IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-57657, TF-98082) ON A MULTI DONOR TRUST FUND FOR ACEH AND NIAS (MDF) GRANTS

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR2678 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-57657, TF-98082) ON A MULTI DONOR TRUST FUND FOR ACEH AND NIAS (MDF) GRANTS IN THE AMOUNT OF US$136.7 MILLION TO THE REPUBLIC OF INDONESIA FOR AN INFRASTRUCTURE RECONSTRUCTION FINANCING FACILITY PROJECT Sustainable Development Department Indonesia Country Management Unit East Asia and Pacific Region May 23, 2013

2 CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2012) Currency Unit = Indonesian rupiah IDR 1,000 = US$ US$1.00 = IDR 9,638 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AF Bappenas BRR CEAP CSC EIA FM FMR GoI IBRD ICB IDA IFR IPM IREP IRFF IRFF- AF Kabupaten LARAP MDF M&E MIS MOF MoPW MOU NCB NGO O&M PAD PDCS PIU PMU PPK Satker Additional Financing National Development Planning Agency Bureau for Rehabilitation and Reconstruction for Aceh and Nias Construction Environmental Action Plan Construction Supervision Consultant Environment Impact Assessment Financial Management Financial Management Report Government of Indonesia International Bank for Reconstruction and Development International Competitive Bidding International Development Association Interim Financial Report Infrastructure Program Management Infrastructure Reconstruction Enabling Program Infrastructure Reconstruction Financing Facility project Infrastructure Reconstruction Financing Facility Additional Financing Rural district with decentralized administrative responsibility Land Acquisition and Resettlement Action Plan Multi-Donor Trust Fund for Aceh and North Sumatra (later simplified to Multi-Donor Trust Fund for Aceh and Nias) Monitoring and Evaluation Monitoring Information System Ministry of Finance Ministry of Public Works Memorandum of Understanding National Competitive Bidding Non-Government Organization Operations and Maintenance Project Appraisal Document Planning, Design and Construction Supervision Project Implementation Unit Project Management Unit Pejabat Pembuat Komitmen (Commitment Making Official) Satuan Kerja Perangkat Daerah (responsible for day-to-day) implementation and overseeing civil works contractors

3 Sumut TA TTL Sumatera Utara (North Sumatera) Technical Assistance Task Team Leader Vice President: Axel van Trotsenburg Country Director: Stefan G. Koeberle Sector Manager: George Soraya Task Team Leader: Khairy Al-Jamal ICR Team Leader: Khairy Al-Jamal ICR Primary Author: Reda Hamedoun

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5 REPUBLIC OF INDONESIA Infrastructure Reconstruction Financing Facility and Additional Financing CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Grantee/Implementing Agencies/Donors Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Grant Preparation and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Grantee's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents Map (IBRD No )... 59

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7 A. Basic Information Country: Indonesia Project Name: Aceh Infrastructure Reconstruction Financing Facility (IRFF) Project ID: P L/C/TF Number(s): TF-57657,TF ICR Date: 05/29/2013 ICR Type: Core ICR Lending Instrument: SIL Grantee: Original Total Commitment: Revised Amount: USD M Environmental Category: A REPUBLIC OF INDONESIA USD M Disbursed Amount: USD M Implementing Agencies: DG Cipta Karya - Ministry of Public Works DG Highway Ministry of Public Works Bureau for Rehabilitation and Reconstruction for Aceh and Nias (BRR) Cofinanciers and Other External Partners: Multi-Donor Trust Fund (MDF) B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/19/2006 Effectiveness: 03/14/2007 Appraisal: 06/20/2006 Restructuring(s): 01/07/ /10/ /16/ /30/ /13/ /19/2012 Approval: 12/11/2006 Mid-term Review: 09/30/ /19/2008 Closing: 06/30/ /31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Grantee Performance: Satisfactory Moderate Satisfactory Satisfactory i

8 C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Performance: Satisfactory Overall Borrower Performance: Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project Yes at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Moderately Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General water, sanitation and flood protection sector Ports, waterways and shipping Roads and highways Theme Code (as % of total Bank financing) Other urban development E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg James W. Adams Country Director: Stefan G. Koeberle Andrew D. Steer Sector Manager: George Soraya Keshav Varma Project Team Leader: Khairy Al-Jamal Aniruddha Dasgupta ICR Team Leader: ICR Primary Author: Reda Hamedoun Reda Hamedoun ii

9 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the Project is to assist the Province of Aceh and 12 Local Governments in Aceh and Nias to reconstruct/rehabilitate strategic infrastructure and to extend key infrastructure services of adequate quality standards that meet the needs of communities where infrastructure was damaged by the tsunami of 2004 and the subsequent earthquake. Revised Project Development Objectives (as approved by original approving authority) In essence, the project development objectives were not revised. However, as per amendment 1, the PDO in the PAD for the Additional Financing, excluded the phrase "Province of Aceh and 12 local governments." This did not change the substance or meaning of the PDO, nor the assessment of outcomes. Three additional PDO key indicators (11 through 13 in the matrix below) were introduced to reflect the specific investments of additional financing. (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Proposals of infrastructure sub-projects financed by IRFF will include a set of indicators that will be used to measure performance. All sub-projects met the selection Design criteria and met the specifications are N/A targeted objective well defined and There was no readily N/A with high quality of met, 100% of available criteria design, supervision infrastructure and continuous projects monitoring and evaluation. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: All sub-projects were selected based on the developed selection criteria, reflected the priority and constructed properly. Two water sub-projects needed to be reconstructed. Indicator 2 : Approved sub-projects after the Recipient's infrastructure development under IREP is drafted to reflect the priorities laid out therein Value quantitative or Qualitative) Prioritized projects A long list of projects was from local constructed but no N/A governments, prioritization yet 100% of projects All sub-projects met the targeted objective with high quality of design and supervision Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % Achieved: The selection criteria developed by the IPM was applied to develop the sub-projects priority list. iii

10 achievement) Indicator 3 : Value quantitative or Qualitative) Technical designs of approved sub-projects are sound and appropriate Prepare Detailed Engineering All designs are Some conceptual designs Designs for all sound and carried were in place. Review Sub-projects N/A out by international verifications and detailed included in the qualified design designs were absent. appraisal firms. checklists. Date achieved 01/15/ /31/ /31/ /31/2012 Comments Achieved: Designs were prepared by competent international consultants under (incl. % the IREP project. achievement) Proper financial and safeguard measures are integrated into the approved subprojects Indicator 4 : Value quantitative or Qualitative) All sub-project Initial sub-projects were preparation reviewed by Bank includes proper safeguards specialists and financial and action plans were safeguard review approved and monitored. and provisions. N/A All sub-projects had provisions to implement the adequate EMP and LARAPs. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: In addition to integrating the financial and safeguards into the constructed sub-project designs, the Task Team monitored the implementation of these measures. Indicator 5 : Implementation of infrastructure sub-projects financed by IRFF is adequately supervised Value quantitative or Qualitative) No supervision consultant was in place prior to IREP. Adequately staffed supervision. N/A All sub-projects had been continuously supervised by qualified consultants and personnel. Date achieved 01/15/ /31/ /31/ /31/2012 Comments Achieved: Four international supervision construction consultants were selected (incl. % to supervise the construction of all sub-projects. achievement) Performance and financial audit reports (in addition to external audits financed Indicator 6 : under IREP) of financial statements of infrastructure sub-projects financed by IRFF are prepared Value quantitative or Qualitative) FM reports to be prepared and submitted on time, N/A 100% of N/A Audits are project related. deliverables received and acceptable to the Bank. Globally complied with. All audits were completed and submitted to the Bank iv

11 Performance and financial audits to be annually conducted. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Indicator 7 : Value quantitative or Qualitative) Achieved: In addition to the performance and financial audit carried out by the national auditor, external audits were annually conducted to the satisfaction of the Bank. A progressively increasing proportion of projects, is managed by local and provincial government staff over IRFF project cycle Provincial and local governments were managing some projects at low pace prior to Tsunami and the earthquake. The scale of reconstruction was far beyond the capacity of these governments and even the central authorities. Increase the number of projects that would be N/A managed by local and provincial government staff. Local and provincial government were involved in managing many projects by their own staff based on their capacity building through the IRFF project Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: Based on the knowledge acquired from the project, the local and provincial governments were able to supervision and implement additional infrastructure projects from their own budgets. A progressively increasing proportion of projects... incorporates appropriate Indicator 8 : safeguards measures, financial management and procurement practices during project design and implementatio Value quantitative or Qualitative) Safeguards were dealt with in the periphery and in most cases neglected. Incorporation of the safeguards measures, financial management and procurement practices during project design and implementation. N/A The local and provincial government projects had carefully handled the safeguards and fiduciary aspects in the design and implementation of their own projects. Date achieved 01/15/ /31/ /31/ /31/2012 Comments Achieved: The local and provincial governments, increasingly, reflected their (incl. % acquired knowledge in safeguards and fiduciary aspects to their own projects. achievement) Maintenance of infrastructure sub-projects reflects asset maintenance strategies Indicator 9 : developed by IPM/IREP consultants Value quantitative or Qualitative) Inadequate maintenance capacity at the local and provincial government levels. Proper maintenance of all N/A assets developed under the project. The capacity of the local and provincial governments was improved through various programs. v

12 The provincial government assisted the local governments to account for maintenance budget. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Indicator 10 : Value quantitative or Qualitative) Partially Achieved: IPM as well as BRR contributed in facilitating capacity building under other programs. Provincial government requested the allocation of maintenance budget for local governments. IPM/IREP consultants design institutional mechanisms according to local/provincial government capacity to sustain sub-project implementation and supervision responsibilities of BRR after the completion of BRR's mandate. N/A Transition arrangement was not in place. However, the decree to establish BRR referred to its closure and the need to transfer its functions to the line agencies. Develop appropriate institutional arrangement and smooth asset transfer to line agencies. N/A Asset management plans were developed by the IPM to be implemented by the local and provincial governments. All sub-projects have been transferred to the respective local, provincial and central government. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: IPM designed the institutional arrangement and assisted the local and provincial governments to be able to handle the asset management. After BRR, the completion of the project was entrusted to MoPW. Indicator 11 : Restoration of the devastated environment of the wetlands along some parts of the West Coast Road and around the Kuala Bubon bridge Value quantitative or Qualitative) Impacted environment at many sections along the West Coast road and at the Bubon bridge. Ensuring proper cross drainage and plantation of local N/A species to restore the devastated environment. Achieved as the cross drainage was accounted for in the elevated section of the roads at the swampy areas. Also plantations were carried out as part of the sub-projects CEAPs. Date achieved 08/13/ /31/ /31/ /31/2012 Comments Achieved. This was a new indicator, added at the time of the additional financing (incl. % in June achievement) Reduction in travel time from Aceh Jaya District (Calang) to Aceh Barat District Indicator 12 : (Meulaboh) Value Travel time is around 2 Travel time to be N/A Achieved as the vi

13 quantitative or Qualitative) hours. reduced to Less than 1 hour. bridge was completed and the travel time was reduced to 50 minutes. Date achieved 08/13/ /31/ /31/ /31/2012 Comments Achieved: No more delay to be suffered from the use the 20 km detour which (incl. % was the only available alternative to bypass the destroyed Kuala Bubon Bridge. achievement) Efficient travel between Calang to Meulaboh across the Kuala Bubon bridge. The Indicator 13 : bridge will eliminate the leeway between km 216 and km 234 Value quantitative or Qualitative) 38km travel distance 18km travel distance N/A 18 kilometers travel distance Date achieved 08/13/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: Reconstruction of the Kuala Bubon Bridge stopped the detour between km 216 and 234 of the coastal highway. Travel costs would be reduced by lower fuel costs, time, and vehicle operating costs. (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Identified priority sub-projects are completed Most coastal infrastructure and substantial inland infrastructure were destroyed or heavily degraded. Completion the reconstructed of priority subprojects with good quality. Formally Revised Target Values Target was not revised, but scope was expanded to include additional investments (road and bridge reconstruction) in additional the project area was expanded to include any impacted area in Aceh and Nias. Actual Value Achieved at Completion or Target Years 59 out of the 60 priority infrastructure subprojects were completed (including 3 terminated subprojects) and budget will be allocated by the GoI to complete the terminated subproject, Nias JK-2. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % Achieved: A final survey confirmed the number and good status of the assets. achievement) Indicator 2 : All sub-projects are handed over to the line agencies for their operation and vii

14 Value (quantitative or Qualitative) maintenance N/A This is project related and the MOUs to handover completed sub-projects were introduced during the implementation phase. Memoranda of understanding are signed between BRR and local and provincial governments to hand over completed subprojects. N/A MOUs for the handover of these assets to relevant agencies (central, provincial and local) to ensure proper operation and maintenance have been signed and effective transfer to the local and provincial governments was completed. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: The MOUs served for smooth transfer of respective sub-projects to the local and provincial governments. This would facilitate the sustainability of assets. Indicator 3 : A comprehensive survey designed to assess the state of infrastructure service delivery from IRFF and AF financing of individual sub-projects Value (quantitative or Qualitative) N/A Project related during the implementation and after completion. Comprehensive assessment survey at the end of the project. N/A In addition to the close supervision by the construction supervision consultants, the project conducted beneficiary interviews and the MDF conducted beneficiary survey as part of the MDF trust fund completion. Date achieved 01/15/ /31/ /31/ /31/2012 Comments (incl. % achievement) Achieved: The status of all sub-projects was continuously assessed. The beneficiary interviews and surveys ensured the good quality of the sub-projects developed under the project. G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 03/28/2007 Satisfactory Satisfactory /04/2008 Satisfactory Moderately Satisfactory /30/2009 Moderately Satisfactory Moderately Satisfactory /30/2010 Moderately Satisfactory Moderately Satisfactory viii

15 5 03/29/2011 Moderately Satisfactory Moderately Satisfactory /25/2011 Moderately Satisfactory Moderately Satisfactory /04/2012 Moderately Satisfactory Moderately Satisfactory H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 01/07/2008 N S MS /10/2009 N S MS /16/2009 S MS /30/2010 N MS MS /13/2010 N MS MS /19/2012 N MS MS Reason for Restructuring & Key Changes Made Revise the scope of the impacted area (eligibility criteria for sub-projects) Misquoted date for Restatement of GA. Should be deleted. Restatement of GA, MoPW became the implementing Agency after closure of BRR. Extension of the closing date to 12/31/2011. Additional Financing (Grant TF098082) for new investments in road and bridge reconstruction / rehabilitation. Extension of the Closing date to 12/31/2012. ix

16 I. Disbursement Profile x

17 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and sector context The tsunami of December 26, 2004 and the subsequent earthquake killed or left missing more than 230,000 people in Indonesia, and the total reconstruction and development program for Aceh and Nias was estimated to cost up to US$9 billion through The government of Indonesia (GOI) created a dedicated Rehabilitation and Reconstruction Agency Badan Rehabilitasi dan Rekonstruksi (BRR) to lead the recovery efforts. The BRR priorities were to (i) strengthen coordination between donors and government agencies; (ii) ensure pledges for infrastructure are prioritized and matched with sector needs; (iii) improve the quality and pace of infrastructure reconstruction supporting housing/settlements; (iv) develop institutional resources for sustainable infrastructure operations and services after the BRR s operating period; (v) improve cost effectiveness through quality management and competitive procurement; and (vi) and increase the efficiency and flexibility of the capital works planning and budgeting process. As of March 2006, approximately US$4.7 billion had been allocated by GOI, NGOs and donors (including MDF) to specific rehabilitation projects and an estimated additional US$3.7 billion had been committed but had not been allocated to specific projects. Of this total of US$8.4 billion, US$535 million comes from the MDF. This total of US$8.4 billion appears sufficient given overall funding needs to: (i) cover the original loss assessment across all sectors from the tsunami and earthquake o f U S$4.9 billion; (ii) cover anticipated cost increases o f U S$ 1.2 billion resulting from inflation; and (iii) build back better (US$2.3 billion) according to the GOI s stated objective. However, BRR, donors and NGOs interests and focus are varied across sectors according to their comparative advantage and preference and this has resulted in some mismatch between available funds and financing needs. Infrastructure, in particular, showed a deficit of available funds for reconstruction of about US$650 million. Damage to infrastructure was substantial and progress slow. To the extent that both physical infrastructure and staffing were limited before the tsunami, (for e.g., in the water and sanitation sector, there were no sewage systems and less than 30 percent of the population were provided with piped water), building back better would require substantially more investment than simply replacing what was lost. Sectoral funding gaps resulting from a mismatch between available funds and financing needed further strain reconstruction efforts. Lack of sufficient funding was particularly severe in the transport sector, and to a lesser extent in flood control and in irrigation. The funding deficit in the transport sector was a critical issue as an efficient transport network was vital for the delivery of rehabilitation and reconstruction assistance and for overall economic development. 1

18 To determine the allocation of remaining MDF resources and to provide a strategic approach to infrastructure design and management, BRR has outlined an Infrastructure Reconstruction Strategy. This strategy serves as a framework for rehabilitation tailored to addressing infrastructure needs at the district and provincial levels, in particular, infrastructure linking communities. The core approach is to engage local governments, in collaboration with affected communities, to prioritize and manage their own infrastructure needs, within a framework of strong planning and oversight by BRR, with appropriate technical assistance (TA). BRR s medium-term strategy for the MDF comprises three main priorities: (i) (ii) (iii) Remaining MDF resources should be predominantly used for the reconstruction and development (i.e., building back better) of infrastructure, broadly defined, at the housing plot, community, district and provincial levels. The provision of infrastructure should be closely matched with capacity building efforts for local and provincial governments through learning by doing approach and community participation for enhanced governance to prepare for the BRR's handover of recovery activities to local and provincial governments in Though the initial focus will on the areas most damaged by the tsunami and earthquake (with a particular focus on Nias), infrastructure support and related capacity building should be gradually extended to districts of Aceh where years of conflict stunted economic and human development. The BRR Infrastructure Reconstruction Strategy encompassed three phases: (i) the execution o f t he ongoing MDF-supported Immediate Action Plan (IAP) agreed upon in November 2005 to meet urgent infrastructure needs; (ii) the Infrastructure Reconstruction Enabling Program (IREP), which provided technical assistance for the mobilization of human resources and technical support to BRR, provincial, and local governments; and (iii) the Infrastructure Reconstruction Financing Facility (IRFF), which financed local and provincial level infrastructure sub-projects, provided targeted technical assistance and capacity building to local governments to plan, implement and strengthen implementation oversight of the infrastructure reconstruction program, and facilitated the transition of infrastructure program management to provincial and local governments. Rationale for Bank Assistance As a leading international development agency in the area of post-disaster reconstruction, with a longstanding engagement with relevant government agencies in Indonesia and around the world, Bank s involvement in Indonesia s community-driven development program also provided a platform to quickly replicate stakeholder consultation, participation mechanism and scale up financing to specifically address reconstruction needs. GoI had also asked the Bank to take a lead in coordinating the donor community, requesting suggestions on how this could be handled in practice. In March 2005, the Bank formally established the "Multi-donor Trust Fund for Aceh and North Sumatra" (MDTFANS), later simplified to "Multi Donor Fund for Aceh and Nias (MDF)". The 2

19 Bank also provided at the same time a grant of US$25 million as a contribution to the MDF. In all, 15 funding agencies contributed an initial US$550 million to the MDF. The Bank and the European commission channeled all their support through the MDF, while the Nordic countries, the Netherlands and Belgium provided half or more of their funding through the MDF. Project Background and development It was noted that most of funds pledged to support rehabilitation and reconstruction in Aceh were quickly programmed by the GoI leaving gap to finance minimum needs in certain critical areas. BRR s strategy, therefore, was to focus on the remaining available funds to ensure that they were allocated to cover these gaps. Of the donor resources, the MDF was the largest source of programmable funds with US$230 million available. Among other priorities, BRR s medium-term strategy calls for the main utilization of the remaining MDF resources for the reconstruction and development (i.e., building back better) of infrastructure on the areas mostly damaged by the tsunami and earthquake in Nias and Aceh. The GoI has, initially allocated $119.5 million from its own resources to supplement the MDF grant. In order to guide the investment program during BRR s assignment period, BRR developed an Infrastructure Reconstruction Strategy. This strategy encompassed three phases: (i) the execution of the ongoing MDF-supported Immediate Action Plan (IAP) agreed upon in November 2005 to meet urgent infrastructure needs; (ii) the proposed Infrastructure Reconstruction Enabling Program (IREP), which would provide technical assistance for the mobilization of human resources and technical support to BRR, provincial, and local governments; and (iii) investment in infrastructure works by BRR and other donors, including through a proposed Aceh Infrastructure Reconstruction Facility (IRFF). The implementation of IRFF would be financed through the MDF and the GoI (while the technical support would be managed under IREP). 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objective of the Project was to assist the Province of Aceh and 12 Local Governments in Aceh and Nias to reconstruct/rehabilitate strategic infrastructure and to extend key infrastructure services of adequate quality standards that meet the needs of communities where infrastructure was damaged by the tsunami of 2004 and the subsequent earthquake. The key Performance Indicators for this development objective at appraisal were: (i) Proposals of infrastructure sub-projects financed by IRFF will include a set of indicators, including use of infrastructure, quality, user satisfaction, cost and timeliness that will be used to measure performance during sub-project implementation and after sub-project completion. Monitoring mechanisms, to assess the level of compliance with sub-project performance criteria will be put in place; 3

20 (ii) (iii) (iv) (v) (vi) (vii) Infrastructure sub-projects financed by IRFF after the infrastructure development strategy drafted to reflect the priorities laid out therein; Technical designs of infrastructure sub-projects are sound and appropriate; Proper financial and safeguards measures are integrated into the preparation of infrastructure sub-projects financed by IRFF; Implementation of infrastructure sub-projects financed by IRFF is adequately supervised; Performance and financial audit reports (in addition to external audits financed under IREP) of financial statements of infrastructure sub-projects financed by IRFF are prepared; A progressively increasing proportion of projects, is managed by local and provincial government staff over IRFF project cycle; (viii) A progressively increasing proportion of projects managed by local and provincial government staff over IRFF project cycle incorporate appropriate safeguards measures, financial management and procurement practices during project design and implementation. (ix) Maintenance of infrastructure sub-projects reflects asset maintenance strategies developed by IPM/IREP consultants; (x) IPM/IREP consultants design institutional mechanisms according to local/provincial government capacity to sustain sub-project implementation and supervision responsibilities of BRR after the completion of BRR s mandate; (xi) A comprehensive survey designed to assess the state of infrastructure service delivery, in the 12 districts of Aceh and Nias that are benefiting from IRFF financing of individual sub-projects will be conducted at the beginning and at the end of IRFF. Additionally, the survey will assess beneficiaries satisfaction with infrastructure investments made in their respective communities as well as their quality at the end of IRFF. As per our assessment, indicator xi would be considered as intermediate indicator rather that PDO key indicator. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 4

21 In essence, the project development objectives were not revised. However, as per amendment 1, the PDO in the Project Paper for the Additional Financing, excluded the phrase Province of Aceh and 12 local governments. This did not change the substance or meaning of the PDO, nor the assessment of outcomes. Three additional PDO key indicators were introduced to reflect the specific investments of additional financing. (i) (ii) (iii) Improved Access from Calang to Meulaboh across the Kuala Bubon Bridge. Efficient travel between Calang to Meulaboh across the Kuala Bubon Bridge. The bridge will eliminate the lee way between Km216 and Km 234. Restoration of the destroyed environment of the wetlands across the West Coast Road and around the Kuala Bubon Bridge 1.4 Main Beneficiaries The primary, direct beneficiaries of the IRFF were the people of the provinces of Aceh and Nias (4,487,000 and 757,000 inhabitants respectively), who benefited from the rebuilding and restoration of essential infrastructure services such as roads, ports, water supply, sanitation, flood mitigation, and drainage. Achievement of the project objectives was intended to in turn support higher level goals of fostering economic growth and improving the quality of life in Aceh and North Sumatra. The geographic coverage of IRFF at local government level spanned, primarily, 12 local governments, 9 of which benefitted from IREP (7 local governments in the West Coast and 2 in Nias), as well as 3 other local governments (Aceh Besar, Banda Aceh and Sabang). At the provincial level, IRFF included strategic projects, prepared by the provincial government with IREP support. As amended (amendment 1), some of these projects were located outside the jurisdiction of the 12 local governments to cover the East Coast and central parts of Aceh. During implementation additional financing was approved for investments outside the original sub-project eligibility areas as reflected in Amendment 2 to the IRFF - TF grant agreement. These investments, focused on road transport and access, benefited not only the people near the sub-projects, but the wider population in the disaster-affected areas. In addition, the BRR, MoPW, PMU, PIU, local governments, and local contractors and subcontractors were secondary beneficiaries of the project through the increase of their project management capacity and the implementation of Aceh and Nias reconstruction program. 1.5 Original Components (as approved): 5

22 The IRFF of US$291 million, co-financed by MDF and BRR, originally consists of two main components that would be implemented over the January January 2010 period. A detailed description of the project components is provided in Annex 2 Component 1 - Financing of Infrastructure Reconstruction and Rehabilitation Investments (US$273.0 million) to finance individual infrastructure reconstruction sub-projects in 12 local governments - 9 of which benefiting from IREP TA, and 3 of which receiving technical advice from existing consulting arrangements, as well as strategic investments at the provincial level. Each individual infrastructure subproject was to be co-financed by BRR and MDF, according to a 70:30 ratio. This component was to provide resources for civil works and goods in sub-projects in the following sectors: roads, ports, water and sanitation, drainage, flood control, coastal protection and restoration of major irrigation canals. Component 2 - Targeted Support to Infrastructure Sub-project Planning, Design, Supervision, and Implementation Oversight (US$3.0 million): This component aimed at (i) strengthening the ability of the Aceh Besar, Banda Aceh and Sabang local governments to improve the provision of infrastructure in their respective jurisdictions by providing technical experts to assist them in planning and sub-project identification, sub-project design, document submission, procurement, safeguards compliance, implementation, construction supervision, and monitoring (US$2 million); (ii) supporting performance and financial audit (over and above external audit) of the project financial statements (US$0.6 million); and (iii) providing technical assistance for transition to a post-brr timeframe and institutional arrangements beyond April 2009, including extension of TA provided under IREP, and capacity building and infrastructure asset maintenance programs for local and provincial governments (USS0.4 million). 1.6 Revised Components i. As per amendment 2, Financing of activities under Component 2 of the original project shifted to IREP, thereby releasing the allocated budget of US$3.0 million to Component 1. BRR decided to keep the focus of IRFF on the physical reconstruction and the technical assistance to be delivered through the IPM of IREP project. ii. The Additional Financing (AF), in the amount of US$36.7 million, scaled up these two components by including the following activities: Reconstruction of a major section of the west coast national road between the key cities of Calang and Meulaboh (West Coast Road), from about kilometer marker (Km) 198 to Km 247 including the Kuala Bubon Bridge and related waterway ecological and environmental restoration. The road, bridge and local ecosystems were severely impacted by the December 2004 tsunami and 6

23 the subsequent earthquake. The estimated cost of the physical works was US$33.8 million. Engineering services for design reviews and implementation supervision of the West Coast Road, and program management. The estimated cost of these activities was US$2.9 million. 1.7 Other significant changes Expansion of sub-project eligibility area. The project was amended in January 2008 to modify and expand the area in which disaster-affected communities and infrastructure were eligible for sub-project financing, and also introduced the West Coast Logistical Area into the definition of the project s geographic scope. The West Coast Logistical Area added the kabupatens of Aceh Basear, Banda Aceh, and Sabang to the kabupatens listed in the original agreement (Aceh Jaya, Aceh Barat, Nagan Rava, Aceh Barat Daya, Aceh Selatan, Aceh Singkil, and Simeulue). It also allowed the flexibility to include additional kabupatens upon written agreement with the Bank. Closure of BRR and transfer of implementing agency role to Ministry of Public Works. Since the BRR s mandate was scheduled to expire and the agency would close after April 15, 2009, the legal agreement was amended to transfer project implementation responsibility to the Ministry of Public Works. Closing date extensions. The project closing date was extended three times, by a total of 30 months (from June 30, 2010 to December 31, 2012). These extensions were required because of slow initial progress in implementing the original project activities, but dominated by the need to allow for the new road and bridge rehabilitation and reconstruction activities financed by the additional financing approved in August Additional financing and new road and bridge investments. In August 2010 the Bank approved the government s request for additional financing of US$36.7 (TF098082) from the MDF to finance road reconstruction (and related design and implementation support) along a 50 km long segment of the West Coast Road, including the Kula Bubon Bridge. As mentioned previously the project closing date was extended as a result. Change in the project estimated cost and GoI contribution schedule: The MDF contribution remained the same as US$100 million to finance 30% of goods and works and 10% of the consultancy services. There was no reference to the GoI contribution in the GA but the PAD referred to government contribution of 191 million (70% of the total estimated project cost of US$291 million). However, and after the final preparation of the sub-projects priority list, the GA was restated and amended (amendment 2, February 16, 2009). The GoI contribution was explicitly 7

24 defined in the restated grant agreement to be US$119.5 while the MDF grant remained unchanged at US$ 100 million. In addition, the financing mechanism was amended so that the MDF would finance 30% of expenditure incurred before February 16, 2009; 100% of expenditures incurred for Type 2 sub-projects and Type 3 sub-projects on or after March16, 2009; and Type 4 sub-projects on or after February 16, Eventually, the GoI fulfilled their obligations and its contribution came to million Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Rating: Satisfactory Soundness of background analysis. The background analysis, incorporation of lessons learned, and rationale for the Bank s involvement were all very solid. There was a clear and timely assessment of conditions on the ground, sectoral priorities and financing needs, phasing of investments, and balance between conducting sound analysis and proceeding with preparation without unnecessary delays. Analysis of infrastructure needs, government strategy, and rationale for Bank involvement are discussed in more detail in Section 1.1. Incorporation of lessons and analysis and mitigation of risks are described below. Assessment of project design. The objectives, components, safeguard policies, monitoring and evaluation, and other implementation arrangements of the project were relevant to the recipient s priorities and the beneficiaries needs and appropriate to their capacity and the types of investments planned. A key rationale for the Bank s participation was expressly to serve as the coordinator and lead partner agency for the MDF to simplify and increase the efficiency of the donors contributions to reconstruction, and to take advantage of the Bank s existing involvement in Indonesia s emerging national CDD program, which had already begun developing local consultation and participation bodies 1 Type 1 sub-projects have been completed as of December 31, 2008 and no further implementation arrangements are required. For each Type 2 sub-projects and Type 3 sub-projects, BRR shall remain responsible for the implementation of such approved sub-projects until the date on which all necessary government action has been taken to transfer such approved sub-projects to the respective implementing agency which shall occur by no later than March 16, 2009 (each, a sub-project Transfer Date) For each type 4 sub-projects: BRR shall remain responsible for the implementation of such approved subproject (but without budget authority, which has been transferred by the recipient to the implementing agency as January 1, 2009) until the date on which the Satker to the approved sub-project for 2009 in the implementing agency has been appointed which shall occur by no later than February 28, 2009 (each, a sub-project Transfer Date ). 8

25 and mechanisms that could play a similar role in helping to implement disaster reconstruction efforts. The IRFF was planned to work in conjunction with its sister project, IREP, to ensure that there was an adequate enabling environment for successful implementation of the investments. Adequacy of government commitment, stakeholder involvement, and participatory processes: As explained in this and other sections (particularly Section 1.1), there was unusually strong government commitment and participation in preparation of the project, including the creation of a temporary government agency expressly for the purpose of carrying out this and other disaster reconstruction projects. Involvement and participation of local stakeholders were clearly demonstrated in the readiness of all local and provincial governments who committed the budget and compensated all impacted land and house owners throughout the project implementation. Main challenges and risks identified during preparation. Considerable attention was given to identifying risks, which were considered high, and putting in place appropriate measures to effectively mitigate them. In order to optimize the design of the IRFF, the task team conducted a review of the first year of the reconstruction efforts, and concluded that the main challenges had been: (i) the geographic spread, sector diversity, and the scale of the program to be delivered, (ii) high (and probably unrealistic) expectations including BRR s ability to deliver the program quickly, local firms ability to provide sizeable inputs, and communities and local governments to provide input into the planning, implementation and absorption of the program, and (iii) the significant time constraints to deliver benefits quickly and to complete GOI s investments before April 2009, when the BRR s work was expected to be completed and the agency would close. The Bank also diagnosed that BRR s major bottlenecks and impediments to effective implementation to be (i) the inadequate procurement systems, (ii) the inadequacy of BRR s quality assurance program and monitoring system and the inability of satkers (Satuan Kerja Perangkat Daerah, responsible for day-to-day implementation and overseeing civil works contractors) to effectively monitor their individual programs, and (iii) the inadequate implementation capacity throughout BRR, satkers and local government (and construction contractors). Lessons learned from similar operations: Based on this on-field diagnosis and similar reconstruction/rehabilitation efforts, the design of the IRFF took in some lessons which included: (i) the need to balance local level planning and overall reconstruction needs to design a sub-project planning process originating at the decentralized while ensuring the efficient coordination and management of available resources; (ii) the importance of speedy reconstruction while upholding the quality of construction by utilizing high quality expertise through the IREP TA to support the speedy delivery by BRR of the infrastructure sub-projects; (iii) the need for local ownership of reconstruction efforts, addressed through the management (satkers) being local government employees and through the ownership of BRR-built assets to local/provincial governments; (iv) the need for transition of overall infrastructure reconstruction management from BRR to local and provincial governments to sustain reconstruction activity beyond the duration of BRR s mandate in April This was mitigated through the support to BRR to design 9

26 institutional mechanisms detailed in a transition strategy to ensure that Government bodies would keep meeting the obligations of BRR beyond the scheduled expiration of its mandate. 2.2 Implementation Project implementation was completed by the project extended closing date and within budget. The following were factors affecting the project s implementation. Capacity constraints and implementation delays: The implantation of the project suffers from delays at the beginning as the appointment of the IPM under IREP took several months after the start of IRFF. In order to expedite the implementation, the Bank and the BRR had agreed to start the screening of the first and second batch of priority sub-project. The list was completed at the time IPM was selected. Reducing the project cost: The project cost at appraisal was estimated at 291 million (100 million as grant from MDF and US$191 million contribution from GoI). This coast has some generous contingencies built into it. However, real contract values lead to lower costs. This lead to lowering the GoI to but without compromising the implementation of the sub-projects priority list. BRR Fixed prices contracting policy and Gaps : These gaps were primarily due to the use of fixed price contracting mandated by BRR. As all contracts awarded for the construction work were Fixed Price Contracts as per BRR requirements, the scope of works often required adjustment in projects to take into account site specific conditions that were not previously evident or anticipated. This often led to crucial items, such as stabilized shoulders or adequate drainage, being omitted to stay within the contract sum. In some cases an overall reduced target (i.e., a shorter road) was delivered. A gaps analysis was done which identified possible supplementary works requiring funding in order to meet the original scope of works. Residual funds from IRFF were used to fund these activities Additional Financing: New investments along the west coast of Aceh were identified that would strengthen achievement of objectives. This has been met through the approval of AF and extension of the project closing date. Expiration of the BRR and review of implementation arrangements: Since the beginning the project envisaged the necessity of phasing out the implementation arrangement from BRR which was established as an interim agency to expedite the reconstruction of Aceh and Nias. The BRR was closed in February 2009 and the implementation arrangements were transferred to MoPW through the Presidential Regulation No IRFF PMU, which was tasked with all remaining reconstruction work, was set up within MoPW and staffed with former BRR staff leading to a very smooth transition without disturbing the pace of the project implementation. Due to the diverse nature of the sub-projects and to maintain the 10

27 integrity of the project activity, this PMU was requested to report directly to the MoPW Secretary General s Office. The consultants funded by IREP continued to provide support to the PMU to ensure proper implementation and program management for the IRFF project. The IREP and IRFF Grant Agreement amendments were signed (April 15, 2009 and Feb 16, 2009 respectively) to reflect the new arrangements. Implementation arrangements for the AF. As the implementation of the original priority sub-projects under IRFF was winding up, the additional financing was approved to finance the newly identified sub-projects along the west coast of Aceh. The MoPW preferred to establish a new PMU within the Directorate General of Highways ( Bina Marga ) which, by law, is the responsible body for the construction and development of all national roads, to oversee the implementation of the additional financing sub-projects. Restructuring: As explained in more detail in Section 1.7, the project was restructured five times to clarify the geographic scope of the project, formalize the transition to a new implementing agency, extend the closing date of TF057657, approve the AF grant TF and to extend the closing date of TF The restructurings were fairly routine in nature, but helped to ensure proper targeting, smooth implementation and alignment of IREP with IRFF (and in particular with the additional financing and extension of IRFF). Relationship between IRFF and IREP: The IREP project financed the reconstruction program management, sub-projects design and construction supervision and the financial management of IRFF. Until its closing on December 31, 2011, IREP was used to finance the design and the initial construction supervision cost for the IRFF- AF sub-projects. These functions were pursued through the appointment of a new construction supervision consultant which was financed from the proceed of the AF grant. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design: The project design included well-conceived, appropriate outcome indicators that were clearly linked to the development objectives, verifiable either quantitatively or qualitatively, and attributable to project interventions. Due to the importance of the M&E in both guiding project implementation and assessing outcomes, and the shortcomings in the capacity of BRR, the design called for the IPM to provide support in carrying out the M&E functions. The design called for the development of a computerized Monitoring Information System (MIS) which was expected to facilitate the monitoring of outcome indicators and routine project implementation and financial management for both IREP and IRFF M&E Implementation: IPM successfully produced regular M&E reports, which were integral parts of the Semi Annual Reports that compiled data provided by the PDCS and 11

28 FM consultant (and confirmed by IPM quality assurance staff). In addition, the PMUs (of the two grants, TF and TF098082) developed a Monthly Portfolio Review for a quick monitoring of the progress of all projects under IRFF and updated the performance indicators matrices for both IREP and IRFF. The efforts of IPM to develop a stand-alone computerized MIS were not fully successful and the system was never used as the focal database for the program. Development of the system took longer than expected, and ultimately the BRR developed its own MIS system which made a separate system specifically for IREP redundant and unnecessary. While the MIS was intended to monitor both physical progress and financial performance, the shortcomings and delays in the MIS system did not significantly hinder monitoring of the KPIs, many of which were qualitative in nature. M&E Utilization: The data and information gathered from the field were compiled by the IPM consultant and communicated to the PDCS consultants to review the designs of some sub-projects. In some cases this led to revisions in technical designs or investment priorities to ensure the relevance, effectiveness, and efficiency of investments. For example, in some roads projects it was determined that the underlying soil or adjacent slopes were more unstable than anticipated, and therefore timely steps were taken to strengthen the road shoulders to reduce the likelihood and mitigate the impact of potential landslides. To maximize the returns from BRR s MIS, it had been centrally connected to Bappenas MIS which enabled sharing of the project information at the central level, and increased both the usefulness and longer term sustainability of the M&E systems. 2.4 Safeguard and Fiduciary Compliance Safeguards Compliance Rating: Satisfactory. The project was classified as Category A (Full Assessment) for safeguards. The specific policies triggered were Environmental Assessment (OP/BP 4.01), Indigenous Peoples (OP/BP 4.10), and Involuntary Resettlement (OP/BP 4.12). Environmental Safeguards: (Satisfactory). The only environmental safeguard policy triggered by IRFF was the environmental assessment (OP/BP 4.01). Environmental safeguard management was generally satisfactory, due to the significant involvement of Bank supervision teams in environmental safeguard management, focusing on resource extraction impacts (primarily sourcing of sand, gravel and other quarry material) and construction impacts (excavation, fuel spills, noise and dust management, obstruction to drainage, pollution and sedimentation of water courses). In addition to the Bank regular supervision missions, Bank staff based in Banda Aceh and Jakarta carried out periodic field visits to review construction progress, quality and 12

29 safeguard aspects. As a matter of practice, the key findings were provided immediately to the BRR, IPM and design consultants upon return from the field, with detailed recommendations and target dates for completion of actions. Through IREP, reports by the design consultants added significant value in terms of quality improvement of implementation. The Construction Environmental Action Plan (CEAP) model proved to be very useful and positively impacted environmental performance under the construction contracts. For instance, a template for a CEAP for a typical road project was prepared by the IPM consultants, which helped to improve the quality of the plans, and ultimately the quality of implementation. Social Safeguards: (Satisfactory). The social safeguard policies triggered by IRFF were the Involuntary Resettlement and the Indigenous People. All land acquisition which took place in IRFF (10 sub-projects) covering road, drainage, seaport and water supply, were carried out in a satisfactory manner. Land Acquisition and Resettlement Action Plans (LARAPs) were prepared for sub-projects involving land acquisition that was identified prior to construction. These sub-projects acquired land from nearly 66 people. Land was acquired through negotiations and by cash compensation at or above market price. Two road sub-projects obtained land through donation by the adjacent beneficiaries. Social Management Plans or Land Acquisition Implementation Reports (LAIRs), including remedial actions were prepared for land acquisition not anticipated during the design stage or that took place during sub-project construction. Sub-project designs were adjusted to minimize or avoid land acquisition during the planning and construction stages. As for the AF, despite the large number of people (1,200) affected by the additional road and bridge rehabilitation (due to widening the right of way and the alignment of the road to comply with the national standards), resettlement issues were concluded appropriately, mainly due to the proactive involvement and rigorous monitoring and commitment of the local authorities at the provincial and district level. As per the indigenous people, no issue was encountered. Fiduciary Compliance Procurement: (Satisfactory). The procurement plan was fully implemented and all services were acquired in accordance with the Bank guidelines. Procurement on the 56 contract packages of IRFF (signed contract value of US$ million), 4 additional contracts under AF (signed contract value of US$ million) and 8 consultancy contracts (signed contract value of million) was generally satisfactory and timely. The IRFF procurement phase was completed in 18 months. 13

30 There were 4 awarded contracts (Calang Port, Idi Rayeuk Keude Geurobak and Tapak Tuan Batas Sumut roads, Nias JK-2)terminated due to the performance of the contractors or to safety and security reasons in the project area, but these were terminated in line with contractual provisions. Three of the four affected sub-projects were completed by the line authorities while the fourth, Nias JK-2, is still under consideration to be completed by the MoPW. Overall, the major factors in the successful completion of IRFF procurement could be identified as the following: (i) the deployment of well-qualified and experienced personnel at the helm of CPU (however, not all the procurement committees had quality members, due to BRR staffing limitations), (ii) advice provided through IREP to the CPU on the finalization of the procurement plans, and (iii) the Bank direct involvement as the packages subjected to prior review of the Bank took on average ten days less time than the packages subjected to post review. However, it could be argued that the short-term objective of speed of procurement was achieved at the expenses the long term goal of building capacity in local governments through the decentralization of within one year of start of procurement, which affected down the line the smooth transition of the project from BRR to local authorities. Another weakness in the IRFF procurement program was the lack emphasis placed on the technical assessment of the capacity of the contractors, as the design consultants were not involved in the selection of the contractors they ultimately had to supervise Financial Management: (Moderately Satisfactory). In general, Financial Management (FM) was in compliance with Bank procedure and external audit reports were concluded with unqualified compliance. However, the following issues were identified during the early stages of project implementation: Delays in the issuance of budget documents (DIPA). The delays were mostly due to the appointment of PPK/satkers on a yearly basis, PPK/satkers who were responsible for the DIPA process. Mitigating measures were introduced, including provision of FM consultant to assist new PMU/PIUs. The Interim Financial Report (IFR) submissions were chronically late, despite the Bank missions systematic reminders that PMU (through IREP 5) should submit them 45 days after each quarter closes. The Bank also recommended that the PMU should implement a financial penalty to any underperforming consultants who submitted their reports late. These delays were also a reflection of the dysfunctional MIS, as the FM consultant (IREP 5) could not rely on a comprehensive and up to date monitoring database and information flows with the three other consultants (IPM and the three PDCS) were not smooth. IREP 5 did not have access to some contract amendments, or IPM did not receive updated physical progress information from PDCS in a timely manner. Numerous occasions arose where the FM consultant received conflicting information from the contractors and the PDCS consultant on the progress of works, especially in 14

31 Nias. These delays improved during the later stages of the project as the FM consultant proactively compiled and consolidated IPM and PDCS reports. Financial control systems were also problematic, especially on payment documentation, verification, delayed submission of financial reports and audit reports. Following a Bank supervision mission that noted that less than a third of payments were verified, in mid-june 2009 the PMU gave clear instructions to the FM consultant to review and verify all payment requests prior to submission to the Treasury Office (no payments would be made unless invoices were verified by the FM consultant). Financial management remained problematic for the AF, notably in terms of payment delays for consultant and contractors. Low disbursement remained a significant issue, as the ICR mission in November 2012 noted that financial progress lagged 30% on average behind physical progress. The mission also noted that the international consultant was paid only in September 2012 for work that had stared in January 2012, and only for the local currency component. Similarly, the mission has noted the growing frustration and financial constraints of local contractors due to the payment delays, which could have an impact on the earlier completion of civil works. As for IRFF, extremely slow payment verification at the Satker and flaws in their internal control systems, as well as DIPA 2012 revisions explained the delays. These payments backlogs required an intensive effort from the Satker and the PMU to process all pending payments prior to the end of disbursement date. Refund of excess payments: During the implementation of the project, excess payments took place in relation to: (i) Calang port sub-project (US$156,518.80); (ii) Gap 2 contract (US$457,057.60); and (iii) the Nias JK-2 contract (US$616,546.90). In addition, remaining fund in the project designated account of US$1,133, needed to be refunded. The MoF refunded the first trench of US$1,290, to account for both Calang port sub-project excess payment and the remaining unused fund in TF designated account. The MoF confirmed to the Bank that the remaining balance of US$1,073, had been scheduled to be paid from the 2013 DIPA allocation of the MoPW. This has not been settled yet and the Bank is following closely with the MoF. The issue is critical as these funds need to be returned to the MDF and the donors, preferably, before its closing date on June 30, Post-completion Operation/Next Phase Arrangements for maintenance of the assets (including institutional capacity, ownership, commitment, and availability of resources) are an important issue in ensuring the sustainability of the project outcomes. 15

32 Out of the 56 completed sub-projects under the IRFF 17 sub-projects, comprising 50 % of the grant cost were handed over to the central authorities (5 ports to the Ministry of Transportation; and 12 national roads to the MoPW). Those sub-projects are being managed following the national standards and using national budget allocations. 9 provincial road sub-projects comprising 24% of the total asset cost were handed over to the Aceh and North Sumatra provincial governments. As with other provincial assets, these roads are being managed by the Provincial Dinas with adequate maintenance budget allocations. Assets directly under the authority of the central and provincial governments, such as national roads, have already been assigned maintenance funds to transfer the assets to local governments, who would ensure the adequate budget allocation for maintenance MoUs for assets handover were signed. For the remaining sub-projects (26% of the total assets) that belong to local authorities, memoranda of understanding (MoUs) for handover (based on a standard template drafted by IREP consultants) have been signed between BRR and local governments. The formal transfer was completed on December 31, 2012, except for the Nias JK-2. The maintenance budget will be included in the DIPA revision in August 2013, and the MOF liquidation team dedicated to the handover task has committed to finalize the transfer of Nias JK 2 by the end of March However, preparedness and financial capabilities of local governments need to be carefully and continuously monitored. The Bank has been reassured at the district and provincial levels that financial and human capacities will be devoted to preserve the sustainability of the project assets, and that budget allocations will reflect that commitment, as was confirmed by Aceh Badan Perencana Pembangunan Daerah Bappeda. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation As a reconstruction project, the relevance of objectives as stated in the PDO is, strictly speaking, not as relevant in a post-reconstruction environment once the objectives are achieved. However, the clearly understood objective is to rebuild infrastructure that will continue to be relevant to the recipient s and beneficiaries needs, and to help ensure its longer term sustainability. In this sense, the project objectives remain highly relevant to the development priorities of Indonesia. The development of large-scale infrastructure remains crucial to the country, and is a pillar of the Bank engagement (Core Engagement 2) as outlined in the Country Partnership Strategy (CPS). The document recognizes the need to strengthen the accountability and capacity of institutions to deliver better infrastructure outcomes. 16

33 In terms of reconstruction needs themselves, the objectives, design, and specific investments were clearly relevant and continue to be relevant to the affected population, which relied on the restoration of the destroyed community and transportation infrastructure to enjoy services and access critical to their quality of life and development opportunities. Community consultation and participation in defining priority needs during project preparation and implementation helped ensure the relevance of the investments and sub-projects. During implementation the geographic scope and eligibility criteria were modified to better target resources where they were most needed and effective, and additional financing was approved to expand investments to road and bridge reconstruction identified during implementation as high priority needs. The coordination of the project with IREP was very effective in helping ensure that there was an appropriate enabling environment to carry out the investments. The project objectives are also highly relevant to the Bank strategy to play a major role in disaster reconstruction, helping to reduce Indonesia s vulnerability to natural disasters as outlined in the CPS (Core Engagement 5). The document stressed that the Bank would continue deepening the relationships established with Bappenas and the local governments of Aceh and Nias in supporting selected elements of the Government s actions to strengthen natural disaster resiliency. Implementation arrangements were consistent with the country policy to build capacity within national institutions. After BRR closed in 2009, the implementing agency of IRFF became the MoPW. The new PMU was tasked to handle remaining construction work in Aceh, and was staffed with many former BRR officials for continuity. New streamlined implementation arrangements were put in place to manage the AF. The new PMU was created within the Directorate General of Highways ( Bina Marga ) which, by law, is the responsible body for the construction and development of all national roads, to oversee the implementation of the AF sub-projects. 3.2 Achievement of Project Development Objectives Rating: Satisfactory Assist the Province of Aceh and Nias to reconstruct/rehabilitate strategic infrastructure and to extend key infrastructure services of adequate quality standards that meet the needs of communities where infrastructure was damaged by the tsunami of 2004 and the subsequent earthquake: The PDO has been achieved in a satisfactory manner as 56 infrastructure reconstruction sub-projects (52 from the original IRFF and 4 from the AF) have been built in Aceh and Nias in sectors as diverse as roads or water supply. In total 4 ports, 7 water supply installations, 4 water resources (flood management and sea defense) projects, 10 national roads (including 3 under AF), 9 provincial roads (7 in Aceh, 2 in Nias), 21 district roads (19 in Aceh, 2 in Nias), and one bridge were effectively constructed. 4 projects (3 district roads and one port) were terminated, due to issues related to the selected contractors performance as in the case of Calang port or due to security reasons as in relation to Nias 17

34 JK-2 sub-project. It is interesting to note that all of these sub-projects, precluding Nias JK-2, had been re-contracted and completed from the GoI own budget. These sub-projects contributed not only to the reconstruction of impacted infrastructure but also to better build Aceh and Nias compared to the pre-disaster conditions. Indeed more than 5.2 million inhabitants in Aceh and Nias benefitted from the project. The project has contributed to the economic growth and the improvement of the quality of life of Aceh and Nias. This is evident from (i) the improvement of sea and land connectivity and mobility; (ii) the improvement of the local community livelihoods and the stimulation of local economic growth (increasing the number of cargo boats and docks loading and unloading consumer items, processed products and crops. In particular, cloves and palm crude oil have increased by more than 20%); (iii) the development of new economic growth contributors such as restaurants, shops, hotels and public services facilities (which all increased the districts disposable income); (iv) the improvement of the Banda Aceh s solid waste management through the construction of sanitary landfill with recycling and composting capacity; and (v) the better provision of clean water supply. The project has achieved all the planned key performance indicators and managed to engage the local, provincial and central governments to be involved in the development of the priority sub-projects which represented the truly needs of the communities. As an assurance to its sustainability, all assets were properly designed and their construction has been satisfactorily supervised through international consultants. All projects, except for the Siron Water Pipe Bridge and the Siggli Water Intake, proved robust and credible detailed engineering design. The Bank and the international design consultants continually stressed the importance of technical consistency to the local government administrators and contractors continuing to address. Thus, design specifications were mostly met through continued check testing and validation, thickness of road construction layers and quality of site processed materials were reported to be adequate, longitudinal drainage was made gradually effective, and shoulder/slope stabilization was given appropriate consideration. The IRFF gaps exercise also enabled adjustments in projects to take into account site specific conditions that were not previously evident or anticipated (mainly shoulder stabilization and drainage). The elaborative layers of the assets quality assurance made it redundant to conduct a one shoot asset survey to assess the assets status. Besides the quality assurance and controls carried out by the IPM, the CSCs, BRR, PMU, and PIU on continuous basis, the MoPW and the MDF have conducted asset assessment surveys which confirms the compliance of the assets quality with the good practices and the well functionality of all completed assets even many years after the commissioning of part some sub-projects. 3.3 Efficiency 18

35 Rating: Satisfactory While no financial or economic feasibility study was conducted, it is evident that the project provides high value for money. It had enabled the reconstruction of some strategic and important infrastructure projects which had evident foot prints to the revival of the Aceh and Nias economy as discussed in section 3.2. All sub-projects were tendered competitively and the costs were consistent with the norms of the construction industry in Indonesia. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory The project achieved its primary development objective to assist the Province of Aceh and Nias to reconstruct/rehabilitate strategic infrastructure and to extend key infrastructure services of adequate quality standards that meet the needs of communities where infrastructure was damaged by the tsunami of 2004 and the subsequent earthquake. The project financed the construction of the large infrastructure program of 56 subprojects to come to fruition in a timely and adequate manner, for the benefit of the people of Aceh and Nias. In summary, IRFF project achieved its development objectives, and remains highly relevant to the country infrastructure and disaster mitigation priorities. During the implementation, sub-projects were properly designed and designs were reviewed to respond to reality checks in terms of quality assurance, financial management, environmental safeguards and social safeguards. The post-completion operation and maintenance problems were identified and mitigated for the most part. As such, an overall rating of satisfactory is justified. The completion of the west coast road sub-projects became critical. Until the last supervision mission (three months before the project closure) the implementation progress was 70%. Under the high risk of missing part of the grant, MoPW gathered a great deal of momentum together with the contractors and the construction supervision and made the completion of the works as their top priority. This effort paid back and the works were completed just before the closing date. Due to the successful completion of the west coast sub-project, the PDO was upgraded to Satisfactory. Through the implementation of the project, the task team selected to be in the conservative side during previous missions and rated the PDO as Moderately Satisfactory for the doubt of not completing the work and the delays which the project suffered at the start of the AF. 19

36 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The project funded the construction and supervision of 56 sub-projects including ports, roads, general water and sanitation/flood protection and water supply. Although no socioeconomic impact study was conducted, the project has positively impacted the livelihoods of Aceh and Nias through (i) the improvement of sea and land connectivity and mobility; (ii) the improvement of the local community livelihoods and the stimulation of local economic growth (increasing the number of cargo boats and docks loading and unloading consumer items, processed products and crops. In particular, cloves and palm crude oil have increased by more than 20%); (iii) the development of new economic growth contributors such as restaurants, shops, hotels and public services facilities (which all increased the districts disposable income); (iv) the improvement of the Banda Aceh s solid waste management through the construction of sanitary landfill with recycling and composting capacity; and (v) the better provision of clean water supply. In terms of impact on gender, BRR had proposed special provisions in IRFF for empowering women throughout the IRFF project cycle. In effect addressing gender considerations was achieved through direct solicitation of inputs from women s groups during early review of proposed project designs (particularly for water and sanitation, and market projects) and obtaining women s inputs on investment prioritization through focus group discussions, or rehabilitation and reconstruction activities in Sabang that included provision of domestic facilities for local women (including a building for washing). (b) Institutional Change/Strengthening Strengthening the capacity and the incentives of local governments, which was decimated by tsunami, to prepare, implement and maintain infrastructure projects with BRR and after BRR s closure was a key priority of IRFF. Several initiatives were taken to maximize the local government involvement in the sub-projects prepared local authorities for the post-brr era. These efforts included local governments capacity assessments and gaps analysis, in-depth training in procurement, safeguards, anti-corruption support as well as in quality assurance, planning, budgeting, assets management strategies and construction supervision. Also, the Transition Strategy developed prior to BRR s exit in April 2009, enabled exchanges of experience between all Aceh and Nias local governments involved in infrastructure reconstruction and development. The day-to-day involvement of the PIUs and the PMUs in the review of the design documents and the construction supervisions and their interactions with the international consultants had strengthened their capacity in such areas and the management of shortfalls remedy after the preliminary handover of the sub-projects. (c) Other Unintended Outcomes and Impacts (positive or negative) 20

37 N/A 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Rating: Moderate Design and Implementation Risk: The IREP program has enabled proper design and construction of good quality infrastructure and has mitigated the risk of short life and/or failure of the assets. As mentioned earlier (see Section 2.5), the majority of large IRFF sub-projects are managed at the national and provincial levels, where capacity to maintain them and budgetary resources are adequate. Capacity Risk: Roads sub-projects which were transferred to the local authorities might very well be affected by poor asset management and maintenance. It was intended during the design of the project to incrementally transfer greater responsibilities in planning, budgeting, procurement, construction management, operation and maintenance from BRR to local governments, but in effect these responsibilities were centralized until BRR s closures. Local government capacity assessments and capacity building programs plans recommended a focus on institutional development, an improvement of existing systems and human resource development in order to ensure adequate operation and maintenance in the future, and in-depth training and workshops were subsequently organized for local governments to that effect. Substantial training of local government staffs was also provided by various international organizations and NGOs. These efforts, focused on implementation support, long-term operations and development infrastructure, mitigate the risk to the development outcome but have not built lasting institutional capacity. Maintenance Budget Risk: The other major risk, common for decentralized infrastructure, is the lack of funding for future operation and maintenance. This risk is significant for all assets that are not managed at the national and provincial levels and the likelihood of falling short is high. While the impact would be high if there was no O&M, it is likely that there will be some resources, capacity, and commitment to O&M. In such event, the impact will be incremental and assets may deteriorate or need major rehabilitation somewhat earlier than their planned design life Assets. On the other hand, under the authority of the central and provincial governments (i.e., national roads, ports and regional roads), maintenance funds are part of the traditional fiscal budgeting. The non-effective resolution of the status of the assets raises this risk further, as they have not been effectively transferred yet despite the signing of the MOUs. MOF will need to liquidate the assets as a first step, enabling in a second step the 21

38 effective commitment of funds from the local government. Both of the central government and the Province of Aceh confirmed their commitments to help the local governments to get the resources needed through the fiscal budgeting Natural Disaster Risk: It is likely that there will be more earthquakes, so assets vulnerable to earthquake damage were designed to mitigate the risk of earthquake damage. This was applicable mainly to some strategic sup-projects like Kuala Bubon Bridge and the sea ports. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory In light of the institutional, budgetary and, above all, time pressures at the time of preparation due to the post-disaster emergency situation, the Bank team designed the program in an effective, flexible and satisfactory manner. The team clearly and adequately intended to give priority to swift and quality implementation in a complex environment where institutional capacity had been decimated by the tsunami, with multiple partners and institutional entities (BRR, donors, central, provincial, district authorities), and where the area scope for the projects extended from Aceh to the island of Nias. The simplicity of the design (with 2 components) was a key factor behind the success of IRFF, albeit aided by the fact that most technical, supervision, and program management tasks were covered by IREP. The methodology set out for identifying the sub-projects to be financed by IRFF also contributed to quick and quality implementation, as it was agreed that BRR would provide an initial prioritized list of candidate sub-projects proposed for IRFF funding. The review and final selection by the Bank of these prescreened projects through eligibility criteria explicitly defined in the Annex 4 of the PAD (sector and geographic location, appropriate design of technical solutions, economic and financial viability, compliance with agreed-upon environmental, social, and fiduciary safeguards safeguard approach under IRFF) enabled the timely identification of the most relevant assets to be funded, with no trade-offs in terms of safeguards. It is noted that the project cost was over-estimated. This is due to the uncertainty in budgeting for the works in the devastated areas. The conditions in Aceh and Nias were not very attractive and the team rightfully accounted for high contingencies. However, the high pace of recovery led to lower bid cost than the estimated price. Thus, the decrease in the GoI contribution did not affect the achievement of the PDO 22

39 While project did not put enough emphasis in effective training in infrastructure management, operation and maintenance of local government staff, this has been covered under the IREP and other technical assistance programs implemented by the BRR. The lack emphasis placed on the technical assessment of the capacity of the contractors (the design consultants were not involved in the selection of the contractors they ultimately had to supervise) led to extra effort in quality assurance and control during implementation. (b) Quality of Supervision Rating: Satisfactory All stakeholders have time and again insisted that the proactive, problem-solving centered and trust building approach followed by the Bank supervision team played no small part in the success of the project. The team in Jakarta and Banda Aceh provided hands-on oversight of the project with a strong emphasis on implementation quality, technical designs, and financial management reporting, resettlement issues and, overall, rigorous Aide-Memoire follow up. The team was also instrumental in the smooth implementation of the post-brr institutional requirements with MoPW, Bappenas and MoF and effectively coordinated other donors involvement in Aceh Province. Comments provided by line ministries, agencies and local authorities staff have all indicated deep appreciation for the respectful working relationship and the flexible and constructive approach that was established, despite the complexity and urgency of the reconstruction task at hand in a post-disaster environment. Task Team Leaders initially followed the project from Washington DC but were in continuous contact with infrastructure team members who were based in Banda Aceh. This turned out to be critical for such a large size post-disaster reconstruction program. Moreover, in late 2010, the TTL was re-located to Jakarta which further enhanced the quality of supervision. This supervision set up and the permanent presence of Bank staff in the reconstruction areas ensured continuous Bank oversight throughout project implementation. The Bank s supervision strategy resulted in relatively high supervision costs which were financed from the MDF and which considered the success of the project a top priority. Moreover, the Bank s policies and procedures were applied consistently. Supervision missions were conducted in a professional and constructive manner, and mission teams consistently included the experts needed to discuss relevant supervision topics and issues. The timing of formal supervision missions (on average twice a year and supplemented by frequent routine supervision missions by the TTLs and the task team members who were based in Banda Aceh) was appropriate and comments received from PMU and BRR/MoPW staff indicated a respectful working relationship and a flexible approach by Bank staff. Aide Memoires, Management Letters, ISRs and other project communications and documents were completed in a timely manner with clear references 23

40 to needed actions covering all aspects of project components, safeguards and fiduciary issues. Such actions were summarized and followed by the team to ensure that the BRR, PMU and PIU were following on the implementation of all recommendation and the response to any shortfalls in a timely manner. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank s overall performance rating is based on satisfactory ratings for both quality at entry and supervision. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory Performance of GoI was satisfactory, especially in terms of the strong and sustained commitment to the project development objective. The agencies (MoF, MoPW and Bappenas) turned out to be extremely cooperative and very effective in taking decisive action in a timely manner, in particular with regard to the Bank recommendations on implementation activities, including channeling the budget allocation (DIPA) and preparing sufficient yearly budget allocation. (b) Implementing Agency or Agencies Performance Rating: Satisfactory Performance of the implementing agencies was satisfactory. BRR and the MoPW protected the integrity of the project and sustained its development objective. The performance of the MoPW as an implementing agency encompasses the PMU for the original sub-projects and established a regional office of the MoPW s Directorate General of Highways for the sub-projects added as part of the additional financing. As an independent agency, BRR performed effectively, and in four years was able to channel and manage not only the resources of IRFF and IREP, but grant financing totaling more than $6 billion (funded by all donors including the MDF) for a wide range of other Aceh reconstruction projects. This fast pace was supported by the strong authority which BRR was granted and enabled it to avoid most of the bureaucracy faced by line ministries. Despite the smooth transition of the implementation arrangements, the slowdown of the implementation of IRFF project was clearly noticed following the closure of BRR and the handover of the implementation to the MoPW where the PMU was functioning more as a Program Management Unit and effective implementation was mostly managed by a number of PIUs which sometimes were difficult to coordinate. This setup required the 24

41 Task Team to devote extra efforts to ensure compliance with the Bank fiduciary and safeguards procedures and guidelines. Taken into account the IRFF experience, the implementation of the IRFF-AF was improved and functioned well since the PMU-AF was strengthened by 7 Individual Consultants who were supported the PMU and protected the integrity of the project and sustained its development objective up to the completion of the projects. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory Both GoI and the Implementing Agencies (BRR and MoPW) managed to implement the IRFF and the AF with Satisfactory performance. 6. Lessons Learned Quality and simplicity of the project design: As clearly demonstrated through the four AF sub-projects, simplicity of design is a key factor of success in environments where the multiplicity of stakeholders (from donors to PMU to PPK/Satkers to the construction supervision consultants (CSCs) to contractors to district, provincial, central authorities), suboptimal administrative processes, weak local capacity, large resettlement requirements and wide geographical project area scope are bound to make implementation complex. Thus the project design was simple and included two components only: the first one to finance infrastructure investments, the second one to fund capacity building. Institutional arrangements: The scope of the devastation caused by the tsunami, the size of the reconstruction program and the specificities of the historical institutional relationship between Aceh province and the central government meant that achieving the right implementation management for the recovery efforts was not a given and that the reconstruction process would not be as effective due to their weak capacity and the complexity of the central government bureaucracy. However, the creation of BRR by the GoI to lead the reconstruction, to strengthen coordination between donors and government agencies, to ensure that the pledges for infrastructure works were matched with the various sector needs, was undoubtedly a major determinant of the effectiveness of the reconstruction program. Most of all, the fact that BRR was given a limited lifetime created a sense of urgency in the daily proceedings of BRR and ensured that all efforts were focused on completing the mandate of the BRR and not on expanding nor sustaining its administrative reach. Maintenance and sustainability of assets: Careful attention should be provided to ensure the preparedness of local governments to handle the assets, budgetary space for funding of maintenance activities, existing capacity in infrastructure management within local governments, and adequate status of assets. These concerns relate exclusively to the local 25

42 governments road assets as national and provincial roads are under the authority of MoPW and the provincial government respectively and will not pose maintenance issues. For future operations, a focus on the effective training in infrastructure management, operation and maintenance of local government s staff, on the planning for making maintenance funds available, and on the follow up on transfer of assets to local governments could be recommended. Sustainability of infrastructure assets is also enhanced when they are effectively used: some of the port sub-projects are not operational yet despite their physical completion, even if neither project identification nor implementation are at fault here (regulations and administrative oversight conflicts are delaying start of service, but there are plans for at least one port to be soon operational as a container hub). Quality Assurance: Using international consultants does not guarantee good construction qualities unless the consultants are properly resourced, supported, and operate in an institutionally clear environment. Conflicting stakeholder interests and long delays in payment can affect the consultant (and the contractor) performance, as was evident for some IRFF and AF sub-projects. Consideration by Bank teams of these realities before contracts are awarded and during supervision helped streamline the dialogue between all parties and enabled to take gain from international expertise. Also, and in order to improve the QA monitoring approach for future large infrastructure programs in Indonesia, the short-listing process for procurement could place greater emphasis on technical capacity, with design consultants being involved in pre-qualification screening of tenderers on the basis of perceived capability, a national contractor database could be put in place to inform on the performance history of contractors, more capacity building for underperforming contractors could be conducted in order to achieve quality outcomes at the outset rather than going to expensive reworking of substandard work, and quality performance-based incentive payments could be considered. CEAP approach: Introducing the CEAP approach was on the balance successful, but its implementation could have been improved on a number of aspects. Training contractors in CEAP implementation could have been for instance an important step in getting CEAPs adopted more successfully. For instance, it proved difficult to get contractors to take seriously asphalt spill management at construction base camps. Similarly, and in light of the novelty of the CEAP, better ownership of the PPK and satkers could have had a direct impact on the dialogue with contractors. Simple measures as watering of planted trees and the maintenance of drainage and side vegetation on areas of prepared slope protection could have been given more consideration through supervision. Finally, MOUs for assets transfers signed by local government needed to include environmental maintenance and all relevant departments with environmental authority probably should have been included in the scope of the MOUs. Stakeholder Participation and Commitment: The project is a successful example of stakeholder participation and commitment, which led for instance to the satisfactory design of the sub-projects priority list and the support of the various authorities to 26

43 facilitate and safeguard project implementation. Stakeholders included the central, provincial and local governments; local communities, NGOs, Donors, MDF and the Bank. Implementation Support Arrangements: Both the MDF and the Bank acknowledged the necessity to be closer to the project area, and the MDF supported the opening of a field office in Banda Aceh so that several infrastructure specialists on the Bank task team were based. This proximity to the center of activity greatly facilitated implementation on a day to day basis and provided continuous support to the client. 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors (a) Grantee/Implementing agencies In general, the government of Indonesia was satisfied with the project s outcomes. The original implementing agency (BRR) was closed in The borrower completion report and comments on the ICR were prepared by the Ministry of Public Works (MoPW), and were mostly related to procurement, project and contract management, safeguards management and financial management and DIPA, Procurement: The PMU of the AF was newly established and entrusted to oversee the implementation of the west coast road including Kuala Bubon Bridge. The Bank had offered training to the project tendering committee and the PMU. However, the relative complexity of the evaluation of the bids resulted in some delays before clearing the bid evaluation report. In accordance to the instruction to bidders, contractors would be selected based on the least combined cost of JNB-1, JNB-2, JNB-3 and JNB-4 lots. The responsiveness of bidders was not straight forward and the Bank requested the PMU to review the BER based on additional information and to provide concrete evidence for the exclusion of any offer. Despite the prompt response of the Bank, the PMU was struggling in providing clarifications as these clarifications would need to be solicited from the Tendering Committee who would be difficult to convene all of its members. Thus the final recommendation was somehow different from the first recommendation made by the Tendering Committee and proved to be to the best interest of the client from economic and quality point of view. On the other hand, the Bank insisted on presenting the court decision related to the Bankruptcy of one of the contracting companies. Though this seemed to be a legitimate request, the PMU struggled to finally get an official copy and submit it to the Bank. The Task Team acknowledges the time constraints and the pressure to expedite the project implementation but without compromising the fiduciary aspects. This was made clear to the PMU and the approach was to hold frequent meeting and talk directly to make sure that comments related to the evaluation reports and procurement aspects are well understood. 27

44 In relation to the selection of the construction supervision consultant (CSC), it was communicated to the PMU that the shortlist should be comprised of 6 consultants (as per the Bank guidelines for the selection of consultants) but not 5. The PMU did not act promptly on the issue and kept arguing about the sufficiency of 5 without trying to invite and extra firm. The task team insisted that all designs to be reviewed prior to launching the construction contract. The practice in Indonesia to delay the review to the contractor mobilization stage was rejected and thought to be unacceptable. Especially for bridge and elevated roads design, the review was considered crucial prior to bidding as material changes to the design and the bill of quantities after bidding may lead to enormous risks of design robustness and significant variation in the contract price. In fact, the review enriched the available design which was debated between the MoPW and the consultant as to increase the bridge and road safety and resilience to earthquakes and floods. Finacial Management: The Task Team As raised in the Grantee ICR report, the project suffered from payment delays to contractors as well as consultants. This was a result of the internal system bureaucracy, delays in DIPA allocation and the complicated payment review process. The Bank realized this and raised the issue in front of high racy officials from the MoF, Bappenas and MoPW which helped in processing all payments, though at the last 6 months of the project. Environmental Safeguards: The project witnessed improvement in the environmental safeguards management. The major impacts related to cross drainage in the elevated roads and the stabilization of the road shoulders were well managed as part of the construction contracts. Other environmental improvements were captured under the CEAP. The only shortfall was noticed with the plantation of the swampy areas. Rushing the plantation increased the mortality rate and many trees died at the beginning. Later, contractors were requested to replace the dead treas. Social Safeguards: The realignment and widening of the west coast road affected 1398 land parcels. Thanks to the readiness and cooperation between the provincial and local authorities, all owners were compensated satisfactorily. The PMU and MoPW played a very important role in coordinating the efforts and the compilation of land acquisition and compensation report. PMU expenses after the project closure: As per the grant agreement, it is not possible to finance any activity from the proceeds of the grant after the closing date. The funding of the PMU was flagged to the MoPW and it was made clear that it would be the GoI responsibility to finance the closing activities. (b) Cofinanciers/Donors 28

45 The Multi-Donor Fund (MDF) was also generally positive about the outcomes of the project (see Annex 8 for comments provided by the MDF Secretariat). The Bank appreciates the inputs and support of the MDF in preparing the ICR, and concurs with the MDF about the challenges faced the completion of the IRFF AF subprojects and the tremendous effort made by the Central, Provincial and Local Governments to compensate all affected people from the land acquisition for the west coast road. It is also worth noting that the GoI contribution to the IRFF reached US$119.5 million including financing the completion of the Gaps works and the terminated sub-projects. (c) Other partners and stakeholders N/A 29

46 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Percentage of Appraisal Financing of Infrastructure Reconstruction and Rehabilitation Investment Targeted Support to Infrastructure Sub-projects Planning, Design, Supervision and Implementation Oversight Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs Project Preparation Costs Total Financing Required (b) Financing Source of Funds Type of Cofinancing Appraisal Estimate (USD millions) Actual/Latest Estimate Percentage of (USD Appraisal millions) Indonesia - Multi-Donor TF for Aceh and North Sumatra Government of Indonesia Total Financing The actual GoI contribution is $US million less than the appraisal estimate mainly due to the Amendment No.1,( Review of the Project Area, January 7, 2008). 30

47 Annex 2. Outputs by Component Component 1: Financing of Infrastructure Reconstruction and Rehabilitation Investments: 60 sub-projects totaling million ( from MDF and from GoI) have been effectively implemented covering wide-ranging areas including 5 ports, 43 roads, one bridge, 7 water supply and sanitation and 4 water resources sub-projects. This includes the early terminate 4 sub-projects which were completed by the GoI line agencies. Table 2.1 lists these sub-projects and illustrates showing their costs. The table also shows the lengths of the various roads that were reconstructed and /or rehabilitated. The total length is estimated about 900 km. While, water supply and sanitation projects were localized and benefited communities in Siggli, Sabang, Siron, Lhokseumawe, Langsa, Gampong Jawa, roads and ports benefitted the entire population of Aceh province and Nias. These sub-projects have facilitated both goods and people movement and enhanced the internal and external connectivity of both Aceh and Nias. Moreover, the construction of the west coast road segment from Calang to Meulaboh complimented the 250 km road which was constructed by the USAID and thus maximizing the benefit of the entire road. Attachment 1 illustrates pictures of some representative sub-projects before, during and/or after construction. Intermediate results have been mostly met as design specifications have been well defined for all sub-projects, as approved sub-projects derived from local priorities, as all sub-projects had provisions for adequate implementation of EMP and LARAPs, as quality supervision of sub-projects implementation was carried out and as proper financial audit reports were prepared. The pictures at the end of this annex demonstrate the project value added by comparing the status of some strategic infrastructure before and after the project. Component 2 - Targeted Support to Infrastructure Sub-project Planning, Design, Supervision, and Implementation Oversight: Originally, this component aimed at (i) strengthening the ability of the Aceh Besar, Banda Aceh and Sabang local governments to improve the provision of infrastructure in their respective jurisdictions by providing technical experts to assist them in planning and sub-project identification, sub-project design, document submission, procurement, safeguards compliance, implementation, construction supervision, and monitoring (US$2.0 million); (ii) supporting performance and financial audit (over and above external audit) of the project financial statements (US$0.6 million); and (iii) providing technical assistance for transition to a post-brr timeframe and institutional arrangements beyond April 2009, including extension of TA provided under IREP, and capacity building and infrastructure asset maintenance programs for local and provincial governments (USS0.4 million). However, and in accordance to Amendment 2, the component budget was reallocated to component 1. And its scope was implemented and financed from the proceeds IREP project. Later, and to account for the closure of IREP which was financing the design, construction supervision, financial management and project management of IRFF, US$2.9 million were allocated to cover these costs. 31

48 The components financed the construction supervision of the 4 sub-projects under IRFF additional financing from January to December It also financed the project management, the financial management and the incremental operating costs of the PMU during the same period. Table 2.1. IRFF sub-projects and their costs; and the lengths of reconstructed roads. No. Ref. Description Cost in US$ Road Length (km) Sub-projects 1 P-1 Calang Port 12,061,445 N/A 2 P-2 Sinabang Port 5,429,692 N/A 3 P-3 Gunung Sitoli Port 3,856,739 N/A 4 P-4 Reconstruction of Malahayati Seaport 9,623,370 N/A 5 P-5 Lhokseumawe and Kuala Langsa Seaport 12,988,275 N/A 6 WS - 1 Water Supply Siggli 3,737,952 N/A 7 WS - 2 Water Supply Sabang 1,953,223 N/A 8 WS - 3 Water Supply Siron 1,572,384 N/A 9 WS - 3A Pipa Air Bersih dan Reservoir 2,967,586 N/A 10 WS - 4 Reconstruction of Langsa Water 1,182,050 N/A 11 WS - 7 Reconstruction of Lhokseumawe Drainages and Reservoir 13,189,467 N/A 12 WS - 8 Gampong Jawa Landfill (TPA) 1,716,102 N/A 13 WR - 1 Aceh Besar Water Resources 620,525 N/A 14 WR - 2 Aceh Selatan Water Resources 531,430 N/A 15 WR - 3 Banda Aceh Water Resources 1,501,180 N/A 16 WR - 5 Aceh Jaya Water Resources 1,747,130 N/A 17 JN 1 Penanggalan - North Sumatra Border Roads 5,290, JN 2 Keumala - Geumpang Roads 7,963, JN 4.1 Meulaboh - Tapaktuan, 4,138, JN 4.5 Meulaboh - Tapaktuan 4,321, JN 4.6 Meulaboh - Tapaktuan 3,153, JN 5.2 Tapak Tuan - Batas Sumut 3,690, JN 5.4 Tapak Tuan - Batas Sumut 2,863, JN 5.6 Tapak Tuan - Batas Sumut 4,148, JNB1 Lueng Gayo - Arongan Lambalek, Km to 9,942, JNB2 Arongan Lambalek - Gp. Suak Breuh, km to 5,950, JNB3 Gp. Suak Breuh - Sp. Kisaran / Meulaboh, km to 7,668, JNB4 Construction of Kuala Bubon Bridge, km to 3,682, JP 1 New Town Access Road 2,717, JP 2 Sabang -Iboih (Weh Island) 3,330, JP 3 Geumpang - Tutut Roads 8,862, JP 4 Tutut - Meulaboh Roads 5,519,

49 No. Ref. Description Cost in US$ Road Length (km) 33 JP 5 Isaq - Jagung Jeget - Sp. Gelelungi Roads 8,396, JP 6 Kuala Tuha - Lamie Roads 9,057, JP 7 Lasikin - Nasrehe Roads 3,968, JK 1 Pasar Lhoong-Umong Seribee-Lamkuta 802, JK 2 Dayah Baro - Ujung Serangga 703, JK 3 Trieng Gading-Pangwa, Gigieng-Iboih 1,132, JK 4 Mamplan Samalanga 613, JK 5 Seuneddon-Bantayan 890, JK 6 Tj.Meulaboh-Pante Cermin 1,029, JK 7 Sp. Blang Ara-Lhok Tonge 895, JK 9 Sp.Kerenjala-SKPd 568, JK 11 Aceh Besar Roads Package , JK 13 Pidie Roads Package , JK 14 Aceh Barat Roads Package 1,097, JK 15 Bakongan - Beutong Roads 554, JK 16 Lentong - Kirenjala Roads 493, JK 17 Aceh Besar Roads Package , JK 18 Kota Banda Aceh Roads Package 1,274, JK 19 Kota Sabang Roads Package 755, JK 21 Pidie Roads Package , JK 22 Bireuen Roads Package 1,445, JK 23 Jalan Blang Glumpang 683, JK 24 Roads Idi Rayeuk - Keude Geurobak 1,361, JK 26 Kota Langsa Roads Package 1,380, NIAS JK1 Gunung Sitoli - Alasa - Tumula Roads 6,425, NIAS JK2 Lahusa - Gomo + Sisirahilioyo - Tuhemberua Roads 8,318, RR02 Simpang Awa'ai - Lotu - Lahewa - Afulu 10,835, RR03 Lolowa'u - Teluk Dalam Roads 11,171, SUB TOTAL 234,700, GAPs Packages 1 Gaps 1 JN 4.6 Meulaboh - Tapaktuan; JN 5.6 Tapaktuan - Batas Sumut 513,487 N/A 2 Gaps 2 JN.1 Extention 10 km to Sumut 1,956, Gaps 3 WS.1 Water Supply Sigli;WS.2 Water Supply Sabang; 181,653 WS3A Pipa Air Bersih and Reservoir N/A 4 Gaps 4 JN.2 Keumala - Geumpang; JP.3 Geumpang - Tutut; JP.4 Tutut - Meulaboh; JP.1 New Town Access; JK 22 Biereun Roads 1,147,948 N/A 5 Gaps 5 JP.5 Continueing of Isaac -Jagung Jeged 1,549,997 N/A SUB TOTAL GAPs 5,349, Total of all Sub-projects construction 240,049,

50 Attachment 1. Pictures of some sub-projects of IRFF before and after construction Before After completion P-2: Sinabang Port: The works consist of i) Jetty construction (120m x 15m) with meant capacity of 10 DWT of vessel with two new trestles, open storage 39,200 m 2 and port facilities such as access road 325m x 12m; and ii) Environmental improvement works. Before After completion P-3: Gunung Sitoli, Nias Port: The works consist of i) Wharf construction with meant capacity of 10 DWT of vessel and port facilities; and ii) Environmental improvement works Before After completion P-4: Malahayati Port: The works consist of i) Wharf construction 141x26 m 2 and 3 units of new mooring buoy including fenders and bollards installation with meant capacity of 10 DWT of vessel, and Trestle 120x9 m 2 ; ii) Dredging works about 10,910 m 3 ; and iii) Port facilities including access road, truck parking of 1,961 m 2 and Environmental improvement works. 34

51 During Construction After completion JNB-4: Kuala Bubon Bridge: The works consist of i) the construction of Kuala Bubon Bridge (0.8 km); and ii) Environmental improvement works Before After completion JP-1: Banda Aceh New Town Access Road: The works consist of i) Approximately 2 km of new road which is equipped with lighting, road signs and drainage; and ii) Environmental improvement works. The direct beneficiaries are the people of the City of Banda Aceh, Aceh Besar and its surrounding (proximately 500,000 of population). Before After completion JP-3: Geumpang - Tutut Roads: The works consist of i) Approximately 54.1 km of existing road reconstruction which is equipped with retaining walls, gabions, drainage, road marking and road signs; and ii) Environmental improvement works. 35

52 Before After completion Nias RR02: Simpang Awa ai-lotu-afulu Road: The works consist of i) Approximately 49 km of existing road reconstruction which is equipped with retaining walls, drainage, box culverts, gabions, marking roads and road signs; and ii) Environmental improvement works Before After completion Nias RR03: Lolowa'u - Teluk Dalam Roads: The works consist of i) Approximately 48 km of existing road reconstruction which is equipped with retaining walls, drainage, box culverts, gabions, marking roads and road signs; and ii) Environmental improvement works. Before After completion JK-1: Pasar Lhoong Umong Seribee Lamkuta Road: The works consist of i) Approximately 7.3 km of road reconstruction equipped with road marking, traffic signs, drainage and ii) Environmental improvement works. 36

53 Before After completion JK-3: Trieng Gading- Pangwa, Gigieng-Iboih Roads: The works consist of i) Approximately 6.3 km of road reconstruction at Trieng Gading to Pangwa; ii) 3 km of road reconstruction at Gigieng to Iboih which is equipped with retaining walls, road marking and traffic signs; and iii) Environmental improvement works. During construction After completion JK-14: Aceh Barat Roads: The works consist of approximately 8 km of i) Road reconstruction at Tanjung Meulaboh Pantai Cermin, equipped with drainage and ii) Environmental improvement works Before After completion JK-16: Lentong-Kirenjala Roads: The works consist of i) Approximately 1.9 km of road reconstruction at Lentong Kirenjala which is equipped with retaining walls, road marking and traffic signs; and ii) Environmental works including planting bamboo trees. 37

54 Before After completion JK-17: Aceh Besar Roads, Package 2: The works consist of i) Approximately 2.3 km of road reconstruction at Lambadheuk-Lampuuk (two sections); and 7 km of road reconstruction at Lambaro-Krueng mak-pekan Bilue which is equipped with retaining walls, road marking and traffic signs; and ii) Environmental improvement works including planting pine and tamarind trees. Before After completion JK-19 Kota Sabang Roads Package: The works consist of i) Approximately 5 km of district road reconstruction at which is equipped with drainage, retaining walls, road marking and traffic signs; and ii) Environmental improvement works. During Construction After completion WS-3: Siron Water Supply: The works consist of i) Intake structure construction including submersible pumps 3 x 20 l/sec, transfer pumps 3 x 20 l/sec, feeder pipes of HDPE dia 200 mm and 315 mm and generator set of 135 KVA; ii) water treatment plants with hydraulic capacity of 2 x 20 l/sec each; iii) Procured transmission pipe of 19.5 km; and iv) miscellaneous works. 38

55 Google Map Location ; After completion WS-7: Reconstruction of Lhokseumawe Drainage and Reservoir: The works consist of i) reservoir construction which is about 600,000 m 2 and holding capacity of about 200,000 m 3 ; and its facilities (embankments, bridges, tidal and sluice gates, pump station including 2 units of axial pumps of 200 l/sec discharge capacity each); ii) primary waste water treatment plant with hydraulic capacity of 90 l/sec; and iii) environmental improvements works. Before After completion WR-2: Aceh Selatan Water Resources: The works consist of i) Coastal barrier construction about 189 m at Samadua district and about 276 m at Paoh Village; and ii) Environmental improvement works including planting casuarina trees. Before After completion WR-5: Aceh Jaya Water Resources: The works consist of i) Two sides of jetty construction about 100 m out to sea ii) River bank protection about 600 m; and iii) Environmental improvement works including planting casuarinas trees. 39