operation, the US$53.2 million Urban and Rural Infrastructure Rehabilitation Project (URIRP) prepared under the Bank s Emergency Response Procedures, OP8.00. Specifically, the grant will be applied to support the government in reestablishing its transport infrastructure. 2. After a civil war and following establishment of democratically elected government in early 2006, the International Development Association (IDA) has, with a series of infrastructure projects, contributed to the Government of Liberia s (GOL s) effort in reestablishing basic infrastructure of the country, and rebuilding institutions and capacity for sectoral management. While these projects have been prepared as standalone emergency operations of relatively modest size, implementation of the projects has had to take account of needed reprioritization along the way, including scaling up of some interventions, critical infrastructure that during this time has collapsed, and significant cost escalation. This has, in practice, resulted in the current set of infrastructure projects being managed as a program responding to the evolving emergency infrastructure needs of the country. The proposed operation continues this approach, and represents an important building block of a holistic multi-donor support to the transport sector in Liberia. 3. This proposed grant would advance IDA S ongoing and leading effort in addressing the rebuilding and developing of Liberia s transport infrastructure and related institutions. The proposed operation will help respond to the situation by financing several critical components of transport infrastructure around the country, including: (i) resurfacing and rehabilitation of city streets in Monrovia and a traffic solution for one major congested city interchange; (ii) rehabilitation of primary road sections in rural area; (iii) maintenance of primary and secondary roads through collaboration with United Nations Development Program (UNDP), and United Nations Mission in Liberia (UNMIL) peacekeepers, and; (iv) construction of a major bridge and a new fuel unloading facility. Crucially, the proposed operation supports the gradual rebuilding of institutions and human capacities to professionally manage the road sector. 4. The full cost of the identified URIRP project is projected at US$53.2 million. The Oversight Committee of the World Bank administered multi-donor infrastructure trust 1 Preparation of the project under OP8.00 was invoked in a memorandum of the Country Director to the Vice President of the Africa region on September 28, Investments in the operation, limited time during the year when civil works can be undertaken, the severely constrained human and institutional capacities and socio-political realities the government faces, are deemed to still qualify Liberia operations for emergency procedures. OP8.00 provides an important enabling environment for mobilizing quick approval and more responsive project implementation, including the Bank s utmost flexibility in procurement, speed of execution, internal cooperation and it summons the need for resources for Liberia operations that require substantial implementation support. Emergency Infrastructure Project (H236-LBR); Emergency Infrastructure - Supplemental Component (H256-LBR); Liberia Infrastructure Rehabilitation Project (TF under special funding); and Agriculture and Infrastructure Development Project (H327-LBR) 1

10 fund - Liberia Reconstruction Trust Fund (LRTF) - has approved a US$9.2 million cofinancing of URIRP. Under this programmatic trust fund, project are subsequent to the Oversight Committee approval processed entirely according to World Bank emergency procedures. The authorization of the Rapid Response Committee to negotiate URIRP constituted approval of the LRTF financing component. Table 1: Cost and Proposed Financing of URIRP (US$ million) I Projected Cost of Urban and Rural Infrastructure Rehabilitation Project I 1 Proposed IDA Grant I Cofinancing authorized December 8,2008 by the Liberia Reconstruction and Development Trust Fund (LRTF) Oversight Committee While IDA FY09 allocation for the Liberia transport sector is expected to amount to US$67.3 million, the proposed IDA grant to support URIRP is capped at US$44 million; the remaining funds of US$23.3 million will be made available as additional financing to current IDA infrastructure projects in Liberia. 6. Donor collaboration in Liberia is very good and activities in the transport sector are closely coordinated. In addition to the LRTF, to which Low Income Countries Under Stress (LICUS), Germany, Sweden, and Ireland have already contributed and to which the European Commission (EC) is preparing a contribution, other donors, including the African Development Bank (AfDB) and United States Agency for International Development (USAID), are engaged in infrastructure on a bilateral basis. As the lead donor in the transport sector, IDA actively engages and coordinates with other donors to ensure a comprehensive and sustained approach to the sector is taken. B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project Context 7. Liberia s economy, institutions, and human capacity were devastated by the country s 14-year civil war, which ended in In August 2003, the warring parties ended hostilities with the signing of the Comprehensive Peace Agreement (CPA) in Accra, Ghana and a National Transitional Government of Liberia (NTGL) was established to administer the affairs of the country for a two-year interim period leading to national elections in October The UNMIL was created and was given the mandate to support the implementation of the peace process. The 2003 Accra Comprehensive Peace accord and the deployment of a United Nations peacekeeping force have provided much-needed space to lay a solid foundation for recovery. 2

11 8. Since the CPA, this country of 3.7 million people has made important progress despite the considerable challenges, difficulties and risks it faces. It has held elections, reestablished a public financial management system, begun rebuilding public sector institutions, reinitiated the delivery of some essential public services, and laid the foundations of a local government system. The World Bank has been assisting Liberia since the conflict ended, which include a series of infrastructure projects amounting to a total of about US$lOO million. 9. Liberia has experienced strong real gross domestic product (GDP) growth3 since the end of its civil war. However, it remains one of Africa s poorest nations, with a GDP per capita of approximately US$190. Liberia reached Decision Point under the Enhanced Heavily Indebted Poor Countries (HIPC) initiative in March 2008, as a result of clearing its arrears to the World Bank and AfDB in December 2007 and those to the International Monetary Fund (IMF) in March Reaching this point enables the government to benefit from interim relief under the HIPC initiative. Steps still need to be taken for Liberia to reach the HIPC Completion Point, and until it does, Liberia is constrained to borrow to finance its tremendous reconstruction needs. 10. Improving fiscal trends reflect a wide range of measures taken by the government. The multi-donor Governance and Economic Management Assistance Program (GEMAP) has provided significant external support for reform of public financial management. The government has taken measures to improve tax and customs administration. It has improved the budget preparation process and implemented an interim commitment control system to ensure that spending does not exceed available revenues and that procurement practices keep to new public procurement guidelines. Given the relatively low domestic revenue base, a major challenge for the government in the medium term will be to manage its spending in ways that maximize value for money and avoid corruption, and that the benefit accrue to the poorer people in society. 11. The new government inherited in 2006 a country with infrastructure that had not been attended to for decades. The road network was seriously deteriorated and numerous bridges have collapsed because of lack of maintenance, thus limiting population movement and access to services. Much of the network is laterite roads subject to annual cycle of damage and repairs due to the heavy six-month rains. A significant allocation of funds is needed to simply preserve the road and bridges assets of Liberia. 12. In terms of sector reform, the Bank is currently supporting an ambitious and sofar successful government effort to reform the chronically corrupt and inefficient port sector, create a Landlord Port Authority and bring about through a transparent and competitive process a professional public private partnership (PPP) arrangement for general cargo, terminal and marine services operations. This is evidence that the government is, even in the fragile conditions the country is in, committed to push difficult sectoral and institutional reform percent in 2006 and 9.5 percent (est.) in 2007, and is estimated at 7.1 percent in 2008 and projected at 6.2 percent in 2009 as a result of the shock from the global economic slowdown and the resulting lower primary commodity prices. 3

12 13. Nevertheless, governance and weak capacity remain a serious challenge in Liberia and therefore in addition to financing emergency civil works, the proposed project would include support to institutional strengthening activities to build the implementation capacity of the Ministry of Public Works (MPW). While a temporary Special Implementation Unit (STU) is in place, the government has put forward a comprehensive Framework for implementation of donor funded projects in infrastructure which will lead by mid to the creation of a self-standing Infrastructure Implementation Unit (IIU) in the MPW and the abolishment of SIU. The government envisions that the IIU will have characteristics and organization resembling a road authority and that the IIU will evolve into one in due time. An eventual autonomous road authority is advisable to improve and professionalize management of the road network and create clear delineation with political decision-making. Recovery Strategy 14. The government has made restoration of basic infrastructure, primarily roads, its priority. At the same time, the government is of the view that a broad strategic approach to the road sector is needed to ensure the sustainability of the investments. 15. In March 2008, the government published its first full Poverty Reduction Strategy (PRS). The PRS articulates the GOL s priorities for re-establishing of the basic infrastructure, primarily rebuilding of the road network that was extensively damaged during years of war. In particular, through the highly participatory process of developing the PRS (hundreds of people participated in consultations across the nation) Liberians overwhelmingly defined roads as their first priority for infrastructure rehabilitation - and even for development overall. 16. With support of the Bank, the government prepared, in 2008, a National Transport Policy and Strategies with Investment Framework. The Cabinet expects that the document will be officially endorsed by mid The investment framework implies a cost of about US$1 billion to reestablish the country s basic roads and bridges network. 17. The policies and strategies developed draw on good international practices and adapt these to the particulars of Liberia, such as the short season civil works can be executed because of the intense rains. The medium and long term goals pertinent to the road sector are: (i) Institutional formulation. MPW will move from the force account execution of the past to a policy and strategic oriented ministry; road sector management will be placed in the hands of an autonomous road authority with requisite capacities; sustainable mechanisms will be developed for financing road maintenance. (ii) Contracting Arrangements. Innovative use of contracting techniques and partnerships with the private sector to achieve government s objective of long term preservation of road assets, including design-build (DB), design-build- 4

13 operate-maintain, performance or outcome payments to contractor, possibly total-asset-management, build-operate-transfer, as well as the more traditional input type of contracts. (iii) Maintenance strategy. Largest part of the road network needs to be rehabilitated to bring it to maintainable status. Once in maintainable condition, the government has a several pronged strategy: maintenance through the above referred contracting arrangements (primary and secondary roads mainly), one-two year road maintenance contracting arrangements with local contractors and maintenance with community participation (feeder roads). In the shorter term, engagement of UNMIL engineering brigades for maintaining strategic roads is being pursued as well as use of force account units. 18. Costs of initial road contracts in post-war Liberia were a concern as limited interest and- negative perception of the country led to few reputable bids and high premium demand. This concern is now more tempered, as Bank financed contracts have attracted two major contractors to the country and interest by others. Recent bids have resulted in costs dropping about 45 percent from initial road contracts. 19. At a donor conference in Berlin in June 2008, the government presented a paper on Infrastructure Financing and requested that donors focus their contributions on infrastructure, particularly roads. In addition, the government requested that, where possible, donors contribute through the Bank-administered multi-donor LRTF. The first two project concepts were approved in December 2008, including the US$9.2 million cofinancing to the URIRP. Donor LRTF Current and Expected Principal Areas of Engagement 5

14 20. In addition to the LRTF, two other formal donor coordination mechanisms exist in Liberia: Liberia Reconstruction and Development Committee (LRDC) is a transitional mechanism that provides a platform for dialogue between the government and development partners. Located in the Office of the President, LRDC is organized around the four PRS pillars (a) Peace and Security; (b) Economic Revitalization; (c) Strengthening Governance and Rule of Law; and (d) Infrastructure and Basic Services. Cooperation among lead donors has been strong, but aid coordination with the government has been less so, however the government is making significant efforts to strengthen its capacity to monitor aid flows and interventions. More predictable sector strategies are expected to improve the government s control over its reconstruction resources and agenda. (ii) PRS Pillars. In order to develop the PRS, the government organized its agencies and ministries around four pillars. Pillar IV focuses on infrastructure and basic services, and is chaired by the Minister of Agriculture. Development partners, line ministries, and other government agencies report monthly on progress against the priority actions identified in the PRS. Rationale for Bank Engagement 21. The IDA Country Assistance Strategy (CAS) bointly prepared with International Finance Corporation (IFC) and AfDB] recognizes and responds to government s emphasis on infrastructure and sector management. This emergency operation will finance activities to rehabilitate infrastructure that was destroyed during the civil conflict. Rehabilitation of infrastructure - especially major urban and rural roads and bridges, as well as the new fuel unloading facility - is viewed as the necessary precursor for economic revival, delivery of basic services, and the resulting improvement in social conditions. 22. The government has provided a clear, strategic vision for the sector, and donors, under World Bank leadership, are addressing these in a systemic manner. Lessons from current projects have been taken on board, particularly regarding the creation of an implementation entity with a clear mandate and sectoral autonomy. In addition, packaging and contract arrangements in URIRP are aimed at furthering competition in road works. 23. The project is in line with the government s expressed request for Bank support and leadership in the emergency rehabilitation of critical transport infrastructure nodes. The Bank has comparative advantage in the sector, both in terms of its IDA hnding for investments and convener of other donor investments, and because of its technical expertise. 24. As current IDA funded infrastructure projects continue to address some of the immediate emergency activities, the proposed project is designed to move IDA 6

15 involvement in the sector towards a comprehensive sustainable program of systemic transport infrastructure investments and rebuilding institutional capacities. This program approach will continue in the upcoming series of infrastructure projects by IDA and LRTF, whose funding will be the predominant source of financing for the transport sector for the medium to long term. C. Bank Response and Strategy: The Project Brief description of Bank s strategy of emergency support 25. This proposed project should be viewed within the context of all donor support to the transport sector in Liberia. With the support of existing IDA funded transport activities, the LRTF, bilateral support to the sector, and more importantly government s growing funding to the sector, an increasingly comprehensive approach to the sector is manifesting itself. As the lead donor in the sector, the Bank will deepen and strengthen the approach. 26. While previous IDA funded projects have been addressing the worst emergencies demanding immediate attention, this operation is afforded the advantage of addressing specific urgent needs in a more cohesive manner. A case in point is the continuing interventions on the important Monrovia-Buchanan road corridor, where IDA funded Emergency Infrastructure Project (EIP) and Agriculture and Infrastructure Development Project (ADP) have financed rehabilitation contract for about 88 km, where URIRP will finance 15 km and upcoming LRTF funding which will be for Output-based Performance Road Contract (OPRC) on the remaining section of the corridor. Similarly, previous engagement of engineering battalions of the UNMIL peacekeepers is continued under this project, but now for the maintenance of the investment already made. An improvement of intersection between two bridges from city center to Bushrod Island complements an IDA funded ongoing demolition of old and construction of new Vai Town Bridge The project is ready for implementation. Procurement is already underway or completed for about 60 percent of the value of the project, with two major works starting by project effectiveness. Implementation capacity is being re-configured (see Section E) to better address the growing portfolio and with a clear plan for eventual integration of these capacities into future government systems. Project Development Objectives 28. The project supports government s goal of improving road access in Monrovia and targeted rural areas, as well as improving institutional structure for technical management of the road sector. 29. This objective lies at the heart of the Bank s assistance strategy for Liberia. The government has requested that IDA take the lead role in the transport sector and intensely The current Vai Town Bridge collapsed in November

16 assist the country not only by providing much needed investments and acting as a catalyst for attracting other donor funding into the sector, but also by helping to establish professional sector management in its broadest sense. Under current projects, IDA is supporting the government in comprehensively reforming its port sector. Under this operation, the implementation arrangements agreed with the government, are a part and parcel of the evolving road management responsibilities, as a proxy of road authority. This operation will also further the discussions already started on sustainable financing for road maintenance, including the possible establishment of a road maintenance fund. The operation will also support and coordinate the reform of the MPW, in light of the evolution of road sector management to a specialized authority. Summary of Project Components 30. The URIRP has two components. Infrastructure Investment and Program Management and Institutional Support. 31. Component I - Infrastructure Investments - US$49.65 million (IDA US$40.45 million; LRTF US$9.20 million): This component will fund design, rehabilitation and supervision activities of infrastructure assets. Included in these activities are: (i) resurfacing and rehabilitation of city streets in Monrovia and traffic solution for one major congested city interchange (at convergence of new Vai Town Bridge funded under ADP and existing Tucker Bridge); (ii) rehabilitation of primary road sections in rural area (Cotton Tree-Bokay Town, and Pleebo-Barclayville); (iii) maintenance of primary and secondary roads through collaboration with UNDP and UNMIL peacekeepers, and; (iv) construction of a major bridge and a new fuel unloading facility. 32. The investments in the proposed project are selected to not only address a cadre of long-identified priorities, but to complement existing World Bank and other donor investments. The investments are geared to scale-up IDA funded intervention on the important Monrovia-Buchanan road corridor and are a strategic step that will be complemented by LRTF financing for the remainder of the corridor later this year, to preserve the maintenance investments already made on primary laterite roads in order to open up access to isolated population in the south-west (thus complementing AfDB work), as well as to address impending collapses of a bridge and a jetty. 33. Procurement for the rehabilitation of the sole fuel unloading facility in Liberia under current IDA funded projects did not prompt interest from the few specialized international firms that do this type of work5. However, the existing, severely dilapidated jetty structure, which is the only fuel unloading facility in Liberia, is at risk of collapse. Therefore, as it is critical to the government to secure continued uninterrupted provision of fuel to the country, URIRP will fund construction of a new facility. Because of the technology involved, a new construction is likely to be of greater interest to a much larger number of construction firms. Funds for the rehabilitation of the fuel unloading facility were initially allocated in the US$8.5 million Liberia Infrastructure Rehabilitation Project (LIRP), but cost escalation of dredging of the port channel depleted IRP funds; funds were allocated in the AIDP, but again cost escalations crowded out that funding. 8

17 34. The current ADP project is financing two consulting services which resulting civil works will be funded under URIRP. The consulting services are: (i) the design and supervision consultancy for the Pleebo-Barclayville road; and (ii) the feasibility and supervision of the new fuel unloading facility. 35. Component II - Program Management and Institutional Support - US$3.55 million (IDA): Project implementation will be by the IIU, which for the short and medium term is intended to substantially improve government s technical and analytical capacity and contract management. For the long term, it is envisioned that the IIU be converted to a road authority. The IIU will have internationally recruited management and be established on the basis of current special implementation arrangements. 36. The transition from the current SIU to IIU is already under way. The government advertised internationally for program management team and is interviewing the shortlisted candidates for a Program Director, Assistant Program Director and Legal Counsel. When selected, the program management will be engaged by mid-2009, the designation of SIU will change to IIU. However, the transition will continue for about six months as the new management installs new procedures, processes, reskills staff capacities, as well as present technical assistance arrangements - all within organizational structure that imparts future road management orientation. The IIU will benefit from intensive training. 37. This component supports project implementation, support to reform of MPW and to the Environmental Protection Agency (EPA). This operation will also provide technical assistance to the GOL as it develops a framework for the establishment of a road authority. Current projects under implementation will continue to contribute to implementation arrangements and sector reforms. 38. The government s reform of MPW will need to be undertaken gradually. The ministry executes contracts directly with its own work force and scaling that approach down will need to happen in parallel with building MPW s capacity to manage contracts with private contractors. Also, the hture role of the MPW as a policy maker giving strategic direction to the sector, will need new skills, which the ministry currently does not have. 39. Capacity at local level is limited and Liberia does not have much of a history of delegation of public sector responsibilities to the counties. Therefore, it is foreseen that the MPW will have to retain certain roles, such as management and maintenance of the feeder road network for some years as preparation for gradual decentralization of responsibility takes place. Eligibility for Processing under OP/BP Since 2006, all projects in the Liberia portfolio have been prepared under emergency procedures, first OPBP 8.50 and subsequently the new OP/BP 8.00 Rapid Response to Crises and Emergencies. 9

18 41. OPBP 8.00 recognizes as one of its principles the continued focus of the Bank s direct assistance on its core development and economic competencies in line with its mandate, including in situations where the Bank supports peace-building objectives and relief to recovery transition. The Bank s policy also was designed for application of rapid response to address major adverse economic and/or social impacts resulting from actual or imminent natural or man-made crisis or disaster. It is specifically on the basis of these principles that the URIRP is prepared. 42. The URIRP, with its response to the PRS priority of road sector and engagement of UN peace-keepers is contributing to the peace-building in Liberia as well as supporting the transition from emergency. Some of the project activities, especially those addressing the possible collapse of a bridge in Caldwell in Monrovia and of a dilapidated fuel unloading facility in the port of Monrovia, pose respectively serious and real risk to break down of access in Monrovia and to continuation of fuel import with the resulting security implications. 43. The streamlined procedures allowed by the OPBP 8.00 permit project preparation that enable quick response to urgent needs on the ground in Liberia. Over time, it is expected that Liberia will transition into regular investment lending with less of a demand on intensive implementation support from the Bank. The focus in the CAS on building implementation capacity aims to fulfill this objective. Projects financed by the Liberia Multi-Donor Trust Fund will be prepared using the Bank s rapid response policies and procedures, since the use of these procedures form part of its governance arrangements agreed by all donors. 44. Under its agreement for debt relief, Liberia is at this moment not able to incur debt, so all donor assistance is currently in the form of grants. Consistency with Country Strategy 45. The proposed project, as well as future LRTF and other donor support to the transport sector, speaks to the core of the joint CAS prepared in conjunction with IDA, IFC, and AfDB. The CAS builds on three principles: (i) aligning with the government s PRS, developed in 2008; (ii) focusing on selectivity and achieving results, and; (iii) making choices that are consistent with regional integration perspectives. 46. The URIRP, with its focus on rehabilitating roads and bridges, addresses the overwhelming demand of the consultative PRS. As far as selectivity is concerned, during the CAS period of FY09-FY11, the US$138 million IDA envelope will provide US$96 million funding to the transport sector; the US$44 million URIRP is a first installment on that commitment. Within UFURP, steps are being taken to boost access and linkages to a main corridor from Monrovia to the Guinea border (Monrovia-Gbarnga-GantdGuinea border and towards the Cote d Ivoire border), which will be funded under the LRTF. The eventual functioning of the corridor as well as the Monrovia - Buchanan road corridor is expected to greatly facilitate increased economic activities. 10

19 47. Specifically, the CAS pursues three strategic themes to address some key constraints on growth, as well as enhance the policy and institutional framework to ensure that growth is increasingly pro-poor to: (i) rebuild core state functions and institutions; (ii) rehabilitate infrastructure to jump-start economic growth; and (iii) facilitate pro-poor growth. The CAS strategy also pursues the cross-cutting objective of capacity development, while HIV/AIDS, gender, and the environment are elements that are mainstreamed into the Bank s programs. 48. The proposed project addresses directly the first two strategic themes, while reestablishment of basic infrastructure is one prerequisite sine qua non without which propoor growth would have difficulty taking place. Expected Outcomes 49. The project will support the government s efforts to re-establish basic transport infrastructure and improve the management of the transport sector. This will contribute to increased access to social services and commercial opportunities for the citizenry and consequently contribute to poverty alleviation in Liberia. 50. The expected outcomes of the project are functioning service provision on the targeted infrastructure providing all season access to the beneficiary population and commerce, as well as IIU as a proxy of a functional and professional road authority, responsible for management, development and maintenance of the road network. This is fully in alignment with the expected outcomes of the joint Country Assistance Strategy. 5 1, The infrastructure investments the project will fund are all high priority and are an important part of rebuilding the basic infrastructure of the country. Repairs to roads and bridge construction will allow all-season access to services and opportunities and in some cases regain access that had been lost. The maintenance of 641 km of roads that were repaired through IDA funding under existing projects will preserve current investments, as well as ensure continued access by a large part of the population (these roads are the backbone of important inter-county corridors). Finally, construction of a new fuel unloading facility in the port of Monrovia will secure the import of fuel, the absence of which could contribute to a risk of renewed insecurity and social upheaval. 52. The successful completion of civil works will advise on whether physical results will be achieved, while development of legal and administrative framework for establishment of road authority during the project life will indicate if institutional objectives have been obtained. D. Appraisal of Project Activities 53. The government s capacity to implement donor funded investment projects is severely constrained even when compared to other post-conflict and fragile countries. Institutions, systems, procedures, and processes collapsed or were distorted and are only now, being restored and/or improved at the most marginal levels. Most professionals left the country, and those that remained lost a two-decade opportunity for education and 11

20 experience. At the same time, there is very urgent need - and country and Bank demand - to immediately address the crumpling infrastructure of the country. 54. Current IDA-funded emergency infrastructure projects recognized this reality and put in place exceptional measures to increase likelihood of proper implementation. An SIU was established in the MPW to concentrate and build on the very weak existing capacities. Wide-spread and systemic corruption in Liberia resulted in the Ministry of Finance (MOF) setting up a separate Project Financial Management Unit (PFMU) to ring-fence financial aspects and to provide checks and balances on investment execution by MPW. lmplementation has been - with robust and intense Bank support - surprisingly successful. 55. In the implementation of current projects, a strategy has been formulated to build on the current extraordinary implementation arrangements with the aim to gradually (within IDA projects) build the appropriate institutions and capacities such that in the medium term IDA and other hnding in infrastructure - and transport especially - can become an integral part of government's institutions. For instance, with Bank support the government is well advanced in comprehensively reforming the port sector, and this project would support implementation of institutional mechanisms for management of the road sector. The strategic context in which the investments were selected is shown in Table 3. Table 3: Strategic Context Component I:Infiastructure Investment Rehabilitation of Monrovia Streets. Improvement in interchange of Vai Town and Tucker Bridges. Construct new Caldwell Bridge Rehabilitate Cotton Tree - Bokay Town (CT-BT) road Rehabilitate Pleebo- Barclayville (P-B) road Road maintenance Cost and Planned Results US$49.65 million 24 km, February 1, 2011, New intersection New structure by December 3 1, km, by June 30, km, by June 30, km for 2 years Strategic Significance Component design is for investment in important physical assets at risk of collapse and preservation of assets - with strategic link to investmentfiamework of the government and activities already under execution and planned. URBAN: Monrovia has about a third of Liberia's population City streets are near collapse; traffic jams caused by road conditions are a constant, streets flood and are impassable after rains, and safety is compromised. A collapse of an important bridge would cut-off large part of the city.... " RURAL: CT-BT is a section of the Monrovia - Buchanan corridor, which is evolving as an important economic corridor; P-B road is in the southwest and the population in the catchment area is by and large cut from Harper during rain season. Maintenance is for preservation of road assets already invested in. 12

21 ... Component Cost and Planned Results Strategic Significance New fuel unloading facility in the Port of Monrovia...+ New structure Collapse of existing jetty risks increasing December 3 1,201 1 cost of food, social upheaval and security. II: Project Management and Institutional Support US$3.55 million In addition to ensuring proper implementation of the project, this and other IDA transport operations are laying the foundation for technical and professional excellence in management of the sector Improved road sector management... ". Implementation of policy of sustainable fimding for road maintenance IIU has organization structure and mandate as per agreed framework... ~ Action plan agreed, approved and implemented for sustainable financing of road sector Substantially improving implementation arrangements, while molding those and building capacity to eventually convert to professional authority for road network management. "... Commence thinking on financing for road maintenance and the resulting institutional consequences. 56. An appraisal of the project was undertaken in October As at the end of the appraisal mission there were still outstanding issues that needed to be addressed, notably inclusion or otherwise of selected project activities. The mission was upgraded to full appraisal in January 2009, following a desk review of final list of agreed project activities. The project does not involve any exceptions to Bank policies. Technical 57. The project total cost, net of taxes, is US$53.2 million. The URIRP includes several project activities related to rural and urban transport, port improvement and institutional and capacity building with intensive on-the-job and overseas training in basic and advanced management and engineering skills. As only one in the series of projects leading to the urgently required revitalization of the country's transport sector, it is aimed at enhancing the efficiency of the transport system and competitiveness of transport services, through building modem business capacity in the public administration, improving critical transport infrastructure and empowering private sector participation. It also paves a way for introduction in future operations of modem methods of management through optimized use of resources, by preparing the basis for long term (7-10 years long) OPRC. 58. The investment part of the proposed operation will finance several critical transport infrastructure emergencies and urgent interventions around the country, 13

22 including: (i) resurfacing and rehabilitation of about 24 km of city streets in Monrovia6 and addressing through improvement of infrastructure a traffic solution for one major congested city intersection (Vai TowdTucker bridges); (ii) rehabilitation of primary road sections in rural area (Cotton Tree-Bokay Town and Pleebo-Barclayville); (iii) maintenance of primary and secondary roads through collaboration with UNDP, and UNMIL peacekeepers (Foya-Voinjama-Zorzor-Gbarnga and Ganta-Tapita-Zwedru- Fishtown for a total of 641 km) and; (iv) construction of a major bridge (in Caldwell at Stockton Creek) and a new fuel unloading facility (in the port of Monrovia). 59. Importantly, the proposed operation supports the gradual rebuilding of institutions and human capacities to professionally manage the road sector. 60. Two contracts, the Cotton Tree - Bokay Town road works, as well as paving of Monrovia Streets apply a DB approach but with output based performance payments. In other words, the tender documents provide conceptual design, technical, environmental and social specifications for defined roads and will provide a payment model. This contracting arrangement was selected for several reasons: the speed of engagement of a contractor and commencement of works; financial and technical risk transfers to private contractors (as compared to traditional input based contracting under FDIC rules); introduction and testing of industry s response to output-based methodology in anticipation of the introduction of full scale OPRC contracts that will be tendered under future projects. Both contracts have already been competitively awarded. 61. Once applied fully (starting with the pending introduction of OPRC through the LRTF-financed road corridors), an eventual road authority will be reduced to an optimal size, and will be better remunerated. No longer tied up with day-to-day operations, the staff will have the capacity to learn about and implement more innovative road network management techniques. Traditionally, for roads in particular, over their lifecycles there is a need for repeated contracts related to detailed designs, construction, supervision management, overlays, maintenance, etc. until facilities are handed over back to the government. With the OPRC, only two operations are required for the entire lifecycle; one for desigdconstructiodrnanagement - by a contractor - and the other for contract monitoring by a consultant, thus dramatically reducing the number of transactions necessary, and allowing for more efficient - and better - governance. OPRC reduces the contracting risks otherwise handled by the government, proportioning it to the party best fit to handle it, and provides real value for money to the government and takes care of the road assets and associated management. In addition, its design (OPRC type of contracts) attracts large contractors who, in order to optimize their works, delegate/subcontract large parts of the operation to local contractors, thus developing the extremely weak local contracting and consulting industry. OPRC also encourages PPP since it calls for private financing until the works are done and only allows contractors to be paid upon meeting the designed criteria and conditions. A Project Preparation Advance of US$3.5 million was provided to find the advance payment required by this contract. 14

23 Institutional 62. The institutional aspects as it relates to the proposed project, takes into account the comprehensive road sector reform already agreed on. The current responsibility for road sector management rests largely with MPW, which before the war was a ministry largely relying on force account for road works execution. 63. The project will directly support the establishment and evolution of IIU as a proxy for a road authority that will be responsible for sector management. This will be done through the formulation and organization of IIU to take on characteristics of a road authority while simultaneously implementing the current IDA funded projects, including URIRP and most LRTF financed operations. As part of that process, the project will support drafting of legal instruments for establishment of a road authority on the basis of TTT T 64. The transition from the current SIU to IIU is, as explained in Section Cy already underway. The mandate of the IIU is agreed on as is the organizational structure. New management will be charged with ensuring amended procedures and processes as well as select new and additional staff into the organization. ' 65. Just as the public sector institutions collapsed because of the war, the private sector suffered substantially. Today, local contracting and consulting capacity is very limited. Lack of equipment, access to financing and to a lesser extent technical knowhow has resulted in an industry that can only take on small civil works. Just as the capacity of the public sector needs to be rebuilt, the capability of the local private contracting and consulting sector also needs to be re-established. A number of donors have provided or plan to provide support in this regard. IDA strategy intends to bring about project activities which the local private sector can participate, and through the experience and profits generated, contribute to healthier, small and medium-scale enterprises contracting and consulting business in Liberia. Fiduciary 66. Procurement and FM assessments were done on the basis of existing implementation arrangements, i.e. SIU and PFMU. The Framework document for the new IIU was reviewed and inputs provided by the Bank's Procurement and FM Specialists. Upon establishment of the IIU by mid-year 2009, and simultaneous abolition of the SJU, the Bank will evaluate if new procurement and FM assessments will be needed. 67. The overall fiduciary environment in Liberia is very weak and this presents an inherent risk for the success of every project in the country. Successful implementation of this project will require ownership and active support from governmental authorities, better focused policy and strategic direction, and only structured intervention in the dayto-day implementation. 15

24 68. Procurement. The assessment reviewed, to some extent, the organizational structure for implementing projects and the interaction between the projects staff responsible for procurement and the PFMU. The risks identified were: (i) the uncertain environment in Liberia typical of post-conflict countries with weak institutional capacities coupled with difficult governance issues; (ii) the still limited familiarity of the SIU with Bank procurement policies and procedures; and (iii) inadequate procurement planning and monitoring. 69. The SIU, until the establishment of IIU, is being relied on to manage URIRP. Their responsibilities include but are not limited to project management, procurement, and FM. The procurement responsibilities of the SIU include: (i) assuring steady progress of procurement in accordance with an implementation schedule reviewed and approved by the World Bank; and (ii) ensuring satisfactory implementation of activities included in all contracts. 70. The SIU, with limited procurement experience is now being strengthened with the planned TA to improve procurement management, to: (i) plan and process all procurement; (ii) monitor the implementation of the procurement plans; and (iii) train staff of the implementing agencies in the use of procurement procedures agreed under the project, including compliance with World Bank Procurement and Consultant Guidelines ((both issued in May 2004 and revised October 2006). There is need for the SIU to complete the Project Operational Manual (POM), which, among others, would include sections on (i) the organizational structure for implementing the project; (ii) procurement planning, management, and monitoring; (iii) the functional relationships and interaction between the project staff responsible for procurement, and the relevant units for administration and finance; and (iv) providing clear instructions and guidance for the management of procurement records. 71. Financial Management (FM). While the project will be implemented by the existing SIU and later by the IIU headed by a Program Director, the FM functions and responsibilities will continue to be handled by the PFMU in the MOF. The working relationship and the respective responsibilities between the PFMU and the SIU/IIU will be outlined in an updated Memorandum of Understanding (MOU) to be signed between the parties. 72. The project FM is strengthened primarily by the involvement of the PFMU which has satisfactorily supported the financial implementation arrangements of current projects in the Liberia portfolio. The PFMU has been a centralized accounting unit which handles all FM for most of the IDA and other donor-funded projects in Liberia. The unit is very familiar with the key requirements for implementing IDA projects and has instituted polices and programs which are acceptable to the IDA as documented in the Financial Procedures Manual (FPM). 73. The PFMU is already adequately staffed with personnel that have the requisite qualification and experiences needed for project implementation. It has a Unit Manager who is responsible for ensuring the overall direction of work at the unit. Under his direction and supervision, the entire PFMU accounting team led by the Project 16

25 Accountant, is responsible for the daily FM functions at the unit, including budgeting, keeping adequate books and records, recording transactions correctly, and ensuring that periodic management reports are produced to facilitate management decisions. 74. The SIU/IIU is responsible for preparing annual budgets and work plans based on agreed programs and components as outlined in this paper. On an annual basis the budget and work plans will be reviewed jointly by the SIU/IIU and the PFMU and copied to IDA for approval. 75. The project will use transaction based disbursement - statement of expenses (SOEs) reports - for reporting on the uses of project funds and also for requesting for subsequent funds. Supporting documentation will be retained by the implementing agencies for review by IDA missions and external auditors. The initial disbursement will be based on the aggregate expenditure forecast for the first six months. Subsequent withdrawals will be made on submission of satisfactory SOE reports. Another acceptable method of withdrawing funds from the grant is through direct payment method, involving payments from the grant to third parties for works, goods, and services upon the Borrower s request. 76. The auditors for the current group of IDA funded infrastructure projects will also be the auditors for the URIRP, thus complying with audit covenants and ensuring timely audit of project expenditure. 77. The overall project fiduciary risk is substantial. Environmental and Social 78. This project has been rated Category B. All of the proposed investments in infrastructure have potentially adverse environmental and social impacts, but none are likely to be other than local in geographic extent, or significant in terms of complexity, precedent, duration or risk to sensitive natural or socio-cultural features. OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement are the safeguard policies triggered for this project. The level of environmental and social impact mitigation needed for each sub-project will depend on site conditions and be proportional to the degree of risk. An Environmental Mitigation Plan (EMP) that was prepared and disclosed under the EIP covers resurfacing of city streets and also addresses the specific road segments scheduled for rehabilitation outside Monrovia. It is being redisclosed for this project. An addendum is being prepared to make this EMP applicable to repair and rehabilitation of urban and rural roads regardless of location. Other project activities - e.g., construction of the new fuel unloading facility and the new Caldwell Bridge - will need site-specific EMPs. However, a preliminary Environmental and Social Impact Assessment (ESIA) prepared and disclosed for the Port under LIRP covered rehabilitation of the existing fuel unloading facility and will need only a modest amount of updating when the design alternative for the new unloading facility is selected. The ESIA prepared for Vai Town Bridge will serve as a model for Caldwell Bridge. The Resettlement Action Plans (RAPS) are unlikely to be required for the city street repairs but will certainly be needed for the Caldwell Bridge. The Vai Town Bridge RAP will 17

26 serve as a model. The Environmental and Social Screening and Assessment Framework in Annex 8 explains the procedure to ensure environmental and social due diligence during implementation. Economic 79. While the project activities are based on the PRS and government priorities thereof, selection of project activities also took into consideration the political and security implication, the economic and social benefits that the component is expected to generate, and the urgency status of the infrastructure concerned. Traditional economic approach of screening the projects and subjecting them to detailed cost-benefit analysis is largely not deemed viable in the case of URIRP. Even when safety and security are the reigning considerations, a multi-criteria-analysis would be applied, which leads to decisions based on the added value of a certain measure to safety and efficiency of transport operations based on a variety of criteria and weighing factors. 80. Yet, the extreme Liberia situation where infrastructure is virtually collapsing, necessitates a different approach to prioritization. The risk of not implementing a particular measure to transport services, access, operations, security and more broadly the supply line/economic life line of Liberia is primarily used as guideline for prioritizing the emergency works. 81. That said, economic analysis will be applied for the purpose of selection of investment options among technical solutions for building road interchange at convergence of new Vai Town Bridge and Tucker Bridge, for a new bridge in Caldwell at Stockton Creek, and for technical solution for a new fuel unloading facility. As part of the preparation for these activities, necessary data collection and analysis will be undertaken. E. Implementation Arrangements and Financing Plan 82. The capacity of the government to implement donor funded projects is very weak. Years of war not only destroy physical infrastructure, but also institutional and human capacity as well. Extraordinary arrangements are therefore needed to ensure speedy and successful implementation of IDA funded infrastructure projects. 83. The existing IDA funded infrastructure projects in Liberia are implemented through a SIU in the MPW, and a PFMU in the MOF. The SIU has basic technical and procurement responsibility, while the PFMU is responsible for FM of the projects. The SIU is managed by national consultants and civil servants with support of international TA. The PFMU, on the other hand, is managed by expatriate consultants with support of staff of the MOF. 84. It has been clear for some time that a rethinking of the implementation arrangements of IDA infrastructure projects was needed, as well as those that will in the future be financed by the LRTF. 18

27 85. Following extensive discussions with the government, an agreement was reached on a Framework Document for a new implementation arrangement. One of the major differences from the traditional Project Implementation Unit approach such as SIU, is that IIU will have defined responsibilities for planning and developing the roads sector at large with significant autonomy and well defined oversight mechanisms. Importantly, the Framework plans for the current extraordinary arrangements to eventually be incorporated into the government s long term structure - a future road authority. For the short to medium term, the principal goal of this change is to raise substantially government s implementation capacity of IDA and other donor funded transport and infrastructure projects in general. 86. The transition from the SIU to IIU is intended to be seamless. An international program management team is being selected and will be engaged by mid Current project coordinator has agreed to assist and support the transition for a period of two to three months. The new IlU management will initially rely on already established procedures and processes, as well as the current staff of SlU. However, it is expected that during a six-month period, new administrative processes will be established and current staff be reassigned if needed (their contracts have specific clause in this regard). The new management will evaluate in the initial two months if there is a need to reconstitute the type o f TA now provided to SIU. Creation of Infrastructure Implementation Unit 87. The IIU will be a self-supported unit within the MPW. As a self-supported unit, it will be entrusted with the planning, scheduling, design, monitoring, supervision and initiation of various infrastructure projects in general and surface transport, water, energy and agriculture projects, in particular. Financial management has been entrusted to PFMU, housed in MOF. IIU will be responsible for approval and certification of all invoices/ accounts/payments to all outsourced activities of the Unit (contractors, consultants, and service/materials/goods providers). 88. The MPW is responsible for the strategic planning, scheduling, development, management, and maintenance of the road networks in Liberia. IIU will, in support of those responsibilities, partly carry out the executive functions on behalf of the Ministry, with regard to road development, scheduling, management, and maintenance leading to the full divestiture o f road project execution mechanisms and the creation of a sustainable road authority. 89. The Ministers of Public Works and Finance will delegate their authority to incur the procurement and the expenditure for the indicated sub-sectors to the Program Director of IlU and Unit Manager of PFMU 90. The IKJ, headed by an internationally recruited Program Director will be responsible for its day-to-day management and for the overall implementation of infrastructure projects designated to be implemented by the IN. The Program Director will report and be accountable to the Minister of Public Works, within the terms of this framework document. 19

28 Mandate of IIU 91. The mandate of IIU is to manage the implementation of infrastructure projects within the purview of the MPW while preparing for the establishment of an autonomous road authority. 92. The IN Management Committee (MC) (see paragraph 92), in consultation with Liberia s development partners, will continuously evaluate the IIU s performance and capacity to manage non-road infrastructure projects, and plans for the IIU will be adjusted accordingly. 93. In the meantime, IIU will move along a fast-track leading to the fill divestiture, by the MPW, of project execution mechanisms. In the transport sector, the IIU will promote PPP by introducing and managing Output and Performance Based Contracts7 or other appropriate contractual methods. Projects finded through the MPW budget will gradually transition to the IIU on a schedule to be determined. It will also promote other forms of PPP, including but not limited to tolls and modes of partial ownership and private ownership. IIU will also manage the presently operated International Federation of Consulting Engineers (FIDIC) based civil works contracts. The IIU will also promote PPP in other infrastructure sectors, namely other transport sub-sectors, water, urban, energy, and agriculture. IIU Management Committee (MC) 94. The MC will monitor and advise the IIU. The membership of the MC will comprise the Minister of Public Works as Chairman, the Deputy Minister of Technical Services, the Deputy Minister of Rural Development, the Assistant Minister of Planning and Programming at MPW; the Deputy Minister of Finance for Expenditure, the Program Director of IIU, and the Manager of the PFMU. The Head of the IIU Secretariat (see paragraph 93) will serve as an ex-officio Secretary to the MC. IIU Secretariat 95. An IIU Secretariat will be established within the MPW to coordinate correspondence and distribute information to and from the IIU. The Secretariat will act as a Secretariat of the M C and be responsible for facilitating the processes of expedited action as required and advise the M C accordingly. Financial Management and IIU/PFMU Structure 96. The government decided in 2006 to centralize the FM tasks associated with donor projects in the PFMU within the MOF. The IIU is being set up in such a way that the relevant FM responsibilities are established in the PFMU. However, it is expected that as the IN will increasingly take on a character of a road authority, the government and IDA Also known as Design-Build-Operate-Maintain-and-Transfer contracts. 20

29 will discuss the possibility of incorporating FM into the IIU structure. This will only take place after a thorough institutional assessment has been undertaken. 97. The IIU will have basic FM capacity to support the requirements of the PFMU that will be responsible for all financial management tasks. Coordination between the IIU and the PFMU will be based on the MOU that was signed between the MPW and the MOF, defining the responsibilities of and levels of service required from both parties, as well as a detailed description of processes and procedures. The PFMU has a unit manager with international accounting qualifications acceptable to the Bank, project accountant and an internal auditor. 98. The IIU Program Director and his management team will be responsible for the day-to-day management of the project. In particular, the IIU is responsible for: (i) assuring steady progress of the procurement in accordance with annual work plans reviewed and approved by the World Bank; (ii) ensuring satisfactory implementation of activities included in all contracts including adherence to World Bank standards with regards to environmental and social issues; (iii) ensuring that a high ethical standard and transparency is maintained throughout the entire project implementation; (iv) preparing the quarterly IFR; and (v) monitoring and evaluating performance indicators and results. Monitoring and Evaluation Methodology and Arrangements 99. Each implementing agency will monitor progress against agreed performance monitoring indicators. The IIU will be responsible for ensuring that such reports are submitted in a timely manner and in accordance with the formats to be agreed. The IIU will review the reports and prepare a comprehensive report for the project. Technical audits may be undertaken to provide further quality assurance. Reporting 100. Full details of project, (including outcome and results indicator data, analysis and recommendations) will be reported in regular quarterly reports prepared, as well, as audit reports. (0 Quarterly progress reports (including financial and procurement status reports as well as assessing environmental and social management actions) will be established by the IIU and PFMU respectively on the basis of project implementation plan; (ii) On the basis of the quarterly reports, IIU will regularly compile and make available to the public annual reports for all its activities in a form and substance acceptable to the Bank. The annual reports shall use audited financial statements, if available at the time of publication. If not available, unaudited statements shall be used; however, when audited statements have been prepared, a local advertisement of their availability should be made; 21

30 (iii) Bank supervision missions will be conducted (jointly with other donors as needed), and will in the first year take place four times a year; and (iv) An Implementation Completion Report (ICR) will be prepared at the end of the Project and presented within six months of the closing date of the Grant (government s contribution to the ICR is required within five months of closing date of the Grant) The monitoring activities will verify if program and project objectives are being achieved, as well as FM and procurement aspects. Project Implementation period and Supervision The project will be implemented from April 22, 2009, or later date to June 30, 103. Of civil works, under URIRP financing the procurement for resurfacing of Monrovia streets and rehabilitation of Cotton Tree - Bokay Town is completed. These works and associated monitoringlsupervision consultancies account for more than 50 percent of the value of URIRP. Additionally, design and preparation of tender documents for Pleebo -Barclayville road and for a new fuel unloading facility is already underway, as engagement for maintenance To ensure fast pace of implementation, an experienced Bank team of specialists will undertake frequent supervision and implementation support missions for the URIRP and other infrastructure projects in Liberia. During the first 18 months of implementation, it is expected that three in-depth and three partiavquick supervision missions will be undertaken. Technical specialists in addition to Bank staff will be brought in for specific areas of expertise, where the Bank may not have the needed capacity. It is expected that following the initial 18 months, the IIU should be sufficiently capacitated and that supervision and implementation support can be reduced This intense supervision and implementation support requires Bank management to ensure sufficient fbnding for supervision of this and other infrastructure projects in Liberia. F. Project Risks and Mitigating Measures 106. Although Liberia has started on a path of transition from an emergency situation, the political, social, and security situation is still fragile. Governance and corruption continues to be a substantial risk, implementation capacity is weak and the current government has had difficulty, at times, in getting the necessary legislation passed to move forward on reforms. Sporadic but containable unrest occurs, but a larger scale recurrence of violence, while unlikely, cannot be ruled out. In that respect, the gradual draw-down of UN peacekeepers and police will increasingly test government s ability to maintain peace and security. 22

31 107. Financial management and procurement, which have been evaluated specifically, are rated as substantial risk. The mitigation of these risks is addressed in relevant annexes Overall, the inadequacy of internal controls in government systems, history of widespread corruption, and lack of experience among civil servants makes this a risky project. The agreed implementation arrangements i.e., the formulation of the IIU and continuance of PFMU in two separate ministries with clear delineation of responsibilities, addresses this risk to some degree. Additionally, this risk is further mitigated by the capacity-building support for these units, complemented by external TA and continued intense Bank supervision The Environmental Protection Agency (EPA) is keen on ensuring that civil works in the country address social and environmental issues in an appropriate manner and has in place procedures and processes. Sectoral capacities and processes are limited and need further support. The project aims at mitigating safeguard risks with its support to EPA and strengthening of capacities in the implementation arrangements Aside from a collapse of project implementation due to political changes or social upheaval, the risk of not achieving the core project development objectives is viewed as moderate. Project investment activities are numerous and while there is always a risk that some specific activities do not materialize, the project would still be able to contribute to the abatement of the emergency situation by addressing some of the deficiencies that exist in the basic transport infrastructure There is limited ability to address or mitigate the larger country specific risks in this operation. However, the delivery of project activities will provide tangible benefit to large part of the population, thus evidencing the benefit of maintaining peace. The undertaking of project activities will provide direct economic benefit to those engaged in the reestablishment of basic infrastructure which is a precondition for revitalizing economic activities The government is committed to the agreed targeted road sector reform and implementation of these through the URlRP. Election planned for end of 2010 has the potential of interfering with timing of road sector reform, but unless there are drastic and unexpected political changes it is expected that threat to reform is moderate Normal civil works risks apply to this project, whether to cost overruns, inability to attract competitive bids or technical challenges that may unravel. Because of the weak local contracting and consulting environment, international interest may be required for successfbl achievement of some of the smaller works. As there are now, because of IDA S effort, two large international road contractors in Liberia, the risk of nonachievement of the smaller works is viewed as limited Corruption Mitigation. Preventing and addressing corruption in this and other Bank transport operations follows a three pronged strategy. Partly, the process will benefit all donor involvement in the transport sector. 23

32 (i) IDA Scrutiny: More intense supervision and implementation support will be provided than is the norm in Bank operations, as has been the case so far in IDA infrastructure operations in the country. This translates into in-depth reviews by the Bank of procurement documents, sample and systemic review of actual proposals and bids received as result of procurement, close technical and financial monitoring during execution of activities and observing tell-tale signs of corrupt practices, whether by private firms, in the administration and management of contracts, or at politicavdecision making level. Technical audits will be conducted as needed. (ii) Transparency. On the premises that the more information there is in the public domain, the less likely it is that corruption occurs; the project will have ongoing disclosure of details and progress of implementation. In addition to the required local and international disclosure of EMPs, RAPS and other social and environment document, and procurement results (as per the Bank s procurement guidelines), the project will have ongoing disclosure of audited financial statements of the transport projects, and information on staffing and investment plans and strategies for the coming years. (iii) Reporting Mechanism. The project will provide support to the government in setting up a rudimentary complaint mechanism in consultation with practitioners and in agreement with the government. As the government systems addressing corruption appear weak, this mechanism may rely on third party execution. Involvement of civil society will also be explored in this regard. Specifics of the design of the mechanisms would include regular reporting to the public Further, typical risks to procurement seen in sectors with weak capacity include collusion, price-fixing, and fraud in qualifications and securities. With IIU, there will be the opportunity for establishing sound procedures and modem mechanisms to support an efficient business process. A database will be established in IlU for managing the primary information on procurement and implementation, e.g. (i) pre- and post-qualification information, e.g. legal registration, ownership, financial statements, and work history; (ii) solicitation and bidding results; and (iii) contract administration and monitoring information. In addition to expediting the procurement processing, such tools improve transparency because they allow ready validation Also, the GOL s envisioned medium and long term institutional arrangements of road authority, sustainable mechanism for financing maintenance of roads, and landlord port authority, can be expected to lead to significant improvement in governance of the transport sector. If well formulated, and within appropriate legislative framework drawing on international good practices, these institutional reforms should lead to a situation where formal procedures, processes, and well designed delineation between technical and political interests, will force discipline and transparency in decision making. 24

33 117. This as well as other IDA investment operations in Liberia will be subjected to intense implementation support. As the need arises, the project team will address specific additional risks as these may emerge. The project will be carried out in accordance with the provisions of the Bank s 2006 Anti-Corruption Guidelines. Risk factor I. Country Macroeconomic framework Country Ris Sector policies and institutions Description of risk I Sector-Level Risks The global economic crisis is expected + to impact Liberia s growth considerably in the short term, with estimates of 4.9% for 2009 (down from previous estimates of 14%). The large debt overhang poses challenges and increases the country s vulnerability to external shocks. External public debt stood at US$3.1 billion or more than 300% of the estimated GDP in External shocks particularly from lower remittance inflows and falling primary commodity prices including iron ore and rubber could pose significant challenges for Liberia going forward. + Poverty is pervasive in Liberia. From the recent (2007) survey, 64 percent of the population lives below the poverty line with most of the poor living in the rural areas. + The security situation in Liberia remains fragile because of the number of (mostly) unemployed ex-combatants who have yet to be reintegrated into society, the lack of strong domestic institutions which can mediate conflicts and enable them to be resolved without recourse to violence. The fragile political situation in Liberia s neighbors, C6te d Ivoire and Guinea augments this risk further. + Political risks loom large as the population looks for a substantial peace dividend. Failure to deliver jobs, social services and to tackle corruption could result in a lack of support for the Government s reform agenda. + The public service has a dearth of well qualified middle and senior level staff, largely because of very unattractive levels of remuneration. The lack of qualified staff is a major constraint to implementing reforms within key agencies such as the MOF. Rating Of rbk Mitigation measures + Liberia is transitioning from post-conflict to economic reconstruction and development. The Government has made progress in improving fiscal management with a fiscal surplus of 1.2 percent of GDP in 2008 The medium-term economic outlook is reasonably favorable, with growth rates expected to increase to around 9 percent, supported by the recovery in sectors that the government estimates will fuel growth, Le., agriculture, forestry, mining and service sectors. + The country benefits from debt relief under the HIPC initiative rescheduling of debt to Paris Club creditors and is nearing the conclusion of a debt buyback operation (at a deep discount) with commercial creditors. + The Government has prepared a Poverty Reduction strategy focused on rapid pro-poor growth. In addition the Government has prepared and is implementing a strategy to respond to the economic crisis. + UNMIL and its partners have supported the restructuring of the national police and army and the re-establishment of state authority throughout the country. In March 2008 UN forces began a drawdown of the military component of UNMIL, but initiated a moderate increase of police personnel. Presently there are 10,231 peacekeepers and 1,226 police personnel in Liberia, with another drawdown of 2,000 military personnel expected to begin in September In sum, UNMIL is expected to retain a substantial security presence over the medium term. + The activities being supported by the project to increase the population s access to markets and basic services will contribute directly to addressing some of the contributory factors to the country s social tension. + The program will aim to mitigate these risks through its reliance on existing capacity as well as a well-defined institution building component, namely the support of the transition to the professionally-managed Infrastructure Implementation Unit. Rating of residual risk 25

34 Risk factors Country ownership (incl. political aspects) Country1 sector governance + Description of risk The government does not have support of the majority in the country's legislature and this can hamper the ability to pursue institutional reforms. + For Liberia as a whole, risks of poor governance in implementation remain high and anti-corruption instruments are in their infancy + The legislative framework to allow for the effective policing of corruption is in need of updating. + The regime goveming the importation of rice is fairly heavily regulated thereby reducing competition in the market and increasing the risk and vulnerability to external shocks. Rating + Mitigation measures There is strong national ownership for the road reconstruction program, including among the constituents of the members of the legislature. Thus, although political opposition remains a substantial risk, popular support for this program makes it less likely that the legislature would be motivated to block it for purely political reasons. + The Corruption Commission has been established (though it needs strengthening) to prosecute cases of corruption. + The program itself contains welldefined targeted activities and will utilize implementation mechanisms that contain Financial Management and Procurement frameworks that have been tested and are under constant monitoring. Rating of residual risk S S Systemic corruption + In general, the inadequacy of internal controls in government systems, the history of widespread corruption during the interim government and lack of trained civil servants make project implementation in Liberia risky. H + The existing projects infrastructure projects, EIF' and ADP and they have performed well. In addition, the substantial institutional strengthening component helps professionalize project management and reduce corruption risk. S 11. Operation-specific Risks Governance and corruption Internal controls + This continues to be a substantial risk, implementation capacity is weak and the current government has had difficulty, at times, in getting the necessary legislation passed to move forward on reforms. + The inadequacy of internal controls in government systems, history of widespread corruption, and lack of experience among civil servants makes this a risky project. + IDA Scrutiny: Intense supervision and implementation support will be provided for infrastructure operations in the country. This translates into in-depth reviews by the Bank of procurement documents, sample and systemic review of actual proposals and bids received as result of procurement, close technical and financial monitoring during execution of activities and observing tell-tale signs of corrupt practices in the administration and management of contracts. + Transparency: Annual disclosure on details and progress of implementation in a form of IIU Annual Report will be made, including of financial statements. + Reporting Mechanism: A rudimentary complaint mechanism will be set up in consultation with practitioners and in agreement with the government. + The implementation arrangements i.e., the formulation of the IIU and continuance of PFMU in two separate ministries with clear delineation of responsibilities, addresses this risk to some degree. Additionally, this risk is further mitigated by the capacity-building support for these units, complemented by external TA and continued intense Bank supervision. 26

35 Risk factors Financial Description of risk + The downsizing of the SIU and the creation of the IIU if not well managed may lead to problems With coordination amongst the components and stakeholders + Weak fiduciary capacity at the MPW. Rating Of risk H Mitigation measures + The SIU has been involved in managing the infrastructure sector and any new unit may encounter challenges which can hamper the smooth implementation of the project. Thls is a managerial issue which must be effectively handled in order not to create discourse. + The weak fiduciary capacity at MPW is addressed by the involvement of the PFMU in financial management. Rating of residual risk S complement the IIU capacity Overall Risk Memo items: Rating of risks on a four-point scale - High, Substantial, Moderate, Low - according to the likelihood of occurrence and magnitude of potential adverse impact. H S 118. Overall, the URIRP project is rated as substantial risk operation. G. Terms and Conditions for Project Financing 119. The Project is an IDA grant and will finance 100 percent of project activities under Liberia s current Country Financing Parameters. There are no proj ect-specific conditions of effectiveness Although financing of taxes and duties is permitted under the financial parameters for Liberia, it is expected that the MOF will give exemption for these, as has been done for the current IDA infrastructure project. 27

36 Annex 1 : Detailed Description of Project Components Liberia: Urban and Rural Infrastructure Rehabilitation Project 1. The project total cost, net of taxes, is US$53.2 million with US$44 million being funded by IDA and US$9.2 million co-financing being funded from the Liberia Reconstruction and Development Trust Fund (LRTF). The project includes several project activities related to rural and urban transport, port improvement and institutional and capacity building with intensive on-the-job and overseas training in basic and advanced management and engineering skills. As only one in the series of projects leading to the urgently required revitalization of the country s transport sector, it is aimed at enhancing the efficiency of the transport system and competitiveness of transport services, through building modem business capacity in the public administration, improving critical transport infrastructure and encouraging private sector participation. It also paves a way for introduction of modern methods of management through optimized use of resources, by preparing for - but not executing - long term (10 years long) Output Based Performance Roads Contracts (OPRC). 2. With the introduction of OPRC, road administration will be reduced to an optimal size, and its staff will be better remunerated. No longer tied up with day-to-day operations, they will have the capacity to learn about and implement more innovative road network management techniques. Traditionally, for roads in particular, over their lifecycles there is a need for repeated contracts related to detailed designs, construction, supervision management, overlays, maintenance, etc. until facilities are handed over back to the government. With the OPRC, only two operations are required for the entire lifecycle; one for desigdconstructiordmanagement - by a contractor - and the other for contract monitoring by a consultant, thus dramatically reducing the number of transactions necessary, and allowing for more efficient - and better - governance. OPRC reduces the contracting risks otherwise handled by government, proportioning it to the party best fit to handle it, and provides real value for money to the govemment and takes care of the road assets. In addition, its design (OPRC type of contracts) attracts large contractors who, in order to optimize their works, delegatehub-contract large parts of the operation to local contractors, thus developing the extremely weak local contracting and consulting industry. OPRC also encourages private public partnership (PPP) since it calls for private financing until the works are done and only allows contractors to be paid upon meeting the designed criteria and conditions. 3. Two contracts, the Cotton Tree - Bokay Town road works, as well as paving of Monrovia Streets apply a Design-Build (DB) approach but with output based performance payments. In other words, the tender documents provide conceptual design, technical, environmental and social (qualitative and quantitative) specifications for defined roads and will provide a payment model. This contracting arrangement was selected for several reasons: the speed of engagement of a contractor and commencement of works; financial and technical risk transfers to private contractors (as compared to traditional input based contracting under FDIC rules); introduction and testing of industry s response to output-based methodology in anticipation of the introduction of a 28

37 full scale OPRC contracts that will be tendered under future projects. Both contracts are well advanced in procurement and have attracted competitive bids. 4. The investments in the proposed project are selected to not only address a cadre of long-identified priorities, but to complement existing World Bank and other donor investments. The investments are geared to scale-up intervention on the important Monrovia-Buchanan road corridor, and are a strategic step that will be complemented by Liberia Reconstruction Trust Fund (LRTF) financing for the remainder of the corridor later this year, to preserve the maintenance investments already made on primary laterite roads in order to open up access to isolated population in the south-west (thus complementing the African Development Bank (AfDB) work), as well as to address impending collapses of a bridge and a jetty. 5. The policies and strategies developed draw on good international practices and adapt these to the particulars of Liberia, such as the short season civil works can be executed because of the intense rains. The medium and long term goals pertinent to the road sector are: (9 Institutional formulation. The Ministry of Public Works (MPW) will move from the force account execution of the past to a policy and strategic oriented ministry; road sector management will be placed in the hands of an autonomous road authority with requisite capacities; sustainable mechanisms will be developed for financing road maintenance. (ii) Contracting Arrangements. Innovative use of contracting techniques and partnerships with the private sector to achieve government s objective of long term preservation of road assets, including design-build (DB), designbuild-operate-maintain, performance or outcome payments to contractor, possibly total-asset-management, build-operate-transfer, as well as the more traditional input type of contracts. (iii) Maintenance strategy. Large parts of the road network need to be rehabilitated to bring it to maintainable status. Once in maintainable condition, the government has a several pronged strategy: maintenance through the above referred contracting arrangements (primary and secondary roads mainly), one to two year road maintenance contracting arrangements with local contractors and maintenance with community participation (feeder roads). In the shorter term, engagement of the United Nations Mission in Liberia (UNMIL) engineering brigades for maintaining strategic roads is being pursued as well as use of force account units. 6. Costs of initial road contracts in post-war Liberia were a concern as limited interest and negative perception of the country led to few reputable bids and high premium demand. This concern is now more tempered, as Bank financed contracts have attracted two major contractors to the country and interest by others. Recent bids have resulted in costs dropping about 45 percent from initial road contracts. 29

38 7. The following components have been designed in the project which will take five years to complete: COMPONENT I: INFRASTRUCTURE INVESTMENT Rehabilitation of Monrovia City Streets, at total cost of US$16.00 million net of taxes, inclusive of 15 percent for price and physical contingencies 8. This sub-component supports works for rehabilitation of the major city streets, detailed below in Table 1. Total length of the streets is close to 24 km and includes the city center streets network, heavily damaged during the last 17 years of hiatus of maintenance in the country. The streets need basically an asphalt concrete (AC) overlay, about 60 mm thick, over improved base course, while in some places there will be a need to remove the present layer of AC, recycle it, repair the drainage and sewerage pipes, and overlay it again. The works will also include major items related to repair of sidewalks, specifically where there is major pedestrian movement. The work is expected to be done over two dry seasons and 12 months defect liability period. The work will commence this dry season and the contractor has already been awarded the contract for civil works. 9. The mode of contracting was carefully considered in order to correspond to the urgency of the works, an immediate ease of the tremendous suffering of the local population, and the need for improvement of the city transport facilities in order to boost the local trade and commerce. This mode of contract involves a conceptual design prepared by the government, which was tendered based on the simplified OPRC sample bidding documents available on the World Bank procurement website. The detailed designs will be prepared by the contractor. The contractor will be paid on the basis of his output and not as traditionally under International Federation of Consulting Engineers (FDIC) type of input contract, when the contractor reaches the prescribed level of service on a completely finished section of streets (each 500 meters). The level of service has been carefully designed to match Liberia s conditions in general and Monrovia City in particular as well as the affordability of the country, taking into account the quality of implementation and materials to be used, duration of pavement design life, quality of pavement surface from user s point of view, and other elements securing the durability and a long life for the investment. 30

39 Table 1: List of Monrovia City Streets Stretch Involved 1 2 Center Street Low End-to-end 800 Carey Street Low End-to-end 1500 Lynch Street Low Intersection of UN Drive to intersection of Broad St. Buchanan Street Medium End-to-end 300 Consulting Services for Supervision on Construction of Monrovia City Streets, at total cost of US$1.60 million net of taxes, inclusive of 15 percent contingency 10. This sub-component complements the construction phase. A consultant, who will be competitively selected, will approve the construction drawings, prepared by the contractor under the terms of the DB civil works contracts, and then approve them for construction, which will then be implemented by the contractor. The consultant will supervise the implementation; make sure that the works are up to the quality and quantity prescribed in works specifications. When the contractor is ready for payment, upon completion of a full section of 500 meters, the contractor will provide a report in this respect and submit to the supervisiodmonitoring consultant. The consultant will then approve it for payment. Only then will the contractor be paid for the finished section. At the end of the project, the consultant will also periodically review the completed project 31

40 which will be under a Defect Liability Period of additional 12 months. The consultant will also prepare monthly supervision reports as well as a final supervision report at the end of the project implementation. Construction of Cotton Tree - Bokay Town Road section to be co-financed by LRTF, at total cost of US$9.80 million (IDA US$0.6 million; LRTF US$9.2 million) net of taxes, inclusive of 15 percent for price and physical contingencies 1 1. This sub-component is co-financed by the LRTF in the amount of US$9.2 million, while IDA will fund the remaining US$0.6 million cost. This component is urgently required in order to solve the problems in commuting between Monrovia and Buchanan which are the two major trade and commercial centers of the country. This road section is along the 87.0 km long Cotton Tree - Buchanan road link. The section is about 15 km long and ends at Bokay Town. 12. The road condition in general over the entire length is very poor and any attempt to patch the sections or repair certain portions of the road, may result in wasting resources and time. The temporary bridge at the end of this section is beyond repair and should be replaced by a permanent structure (of reinforced concrete). 13. Traffic along the road is light, with an average daily traffic of about 180 vehicles but this could be a result of the road s poor condition. In other words, currently traffic could be suppressed and avoiding this route because of the poor condition of the road, even in absence of an alternative route. Several options were considered given the urgency of the rehabilitation of this section. One of them identified various sections of the road link and described the needed interventions. While the proposed interventions might be adequate for the immediate future, with the expected growth in traffic volumes, as well as the expected increase of movement of heavy trucks, the road, if implemented as proposed, would very soon fall into the similar poor condition and the investment would be lost. Therefore, after in-depth consideration, the adopted intervention involves a full rehabilitation of the road. Two lanes travel way of 7.0 meters wide with 1.5 meters shoulders on both sides will be constructed. The road structure will be defined by forecast traffic and conditions of the base and sub grade layers, as defined by a required geotechnical survey. 14. The mode of contracting was carefully considered to correspond to the urgency of the works and the need to boost the local trade and commerce. This mode of contract involves a conceptual design prepared by the government, which will be tendered under a DB method, or called elsewhere turn key, based on the simplified OPRC sample bidding documents available in the Bank procurement source. The detailed designs based on detailed field geo-technical survey will be carried out and prepared by a contractor. The contractor will be paid on the basis of his output and not as traditionally under a FIDICtype of input contract, when he reaches the prescribed level of service on a completely finished section of streets (each 1.O km). The level of service has been carefully designed to match Liberia s conditions in general and national highways level in particular and the affordability of the country, taking into consideration the quality of implementation and materials to be used, duration of pavement design life, quality of pavement surface from 32

41 the user s point of view, and other elements securing the durability and a long life for the investment. 15. The duration of the civil works contract is expected to be at least two dry seasons and 12 months for defect liability period, which will include also the construction of a permanent type reinforced concrete bridge at Bokay Town, about 25 meters long on concrete abutments, for which a contractor will carry necessary geo-technical/materials investigations and prepare detailed construction drawings. 16. Eventual maintenance of this section will be included in a planned OPRC contract for the full length of Cotton Tree - Buchanan road. Consulting Services for Supervision on Construction of Cotton Tree- Bokay Town Road section, at total cost of US$l.OO million net of taxes, inclusive of 15 percent contingency 17. This sub-component complements the construction phase. A consultant, who will be competitively selected, will approve the construction drawings, to be prepared by the contractor under the terms of the DB civil works contracts, and then approve them for construction, which will be implemented by the contractor. The consultant will supervise the implementation, make sure that the works are up to the quality prescribed in works specifications, and when the contractor is ready for payment, and upon completion of a full section of 1.0 km, the consultant will approve it for payment. Only then will the contractor be paid for the finished section. At the end of the project, he will also periodically review the completed project which will be under a defect liability period of additional 12 months. The consultant will prepare monthly supervision reports as well as a final supervision report at the end of the project implementation. Construction of Caldwell Bridge and approaches, at total cost of US$6.00 million net of taxes, exclusive of price and physical contingencies 18. This bridge, about 120 meters long, is in a state of near collapse. The existing bridge has been closed by the government to heavy vehicles (trucks and heavy equipment) and only light vehicles, pedestrians, and bicycles are allowed to cross. The bridge connects two major sections of Monrovia City and its closure would represent a major disturbance to the trade and commerce in this area of the City. 19. The tentative identification of the bridge location has been already selected among several alternatives, and it will be close to the existing bridge. The new alignment will also require new alignments for the bridge approaches, each about meters long. 20. The type of the new construction will follow the Vai Town Bridge which is presently under contract, because of the possibility that the same contractor for Vai Town Bridge, if successful, would use the same equipment for the construction, which otherwise would not attract a new contractor for a relatively small contract. 33

42 21. The bridge will be designed and the bidding documents prepared by an internationally recruited consultant, who will also prepare bidding documents and supervise the construction. The type of contracting will be the input traditional, FDIC governed, given the nature and complexity of the project and the duration for implementation estimated to three dry seasons and 12 months for defect liability period. As explained earlier, the project includes also the construction of the two approaches, each about meters long. Consulting Services for Design and Supervision on Construction of Caldwell Bridge and approaches at total cost of US$l.OO million net of taxes, inclusive of 15 percent contingency 22. This sub-component complements the construction phase. An international consultant competitively will cany out this assignment in two phases. The first phase will include a review of the proposed solutions, and preparation of the detailed designs, and bidding documents for construction based on the FIDIC-type of contracting. The consultant will also support the employer in the selection of a contractor. During the second phase, the construction phase, the consultant will approve the construction drawings, which will then be implemented by the contractor. The consultant will supervise the implementation on a daily basis and make sure that the works are up to the quality prescribed in works specifications. At the end of the project, the consultant will also periodically review the completed project which will be under a defect liability period of additional 12 months (one rain and one dry season). The duration of the first phase is estimated to nine weeks and for the second phase three dry seasons, in addition to 12 months defect liability period. Construction of Pleebo - Barclayville Road at total cost of US$2.50 million, net of taxes, exclusive of physical and financial contingencies 23. This sub-component supports the emergency improvement of this road which is about 67 km long and is located in the southern part of the country. The road has been in a very poor condition, with huge potholes and without any drainage and maintenance for the last 15 years. The works include: clearing of Right of Way, bush clearing, leveling of formation course and re-graveling with basic improvement of drainage and broken reinforced culverts. The overall road width is six meters and shoulders on both sides are about meters wide. 24. The method of contracting will be input type of contract, FIDIC governed. The bidding documents for a National Competitive Bidding (NCB) will be prepared by a consultant who already was selected and has commenced with the design works. 25. Consultancy Services for Design and Supervision of Pleebo-Barclayville Road at total cost of US$O.OO million. The contract for the services was awarded under the Agriculture and Infrastructure Development Project (AIDP) and is ongoing. Plans for intervention on this priority road have existed for some time and in order to expedite preparations a consultant was engage. 34

43 Road Maintenance for Rural Roads, in total amount of US$3.00 million, net of taxes, inclusive of 15 percent for price and physical contingencies 26. This sub-component will support the maintenance efforts by the Government of Liberia (GOL), which will materialize in about two to three years. In that period, the GOL, having already developed its Transport Sector Policy and Strategy as related to maintenance, will further strengthen its implementation strategy and will gradually take over the implementation and financing aspects of the maintenance works. 27. The roads that will be included in this sub-component will include all roads presently and in the past already rehabilitated with the Bank andor other donor financing and which has no firm maintenance funding after completion of their defect liability periods. These roads are those implemented by UNMIL, United Nations High Commission for Refugees (UNHCR) and directly by GOL. The duration of the works financed by this sub-component is two calendar years starting from FY Because of the absence of systemic maintenance management capacities, including management of multitudes of contracts, and very weak contracting industry, the government intends to engage United Nations Development Program (UNDP) to manage the maintenance on the specified roads for at least one year period with the support of UNMIL Engineering brigades, subject to draw-down schedule of the peacekeepers. If the draw down prevents longer term engagement of UNMIL, maintenance will be done with local contractors. Road intersection at convergence of new Vai Town Bridge and Tucker Bridge, in total amount of US$1.50 million, net of taxes, exclusive of price and physical contingencies 29. The intersection in question is on Bushrod Island where traffic from two bridges linked to the city center merge. One of these bridges recently collapsed and is now being constructed under IDA funds in ADP. The interchange is a major traffic bottleneck and upgrading of this intersection is needed to ensure flow of traffic. A specific technical solution has not yet been identified. Consulting services for the road intersection at convergence of new Vai Town Bridge and Tucker Bridge, in total amount of US$0.20 million, net of taxes, inclusive of 15 percent contingency 30. A consultant will be engaged for examination of options, design and supervision. The consultant will also support the government in the selection of a contractor. New Fuel Unloading Facility in the Port of Monrovia, in total amount of US$5.00 million, net of taxes, exclusive of 15 percent for price and physical contingencies 31. Liberia s sole facility for import of fuel is in the port of Monrovia and consists of about 400 meter jetty and offloading facility. The jetty is in very poor state. Funding for rehabilitation of the jetty was provided in the Liberia Infrastructure Rehabilitation Project 35

44 (LIRP) and in AIDP, but procurement for the rehabilitation did not prompt interest from the few specialized international firms that do this type of work. However, as the existing, severely dilapidated jetty structure is at risk of collapse, it is critical to the government to secure continued uninterrupted provision of fuel to the country. Because of the technology involved, a new construction is likely to be of greater interest to a much larger number of construction firms. 32. Discussion with the National Ports Authority (NPA), the owner of the jetty, and Liberia Petroleum Refining Company (LPRC), the user, resulted in agreement to undertake feasibility study of options. Two principal conceptual alternatives have been identified but are still under evaluation. Works are likely to be tendered as Design-Build. 0 The construction of a new fuel unloading facility to replace the existing facility - either a full construction of a new jetty or partial jetty following an embankment into the sea from the shore to close to the unloading platform, The construction of a Conventional Buoy Mooring (CBM) system - again, possibly with an embankment into the sea from shore. 33. Consultancy Services for Design and Supervision of a new fuel unloading facility in the port of Monrovia at total cost of US$O.OO million. The contract for the services was awarded under AIDP and has commenced,, The feasibility study of options is expected to be available by mid-2009 while the tendering of the selected option would start by September Physical and Price Contingencies in above project activities amount to US$2.05 million 34. While the final cost tables are being prepared, actual bid prices for some of the major construction works are already known. As some of these are on the basis of output based payments, it significantly reduces the uncertainty of final prices, as only items identified as provisional amount have the potential of changing. The contingency calculation takes account of this. COMPONENT 11: P SUPPORT AGEMEN Program Management, Institutional Support, Capacity Building and Technical Assistance services at total cost of US$3.55 million 35. The infrastructure projects and programs of IDA, LRTF, and possibly other donors will be implemented by an IIU endowed with international and local staff and technical support. The IIU will during the project period increasingly take on characteristics of a road authority and the component will assist the government in preparation for the formal conversion to one. This project will contribute to the operating cost of IIU as well as to the Project Financial Management Unit (PFMU) at the Ministry of Finance (MOF). 36

45 36. This project will also contribute, along with other donors, to enhancing the capacity of the MPW in general. Currently, the Ministry retains the characteristics of the force account ministries of the past, and lacks the skills to tackle the future. The role of the MPW will largely evolve to one of developing and giving substance to government s infrastructure policies and strategies and will not only need reorganization and significant reduction in staffing, but more importantly, whole-sale re-skilling of its staffing to take on the challenges of the future. 37. The government s reform of MPW will need to be undertaken gradually. The ministry executes contracts directly with its own work force and scaling that approach down will need to happen in parallel with building MPW s capacity to manage contracts with private contractors. Also, the future role of the MPW as a policy maker, giving strategic direction to the sector, will need new skills, which the ministry currently does not have. 38. Following establishment of IIU and the recruitment of internationally selected management and staffing of most technical positions, training needs of IlU will be assessed and training plan agreed on. 39. Capacity at local level is limited and Liberia does not have much of a history of delegation of public sector responsibilities to the counties. Therefore, it is foreseen that the MPW will have to retain certain roles, such as management and maintenance of the feeder road network for some years as preparation for gradual decentralization of responsibility takes place. 40. Because of lack of administrative and technical capacity of the Counties, management of the feeder road network will need to reside for some years in the MPW while preparation for delegation to the Counties of there respective road networks is made. Therefore, IDA and other donors, notably United States Agency for International Development (USAID), European Commission (EC) and Swedish International Development Agency (SIDA) will support building the MPW s capacity to manage and rebuild the feeder road network. The proposed project will, under this component, contribute on a small scale through training, TA or provision of equipment. 41. In addition and because of the importance to transport infrastructure of well capacitated and client environmental management, the project will provide institutional support to the Liberian Environmental Protection Agency (EPA). The support will be limited in scope, with provision of TA and minor equipment. 42. In summary, Component I1 will provide support for the overall project coordination, evaluation, supervision, and implementation including, inter alia: (i) Provision of technical assistance, training and operating costs for the establishment of the IIU. (ii) Provision of training to MPW staff to enhance their administrative and technical capacities. 37

46 (iii) Financing of operating costs for the PFMU for the implementation of the project. (iv) Provision of technical assistance, training and equipment to MPW to enhance its capacity to manage the feeder road network. (v) Provision of technical assistance and training to MPW to develop a framework to enable a roads authority entity. (vi) Provision of technical 'assistance, training and goods to EPA for the strengthening of its administrative and technical capacities. (vii) Resettlement of affected persons in connection with the carrying out of Part C of the project. (viii) Carrying out environmental and social assessments in connection with the implementation of the Project. (ix) The carrying out of audits for the Project. (x) The implementation of a program to monitor and evaluate the carrying out of the Project. 38

47 Table 2: Project Activities and Cost Estimate (US$ million) Monrovia Streets - Works Monrovia Streets - Consulting Services Cotton-Tree-Bokey Town Rehabilitation - Works Cotton-Tree-Bokey Town Rehabilitation - Consulting Services Caldwell Bridge - Works Caldwell Bridge - Consulting Services Pleebo-Barclayville Road - Works Pleebo-Barclayville Road - Consulting Services Road Maintenance (rural) Vai TowdTucker Bridge Intersection Improvement - Works Vai TowdTucker Bridge Intersection Improvement - Consulting Services Fuel Unloading Facility in Monrovia Freeport - Works Fuel Unloading Facility in Monrovia Freeport - Consulting Services Physical and Price Contingencies Subtotal oo oo 1.oo SO COMPONENT I - PROGRAM MANAGEMEWT AND PWIITUnONAL ** Program Mgmt, Institutional Support, Capacity Building and TA Project Preparation Advance Reimbursement ESTIMATED COST OF URIRP - IDA Funded - LRTF Cofinancing * Cost is borne by existing IDA funded project - the Agriculture and Infrastructure Development Project (AIDP) ** Existing IDA funded infrastructure projects provide additional support 39

48 Annex 2: Results Framework and Monitoring Liberia: Urban and Rural Infrastructure Rehabilitation Project PDO Improved road access in Monrovia and targeted rural areas. Improved institutional structure for technical management of the road sector, Intermediate Results One per Component Component I Infrastructure Investment Construct and rehabilitate key roads in the city of Monrovia Construct and rehabilitate key rural roads Outcome Indicators Roads in good and fair conditions (km, %) - Monrovia Average travel time between Cotton Tree and Bokay Town (min) Average travel time between Pleebo and Barclayville (min) Legal and administrative framework for the establishment of road authority Results Indicators for Each Component Roads rehabilitated, non rural' (hs) - Monrovia: 24 km, February 1) 2011, Construction of new Caldwell bridge by Dec 3 1 ) Roads rehabilitated, rural (hs) - Cotton Tree - Bokay Town: 15 km, by June 30, Pleebo-Barclayville: 67 km, by June 30,20 11 Maintain 641 km of previously repaired rural roads Use of Outcome Information Restoration of critical infrastructure will indicate success in supporting GOL's top priority to reinstate assets destroyed during the war; ensure continued and reliable flow of goods to and in Liberia, and support safety and security in the country. Critical stepping-stone for further institutional development in transport sector Use of Results Monitoring Good progress or otherwise may indicate government procurement and contractual management performance that will be addressed if the need arises New fuel unloading fa the Port of Monrovia ility in Continued secure unloading of fuel with new structure by December ' Likely future Bank-wide indicator: Non-rural roads are roads fbnctionally classified in various countries as Trunk or Primary, Secondary or Link roads (or sometimes Tertiary roads). Typically, non-rural roads connect urban centers/towns/settlements of more than 5,000 inhabitants to each other or to higher classes of road, market towns and urban centers. 40

49 Component I1 Project Management and Institutional Support Improved road sector management Implementation of policy of sustainable funding for road maintenance IIU has organization structure and mandate as per agreed framework Action plan agreed, approved and implemented for sustainable financing of road sector Implementation of transport policies lead to effective management o f the road sector. 41

50 I I I I I I I U fi * 0 e, z d &. 0 Y w El L 0.I.I Y E Y v1 R 2 I h (El 3 B %I El E 2.. N Q) z H VI m 2 e VI m - VI m VI N 2 - VI m e - e 33 x 2 22 a P 2 t- W 3 t- u) - 2 t- W 3 L P 0- c '3 0 0 m 2 0, h I VI 0 m e VI N - b W - L e, 0 0 W z" z" 3 g 8 z OE M B 0 e, r 8 Y (P w E 3 P 0 Y d P *- e k - r 8 (P.Y P 3 P 0 B d 0) c) (P g E b c) E I -

51 Annex 3: Summary of Estimated Project Costs Liberia: Urban and Rural Infrastructure Rehabilitation Project US$ million Project Cost By Component Total IDA LRTF Component I - Infrastructure Investment Component I1 - Program Mgmt, Institutional Support Total Baseline Cost Physical and Price Contingencies PPA Reimbursement Total Proiect Costs Project Cost By Component : Total Local Foreign Component I - Infrastructure Investment ComDonent I1 - Promam Mmt. Institutional Sumort Total Baseline Cost Physical and Price Contingencies Proiect Preparation Advance Reimbursement

52 Annex 4: Financial Management and Disbursement Arrangements Liberia: Urban and Rural Infrastructure Rehabilitation Project Introduction 1. In accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on November 3, 2005, a financial management (FM) assessment was done to assesses the adequacy or otherwise of the financial management (FM) for Urban and Rural Infrastructure Rehabilitation Project (URIRP) to be implemented through a self-standing Infrastructure Implementation Unit (IIU) of the Ministry of Public Works (MPW). 2. Currently, a Special Implementation Unit (SIU) at the MPW is implementing IDA funded infrastructure projects and financial management assessment was done on basis of current capacities; but as reported elsewhere in this paper, the new IIU with enhanced capacity and role over that of SIU, is to be established by mid-year 2009 and the S lu will be abolished at that time. The Framework for the new IIU has been reviewed and inputs provided by financial management specialist (FMS). A new FM assessment will be undertaken upon the establishment of IIU, if deemed needed at that time. 3. Due to the lack of acceptable FM system that meets the Bank s minimum requirements at the MPW, the financial management of the project will be carried out through the Project Financial Management Unit (PFMU) at the Ministry of Finance (MOF). 4. The objective of the assessment was to determine whether: (i) the SIU/MPW and PFMU has adequate financial management arrangements to ensure project funds will be used for purposes intended in an efficient and economical way; (ii) the project s financial reports will be prepared in an accurate, reliable and timely manner; and (iii) there are procedures and processes to safeguard the assets of the project. Implementation Arrangements 5. Project implementation will benefit from arrangements established under the existing infrastructure projects, namely; Emergency Infrastructure Project (EIP), Emergency Infrastructure Project Supplemental Component (EIPSC), Liberia Infrastructure Rehabilitation Project (LIRP), and Agriculture and Infrastructure Development Project (ADP).,Oversight is provided by a project steering committee, chaired by the MPW and with membership including representatives from Infrastructure and Basic Services Pillars, Ministry of Transport (MOT), and MOF. 6. Project management will focus on ensuring the project s operational effectiveness, implementation, and compliance with Bank operational policies and guidelines. Project management will be handled initially by the SIU. The SIU is a temporary arrangement and the government has put forward a comprehensive framework 44

53 for implementation of donor funds in infrastructure which will lead to the creation of a self-standing IIU in the MPW and the eventual abolishment of SIU. 7. Financial management for the project will be handled by the PFMU in the MOF. The PFMU has since 2006 been providing FM services to the entire infrastructure projects in Liberia and other donor funded projects. The PFMU is staffed with a team of competent financial professionals with the required experience and qualifications acceptable to the Bank. The PFMU team will be responsible for the day to day management of project finances, in accordance with the project financial procedures manual already developed for the ongoing projects. The PFMU will also have responsibility for project financial reporting, using already agreed interim un-audited financial statements (IFR) formats in use for the other projects. 8. In general terms, during implementation the PFMU is tasked with the following responsibilities: 0 Operate an efficient FM system acceptable to the IDA, 0 Establish effective accounting and transaction processing procedures to support the payment of all eligible expenditure, 0 Provide internal audit services and periodically review the control environment to ensure that policies and procedures are being complied with, 0 Country Issues Prepare on a timely basis quarterly financial reports and any other financial reports as may be requested by the IDA and the MPW/IIU, 0 Lastly, in consultation with the MPW/IIU ensure that the financial statements of the project are audited and conform to the financial covenants as per the Grant Agreement. 9. The Bank has not yet carried out a Country Financial Accountability Assessment (CFAA) or an Economic Sector Work (ESW) in the area of FM for Liberia. It is therefore not possible to identify the overall country issues. A Public Expenditure Management and Financial Accountability Review (PEMFAR) has recently been completed, which includes an analysis of the country s Public Financial Management (PFM) strengths and weaknesses. Preliminary findings from the PEMFAR suggest that the government has made considerable progress on financial management since 2006, but several areas have been identified that need further strengthening, including the need to: (i) improve the budget classification system; (ii) increase the computerization of FM systems; (iii) improve accounting by moving towards an accrual and double entry system; and (iv) improve the quality of expenditure reporting. 10. However, some efforts have been taken by the government to improve FM, including a review of concessions, strengthening of tax and customs administration and improved functioning of the cash management committee. In order to restore basic FM and to address long-standing governance problems, the government embraced the 45

54 Governance and Economic Management Assistance Program (GEMAP) which involves robust international technical assistance to key ministries, the Central Bank and revenue generating agencies. 11. As part of efforts for strengthening the fiduciary aspects of governance, IDA supported the establishment of a centralized PFMU within the MOF in order to create a reservoir of skilled personnel that would offer satisfactory financial service for all projects. Project Risk Assessment and Mitigation 12. The table below shows the results of the risk assessment identified during the FM assessment which may hinder the achievement of project objectives, together with risk mitigating recommendations on how the URIRP Project Management team and the PFMU should address these risks. Type of Risk Inherent Risk Table 1: Risk Rating Summary Table Risk Risk Mitigating Conditions for Residual Rating Measuresiltemarks Negotiation or Risk Effectiveness Rating (YeslNo) Weaknesses in public financial management by state institutions due to lack of technical capacity. H There is a an inherent risk that government entities are too weak to fulfill their functions, implement project activities, and to comply with Bank s environmental, social and fiduciary safeguards. No S This risk is being mitigated through engagement by the IDA and other donors aimed at strengthening the role of the public institutions in FM capacity building through ongoing reforms e.g. GEMAP Entity Level Weak fiduciary, monitoring and enforcement arrangements within the MPW for implementation. H The PFMU has been set up in the MOF and staffed with qualified personnel to provide financial management support for all projects. The proposed creation o f the IIU and Ministerial Committees of all stakeholders to provide technical and strategic oversight during implementation. No S It is ewected that under the IIU 46

55 Type of Risk MeasureslRernarks Negotiation or Effectiveness the project will have an institutional strengthening component aimed at addressing Project Level The downsizing of the SKJ and the creation of the IIU if not well managed may lead to problems with coordination amongst the components and stakeholders. H The SIU has been involved in managing the infrastructure sector and any new unit may encounter challenges which can hamper the smooth implementation of the project. This is a managerial issue which must be effectively handled in order not to create discourse. No Weak fiduciary capacity at the MPW. The weak fiduciary capacity at MPW is addressed by the involvement of the PFMU in Overall IR H Control Risk Budgeting Delays in preparing detailed budget estimates and annual work plans. The budget has to be prepared and owned by MPW/SIUlIIU. The PFMU tasked with FM responsibilities will assist the MPW in finalizing the budgets and work plans. In addition, budgets will be subjected to reviews and approval by the MPW, IIU, and the IDA. No Accounting Account staff at MPWISIU do not have much experience in Bank disbursement and procedures. The financial management responsibility will be done through the PFMU, which is adequately staffed and technically competent. No M Workload challenges within the PFMU. The unit intends to recruit an additional senior staff to help in the effective management of additional responsibilities. [nternal controls I [nternal Auditing Risk of non compliance with internal control xocedures. S The Financial Procedures Manual of the PFMU will provide guidelines on policies and procedures. No M 47

56 Type of Risk Risk Mitigating Measures/Remarks Risk of senior management at the MPW/IIU overriding laid down procedures. The PFMU has a qualified Internal Auditor who will oversee the control environment of the project. Funds Flow Possible delays in processing withdrawal applications leading to problems in honoring payments to third parties. M The effectiveness of the Internal Audit function at PFMU will be assessed regularly during smervision missions. This risk is minimized because the PFMU will be responsible for preparing and submitting withdrawal application and the Unit is familiar with Bank processes. No M Financial Reporting Quality and timeliness in submitting IFR and other reports. M The PFMU operates an efficient computerized system (Sun Accounts) capable of generating reliable reports in line with the formats acceptable to IDA. No M Auditing Delays in the submission of audit reports and the timeliness of management follow up on audit issues. To ensure timeliness of audit compliance, the engagement of an acceptable auditor will be done 6 months after effectiveness. No M Overall Risk Rating Supervision missions will follow up on compliance with audit recommendations. M H - High S - Substantial M - Modest L - Low Strengths and weaknesses of the Financial Management System Strengths: 13. The project FM is strengthened primarily by the involvement of the PFMU which has satisfactorily supported the financial implementation arrangements of current projects in the Liberia portfolio. The PFMU has been a centralized accounting unit which handles all FM for most of the IDA and other donor-funded projects in Liberia. The unit is very familiar with the key requirements for implementing IDA projects and has instituted polices and programs which are acceptable to the IDA as documented in the Financial Procedures Manual (FPM). 48

57 14. The oversight responsibility of the Internal Auditor of the PFMU will also help to strengthen fiduciary compliance, although the staffing capacity will have to be enhanced to ensure regular supervision. Currently transaction processing is based on the use of Sun Accounting System software which has been customized to suit the day-to-day transaction processing at the unit, and generate financial reports acceptable to the IDA. Weaknesses: 15. As in most post conflict countries, the overall fiduciary environment in Liberia is very weak and this posses an inherent risk for the success of every project in the country. In addition a major challenge will be in ensuring that the transitional arrangement from the SIU to the IIU are done with minimal disruption to ongoing projects and with full support of the staff of MPW/SIU who have had some experiences in managing IDA Projects. 16. Successful implementation of this project will require ownership and active support from governmental authorities, better focused policy and strategic direction, and less interference in day-to-day implementation. 17. Our assessment noted that the Project Accountant at the SIU has not been adequately trained in IDA disbursements processes. This lack of training can lead to delays, errors and instances of non compliance with eligibility criteria and other financial convents. Project Financial Management 18. The project will be implemented by the MPW, in the initial weeks through the existing SIU and later by the IIU headed by the Program Director. However, the FM functions and responsibilities will continue to be handled by the PFMU of the MOF. The working relationship and the respective responsibilities between the PFMU and the SIU/IIU will be outlined in an updated Memorandum of Understanding (MOU) to be signed between the parties. 19. The PFMU has a Unit Manager who is responsible for ensuring the overall direction of work at the unit. Under the direction and supervision of the Unit Manager, the entire PFMU accounting team led by the Project Accountant, is responsible for all the day-to-day FM functions at the Unit, including budgeting, keeping adequate books and records, recording transactions correctly and ensuring that periodic management reports are produced to facilitate management decisions. The project s FM will be complimented by adhering to the policies, rules and procedures to be outlined in the Bank approved FPM which would provide guidelines on budgeting, financial reporting, funds disbursement procedures, and FM monitoring and control. 49

58 Budgeting Arrangements 20. The SIU/IIU Program Director is responsible for preparing annual budgets and work plans based on agreed programs and components as outlined in this paper. On an annual basis the budget and work plans will be reviewed jointly by the IIU and the PFMU and copied to the IDA for approval. It is expected that the project s budget will in due course be an integral part of the overall program of the MPW s strategic plan aimed at improving the infrastructure of Liberia. Our assessment indicated that budgeting and the development of reasonable work plans is a major challenge which must be addressed as part of the FM institutional strengthening arrangements in order to get the MPW to own and be responsible for the activities. Accounting Arrangements 21. The Unit Manager of the PFMU will be responsible for overall FM of the project working in collaboration with the accounts staff of the SIU/IIU to facilitate processing of transactions. The PFMU is already adequately staffed with personnel that have the requisite qualification and experiences needed for project implementation. The current staff numbers ensure a fairly balanced distribution of workload and adequate segregation of duties and responsibilities. The processes and procedures for receiving invoices and transaction processing for accounting will be done in line with the procedures as documented in the Project Operations Manual (POM) and consistent with the FPM of the PFMU. 22. The PFMU uses Sun Accounting package and our assessment indicates that it is suitable for recording all accounting transactions and reporting correctly the assets and liabilities of different projects and can be relied upon for effective processing of accounting data. Internal Control and Internal Auditing 23. The MPW does not have an internal audit department, thus the internal auditor of the PFMU will be responsible for ensuring that the control environment for implementation is adequate and satisfactory. The project s internal control procedures, including processes for recording and safe guarding of assets, will be documented in a POM which will be cleared by the Bank prior to adoption. The POM would be a working document that can be updated to strengthen the internal control system when the need arises. In addition to the POM, project implementation will seek to comply with the internal control procedures of the PFMU as documented in the FPM. 24. The duties and responsibilities of the internal auditor at the PFMU are documented in an Internal Audit Manual and these include reviewing the internal control systems of all IDA projects under the supervision of the PFMU. The internal auditor is expected to play an active role in implementation by conducting regular reviews of operations and financial transaction for the entire ministry including both budgetary and donor finded activities. The assessment noted that the internal audit function though 50

59 satisfactory should be improved upon to offer more value to the PFMU and not just be based on compliance audits. Funds Flow Arrangements 25. The proposed project will be financed through an emergency grant to be disbursed over a five year period. Releases into the Designated Account will be through the submission of approved withdrawal applications for the initial deposit and subsequent replenishment as per the Disbursement Letter. Banking and payment processing will be managed by the PFMU in order to ensure adequate control and financial monitoring. All approvals and processing of payments will be done at the SIU/IIU level and supporting documents transferred to the PFMU for processing for payment to third parties. Disbursement Arrangements 26. The project will use transaction based disbursement (statement of expenses (SOE) reports) for reporting on the uses of project funds and also for requesting for subsequent funds. Supporting documentation will be retained by the implementing agencies for review by the IDA missions and external auditors. The initial disbursement will be based on the aggregate expenditure forecast for the first six months. Subsequent withdrawals will be made on submission of satisfactory SOE reports. Another acceptable method of withdrawing funds from the grant is through direct payment method, involving payments from the grant to third parties for works, goods and services upon the Borrower s request. 27. If ineligible expenditures are found to have been made from the Designated Account, the Borrower will be obligated to rehnd the same to the Designated Account and IDA will have the right to suspend disbursement of the Funds if reporting requirements are not complied with as provided for in the Financing Agreement. The Bank s FM team will periodically assess the adequacy of FM systems and this will form the basis of any change in disbursement methods. 28. Additional instructions for disbursements and operating the Designated Account will be provided in a Disbursement Letter issued for this project. 29. The Bank s FM team will periodically assess the adequacy of FM systems and this will form the basis of any change in disbursement methods. Financial Reporting Arrangements 30. The Project Accountant of the PFMU, working under the direct supervision of the Head of the PFMU will be responsible for generating IFRs each semester and any other financial reports as may be required during implementation. These reports should show clearly at a minimum: (i) Sources and Uses of Funds, (ii) Uses of Funds by Project Activity/Component, (iii) expenditure summary by category code, and (iv) cash flow forecast by the project. Financial reporting for disbursement purposes during implementation will be based on transactions and as such proper record keeping is hndamental in order to generate accurate SOE returns. 51

60 3 1. Formats of the various periodic financial monitoring reports to be generated from the FM system have been developed and discussed with the PFMU. The financial reports have been designed to provide relevant and timely information to the project management, implementing agencies, and various stakeholders involved in monitoring the project s performance. The FM assessment of the accounting package indicates the systems in place will be able to generate these reports. The PFMU has been consistent is submitting the interim un-audited financial reports (IFRs) for the entire infrastructure project currently under their management. The contents, format and timing of the IFRs regularly submitted have been found to be satisfactory. Auditing 32. The Auditor General of Liberia is primarily responsible for the auditing of all government projects. However due to capacity constraints it is usual for the Auditor General to sub-contract the audit of donor funded projects to private firms. The selection and engagement of the auditor is subject to the Bank s procurement and technical clearance procedures for recruiting acceptable auditors. 33. The scope, terms of reference, audit standards applied, content and format of audit reports for the existing infrastructure projects is satisfactory and with unqualified opinions issued by the external auditors. Terms of reference and contract with auditor for existing IDA funded infrastructure projects were amended to include audit of URIRP. Supervision plan 34. During the first two years of implementation intensive FM supervision will be required; it is planned that FM supervision missions will be conducted at least four times a year in the first two years of implementation based on the current risk assessment of the project. The presence of the FM Analyst in the country will be most beneficial in monitoring on a regular basis the level of compliance and the adequacy of financial management arrangements for the project. The supervision will include desk reviews of the IFR and SOE returns, review of audit reports and evaluation of the efficiency of the payment processing and fund flow arrangements. 35. The FM supervision mission s objectives will ensure that strong FM systems are maintained for the project throughout project tenure. A major focus of supervision will be to review the technical competence of the PFMU staff in preparing accounts and generating credible reports which can be substantiated by the records and a review of the role of internal audit in ensuring compliance. Conclusion 36. Our assessment of the project s FM arrangements being implemented by the PFMU as documented in the preceding paragraphs indicates that the systems satisfy the Bank s minimum requirements under OPA3P

61 37. At the country level the risk would be judged as high due to the weaknesses in governance and the lack of technical capacity of public institutions coupled with the slow pace of public financial management reforms. At the entity level the risk is rated as high, primarily because of the inexperience of the SKJ/IN in managing IDA funded projects and this rating also influenced the project level risk. Key challenges will be in providing adequate technical support to the project team during implementation and engaging all stakeholders to help achieve project objectives. Overall the project FM risk is rated as being substantial and this risk will be mitigated by the involvement of the PFMU during implementation. 53

62 Annex 5: Procurement Arrangements Liberia: Urban and Rural Infrastructure Rehabilitation Project General 1. Procurement of goods and works and selection of consultants would be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004, revised in October 2006; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004, revised in October 2006, and the provisions stipulated in the Financial Agreement or any other method accepted by the Bank. The various items under different expenditure categories to be financed are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the government and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 2. Procurement of Works: A total of about US$43.9 million of works would be procured under this project. These would include the construction of the following transport infrastructure: (i) Monrovia city streets, (ii) Cotton Tree-Bokay Town Rehabilitation works, (iii) Pleebo-Barclayville Road, (iv) maintenance of rural roads, (v) construction of Caldwell Bridge, (vi) construction of the new he1 unloading facility in the Port of Monrovia, (vii) Via Town/ Tucker Street Interchange Improvements, and (viii) Institutional support works. The procurement will be done using the Bank s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) except for the Monrovia City streets and Cotton Tree-Bokay Town component which will be prepared under a simplified World Bank sample bidding documents for Output and Performance based Road Contracts (OPRC) and for all others National SBDs agreed with or satisfactory to the Bank. The simplified bidding documents for OPRC means a contract without the maintenance works after the initial rehabilitation works are done. The works will be measured and paid based on the achievement of the defined level of service parameters (technical, social, and environmental). Payment will be made only on the basis of a fully completed 1.0 km of the road (or 0.5 km of city streets). Contracts below US$3,000,000 but above US$lOO,OOO equivalent per contract will be procured under National Competitive Bidding (NCB). Irrespective of this, NCB contracts deemed complex or subject to high risks will be identified in the procurement plans and be priorreviewed. For sustainability reasons, the works on (i) maintenance of rural roads, and (ii) sealing of laterite roads would be appropriately packaged to be procured through the NCB processes irrespective of cost. Contracts estimated to cost less than US$lOO,OOO equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where justified, but will be subject to Bank s prior No-Objection. 3. Further, in response to the new Framework for Rapid Response to Crises and Emergencies captured in OP8.00, and to facilitate project implementation and quick 54

63 delivery of results, the appropriate approach from the bulleted list below may be applied, 1.e.: Using rapid procurement methods (direct contracting or simple shopping) for engaging the services of qualified United Nations (UN) Agencies / programs and/ or civil works contractors already mobilized and working in emergency area; Using lists of qualified contractors with good track record to whom periodic invitations are issued. The qualification document may use a simplified format; Extending contracts issued under existing projects for similar activities by increasing their corresponding contract amounts; Where alternative arrangements are not available, using Force Account for delivery of works services directly related to the emergency; and 0 Using NCB, accelerated bid times not below 21 days, and streamlined procedures and applying Bank provisions on the use of bid-securing declarations and the elimination or waiving of bid bond or, bid securities for small contracts. 4. Procurement of Goods: A total of about US$0.5 million of goods would be procured under this project. These would include procurement of goods for institutional support. The procurement will be done using the Bank s SBD for all ICB and National SBD agreed with or satisfactory to the Bank. Contracts below US$500,000 but above US$50,000 equivalent per contract may be procured under NCB. Irrespective of this, NCB contracts deemed complex or subject to high risks will be identified in the procurement plans and be prior-reviewed by the Bank. Contracts estimated to cost less than US$50,000 equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where justifiable, subject to Bank s prior No-Objection. 5. Alternatively, goods may also be procured from UN Agencies provided that such a contract does not exceed US$200,000 for each type of goods. Further, in response to the new Framework for Rapid Response to Crises and Emergencies captured in OP8.00, and to facilitate project implementation and quick delivery of results, the appropriate approach from the bulleted list below may be applied, Le.: 0 Using rapid procurement methods (direct contracting or simple shopping) for engaging the services of qualified UN Agencies / programs andor suppliers of goods; 0 Using lists of qualified suppliers with good track record to whom periodic invitations are issued. The qualification document may use a simplified format; 0 Extending contracts issued under existing projects for similar activities by increasing their corresponding contract amounts; and 55

64 Using NCB, accelerated bid times not below 21 days and streamlined procedures and applying Bank provisions on the use of bid-securing declarations and the elimination or waiving of bid bond or bid securities for small contracts. 6. Selection of Consultants: Consultancy services valued at about US$6.75 million to be provided include (i) Monrovia Streets Consulting Services, (ii) Cotton Tree-Bokay Town Rehabilitation Services, (iii) Caldwell Bridge DesigdSupervision, (iv) Vai Town/ Tucker Bridge Intersection Improvements Services, and (v) Institutional Support Services. Contracts for consulting services, each estimated to cost US$lOO,OOO equivalent or more, will be awarded following the procedure of Quality and Cost Based Selection (QCBS). Consulting services estimated to cost less than US$lOO,OOO per contract under this project would be procured following the procedures of Selection Based on Consultants Qualifications (CQS) in accordance with the procedures as described under paragraphs 3.7 and 3.8 of the Consultant s Guidelines. Fixed Budget Selection (FBS), and Least Cost Selection (LCS) will apply to the circumstances as respectively described under paragraphs 3.5 and 3.6 of the Consultant s Guidelines. For all contracts to be awarded following QCBS, FBS and LCS the Bank s Standard Request for Proposals will be used. Procedures of Selection of Individual Consultants (IC) would be followed for assignments which meet the requirements of paragraph 5.1 and 5.3 of the Consultant Guidelines. LCS would be used for assignments for selecting the auditors. Procedure of Single-Source Selection (SSS) would be followed for assignments which meet the requirements of paragraphs of the Consultant Guidelines and will always require the Bank s prior review regardless of the amount. 7. Further, given that Liberia procurement comes under rapid response program, where with the new Policy Framework (OP8.OO) accelerated and Streamlined Procedures may apply to improve the flexibility, speed and effectiveness of the Bank s emergency response, the use of pool of experts or a list of pre-selected consulting firms and/or individuals may be an appropriate method for supporting counterpart agencies at various steps of project execution. Such a method will remain consistent with QCBS, CQS, FBS, LCS and/or the Selection of Individual Consultants. The selection process would be conducted by the implementing units for a series of assignments, with standard terms of reference (TOR) before credit effectiveness, and would be subject to the Bank s review as usual. 8. During the project execution, the implementing unit would just pick experts or firms from the list, based on their availability to carry out the assignment. Remuneration and fees would be resolved, at the time of pre-selection and prescribed in a framework agreement - a sort of retainer contract. While this approach will expedite ad hoc recruitment of consultants for specific frequent assignment, it does not require any waiver or clearance, because it will be filly consistent with the regular procedures. 56

65 9. 1.e.; In summary the appropriate approach from the list bulleted below may be applied, Using sole-sourcing (single sourcing) of consulting firms, where it presents a clear advantage over competition. Firms already working in the area and which have a proven track record in similar assignments may be the most suitable; Selecting of consulting firms through CQS method for contracting firms already working in the area and which have a proven track record for the provision of technical assistance (TA); 0 Using a pool of experts or a list of pre-selected consulting firms for supporting counterpart agencies at various steps of project execution - including the procurement process, the preparation of TORS, shortlists, Request for Proposals (RFPs), and bidding documents; and 0 Extending contracts issued under existing projects for similar activities by increasing their corresponding contract amounts. 10. Short lists of consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines, if in-country capacity exists. Consultancy services estimated to cost above US$200,000 per contract for firms, and contracts for individuals for assignments estimated to cost above US$50,000 and single source selection of consultants (firms and individuals) will be subject to prior review by the Bank. 11. Training, Workshops and Study Tours: A total amount of US$0.5 million will be provided for training. These will be carried out on the basis of approved programs on a yearly basis. The programs will identify the general framework of training and similar activities for the year, including the nature and objectives of training and study tours, conferences, workshops, the number of participants, cost estimates, and the translation of the knowledge gained in the actual implementation of proj ect components. 12. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured would be available for IDA review by effectiveness. In the case of the applied OPRC, the simplified bidding documents to be used for the project will not include the maintenance works services after the initial rehabilitation works are completed. Terms of employment for hiring individual consultants and sample form of contract for hiring firms using CQS should also be submitted for IDA review before effectiveness. Assessment of the Agency s Capacity to Implement Procurement 13. An assessment of the capacity of the Special Implementation Unit (SIU) of the Ministry of Public Works (MPW) to implement procurement actions was carried out in 2007 by a World Bank team consisting of a Lead Procurement Specialist and a Consultant Procurement Specialist from the Ghana Country Office. The assessment 57

66 reviewed, to some extent, the organizational structure for implementing projects and the interaction between the projects staff responsible for procurement and the Project Financial Management Unit (PFMU) created and established in the Ministry of Finance (MOF). The risks identified were: (i) the uncertain environment in Liberia typical of postconflict countries with weak institutional capacities coupled with difficult governance issues; (ii) the limited familiarity of the SIU with Bank procurement policies and procedures; and (iii) inadequate procurement planning and monitoring. 14. The SIU, created at the MPW and staffed with competent MPW staff and technical support, is being relied on to manage the Urban and Rural Infrastructure Rehabilitation Project (URIRP). Their responsibilities include but are not limited to project management, procurement, and financial management (FM). In the area of procurement, the SIU will also mitigate the substantial procurement risk identified in an earlier assessment of the country s procurement capacity. The procurement responsibilities of SIU were to include: (i) assuring steady progress of procurement in accordance with an implementation schedule reviewed and approved by the World Bank; and (ii) ensuring satisfactory implementation of activities included in all contracts. 15. While there is one procurement staff with some procurement capacity, the SIU, is only now being complemented with the planned TA, with engineering background, to improve procurement management, as earlier recommended, to: (i) plan and process all procurement; (ii) monitor the implementation of the procurement plans; and (iii) train staff of the implementing agencies in the use of procurement procedures agreed under the project, including compliance with World Bank Procurement Guidelines. There is, therefore, an urgent need to fill the TA procurement position in the SIU to facilitate realization of its objectives and to mitigate the substantial procurement risk identified earlier. Also, there is need for the SIU to complete the Project Operational Manual (POM), which, among others, would include sections on (i) the organizational structure for implementing the project; (ii) procurement planning, management and monitoring; (iii) the functional relationships and interaction between the project staff responsible for procurement, and the relevant units for administration and finance; and (iv) in addition provide clear instructions and guidance for the management of procurement records. 1 No I KeyFUsk I RiskMitigation Actions I ByWhorn 1 By When 1 1 Lack of presence of Contracting of Procurement SIU of the Ministry As soon as possible, Procurement TA to TA to complement the SIU of Public Works but not later than the improve procurement capacity (MPW) May 2009 management 16. Procurement assessment was done on the basis of the current SIU capacities; but as reported elsewhere in this paper, the new Infrastructure Implementation Unit (IN) with enhanced capacity and role over that of SIU, is to be established by mid-year 2009 and the SIU will be abolished at that time. The Framework for the new IIU has been reviewed and inputs provided by procurement management. A new procurement assessment will be undertaken upon the establishment of IIU, if deemed needed at that time. 58

67 17. The overall project risk for procurement is substantial. Procurement Plan 18. The government, at appraisal, drafted an 18 month procurement plan for project implementation which provides the basis for the procurement methods. This plan will be agreed on between the government and the project team during negotiations and will be available at the offices of the SIU at the MPW in Monrovia. It will also be available in the project s database and in the Bank s external website. The Procurement Plan will be updated in agreement with the project team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 59

68 Expenditure Category Works Contract Value Procurement Contracts Subject to Threshold** Method Prior Review /(US%) C>=3,000,000 ICB All contracts 100,000<C<3,000,000 NCB Specified contracts as would be identified in the Procurement Plans c<100,000 Shopping None 1 AH Values I Direct Contracting I All Contracts C>=500,000 ICB / LIB All contracts Goods and services other than Consulting Services C<50,000 Shopping Specified contracts as would be identified in the Procurement Plans All Values Direct Contracting All Contracts c>=200,000 (fm) QCBS/LCS/FBS All contracts Consulting Services 100,000=<c~200,000 (firms) c<100,000 (firms) 1 C>50,000 (individuals) Qcss,Lcs/ FBS CQS I IC All contracts Qualifications of short listed cinsultants + TORS.. Ifpool of experts method is chosen, then only TORS Qualifications of short listed consultants + TORs. If pool of experts method is chosen, then oniy TORs. Training, Workshops, Study Tours C<50,000 (individuals) All values All Values IC SSS for hiring firm or individual To be based on Annual Work Plan and Budgets Only TOR Al contracts periodically based on re-assessment of risks. Frequency of Procurement Supervision 19. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the implementing agency has recommended three to four supervision missions each year to visit the field to carry out post-review of procurement 60

69 actions. The procurement post-reviews should cover at least 20 percent of the contracts subject to post-review. In addition post-reviews of in-country training will be conducted from time to time to review the selection of institutions, facilitators, course contents of the training, and the justifications thereof, and costs incurred. 20. Procurement Audits: Not later than three months after the end of each financial year. The PFMU will have prepared a procurement audit report, by consultants selected in accordance with the guidelines for selection of consultants and terms of reference incorporated in the Project Operational Manual (POM). The audits would: (i) verify that the procurement and contracting procedures and processes followed for the projects were in accordance with the Grant Agreement; (ii) verify technical compliance, physical completion and price competitiveness of each contract in the selected representative sample; (iii) review and comment on contract administration and management issues as dealt with by participating agencies; (iv) review capacity of participating agencies in handling procurement efficiently; and (v) identify improvements in the procurement process in the light of any identified deficiencies. The Borrower and IDA will review all thresholds stated in this section on an annual basis. Amendments may be agreed upon based on performance and actual values of procurement implemented. Amendments to the Financing Agreement may be proposed accordingly. 21. Contract Management and Expenditure Reports: As part of the project reports, PFMU and the beneficiary agencies will submit contract management and expenditure information in quarterly reports to IDA. The procurement management report will consist of information on procurement of goods, works and consultants services and compliance with agreed procurement methods. The report will compare procurement performance against the plan agreed at negotiations and as appropriately update at the end of each quarter. The report will also provide any information on complaints by bidders, unsatisfactory performance by contractors and any information on contractual disputes. 22. Publication of Awards and Debriejng: Publication of results of the bidding process for all ICB goods and works, and also for consultant contracts estimated at US$200,000 and above, in response to paragraphs 2.60 and 2.65 of the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004 and revised in October 2006; and paragraphs 2.28 and 2.29 of the Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004 and revised in October Publication of all other procurement activities, including debriefing and review shall be subject to the relevant stipulates in the Liberian Public Procurement and Concessions Law of Fraud and Corruption: All procuring entities as well as bidders and service providers, i.e. suppliers, contractors and consultants shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.14 of the Procurement Guidelines and paragraphs 1.22 of the Consultants Guidelines. 61

70 Details of the Procurement Arrangements Involving International Competition 24. List of contract packages to be procured following ICB and direct contracting. ICB goods contracts estimated to cost above US$500,000 per contract and all direct contracting will be subject to prior review by the Bank. 1 Monrovia city streets cost ($Million) Table 2: Works Method LIB Yes 6 Domestic Preference (yedno) Cotton Tree-Bokay Town 2 Rehabilitation 9.80 ICB No No No 7 8 Review Expected by Bank Bid (Prior/ Opening post) Date Prior Oct 08 Prior Mar09 3 Construction of Caldwell Bridge 6.00 ICB No No Prior TBD 4 Pleebo-Barclayville Road Works 2.50 ICB No No Prior TBD 5 Maintenance of Rural Roads (various) 3.00 NCB No No Post TBD Vai Town/ Tucker Bridge Intersection Improvements No Post TBD New Fuel Unloading Facility in the Port of Monrovia Institutional Support Works NCB 1 No No No 1 Post Prior 1 TBD TBD 25. ICB contracts estimated to cost above US$3 million per contract and all direct contracting will be subject to prior review by the Bank. 9 The procurement was advertised in on-line UNDB and dgmarket. However, the bidding documents were issued only to those who had expressed interest in response to the advertisements. 62

71 1 Ref No. 1 2 Description of Assignment Monrovia Streets Consulting Services 3 Estimated cost (%Million) Selection Review by Expected Proposals Method Bank (Prior submission Date /Post) QCBS Prior TBD 2 Cotton Tree-Bokay Town Rehabilitation Services TBD 3 Caldwell Bridge DesigdSupervision 1.oo QCBS Prior TBD 4 5 Vai Town/ Tucker Bridge Interchange Improvements Services Institutional Support Services (inclusive of Training, Workshops and Study Tours, as well as Incremental Operating Costs) QCBS Prior TBD QCBS Prior TBD I I I I I 26. All contracts not subject to prior review will be post-reviewed. 63

72 Annex 6: Implementation and Monitoring Arrangements Liberia: Urban and Rural Infrastructure Rehabilitation Project 1. The capacity of the government to implement donor funded projects is very weak. Years of war did not only destroy physical infrastructure, but institutional and human capacity as well. Extraordinary arrangements are therefore needed to be in place to ensure speedy and successful implementation of IDA fbnded infrastructure projects. 2. The existing IDA funded infrastructure projects in Liberia are implemented through a Special Implementation Unit (SIU) in the Ministry of Public Works (MPW), and a Project Financial Management Unit (PFMU) in the Ministry of Finance (MOF). The SIU and PFMU were originally set up to implement the initial post-war IDA funded project, the US$30 million Emergency Infrastructure Project (EIP). The SIU has technical and procurement responsibility, while the PFMU is held responsible for financial management of the projects. The SIU is managed by national consultants and civil servants with support of technical assistance (TA). The PFMU, on other hand, is managed by expatriate consultants with support of staff of the MOF. The PFMU, in addition to the IDA projects, is also responsible for financial management of finds deriving from donors that channel fhd through the MOF. 3. The existing portfolio of project under SIU has now grown to about US$lOO million and it has been clear for some time that a rethinking was needed of the implementation arrangements of IDA infrastructure projects, as well as those that will in the future be financed by the Liberia Reconstruction and Development Trust Fund (LRTF). 4. In the fall of 2008, following extensive discussion with the government, an agreement was reached on a Framework for a new implementation arrangement. Importantly, the Framework plans for the extraordinary arrangements to eventually be incorporated into the government s long term structure - as a future road authority. The Ministries of Public Works, Finance, Agriculture, and the Minister of State without Portfolio and Chair of the Liberia Reconstruction and Development Committee were involved in the dialogue and the agreement. H.E. the President was also consulted. 5. For the short-medium term, the principal goal of this change is to raise substantially government s implementation capacity of IDA and other donor funded transport and infrastructure projects in general. 6. The government is committed to better performance and transparency and has enacted a Public Procurement Commission Act. This Act was drafted under the Bank s Trust Fund for Liberia (TFLIB) project and closely follows the Bank s own procurement Guidelines. Framework Document for Implementation 7. The SIU to Infrastructure Implementation Unit (IN) Framework Document spells out the principles and roles of the IIU and MPW. 64

73 8. IIU shall be a self-supported unit within the MPW. As a self-supported unit, it will be entrusted with the planning, scheduling, design, monitoring, supervision and initiation of various infrastructure projects in general and surface transport, water, energy and agriculture projects, in particular. The receipt, custody and disbursement of public monies and rendering of monthly accounts to the Minister of Finance as Accounting Officer to the MOF have been entrusted to PFMU, housed in MOF. The overall FM responsibility shall be with the MOF as the Accounting Officer. IIU shall be responsible for approval and certification of all invoices/accounts/payments to all outsourced activities of the Unit (contractors, consultants, and service/materials/goods providers). 9. The MPW is responsible for the strategic planning, scheduling, development, management, and maintenance of the road networks in Liberia. The IIU will, in support of those responsibilities, partly carry out the executive functions on behalf of the Ministry, in regard to road development, scheduling, management, and maintenance, eventually leading to the full divestiture of road project execution mechanisms and creation of a sustainable road authority, although that will not be the specific objective of URIRP. 10. The Ministers of Public Works and Finance will delegate their authority to incur the procurement and the expenditure for the indicated sub-sectors to the Program Director of IIU and manager of PFMU in accordance with the MOF accounting instructions and other relevant Government of Liberia (GOL) rules and regulations. This will be done through the use of a Unit warrant. The warrant will specify the items of expenditure under which the Program Director and PFMU Manageds may incur expenditure, and the maximum amount of expenditure that may be incurred under any item The IIU will be headed by a Program Director who will be responsible for its day to day management and for the overall implementation of infrastructure projects designated to be implemented by the IIU. The Program Director will report to and will be accountable to the Minister of Public Works, within the terms of this framework document. 12. The transition from the current SIU to IIU is already under way. The government advertised internationally for program management team and is interviewing the shortlisted candidates. When selected, the program management will be engaged by mid- 2009, the designation of SIU will change to IIU. However, the transition will continue for about six months as the new management installs new procedures, processes, reskills staff capacities, as well as present technical assistance arrangements - all within organizational structure that imparts future road management arrangements. Mandate of IIU 13. The mandate of IIU is to manage the implementation of infrastructure projects in the purview of the MPW while preparing for the establishment of an autonomous road authority. 65

74 14. The IIU Management Committee (see paragraph 22), in consultation with Liberia s development partners, will continuously evaluate the IIU s performance and capacity to manage non-road infrastructure projects, and plans for the IIU will be adjusted accordingly. 15. In the meantime, IIU will move along a fast track leading to the full divestiture, by the MPW, of project execution mechanisms. In the transport sector, the IIU will promote private-public partnerships (PPP) by introducing and managing Output and Performance Based Contracts (OPRC) or other appropriate contractual methods, funded through the LRTF. Projects funded through the MPW budget will gradually transition to the IIU on a schedule to be determined. It will also promote other forms of PPP, including but not limited to: tolls and modes of partial ownership and private ownership. The IIU will also manage the presently operated International Federation of Consulting Engineers (FDIC) based civil works contracts. The IIU will also promote PPP in other infrastructure sectors, namely other transport sub-sectors, water, urban, energy and agriculture. Status 16. The IIU will be administratively established as a self accounting unit within the institutional framework of the MPW, reporting to the Minister. Its functions and operations will be monitored and overseen by a Management Committee (MC) within the Ministry. In this respect IIU will essentially be an infrastructure project engineering organization which will purchase or procure resources from the market through competitive bidding under public procurement rules, procedures and guidelines issued by the government and its development partners. 17. The primary objectives of IIU shall be: 0 Implementation of infrastructure projects in the following subsectors: transport, including, ports, airports, and railways; energy; agriculture; urban works; water; and agriculture by procurement, supervision, monitoring, and other activities; Coordination, monitoring and strategic programming of Road Network implementing activities, including those of construction, rehabilitation, and maintenance; Implementation of capacity building projects from inception to completion; and Establishment of a small, efficient, highly professional, performance-oriented organization that will form a suitable nucleus for and evolve into a road authority. 66

75 Structural Features 18. The organizational structures for the implementation of the overall and the specific objectives detailed above during the transitional period will comprise the following: 0 Infrastructure Implementation Unit (IIU); Project Financial Management Unit (PFMU) 0 IIU Management Committee (MC); 0 Financial Management Sub-committee; and 0 MPW and MOF (with a specific IIU Secretariat, under MPW) Organizational Structure and Composition 19. The relationship between IIU and various implementation organs during the transitional period are outlined in the Minister of Public Works decree related to the establishment of IIU. 20. The IN S organization will span three hierarchical levels namely; 0 Management, including a Program Director, Deputy Program Director and a Legal Advisor; 0 Three Divisions managed by Division Heads, namely; o Engineering; o Information and Internal Monitoring; o Administration and Finance, Seven sections falling under the above Divisions, namely; o Programming and Evaluation; o Project Preparation; o Procurement; o Implementation and Monitoring; o Maintenance; o Finance/Accounting; o Personnel and General Services. 21. International competitive recruitment is currently underway for the Management. It is expected that the management team will be in place no later than June

76 IIU Management Committee (MC) 22. The MC will monitor and advise the IIU. The membership of the MC will comprise the Minister of Public Works as Chairman, the Deputy Minister of Technical Services, the Deputy Minister of Rural Development and the Assistant Minister of Planning and Programming at MPW; the Deputy Minister of Finance for Expenditure; the Program Director of IIU and the Manager of PFMU. The Head of the IIU Secretariat will serve as an ex-officio Secretary to the MC. IIU Secretariat 23. An IIU Secretariat will be established within MPW to coordinate correspondence and distribute information to and from the IIU. The Secretariat will act as a Secretariat of the M C and be responsible for facilitating the processes of expedited action as required and advise the MC accordingly. This desk will be headed by the Deputy Minister Technical Services Public Works and will include one of the Ministry s senior staff/advisors. The major function of the Secretariat is to release the Minister of being involved daily in the dissemination of the information and provide an organized and institutionalized system of involvement and interaction between IIU and other parts of the Ministry. Financial Management and IIU/PFMU Structure 24. The government decided in 2006 to centralize the FM tasks associated with donor projects in one PFMU in the MOF. The IIU is being set up in such a way that the relevant FM responsibilities are established in the PFMU. However, it is expected that as the IIU increasingly will take on a character of a road authority, the government and IDA will discuss the possibility of incorporating FM into the IIU structure. This will only take place after a thorough institutional assessment has been undertaken. 25. The IIU will have basic FM capacity to support the requirements of the PFMU that will be responsible for all FM tasks. Coordination between the IIU and the PFMU is based on a Memorandum of Understanding (MOU) that was signed between the MPW and the MOF, defining the responsibilities of and levels of service required from both parties, as well as a detailed description of processes and procedures. The PFMU has a unit manager with international accounting qualifications acceptable to the Bank, project accountant and an internal auditor. 26. The IIU Program Director and his management team will have direct communication with the Team Leader and will be responsible for day-to-day management of the project. In particular, the IIU is responsible for: (i) assuring steady progress of the procurement in accordance with annual work plans reviewed and approved by the World Bank; (ii) ensuring satisfactory implementation of activities included in all contracts including adherence to World Bank standards with regards to environmental and social issues; (iii) ensuring that a high ethical standard and transparency is maintained throughout the entire project implementation; (iv) preparing 68

77 the quarterly interim un-audited financial reports (IFRs); and (v) monitoring and evaluating performance indicators and results. 27. Monitorinn and Evaluation Methodolonv and Arrangements. Each implementing agency will monitor progress against agreed upon performance monitoring indicators, as shown in the results framework in Annex 2. The IIU will be responsible for ensuring that such reports are submitted in a timely manner and in accordance with the formats to be agreed. The IIU will review the reports and prepare a comprehensive report for the project. Technical Audits may be undertaken to provide hrther quality assurance. 28. Reportinn. Full details of project, (including outcome and results indicator data, analysis and recommendations) will be reported in regular quarterly reports prepared as well as audit reports. 0 Quarterly progress reports (including financial and procurement status reports as well as assessing environmental and social management actions) will be established by the IIU and PFMU respectively on the basis of project implementation plan; 0 On the basis of the quarterly reports, IIU will compile and make available to the public within 3 months of close of each calendar year Annual Reports for all its activities in a form and substance acceptable to the Bank. The Annual Reports shall use audited financial statements, if available at the time of publication. If not available, unaudited statements shall be used; however, when audited statements have been prepared, a local advertisement of their availability shall be made; Bank supervision missions will be conducted uointly with other donors as needed), and will in the first year take place four times a year; and 0 An Implementation Completion Report (ICR) will be prepared at the end of the Project and presented within six months of the closing date of the Grant (government s contribution to the ICR is required within five months of closing date o f the Grant). 29. The monitoring activities will verify if program and project objectives are being achieved, as well as FM and procurement aspects. 30. Corruption Mitination. Preventing and addressing corruption in this and other Bank transport operations follows a three pronged strategy. Partly, the process will benefit all donor involvement in the transport sector. 0 IDA Scrutiny: More intense supervision and implementation support will be provided than is the norm in Bank operations, as has been the case so far in IDA infrastructure operations in the country. This translates into in-depth reviews by the Bank of procurement documents, sample and systemic review of actual proposals and bids received as result of procurement, close technical and financial monitoring during execution of activities and observing tell-tale 69

78 signs of corrupt practices, whether by private firms, in the administration and management of contracts, or at politicavdecision making level. Technical audits will be conducted as needed. Transparency. On the premises that the more information there is in the public domain, the less likely it is that corruption occurs; the project requires annual disclosure on details and progress of implementation in a form of IIU Annual Report. In addition to the required local and international disclosure of EMPs, RAPS and other social and environment document, and procurement results (as per the Bank s procurement guidelines), the project will require public disclosure of audited financial statements of the transport projects, and information on staffing and investment plans and strategies for the coming years. 0 Reporting Mechanism. A rudimentary complaint mechanism will be set up by January 1, 2010 in consultation with practitioners and in agreement with the government. This may include setting up a position of an independent Ombudsman to address complaints of corruptions in the transport sector, possibly sitting in the Liberia Reconstruction and Development Committee (LRDC), and whose responsibilities include receiving, processing and recommending for action corruption complaints in the transport sector at large, independent of financing sources. As the government systems addressing corruption appear weak, this mechanism may even rely on third party execution. Involvement of civil society will also be explored in this regard. Specifics of the design of the mechanisms would include regular reporting to the public. 31. Further typical risks to procurement seen in sectors with thin capacity include collusion, price-fixing, and fraud in qualifications and securities. With the establishment of IIU, there will be the opportunity for establishing sound procedures and modem mechanisms to support an efficient business process. A database will be established in IIU for managing the primary information on procurement and implementation, e.g. (i) pre- and post-qualification information, e.g. legal registration, ownership, financial statements, and work history; (ii) solicitation and bidding results; and (iii) contract administration and monitoring information. In addition to expediting the procurement processing, such tools improve transparency because they allow ready validation. 32. Proiect implementation period. The project will be implemented from April , or later date to June 30,

79 Annex 7: Environmental and Social Screening and Assessment Framework Liberia: Urban and Rural Infrastructure Rehabilitation Project Sub-project Screening 1. The investments to be supported have been screened for safeguards as shown in the table below. The sub-components, for which the only applicable instrument is the generic Environmental Management Plan (EMP), are judged to be of low risk. Moreover, the EMP already exists, and so the project can begin implementation immediately after effectiveness. Subcomponent Table 1 : Applicable Safeguards Instruments I I Applicable Safeguards Instruments Monrovia Port Institutional strengthening C for Liberia EPA * Existing EMP will be suitable for all rural roads with the addendum that is in preparation. Preparation of Safeguards Instruments 2. Environmental Management Plan for Roads. An EMP for specific sections of city streets and intercity roads was prepared and disclosed for the Emergency Infrastructure Project (EIP). It covers the specific road links identified for financing in this project. It is being amended through an addendum to cover city streets and rural roads in general for Emergency Infrastructure Project-Supplemental Component (EIPSC). However, the original EMP already covers the specific road segments to be rehabilitated outside of Monrovia. The existing EMP plus the addendum will be utilized for all roads and streets projects in the Urban and Rural Infrastructure Rehabilitation Project (URIRP). The original EMP will be re-disclosed and the addendum will be separately disclosed when completed. 71

80 3. Site-specijk EMPs and RAPS for the Roads sub-projects. As the screening table shows, several of the transport sub-projects involve new construction that warrants field investigation of the sites, identification of elements of the natural and human environments that could be adversely affected, and preparation of EMPs for mitigation and monitoring. RAPs will be needed, for even where new land is not being acquired, it will be necessary to carry out permanent or temporary relocation of roadside businesses and other structures presently in the rights of way. A RAP for solid waste management recently prepared and disclosed for EPSC conforms quite well to the provisions of OP 4.12 and will be provided to consultants as a template for roads project RAPs in URIRP. SIU will procure consulting services for the site-specific EMPs and RAPs as part of design or through separate consulting contracts. 4. EMP and RAP for Caldwell Bridge. The EMP recently prepared and disclosed for the demolition and replacement of the Vai Town Bridge will be adapted for use in managing the impacts of the replacement of the decrepit Caldwell Bridge, which includes construction of new bridge approaches. This sub-project reportedly does not involve new land acquisition - a fact that needs to be confirmed in the field when design is complete - but may still require a RAP if there are informal settlements or businesses on the land that will be used for the new approaches. The RAP for Vai Town Bridge, also recently prepared and disclosed, can be readily adapted for Caldwell Bridge, with improvements added from the above-mentioned RAP for solid waste management. The design consultant will prepare or sub-contract for the EMP and, if needed, the RAP, as was the case with Vai Town Bridge. 5. EMP for the New Fuel Unloading Facility. The initial assessment of infrastructure needs at the Port of Monrovia prepared under the Liberia Infrastructure Rehabilitation Project (LIRP) recommended that the existing fuel unloading facility be reconstructed. The assessment consultant prepared a preliminary Environmental Impact Assessment (EIA) that included an EMP for all works at the Port, including dredging, the fuel unloading facility, and other items, and this was disclosed for LIRP. Attempts to procure the contracting services for the jetty reconstruction failed because of lack of interest on the part of qualified firms, and the National Ports Authority (NPA), the Liberia Petroleum Refining Company (LPRC) and IDA have agreed that construction of a new fuel unloading facility is preferable and that URIRP will be the funding source. The SIU is in the process of procuring consulting services for pre-feasibility studies of alternatives for the new facility. The consultant will include environmental considerations in the comparison of alternatives and, once a preferred alternative has been selected, will modify the existing EMP accordingly. The eventual tender documents will include the information that the successful bidder will be required to prepare a health, safety, environmental and social (HSES) plan for the work and obtain approval for it from the supervision consultant before proceeding with the works. Review and Approval of Environmental Procedures 6. Annex 1 to the Environmental Protection and Management Law of the Republic of Liberia (November 2002) specifies the types of development projects for which environmental impact assessment is mandatory and includes: Construction and 72