Project Administration Manual

Transcription

1 Project Administration Manual Project Number: June 2011 Proposed Loan for Additional Financing Democratic Socialist Republic of Sri Lanka: Secondary Towns and Rural Community-Based Water Supply and Sanitation Project

2 Contents ABBREVIATIONS 4 I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLANS 2 A. Project Readiness Activities (proposed additional financing) 2 B. Overall Project Implementation Plan 3 III. PROJECT MANAGEMENT ARRANGEMENTS 4 A. Project Implementation Organizations Roles and Responsibilities 4 B. Key Persons Involved in Implementation 5 C. Project Organization Structure 6 IV. COSTS AND FINANCING 7 B. Allocation and Withdrawal of Loan Proceeds 8 C. Detailed Cost Estimates by Financier 11 D. Detailed Cost Estimates by Outputs/Components 12 E. Detailed Cost Estimates by Year 13 A. Contract and Disbursement S-curve 14 B. Fund Flow Diagram 15 V. FINANCIAL MANAGEMENT 16 A. Financial Management Assessment 16 B. Disbursement 16 C. Accounting 18 D. Auditing 18 VI. PROCUREMENT AND CONSULTING SERVICES 19 A. Advance Contracting and Retroactive Financing 19 B. Procurement of Goods, Works and Consulting Services 19 C. Procurement Plan 20 D. Consultant's Terms of Reference 20 VII. SAFEGUARDS 21 VIII. GENDER AND SOCIAL DIMENSIONS 22 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 23 A. Project Design and Monitoring Framework 23 B. Monitoring 26 C. Evaluation 27 D. Reporting 27 E. Stakeholder Communication Strategy 27 X. ANTICORRUPTION POLICY 29 XI. ACCOUNTABILITY MECHANISM 30 XII. RECORD OF PAM CHANGES 31

3 Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Executing Agency and Implementing Agency are wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB s policies and procedures. ADB staff is responsible to support implementation including compliance by Executing Agency and Implementing Agency of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At loan negotiations the borrower and ADB shall agree to the PAM and ensure consistency with the Loan agreement. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan Agreement, the provisions of the Loan Agreement shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

4 Abbreviations ADB = Asian Development Bank ADF = Asian Development Fund AFS = audited financial statements CQS = consultant qualification selection DMF = design and monitoring framework EARF = environmental assessment and review framework EIA = environmental impact assessment EMP = environmental management plan ESMS = environmental and social management system GACAP = governance and anticorruption action plan GDP = gross domestic product ICB = international competitive bidding IEE = initial environmental examination IPP = indigenous people plan IPPF = indigenous people planning framework LAR = land acquisition and resettlement LIBOR = London interbank offered rate NCB = national competitive bidding NGOs = nongovernment organizations PAI = project administration instructions PAM = project administration manual PIU = project implementation unit QBS = quality based selection QCBS = quality- and cost based selection RRP = report and recommendation of the President to the Board SBD = standard bidding documents SGIA = second generation imprest accounts SOE = statement of expenditure SPS = Safeguard Policy Statement SPRSS = summary poverty reduction and social strategy TOR = terms of reference

5 I. PROJECT DESCRIPTION 1. The government gives high priority to the provision of and access to safe drinking water to its population. In addition, the proposed additional finance further strengthens the government s efforts in (i) promoting regionally balanced development, (ii) rehabilitating and reconstructing the conflict-affected areas, and (iii) reducing poverty and ensuring equitable development in the conflict affected areas. The proposed additional finance was included in the country operations business plan The project s rationale is based on the 2002 Poverty Reduction Strategy which states that "the provision of safe drinking water, and adequate sewage and sanitation systems, is frequently cited as the single, highest social service priority by poor households. 1 Furthermore, under Section III of its 2001 Millennium Goals objective, the government aims by 2015 to reduce by 50%, the proportion of people unable to reach or afford safe drinking water The impact of the project is to improve health conditions in Batticaloa, Hambantota, Muttur, and Polonnaruwa by reducing (i) the incidence of waterborne diseases by 50%, (ii) the infant mortality by 20%, and (iii) the time and resources that households spend in acquiring water by 75%. The outcome of the project is to provide pipe-borne safe drinking water to 946,000 people and safe sanitation 3 to 171,500 people in the project areas. 3. The project continues to be consistent with the government s efforts to promote regionally balanced development, rehabilitating and reconstructing conflict-affected areas, and reducing poverty. The additional financing will assist the government in delivering the originally defined development objectives of improving the provision and access to safe drinking water through construction of new schemes for water supply. 1 ADB Sri Lanka: Connecting to Growth: Sri Lanka's Poverty Reduction Strategy. Government of Sri Lanka. Manila. 2 United Nations Road Map Towards the Implementation of the United Nations Millennium Declaration. Report of the Secretary-General. Currently, the proportion of households with sustainable access to safe drinking water is 84.7% and households access to improved sanitation is 93.6%. 3 As defined by the World Health Organization, basic sanitation is the lowest-cost technology ensuring hygienic excreta and sullage disposal and a clean and healthful living environment both at home and in the neighborhood of users. Access to basic sanitation includes safety and privacy in the use of these services. Coverage is the proportion of people using improved sanitation facilities: public sewer connection, septic system connection, pourflush latrine, simple pit latrine, and ventilated improved pit latrine.

6 II. IMPLEMENTATION PLANS A. Project Readiness Activities (proposed additional financing) Indicative Activities Jan 2011 March 2011 Months April 2011 May 2011 June 2011 July 2011 Who responsible Advance contracting actions 1 X Executing Agency Retroactive financing actions X Executing Agency Establish project implementation arrangements X ADB Board approval X ADB Loan signing X Executing Agency (already existing) Government and ADB Government legal opinion provided X Government Government budget inclusion X Government Loan effectiveness X Government 1. Government evaluation of the contract to be financed under the proposed additional financing is completed. Only ADB s approval is required. 2

7 B. Overall Project Implementation Plan Activities Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 A. DMF 1 Urban Schemes Batticaloa, X X X X X X X X Polonnaruwa X X X X X X X X X Muttur X X X X X X X 1.2 Extension of Network in Hambantota X X X X X X X X 1.3 Construction low cost latrines X X X X X X X X X 1.4 Batticaloa Hospital Waste water treatment X X X X X X X X 2 Rural Water Schemes X X X X X X X X X X X X X 3. Institutional Strengthening X X X X X X X X X X X X X X X B. Management Activities Procurement plan key activities to procure contract packages X X X X X X Consultant selection procedures X X X Environment management plan key activities X X X X X X X X X X X X X X X X X X Gender action plan key activities X X X X X X X X X X X X X X Communication strategy key activities X X X X X X X X X X X X X X X X X X X Annual/Mid-term review X Project completion report X 3

8 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations Roles and Responsibilities Project implementation Management Roles and Responsibilities organizations Executing agency Ministry of Water Supply and Drainage (MWSD) Through the National Water Supply and Drainage Board oversee the project at national level advise and guide the project on strategic and policy decisions Project Steering National Project Steering Committee will be Committee responsible for guide the project on strategic and policy decisions on implementation and coordinate Implementing agency: National Water Supply and Drainage Board through the Project Management Unit inter-agency issues Overall responsible for (i) project management, (ii) coordinate implementation particularly with project implementation unit (PMU), and (iii) function as project implementation unit to assist in day-to-day project implementation of water supply, sanitation, water resource management, and capacity building components: preparing overall project implementation plan and consolidated annual work plan, appointing project consulting teams, approving design of investment components prepared by PM and consultants, preparing standard bid documents to comply with ADB guidelines, monitoring the bidding process, reviewing the bid's evaluation and preparing bid evaluation reports for approval by ADB, procuring equipment and services for water, sanitation, and public awareness, reviewing community awareness and participation programs, ensuring project compliance with loan and grant covenants, coordinating with ADB on matters related to disbursements, undertaking institutional development assistance and capacity building programs, maintaining project documents and submitting timely reports to ADB and the Government including audit reports, organize monitoring and evaluation activities, oversee implementation and monitoring of social and environmental safeguards, supervise the implementation of the gender action plan and other activities under the summary 4

9 poverty reduction and social strategy, and obtain necessary clearances ADB monitor and review overall implementation in consultation with the executing agencies/implementing agencies including: project implementation schedule; actions required with reference to the summary poverty reduction & social strategy, gender action plan, environment management plan, and resettlement plan if applicable; timeliness of budgetary allocations and counterpart funding; project expenditures progress with procurement and disbursement, statement of expenditures when applicable; compliance with loan covenants; and likelihood of attaining Project development objectives. B. Key Persons Involved in Implementation Executing Agencies Ministry of Water Supply and Drainage National Water Supply and Drainage Board Project Management Unit A. Abeygunasekara Secretary Lak Diya Medura, Pelawatta BAttaramulla K.L.L. Premanath General Manager Galle Road Ratmalana, Sri Lanka M.K Hapuarachchi Project Director /5A, Asoka Place Katubadda, Sri Lanka ADB Sri Lanka Resident Mission/South Asia Regional Department Mission Leader Officer in Charge M. Thiruchelvam Senior Project Officer, SLRM

10 C. Project Organization Structure Project ` Steering & Coordination Committees Project Unit Government National Steering Committee Project Management Unit (PMU) Rural Urban NWSDB Irrigation Department Secretary, Ministry of Water Supply and Drainage North Central Provincial Council Chief Secretary, Provincial Council Provincial Coordinating Committee Rural Water Supply Division - NWSDB NCPC RWSS Unit District Committee Project Implementation Unit (PIU) Urban - NWSDB District Office GA, District, MOH Technical Support Pradeshiya Sabha Coordinating Committee Pradeshiya Sabha Implementation Unit (PSIU) Pradeshiya Sabha PS Members Chairmen Divisional Secretary GA = Government Agent, MOH = medical officer of health, PS = pradeshiya sabha 6

11 IV. COSTS AND FINANCING A. Detailed Revised Cost Estimates by Expenditure Category ($ 000) Total % of Total Base Cost Cost A. Investment Costs 1 Civil Work % 2 Equipment % 3 Resettlement % 4 Survey % 5 International consultants % 6 Local consultants % 7 Training Land % 9 Vehicles/motorcycles % 10 Office equipment and computer % Subtotal (A) % B. Recurrent Costs % C. Contingencies 1 Physical % 2 Price % Subtotal (C) % D. Financing Charges During Implementation % E. Taxes % Total Project Cost (A+B+C+D+E) % Base costs are based on market rates for August 2010 or awarded contract values. c Physical contingencies are computed as 5% for civil work and equipment. d Price contingencies are estimated at awarded variation values. e Interest charges are computed as 1% during the grace period of 8 years. Interest charges for the OCR loan are computed as 4.2%. All loans have been capitalized during the implementation period. f Taxes and duties include customs and duties for imported goods, and 15% VAT for all goods. g Estimated gap to complete the Muttur water supply scheme Source: Asian Development Bank estimates. 7

12 B. Allocation and Withdrawal of Loan Proceeds ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS Asian Development Fund [L1993-SRI(SF)] (Secondary Towns and Rural Community-Based Water Supply and Sanitation Project- Additional Financing) CATEGORY ADB FINANCING Amount Allocated [SDR] Percentage and Basis for Withdrawal from the Loan Number Item Category Percentage* Account 80 percent of total expenditure** Civil Works 1 20,782,000 (0% for foreign and 80% for local) Equipment and % of foreign expenditure 2 Materials 9,359, percent of local expenditure** 100 Percentage of foreign expenditure Vehicles 3 282, percent of local expenditure** 100 Percentage of foreign expenditure Consulting Services 4 437, percent of local expenditure** Project Management 100 Percentage of foreign expenditure 5 Office Equipment 425, percent of local expenditure** 100 Percentage of foreign expenditure Training/Fellowship 6 923, percent of local expenditure** Surveys and Public 100 Percentage of foreign expenditure 7 Awareness 649, percent of local expenditure** 8 Interest Charge 1,103, percent of amounts due* 9 Unallocated 7,839, Total 45,689,000 *CBO contributions are exclusively in-kind and are not included in the percentages in this table. **Exclusive of local taxes 8

13 ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS Ordinary Capital Resources (L2275-SRI) (Secondary Towns and Rural Community-Based Water Supply and Sanitation Project- Supplementary) Number Item CATEGORY Amount Allocated [SDR/$] $ Subcategory ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account 1 2 Works 5,747, percent of total expenditure Equipment and Materials 4,609, percent of total expenditure* 3 Interest Charge 1,561, percent of due amount 4 Unallocated 1,583,000 Total 13,500,000 *Exclusive of taxes and duties ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS Asian Development Fund [L2276-SRI(SF)] (Secondary Towns and Rural Community-Based Water Supply and Sanitation Project- Supplementary) Number Item CATEGORY Amount Allocated [SDR] Category Subcategory ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account 1 2 Works 17,270, percent of total expenditure Equipment and Materials 8,977, percent of total expenditure* 3 Interest Charge 896, percent of amounts due 4 Unallocated 4,338,000 Total 31,481,000 *Exclusive of taxes and duties 9

14 ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS Ordinary Capital Resources (Secondary Towns and Rural Community-Based Water Supply and Sanitation Project- Additional Financing) CATEGORY ADB FINANCING Amount Allocated [$] Percentage and Basis for Withdrawal from the Loan Number Item $ Subcategory Account Equipment and 1 Materials 3,900, percent of total expenditure* 2 Interest Charge 200, percent of total expenditure* 3 Unallocated 200,000 Total 4,300,000 * Exclusive of taxes and duties imposed within the territory of Sri Lanka ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS Asian Development Fund (Secondary Towns and Rural Community-Based Water Supply and Sanitation Project- Additional Financing) Number 1 Item Civil Works CATEGORY Amount Allocated [SDR/$] Category Percentage 10,700, ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account percent of total expenditure 2 3 Consultancy Incremental 800, , Interest Charge 300, Unallocated 1,200, Total 13,300,000 *Exclusive of taxes and duties imposed within the territory of Sri Lanka percent of total expenditure* percent of total expenditure* percent of amounts due 10

15 C. Detailed Cost Estimates by Financier L1993 ADB - Original ADF loan L2276 ADB - Supplementary ADF loan L2275 ADB - Supplementary OCR loan Muttur ADB Additional ADF loan Muttur ADB Additional OCR loan Government Community Total Cost Total Total Total Total Total Total Total Total A. Base Cost 1 Civil Work % % % % - 0% % % 2 Equipment % % % - 0% % % % 3 Resettlement % - 0% - 0% - 0% - 0% % % 4Survey % - 0% - 0% - 0% - 0% - 0% % 5 International consultants % - 0% - 0% % - 0% - 0% % 6 Local consultants % - 0% - 0% - 0% - 0% - 0% % 7 Training % - 0% - 0% - 0% - 0% - 0% % 8 Land % - 0% - 0% - 0% - 0% % % 9 Vehicles/motorcycles % - 0% - 0% - 0% - 0% - 0% % 10 Office equipment and computer % - 0% - 0% - 0% - 0% - 0% % 11 Incremental Recurrent Cost % - 0% - 0% % 0% % % Total base costs % % % % % % % B. Contingencies 1 Physical Contingencies % % % % % % % 2 Price Contingencies % % % % % % % Total contingencies % % % % % % % C. Finance Charges % % % % % - 0% % D. Tax and Duties % - 0% - 0% 0% 0% % % Grand Total % % % % % % % Totals do not tally due to rounding off. Source: Asian Development Bank estimates % of Total Base Cost 11

16 D. Detailed Cost Estimates by Outputs/Components Component 1 - Urban WSS % of Cost Category ($ million) Component 2 - Rural WSS % of Cost Category Component 3 - Institutional Strengthening % of Cost Category Amount Component 4 - Project Management % of Cost Amount Category Item Total Cost Amount Amount A. Investment Costs b Civil Work % % % % Equipment % % % % Resettlement % % % % Survey % % % % International consultants % % % % Local consultants % % % % 1 Training % % % % 2 Land % % % % 3 Vehicles/motorcycles % % % % 4 Office equipment and computer % % % % Subtotal (A) % % % % B. Recurrent Costs % % % % Total Base Cost % % % % C. Contingencies 1 Physical c % % % % 2 Price d % % % % Subtotal (C) % % % % D. Financing Charges During Implementation e % % % % E. Taxes % % % % Total Project Cost (A+B+C+D) % % % % Source: Asian Development Bank estimates 12

17 E. Detailed Cost Estimates by Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Total A. Investment Cost Civil Work Equipment Resettlement Survey International consultants Local consultants Training Land Vehicles/motorcycles Office equipment and computer Sub Total A B. Incremental Recurrent Cost C Contingencies D. Interest E. Taxes Total % Total Project Cost 0.75% 0.45% 0.75% 1.65% 5.88% 7.99% 13.89% 16.89% 51.76% % Source: Asian Development Bank estimates 13

18 A. Contract and Disbursement S-curve 1. Graph show contract awards and disbursement over the life of the project, and annually based on the contract awards and disbursement projections Amount $'million Year Series1 Series2 Source: Asian Development Bank estimates 14

19 B. Fund Flow Diagram Direct Payment MOF ADB Reimbursement Ministry of Water Supply and Drainage (FGIA) Contractors Suppliers Consultants EA - PMU (SGIA) Loan repayments Contractors Suppliers Consultants Urban Water Supply PIUs Rural Water Supply PIUs Contractors Suppliers Consultants Contractors Suppliers Consultants Consumers ADB: Asian Development Bank, EA: Executing Agency, FGIA: First Generation Impreset Account; MOF: Ministry of Finance, PMU: Project Management Unit; PIU: Project Implementation Unit 15

20 V. FINANCIAL MANAGEMENT A. Financial Management Assessment 1. Financial management assessment indicates there is no major potential issue with management of loan proceeds in NWSDB during project implementation. However, for NWSDB to achieve the highest accuracy in accounting, it is necessary to complete and fully implement the on-going enterprise resource planning system. Also, the transfer of asset balances from work-in-progress to respective asset classes is generally delayed even after the completion of the construction work. As such, the depreciation on these completed projects is not accounted for and underestimated. This may affect the tariff revision process, as the NWSDB s tariff policy is to recover operation and maintenance (O&M) costs and debt service or depreciation whichever is higher at the national level. 2. NWSDB suffers from large financial losses due to low tariffs, increasing energy cost, high non-revenue water, and large amount of accounts receivables. However, the size of losses has been reduced as a result of major tariff revisions in 2009, and a reduction of operational costs. The financial internal rate of return for the water and sewerage subprojects are negative due to the large capital cost. Nevertheless, the adopted design is considered as the least cost design. The operation of new subprojects will be sustainable when NWSDB: (i) revises water tariff annually as applicable, (ii) introduce sewerage tariff and annually revise as applicable, improve operation efficiency by 2.5% annually, reduction of non revenue water to 20%, and staffing to connection ratios to be 6 per connection. A summary of the Financial Management Assessment is in Annex A. B. Disbursement 2. The Loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2007, as amended from time to time), 4 and detailed arrangements agreed upon between the Government and ADB. 3. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS), 5 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list (Appendix 5) to subprojects financed by ADB. 4. Direct payment procedure by ADB will be utilized for payments to contractors above $100,000, and consultant's fees. Reimbursement, liquidation and replenishment through imprest accounts and statement of expenditure (SOE) procedures will be utilized for payments on civil works below $100,000, procurement of goods, recurrent costs (project management). Two separate first generation imprest accounts (FGIAs) and two second generation imprest accounts (SGIAs), depending on its funding sources, will be established and maintained by NWSDB as follows: 4 Available at: 5 Available at: 16

21 First Generation Imprest Account Second Generation Imprest Account OCR (1) account ($) established at the Central Bank of Sri Lanka in the name of MWSD (1) account (SLRs) established at the state owned bank in the name of NWSDB Project Management and Implementation Unit Funding Source ADF (1) accounts ($) established at the Central Bank of Sri Lanka in the name of MWSD (1) accounts (SLRs) established at the state owned bank in the name of NWSDB Project Management and Implementation Unit 5. The FGIAs and SGIAs will be established, managed, replenished and liquidated in accordance with ADB s Loan Disbursement Handbook (2007, as amended from time to time). The ceiling for the FGIAs will not exceed the lower of: (i) the estimated expenditure to be financed from the FGIAs for the first 6 months of Project implementation, or (ii) the equivalent of 10% of the loan amount. The maximum ceiling of each SGIA will be equivalent to 6 months estimated expenditures to be funded from each SGIA or 10% of the respective loan amount, whichever is lower. The request for initial advance to the FGIAs should be accompanied by an Estimate of Expenditure Sheet 6 setting out the estimated expenditures for the first six (6) months of project implementation, and submission of evidence satisfactory to ADB that the Imprest Accounts have been duly opened. For every liquidation and replenishment request of the FGIA, the borrower will furnish to ADB (a) Statement of Account (Bank Statement) where the imprest accounts are maintained, and (b) the Imprest Account Reconciliation Statement reconciling the above mentioned bank statement against the EA s records ADB's statements of expenditure (SOE) will be utilized for reimbursement and liquidation and replenishment of the imprest accounts for any individual payments not exceeding the equivalent of $100,000. SOE records should be maintained and made readily available for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000, unless otherwise approved by ADB. The Government is to consolidate claims to meet this limit for reimbursement and imprest account claims. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. 6. NWSDB will be responsible for: (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications to ADB. 6 Available in Appendix 29 of the Loan Disbursement Handbook. 7 Follow the format provided in Appendix 30 of the Loan Disbursement Handbook. 8 Checklist for SOE procedures and formats are available at:

22 C. Accounting 6. The NWSDB will maintain separate project accounts and records by funding sources for all expenditures incurred on the Project. Project accounts will follow international accounting principles and practices. D. Auditing 7. The NWSDB will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing and in accordance with the Government's audit regulations by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 6 months 9 of the end of the fiscal year by the executing agency. The annual audit report will include a separate audit opinion on the use of the Imprest Accounts, and the SOE procedures (as applicable). The Government, MWSD have been made aware of ADB s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited accounts. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB s financing is used in accordance with ADB s policies and procedures. For revenue generating projects only, ADB requires audited financial statements for each executing and/or implementation agency associated with the project. 9 for the ongoing loan 1993 the audit submission is by 9 months of the end of the fiscal year 18

23 VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 8. All advance contracting will be undertaken in conformity with ADB s Procurement Guidelines (April 2010, as amended from time to time) 10 and ADB s Guidelines on the Use of Consultants (April 2010, as amended from time to time). 11 The issuance of invitations to bid under advance contracting will be subject to ADB approval. The Government, executing and implementing agencies have been advised that approval of advance contracting does not commit ADB to finance the Project. 9. Advance contracting (proposed additional financing). Civil works contract HW&T/UWS/PA2/MUT/ICB for Muttur head works is ready for award. The re-bidding process started in 2008 and the bidding were closed in October The final evaluation was completed in middle of However the tender was not awarded due to shortage of funds. This contact will be financed by the proposed additional financing. The bidder has extended the validity of the tender in anticipation of the government or the proposed additional financing Retroactive financing (proposed additional financing). A maximum amount of eligible expenditures up to 20%% of the additional financing loans, incurred before loan effectiveness, but not more than 12 months before the signing of the loan agreements will be allowed. B. Procurement of Goods, Works and Consulting Services 11. All procurement of goods and works will be undertaken in accordance with ADB s Procurement Guidelines. 12. International competitive bidding procedures will be used for civil works contracts estimated to cost $2.5 million or more, and supply contracts valued at $500,000 or higher. Shopping will be used for contracts for procurement of works and equipment worth less than $100,000. All construction works for the rural component remain valued at less than $1 million equivalent, so they will be procured through NCB or, in the case of contracts valued at less than SLRs5 million (approximately $50,000 equivalent), they will be procured by CBOs following procedures for community participation in procurement acceptable to ADB. 13. Before the start of any procurement ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB s Procurement Guidelines. 14. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C. 15. All consultants and nongovernmental organizations (NGOs) will be recruited according 10 Available at: 11 Available at: 12 This is in the procurement plan under Consulting Services - item 1 & 2 19

24 to ADB s Guidelines on the Use of Consultants. 13 services are detailed in Section D. The terms of reference for all consulting 16. Under the additional financing, the services of the ongoing design and supervision consultants will be extended to facilitate project management and implementation. The Consulting firm is engaged using the quality- and cost-based selection (QCBS) method C. Procurement Plan 17. The procurement plan is in Annex B. D. Consultant's Terms of Reference 18. The consultant s terms of reference is in Annex C. 13 Checklists for actions required to contract consultants by method available in e-handbook on Project Implementation at: 20

25 VII. SAFEGUARDS 1. Environment. The Project is classified as environmental category B. As part of due diligence, proposed physical changes within the original design have been screened for safeguard significance and found to be within the original project categorization. IEEs incorporating detailed engineering design changes have been formulated for Batticaloa and Polonnaruwa; original IEEs for Hambantota and Muttur have been found to adequately address potential environmental impacts and mitigation measures. The project has renewed all environmental clearances from the Central Environmental Authority. During the supplementary loan processing in 2006, summary IEE (SIEE) was updated and it shows that none of the components will have significant adverse environmental impacts. Anticipated minor environmental impacts not included in the original design include dust generation caused by excavation activities, increased vibrations resulting from rock drilling, land subsidence because of poor soil conditions, and minor disturbance of the lagoon bed in Batticaloa during pipe-laying operations. Environmental impacts have been minimized through appropriate design and site location, and adequate mitigation measures have been proposed to prevent or minimize impacts resulting from construction and operation. The environmental management plan (EMP) will be implemented in accordance with ADB's Environment Policy (2002). 2. Involuntary Resettlement. A short resettlement plan (SRP) was prepared by the EA (NWSDB) during project appraisal, in accordance with the Government s National Involuntary Resettlement Policy 14 and ADB s Policy on Involuntary Resettlement (1995) 15. The proposed activity under this additional financing is within the original scope, the current SRP is valid. 3. Indigenous Peoples. he project was classified as category C for indigenous people s safeguards under the original loan. Since the Muttur scheme is within the original scope, the current classification is valid and no revision is needed in light of ADB s Policy on Indigenous People (1998). 14 Ministry of Land Development National Involuntary Resettlement Policy. Colombo. 15 ADB Policy on Involuntary Resettlement. Manila 21

26 VIII. GENDER AND SOCIAL DIMENSIONS 1. The gender action plan for the Project promotes equal representation of women in staff and project and partner organizations, and ensures the involvement of women throughout project development activities in all phases. Numerical targets set for the project have been met or exceeded. To facilitate gender and development, the project has initiated activities such as: (i) initial participatory social assessments to understand women s roles; (ii) formation of groups and organizations for women, and ensuring women s representation in other groups; (iii) women income generation programs through project construction work; (iv) women s associations savings and credit programs; and (v) female leaders training sessions. The gender action plan is attached in Annex D. 22

27 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION A. Project Design and Monitoring Framework Design Summary Impact Improve health conditions in Batticaloa, Hambantota, Muttur and Polonnaruwa Performance Targets and Indicators with Baselines Decrease of about 20% in infant mortality in project areas by baseline (per 1,000 live births): Sri Lanka 11.3 Hambantota 6.7, Batticaloa 21.1, Trincomalee (Muttur) 3.4, Polonnaruwa 27.6 Data Sources and Reporting Mechanisms Hospital and medical centers records in project areas Provincial statistics (Batticaloa and Muttur, a Polonnaruwa, b Hambantota c Assumptions and Risks Assumptions Macroeconomic stability Stable security situation 50% decrease in incidence of waterborne diseases in project areas by baseline (incidence of water and sanitation-related disease): Batticaloa 16%, Hambantota 16%, Muttur 39%, Polonnaruwa 10%. Project completion report Department of census and statistics d Central Bank statistics e Risks Lack of capacity in service delivery Economic growth cannot be easily projected 75% decrease in time spent collecting water in project areas by baseline (service hours per day): 3 4 hours per day in rural areas. Urban: Batticaloa 6, Hambantota 16, Muttur 0, Polonnaruwa 24 Project review missions Reports, and IED impact evaluation studies Project website f Essential water tariff revisions are not undertaken The bids are not valid or the contract is not permissible for award Cost overrun Outcome To provide safe drinking water and safe sanitation to people in project areas An additional 946,000 people have access to safe water g and 171,500 people have access to safe sanitation h in five urban areas and two rural districts by Project BME reporting, Government of Sri Lanka official statistics, ADB review, and evaluation reports Assumption A stable political environment and positive economic growth Outputs 1. Urban schemes 1.1 Construction of three new water networks to provide 40,000 m 3 /day in Batticaloa, 30,500 m 3 /day in Polonnaruwa and 8,500 m 3 /day in Muttur (to be finalized under additional financing) 799km water supply pipes installed or upgraded and length of network 100,000 connections providing at least 15 m 3 /month of safe drinking water 24 hours daily by % of households in project area have access to safe sanitation by 2012 Batticaloa Hospital waste discharge meets Government of Sri Lanka standards by 2010 NWSDB monthly report on service performance, billing, collection, and expenditure Project BME reporting, Government of Sri Lanka official statistics, ADB review and evaluation reports NWSDB monthly report on service performance, billing, collection, and expenditure PMU monitoring reports NWSDB water quality tests Assumptions Timely provision of counterpart funds No delays in construction activities due to former conflict areas Continuous government support to the National Water Supply and Sanitation Policy 23

28 Design Summary 1.2 Extension of one existing water network to provide 15,000 m 3 /day in Hambantota 1.3 Construction of 33,000 low-cost latrines 1.4 Construction of Batticaloa Hospital waste treatment plan with capacity to treat 350 m 3 /day 1.5 Provision of training and public awareness campaigns 2. Developing rural water supply and sanitation 2.1 Construction of rural water schemes to provide drinking water (piped, rainfed, protected well) to 350,000 people in Anuradhapura, Batticaloa and Polonnaruwa. 2.2 Construction of 27,000 low-cost latrines 2.3 Delivering of training Performance Targets and Indicators with Baselines Nonrevenue water less than 25% and collection rate is greater than 90% by baseline: Polonnaruwa: capacity 6,000 m 3 /day, 4,200 connections, coverage of 22,300 people, NRW 30% Muttur: small scheme only supply is limited to 2 hours daily. Hambantota: capacity of 7,500 m 3 /day, 9,288 connections, coverage of 42,000 people, NRW 29% Batticaloa: capacity of 1,400 m 3 /day, 1,769 connections, coverage of 7,200 people, NRW 30% Batticaloa Hospital: No treatment 85% of the population in project areas has access to at least 20 liters/person/day of safe drinking water by % of the population in project areas has access to safe sanitation by CBOs, pradeshiya sabhas, i and provincial councils have the capacity to implement all project activities and to assure the sustainability of investments, including O&M. Training to participating CBOs, 15 participating pradeshiya sabhas, and one provincial council Data Sources and Reporting Mechanisms Project progress reports Department of Health assessments Project progress reports Central Environmental Authority monitoring Project BME reporting and surveys ADB review missions reports and IED impact evaluation studies Department of Health assessments Government of Sri Lanka official statistics Project progress reports Assumptions and Risks and sector reforms Assumption Willingness of beneficiaries to organize into CBOs and participate in project activities 3. Supporting institutional strengthening capacity 3.1 Delivery of a national public awareness and education campaign 3.2 Implementation of a corporate strategy to improve NWSDB management 3.3 Implementation of a strategy to reduce O&M cost 3.4 Implementation of a financial management strategy Increased public awareness of cost of water Performance targets agreed by the project are met, including a 1.2 debt service ratio, a 10% decrease in establishment expenses, and a 20% increase in rehabilitation costs, a 2% annual decrease in kilowatt-hours electricity and a 5% annual decrease of staff numbers, a 14% increase in cubic meters billed, and a 97% collection rate by Weighted average tariff covers O&M, debt service, and rehabilitation expenses 85% of schemes with less than 1,000 connections are operated by CBOs, local authorities, or the private sector Project BME reporting and surveys ADB review missions reports and IED impact evaluation studies NWSDB planning and operational data and annual reports Project progress reports NWSDB planning and operational data and annual reports Project progress reports NWSDB planning and operational data and annual Assumptions Enforcement of water sector regulations and implementation of sector reforms Willingness of CBOs, local authorities, or the private sector to take responsibility for small schemes Willingness of consumers to pay full cost of water Commitment to an autonomous and accountable service 24

29 Design Summary 3.5 Implementation of a strategy to transfer systems with less than 1,000 connections to local authorities, CBOs, and the private sector 3.6 Development of an asset registry for systems with more than 10,000 connections Performance Targets and Indicators with Baselines by % of schemes with more than 10,000 connections have an asset registry by Activities with Milestones j 1. Urban Component 1.1 PMU, town PIUs, and PIU (irrigation) formed by Q Benefit monitoring survey conducted for different towns by the end of Q Necessary water rights water extraction (memorandum of understanding signing) obtained by the end of Q Bidding documents tendered, evaluated, and contractors selected by the end of Q Construction activities completed by the end of Q Initial households connections started by Q for completed schemes 2. Rural Component 2.1 PMU, Technical Support Unit, and pradeshiya sabha implementation units formed by the end of Q Pradeshiya sabhas selected by the end of Q Nongovernment organizations/partner organizations registered and recruited to support CBOs for batch 1 by Q Completion of all schemes by Q Institutional Strengthening 3.1 NWSDB will implement a corporate strategy to improve financial planning and resource allocation by the end of Q NWSDB will implement its strategy and action plan to address audit findings and accounting and financial management recommendations by the end of Q Action plan to improve operational performance implemented by the end of Q NWSDB will complete an asset registry in all regional centers by Q Strategy to identify water schemes with less than 1,000 connections for rehabilitation and eventual transfer to local government institutions and CBOs to be staged in two phases: (i) start pilot testing Q2 2007, and (ii) extended program by end of project 25 Data Sources and Reporting Mechanisms reports Project progress reports NWSDB planning and operational data and annual reports Project progress reports Inputs Loan ADB: $137.9 million Item Asian Development Fund resources (original) Asian Development Fund resources (supplementary 1) Asian Development Fund resources (additional financing 2) Ordinary capital resources (supplementary 1) Ordinary capital resources (additional financing 2) Assumptions and Risks delivery mechanism Amount ($ million) Government $118.5 million Item Amount ($ million) Counterpart financing 18.6 (original) Counterpart financing 97.9 (supplementary 1) Counterpart financing 2.0 (additional financing) Community $3.1 million ADB = Asian Development Bank, BME = benefit monitoring and evaluation, CBO = community-based organization, IED = Independent Evaluation Department, m 3 = cubic meter, NRW = nonrevenue water, NWSDB = National Water Supply and Drainage Board, O&M = operation and maintenance, PIU = project implementation unit, PMU = project management unit, Q = quarter. a Batticaloa and Muttur: b Polonnaruwa: c Hambantota: d Department of Census and Statistics: e Central Bank Statistics: f Project website: g As defined by the World Health Organization, access to safe drinking water is the proportion of people using improved drinking water sources: household connection, public standpipe, borehole, protected dug well, protected spring, and rainwater. Safe drinking water is water with microbial, chemical, and physical characteristics that meet World Health Organization guidelines or national standards on drinking water quality.

30 h United Nations Road Map Towards the Implementation of the United Nations Millennium Declaration. New York (The report of the Secretary-General). Currently, the proportion of households with sustainable access to safe drinking water is 84.7% and households access to improved sanitation is 93.6%. i Pradeshiya sabha = smallest local government unit. j Activities with milestones under the ongoing project. The same activities will support the implementation of the project under the second supplementary loan. Sources: Asian Development Bank. B. Monitoring 1. Project performance monitoring The Project has establish a project performance monitoring system (PPMS) which will show cause-and-effect relationships between the Project and its impact, will be updated and reported quarterly, and may include Critical Path Method diagrams. Project performance monitoring and evaluation will be based on the design and monitoring framework and the baseline surveys specified. Beneficiaries will be involved in project monitoring evaluation, through direct reporting to project management unit (PMU). The indicators to be monitored will be formulated by and agreed upon with the executing agency, including indicators pertaining to physical progress and institutional reform activities. The PMCIU will gather disaggregated baseline physical and socioeconomic data, submit a detail implementation plan for monitoring performance, and prepare benchmark information for ADB s review and concurrence within 9 months of loan and grant effectiveness. This will be reported quarterly through the executing agency's quarterly progress reports and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system. 16 Progress is updated in the project s 17 and NWSD s websites respectively. 2. Compliance monitoring: Monitoring of the resettlement plan will be undertaken throughout the project period by the PMU. This will begin during the pre-construction period to comply with ADB's policy that full compensation for resettlement impacts must be provided before physical or economic displacement occurs. During the project period, the PMU will track indicators such as: (i) the number of persons affected, (ii) assistance extended, (iii) community resources affected, (iv) restoration undertaken, and (v) financial aspects such as compensation paid (as relevant). Monthly targets will be provided by the PMU Social Officer. Monthly progress reports will be prepared by the PMU, reporting actual achievements against the targets and reasons for shortfalls, if any. The PMU will be responsible for managing and maintaining affected persons databases, documenting results of the affected person census, and verifying asset and socio-economic survey data that will be used as the baseline for assessing resettlement plan implementation impacts. Updates on resettlement plan implementation will be included in the overall project implementation reporting to ADB. 7. The environmental officer attached to the PMU will be responsible to: (i) ensure that the environmental/technical requirements and administrative policies and recommendations are properly integrated in the designing and planning as well as during construction and operation of the project; (ii) review the updated and revised EMP prepared during detailed design; (iii) ensure that the respective bid documents and contract have adequately covered the requirements to comply with respective environmental safeguard documents such as IEE and EMP; (iv) ensure that applicable guidelines and criteria on environment are complied with; (v) Oversee the regular monitoring activities during construction and operation phases of the project conducted by 16 ADB's project performance reporting system is available at: