Document of The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 1576 MILLION (US$2438 MILLION EQUIVALENT) TO THE REPUBLIC OF UGANDA FOR A Report No: PAD707 NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT (NERAMP) Transport Sector Country Department, AFCE1 Africa Region April 4, 2014 This document has a restricted distribution and may be used by recipients only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization

2 CURRENCY EQUIVALENTS (Exchange Rate Effective February 28, 2014) Currency Unit = UGX 2524UGX = US$1 US$ = SDR SDR 1 US$15474 FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS AC CC CAS CoST DBS DBMOT DBST DLP DP DRC ED EIRR ESIA ESMF ESMPs EU FM FMM FY FWD GAAP GDP GoU HDM IBRD IDA IFC IFR Asphalt Concrete Contracts Committee Country Assistance Strategy Construction Sector Transparency Initiative Data Base Section Design-build, Maintain, Operate and Transfer Double Bituminous Surface Treatment Defect Liability Period Development Partner Democratic Republic of Congo Executive Director Economic Internal Rate of Return Environmental and Social Impacts Assessment Environmental and Social Management Framework Environmental and Social Management Programs European Union Financial Management Financial Management Manual Fiscal Year Falling Weight Deflectometer Governance and Accountability Action Plan Gross Domestic Product Government of Uganda Highway Design and Maintenance Model International Bank for Reconstruction and Development International Development Association International Finance Corporation Intermediate Financial Report

3 IRF International Road Federation IPBE Independent Parallel Bid Evaluation ISIES Institutional Support and Integrity Enhancement Services IRI International Roughness Index MOFPED Ministry of Finance, Planning and Economic Development MOWT Ministry of Works and Transport NCB National Competitive Bidding NDP National Development Plan NERAMP North Eastern Road-corridor Asset Management Project NEMA National Environment Management Authority NITA National Information Technology Authority NPV Net Present Value NRSA National Road Safety Authority NTPS National Transport Plan Strategy NWSC National Water & Sewerage Cooperation OPRC Output and Performance-based Road Contract PAD Project Appraisal Document PBC Performance Based Contract PCRs Physical Cultural Resources PPDA Procurement and Disposal of Public Assets Authority PDO Project Development Objective PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PIP Project Implementation Plan PMS Pavement Management System PMT Project Management Team PDU Procurement and Disposal Unit RAFU Road Agency Formation Unit RAMP Road Asset Management Program RAMS Road Assets Management Systems RAP Resettlement Action Plan RDP Road Development Project RDPP1 Road Development Program Phase 1 RDPP2 Road Development Program Phase 2 RDPP3 Road Development Program Phase 3 RFQ Request for Quotation RMI Road Maintenance Initiative RMS Road Management System RMMS Routine Maintenance Management System RoW Right of Way RPF Resettlement Policy Framework RSDP Road Sector Development Program SBSAT Single Bituminous Surface Treatment SDR Special Drawing Rights SSATP Sub Saharan Africa Transport Program SRFP Standard Request for Proposals

4 TA TIS TORs TSDP TSDMS UBOS UNRA URF VfM URURA VOC WB Technical Assistance Traffic Information System Terms of Reference Transport Sector Development Program Transport Sector Data Management System Uganda Bureau of Statistics Uganda National Roads Authority Uganda Road Fund Value for Money Uganda Rural and Urban Roads Authority Vehicle Operating Cost World Bank Regional Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader: Makhtar Diop Philippe Dongier Jamal Saghir Supee Teravaninthorn Negede Lewi

5 THE REPUBLIC OF UGANDA NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT TABLE OF CONTENTS Page I STRATEGIC CONTEXT 1 A Country Context 1 B Higher Level Objectives to which the Project Contributes 5 II PROJECT DEVELOPMENT OBJECTIVE(S)6 A Project Development Objective (PDO) 6 III PROJECT DESCRIPTION 7 A Project Components 7 B Project Financing 9 C Institutional and Implementation Arrangements 10 D Results Monitoring and Evaluation 11 E Sustainability 11 IV KEY RISKS AND MITIGATION MEASURES 12 A Risk Ratings Summary 12 B Overall Risk Rating Explanation 12 V APPRAISAL SUMMARY 13 A Economic and Financial Analysis 13 B Technical 14 C Financial Management 16 D Procurement 16 E Social (including Safeguards) 16 F Environment (including Safeguards) 17 G Other Safeguards Policies Triggered 18 Annex 1: Results Framework and Monitoring 19 Annex 2: Detailed Project Description 24 Annex 3: Implementation Arrangements 35

6 Annex 4: Operational Risk Assessment Framework (ORAF)57 Annex 5: Implementation Support Plan 63 Annex 6 Economic Analysis 65 Annex 7: Governance and Anti-Corruption70 Annex 8: Letter of Sector Development Policy 73 MAP 83

7 PAD DATA SHEET Uganda North Eastern Road-corridor Asset Management Project (NERAMP) (P125590) PROJECT APPRAISAL DOCUMENT AFRICA AFTTR Report No: PAD707 Basic Information Project ID EA Category Team Leader P B - Partial Assessment Negede Lewi Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 29-Apr Apr-2024 Expected Effectiveness Date Expected Closing Date 01-Sep Oct-2024 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Supee Teravaninthorn Jamal Saghir Philippe Dongier Makhtar Diop Borrower: REPUBLIC OF UGANDA Responsible Agency: Uganda National Roads Authority (UNRA) Contact: B Ssebbugga-Kimeze Title: Ag Executive Director Telephone No: executive@unragoug Project Financing Data(in USD Million) [ ] Loan [ ] Grant [ ] Guarantee [ X ] Credit [ ] IDA Grant [ ] Other Total Project Cost: Total Bank Financing: Financing Gap: 000 i

8 Financing Source Amount BORROWER/RECIPIENT 1120 International Development Association (IDA) Total Expected Disbursements (in USD Million) Fiscal Year Annual Cumulati ve Proposed Development Objective(s) The PDO is to reduce transport costs, enhance road safety, and improve and preserve the road assets sustainably by applying cost effective performance based asset management contracts, along the Tororo - Kamdini road Corridor Components Component Name Cost (USD Millions) Road Rehabilitation, Operations and Maintenance Institutional Support to UNRA 1400 Sector Board Transport Institutional Data Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Co-benefits % Transportation Public Administration, Law, and Justice Transportation Rural and Inter-Urban Roads and Highways Public administration- Transportation General transportation sector Total Mitigation Co-benefits % I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project Themes ii

9 Theme (Maximum 5 and total % must equal 100) Major theme Theme % Financial and private sector development Infrastructure services for private sector development Trade and integration Regional integration 20 Rural development Rural services and infrastructure 20 Public sector governance Administrative and civil service reform 10 Total Policy Compliance Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 401 Natural Habitats OP/BP 404 Forests OP/BP 436 Pest Management OP 409 Physical Cultural Resources OP/BP 411 Indigenous Peoples OP/BP 410 Involuntary Resettlement OP/BP 412 Safety of Dams OP/BP 437 Projects on International Waterways OP/BP 750 Projects in Disputed Areas OP/BP 760 Legal Covenants Name Recurrent Due Date Frequency Procurement Management Description of Covenant 01-Dec-2014 The Recipient, through UNRA, shall not later than three (3) months after the Effective Date, appoint or recruit or designate a procurement specialist, all with qualifications, experience and on terms of reference satisfactory to the Association Financing Agreement (FA), Schedule 2, Section III, E1 X X X X X X X X X X iii

10 Name Recurrent Due Date Frequency Designate a Director for UNRA's Procurement directorate Description of Covenant 31-Aug-2015 The Recipient, through UNRA, shall not later than twelve (12) months after the Effective Date, designate a director for UNRA s procurement directorate, with qualifications, experience and on terms of reference satisfactory to the Association FA Schedule 2, Section III, E2 Name Recurrent Due Date Frequency Training to contract managers Description of Covenant 01-Feb-2016 The Recipient, through UNRA, shall not later than eighteen (18) months after the Effective Date, provide procurement Training for contract managers, under terms of reference acceptable to the Association FA Schedule 2, Section III, E3 Name Recurrent Due Date Frequency Financial Management Description of Covenant 31-Aug-2015 The Recipient, through UNRA, shall: (a) not later than twelve (12) months after the Effective Date, upgrade its accounting system, and update its financial management manual and its internal audit policy and procedures manual, all in form and substance satisfactory to the Association FA Schedule 2, Section II, B4 Name Recurrent Due Date Frequency Social and Environmental specialists Description of Covenant 31-Aug-2015 The Recipient, through UNRA, shall not later than twelve (12) months after the Effective Date, appoint an environmental specialist, a sociologist and a right of way officer, all in accordance with the provisions of Section III of Schedule 2 to this Agreement FA Schedule 2, Section I, A1 Name Recurrent Due Date Frequency Appointment of OPRC contractor Description of Covenant 31-Mar-2015 The Recipient, through UNRA, shall not later than March 31, 2015, appoint at least one OPRC contractor FA Schedule 2, Section V Name Recurrent Due Date Frequency Designation of key internal audit staff Description of Covenant 01-Sep-2015 The Recipient, through UNRA, shall not later than twelve (12) months after the Effective Date, designate key internal audit staff, all with qualifications, experience and on terms of reference satisfactory to the Association FA Schedule 2, Section II, B5 Name Recurrent Due Date Frequency iv

11 RAP compensation costs X Yearly Description of Covenant The Recipient shall, in each Fiscal Year ( FY ) commencing FY2015/2016: (a) through UNRA, establish and thereafter maintain at all material times during the implementation of the Project, a budget line item for RAP compensation costs under Part 1(a) of the Project; and (b) through MoFPED, allocate counterpart funds required for said RAP compensation costs under said Part 1(a) of the Project FA Schedule 2, Section I, D3(a) Conditions Source of Fund Name Type IDA Subsidiary Agreement Effectiveness Description of Condition The Subsidiary Agreement has been executed on behalf of the Recipient and UNRA FA article 501(a) Source of Fund Name Type IDA Project Implementation Plan Effectiveness Description of Condition The Recipient has adopted the Project Implementation Plan, in accordance with the provisions of Section IB1 of Schedule 2 to the Financing Agreement FA article 501(b) Bank Staff Team Composition Name Title Specialization Unit Luis M Schwarz Senior Finance Officer Senior Finance Officer CTRLA Negede Lewi Sr Highway Engineer Team Lead AFTTR Labite Victorio Ocaya Sr Highway Engineer AFTU1 Petrus Benjamin Gericke Lead Transport Specialist Rosemary Birungi Kyabukooli Lead Transport Specialist AFTTR Program Assistant Program Assistant AFMUG Christine Makori Senior Counsel Senior Counsel LEGAM Grace Nakuya Musoke Munanura Christiaan Johannes Nieuwoudt Paul Kato Kamuchwezi Senior Procurement Specialist Sr Procurement Specialist AFTPE Finance Officer Finance Officer CTRLA Financial Management Specialist Financial Management Specialist AFTME Mariame Bamba Program Assistant Program Assistant AFCF2 Elijah Ayieko Osiro Consultant Consultant AFTP5 Zemedkun Girma Tessema Sr Transport Spec Sr Transport Spec AFTTR v

12 Herbert Oule Constance Nekessa- Ouma Environmental Specialist Environmental Specialist AFTN3 Social Development Specialist Social Development Specialist AFTCS Celi Marie Dean Temporary Temporary AFTTR Non Bank Staff Name Title Office Phone City Locations Country First Administrative Division Location Planned Actual Comments vi

13 I STRATEGIC CONTEXT A Country Context 1 Uganda s Economy and Social Context Uganda, located in Eastern Africa, is a landlocked country with an area of 236,040 square kilometers With a population size of 341 million 1, the country has recorded a high population growth rate of 32 percent per annum Growth rate of the annual gross domestic product (GDP) averaged seven percent in the 1990s, and accelerated to more than eight percent over a consecutive seven-year period up to Fiscal Year (FY) Starting from 2009, a combination of exogenous shocks and domestic factors, such as the global economic crisis, bad weather, and surges in international commodity prices, affected the country s growth rate Subdued export performance, decline in aid (following high-profile corruption cases), high inflation, and the subsequent tightening of monetary policy to restore macroeconomic stability, reduced GDP growth to 34 percent in FY Uganda turned in a noteworthy economic performance during FY 2013, helped by good macroeconomic policy and favorable weather conditions Real GDP at constant market prices grew by 58 percent 2 The strong economic growth over the past two decades has enabled Uganda to substantially reduce poverty as the proportion of people living in poverty has reduced from 56 percent in 1993 to 24 percent in 2010 Uganda has surpassed the 2015 Millennium Development Goal of halving the poverty rate The share of population living below the poverty line has come down to 22 percent in The overall decline in poverty can be attributed to subtle diversification of economic activity away from over-reliance on the farm, to nonfarm household enterprises 4 Country s Development Plan Uganda s National Development Plan (NDP) (FY 2011 to 2015) stipulates the country s medium-term development priorities and its implementation strategy The NDP has highlighted low levels of investments in infrastructure as a key constraint to growth The transport sector, especially roads, is a high priority of the NDP In addition, investments in road connectivity (including rehabilitation of major transport corridors) are seen as essential for economic development, agricultural productivity, and poverty reduction in Uganda s Vision for 2040 and the NDP under preparation 5 Regional Integration and Trade Uganda is the land bridge for the rest of the Great Lakes region, connecting a number of landlocked neighbors to the coastal countries The East Africa Community (EAC) regional integration agenda is also partly driven by Uganda s active economic and trade performance Uganda s trade with its neighbors has more than doubled from 1 Uganda Bureau of Statistics (UBOS): Uganda in Figures Uganda Economic Update: Bridges Across Borders --Unleashing Uganda s Regional Trade Potential, February, First Edition, The World Bank 3 Poverty head count ratio at national poverty line (% of population) Source: Uganda Bureau of Statistics Estimates are consistent with the World Bank s Global Poverty Working Group data 1

14 about 20 percent of GDP in 1990 to over 42 percent by June The volume of trade increased by the type of goods in transit, both by destination and sources of trade, particularly with South Sudan The efficiency of the transit traffic performance in the major road corridors is critical for supporting and sustaining competitive international trade in the sub-region This calls for addressing infrastructure bottlenecks and non-physical trade barriers that hamper smooth flow of traffic for people and goods Sectoral and Institutional Context 6 Uganda s Transport System Uganda s transport system includes road, rail, water, and air transport Road transport is the most dominant mode and plays a pivotal role in supporting the economic and social development of the country Road transport carries over 90 percent of the country s passenger and freight traffic and provides the only means of access for the rural population The road infrastructure also serves the transit corridors linking the land-locked neighboring countries of Rwanda, Burundi, South Sudan, and parts of the Democratic Republic of Congo (DRC) to the Indian Ocean port of Mombasa, Kenya The classified road network length is about 66,000 km and consists of 21,000 km national, 32,000 km district and 13,000 km urban roads The community access road network is estimated at 85,000 km Other modes of transport are: (a) a railway system that consists of 1,260 km of which only 320 km are functioning, while the rest are in a dilapidated state; (b) water transport mainly on Lake Victoria and the Nile river served by wagon ferries; and (c) air transport facilities including one international airport, and 13 domestic air fields 5 7 National roads, of which 3,490 km are paved, connect districts with one another and the country with its neighbors The Uganda National Roads Authority (UNRA) is responsible for managing national roads The urban roads, located within the boundaries of urban councils, are of different types (bitumen, gravel and earth surface) and are managed by urban local governments District roads provide access from rural areas to markets, health centers, educational institutions, administrative centers and other services and are managed by district governments The community roads are managed by sub-county local governments The national roads, which make up only 30 percent of the network, carry 80 percent of the total road traffic 8 National Transport Policy and Strategy (NTPS) The NTPS, adopted in 2002, promotes less costly, efficient, and reliable transport services as a means of providing effective support to increased agricultural and industrial production, trade, tourism, social and administrative services The Government of Uganda (GoU) has received support from development partners (DPs) in the sector The first 10 year Road Sector Development Program Phase 1 (RSDPP1) covered the period from FY 1997 to 2006 In April 2002, RSDPP1 was updated and rolled over for a second 10 years as RSDPP2 (FY 2001 to 2011) and its total estimated cost was increased from the original US$15 billion to US$23 billion The update included district roads, which were not part of RSDPP1 Based on the lessons learned in the implementation of the two phases of the program, the Government, with support from DPs, has developed an ambitious RSDPP3 program which also includes urban roads with a total proposed 4 UGANDA Assessment of Trade and Transport Corridors Serving Uganda, October 15, Annual Sector Performance Report Financial year 2102/13, Ministry of Works and Transport 2

15 investment requirement of US$1036 billion over the ten year period from FY 2012 to RSDPP3 places emphasis on the provision of a technically sound, economically justified and financially sustainable road transport infrastructure through active participation of the private sector In order to adequately respond to the growing transport demand on a timely basis, support national economic development, and the growing regional trade in a sustainable manner, the RSDP has prioritized the rehabilitation of maintenance of the major road corridors One of the key corridors included in the RSDP is the north eastern corridor 9 Institutional and Policy Reforms The GoU has restructured the Ministry of Works and Transport (MoWT) to focus on formulating policies, setting standards, strategic planning, and sector oversight and monitoring The Government has been delegating executive functions, including implementation and regulatory functions, to specialized entities which have been or are being created Accordingly, UNRA was established to manage national roads and it commenced operations on July 1, 2008 The Uganda Road Fund (URF) was established to finance road maintenance and it became fully operational on July 1, 2010 The ongoing reform is focusing on the creation of: (a) a National Road Safety Authority (NRSA) that will lead road safety initiatives; (b) a Multi-Sector Transport Regulatory Authority (MTRA) to take care of surface transport regulation; (c) Uganda Rural and Urban Roads Authority (URURA) to manage rural and urban roads; and (d) a Metropolitan Area Transport Authority (MATA) to manage Urban transport and the proposed bus rapid transit system in the Greater Kampala Metropolitan Area (GKMA) The GoU is also committed to privatization and commercialization functions that can be transferred to specialized service providers to enable the public sector to concentrate on its core responsibilities 10 Key Sector Issues Although reforms to date have substantially enhanced sector performance, there are a number of areas that need further attention The September 2013 annual review of the transport sector points to some gaps in transport infrastructure, poor condition on some of the high priority national road network, and high vehicle operating costs (VOC) The operationalization of the URF as a second generation maintenance financing instrument has not yet materialized and maintenance activities are underfunded Inadequate road designs have in some instances led to major variations and increased the cost of works contracts making the programming and budgeting for roads difficult Furthermore, over the last few years, there have been delays in payments to contractors and consultants under Government-funded projects primarily due to over commitments in the road sector These issues have stretched the contract management capacity of UNRA as it has to deal with a number of claims under the contracts due to variations, extension of time, and delayed payments 11 Governance Challenges Under the ongoing Transport Sector Development Project (TSDP), the Government has been implementing the Governance and Accountability Action Plan (GAAP) aimed at developing a system and culture for promoting transparency and accountability in the road sector As part of implementation support to the TSDP, the Bank and the Government have put in place an Institutional Support and Integrity Enhancement Services (ISIES) system The ISIES includes measures to enhance transparency, accountability and participation in the implementation of both Government and donor funded projects in the 6 Preparation of Third Phase of Road Sector Development Program (RSDP3), Kagga & Mott Macdonald, June 2012, UNRA 3

16 national roads program These measures implemented in UNRA have helped in reducing the number of administrative reviews associated with contracts award and have resulted with competitive bids over the last two years However the third annual report on tracking corruption trends in Uganda points out the challenge of achieving value for money (VfM) in the roads sector, noting that up to 85 percent of the road works were not implemented as scheduled for district roads program 7 Delayed release of funds works by the Ministry of Finance, Planning and Economic Development (MoFPED) and URF, insufficient funding, inadequate capacity of contractors, machine breakdowns, as well as delays in the procurement process were the main reasons cited for slow implementation of district road works 12 Road Asset Management The focus of investment in the past was geared towards road development, while road maintenance was underfunded Furthermore, there was no systematic long-term road asset management practice in UNRA The backlog of periodic maintenance on the national paved roads had increased from about 450 km in 1999 to about 750 km in There was a need to address this situation that led to the reduction of the paved road assets value by about 10 percent annually The Bank has supported the establishment of a Road Asset Management System (RAMS) for the national road network, under the TSDP and the completed third support to the RSDP, to enable the optimization and prioritization of the RSDP activities The rationale for RAMS mainly lies on preserving the road assets from deterioration through cost-effective, efficient, and well-designed interventions Thus, RAMS was based on a strategy that is designed to increase the effectiveness and efficiency of the road system through the preservation of the road assets It also aims at the optimal allocation of resources, to clear road maintenance backlog and ensure the VfM principle and avoid the build and collapse practice observed on the road assets Although the RAMS was made operational, the benefits could not be fully utilized due to challenges and constraints facing UNRA 13 There is a shortage of staff and specialized expertise in some of the emerging and complex areas of infrastructure delivery such as managing private-public-partnerships (PPP), and design-build, maintain, operate and transfer (DBMOT) Other constraints include the lack of defined procedures and standard output-based contract management processes, and the mainstreaming of such systems and procedures within UNRA 14 Road Asset Management Contracts In support of its strategy to mainstream road asset management practices, the GoU is introducing innovative road asset management contracts, under the North Eastern Road-corridor Asset Management Project (NERAMP) The DBMOT asset management contracts are also referred to Output and Performance-based Road Contracts (OPRC) 9 This contracting approach reduces the risks related with poor road design, quality control, and cost overruns as the contractor will be responsible for the design of the road and payments would be on a lump sum basis for a predefined level of performance and output The OPRC will introduce a new way of doing business shifting from the more traditional approach of 7 The Third Annual Report on Corruption Trends Tracking Mechanism, the Republic of Uganda Inspectorate of Government - December Final report: Needs Assessment for Engaging the Diaspora - Capacity Needs Assessment of Uganda National Roads Authority - Ministry of Foreign Affairs, May In the rest of the Document reference is only made to OPRC since this terminology is consistent with the Bank s sample Bid Document 4

17 admeasurement contracts, which is based on payment for inputs, a method that has not been budget friendly due to quantity and price variations arising during contract implementation OPRC contracts, on the other hand, promote innovation, efficiency and effectiveness as contractors strive to achieve set performance standards with an optimally agreed contract price OPRC also helps to preserve road assets by protecting them from further deterioration through application of appropriate and timely interventions This, coupled with the institutional support to be provided to UNRA under the NERAMP, will improve the efficiency and effectiveness of road network management, and will bring about the culture change to deliver the benefits of the RAMS 15 Rationale for World Bank Involvement The World Bank brings in global experience in the application of OPRC The Bank has also benefited from the experience gained in implementing comprehensive road sector development programs and institutional reforms in Sub-Saharan Africa In Uganda, the Bank's key role during the preparation and implementation of the RSDP has been recognized by all stakeholders The Bank funded three completed projects in support of RSDP, and another ongoing project, the TSDP which has funded, among others, institutional transformations in MoWT and the establishment of RAMS The Bank's participation in this new project will provide for continuity in carrying out sector reforms and implementation of long-term national road sector programs, using innovative approaches Box 1: Overview of OPRC OPRC requires the contractor to prepare the design of the expected rehabilitation works, and after approval of the design by the Employer, the contractor will be responsible for the construction, maintenance, and operations activities The maintenance of the selected road links will be at the required levels of service Payments will be based on whether the roads under contract must comply with the level of service as specified in the bidding document, ie, the outcomes for all required activities beginning from rehabilitation, through maintenance services ensures continuous compliance with the specified level of service OPRC addresses the shortcoming of conventional contracting by creating incentive structures for the contractor The main advantages of OPRC, based on Bank experience in other projects can be summarized as follows: (a) cost savings in managing and maintaining road assets ranging from 20 to 45 percent; (b) expenditure certainty (fixed price contracts with monthly regularity to avoid unexpected variations); (c) leaner road agencies (reduction of road agency s in-house workforce and general administrative costs); (d) improved and sustained condition of contracted road assets; (e) enhance satisfaction of road users; (f) secured financing for multi-year maintenance program (long-term contracts); (g) better planning and use of resources, and improved governance; and (h) reduced number of contracts which otherwise would need to be carried out and administered by the Road Authority during the same long-term contract From a lesson learnt in earlier Bank-financed projects, for a successful implementation of OPRC, the contracts require proper risks identification and allocation between Employer and Contractor or to be shared by both The Assessment Study for the conceptual design and preparation of bid documents for the project roads studied these and the outcome of the risk allocation will be included as specific clauses in the bid documents B Higher Level Objectives to which the Project Contributes 16 The proposed NERAMP will contribute to the Government of Uganda s National 5

18 Development Plan, NTPS, and RSDP As the project is focusing on one of the major transport corridors it will also support GoU s effort of unleashing Uganda s regional trade potential, thus enhancing the regional integration objective of the East Africa Community (EAC) 17 The project supports the World Bank s twin goals of reducing extreme poverty and promoting shared prosperity The corridor will connect some of the poorest regions in Uganda with its neighboring countries where poverty rates are high A large majority of the population lives in rural areas and lives on subsistence agriculture The project corridor, apart from providing a cost effective transport system for economic activity, especially for agricultural development in the project area, has been serving as the main access route to northern Uganda, Kenya, south eastern DRC and South Sudan, where some of the poorest populations reside Improving connectivity will provide better access to markets and services for the bottom 40 percent of the population, while upgrading the corridor will help to reduce the cost of imports to the region, expand markets, facilitate development and create local jobs 18 The project supports the core pillars of the Africa Strategy: (a) improving competitiveness and employment; and (b) addressing vulnerability and promoting resilience It is also aligned with the current Bank s Country Assistance Strategy (CAS) for Uganda 10, covering FY 2011 to 2015 which has a strategic objective of enhancing public infrastructure and promoting inclusive and sustainable growth Transport is one of the priorities of the CAS and is considered to be one of the determining factors for growth, interconnectivity, trade and regional integration Improved access to and quality of the roads are being monitored as key outcome indicators of the CAS The CAS Progress Report (CAS PR) 11 of July 2013 highlights an emphasis on transformational operations focusing on infrastructure, (including rehabilitation of major transport corridors), agricultural productivity and access to markets and skills development that leads to more jobs 19 As the project is to introduce the utilization of output-based asset management contracts it would be a paradigm shift from the current practice of input-based contracting The transformational nature of the operation could provide lessons that could be replicated in Uganda and other countries II PROJECT DEVELOPMENT OBJECTIVE(S) A Project Development Objective (PDO) 20 The PDO is to reduce transport costs, enhance road safety, and improve and preserve the road assets sustainably by applying cost effective performance based asset management contracts, along the Tororo-Kamdini road corridor 21 Project Beneficiaries The primary target group or main beneficiaries of the project will be: (a) the road users, who will gain from an improved level of service as a result of the 10 Report No UG 11 Report No UG 6

19 improvements and the maintenance of the road corridor; (b) the tourism industry, as the corridor would provide better access to two national parks (Murchison Falls and Kidepo); and (c) the agricultural producers and communities along the corridor that would benefit from the jobs created and the improved access to markets, social and economic activities The project beneficiaries are about 225 million people out of which about 40 percent are female 22 PDO Level Results Indicators The PDO key result indicators are: (a) road corridor sections in good, fair and bad condition (percentage); (b) reduced travel time (HR); (c) vehicle operating cost (VOC) savings (US$); (d) reduced road accidents on project road (number); (e) direct project beneficiaries (number); and (f) female beneficiaries (number) III PROJECT DESCRIPTION A Project Components 23 Component 1 - Road Rehabilitation, Operations and Maintenance (US$241 million) This component will finance long term OPRC for the Tororo - Mbale - Soroti - Lira - Kamdini road (340 km) This road corridor links South Sudan, parts of the Democratic Republic of Congo, and northern and eastern Uganda to the port of Mombasa The works and services under the OPRC contract will include: (a) the design and rehabilitation of sections of the road corridor; (b) routine and periodic maintenance of the whole corridor; and (c) operations which will include management of traffic, road safety and axle load control measures This component will also finance consultancy services for the Project Management Unit that will be responsible for administering and supervising the OPRC contracts 24 The North-East Corridor The project road comprises paved road that stretches from Tororo up to Kamdini located in the eastern and north eastern part of Uganda, respectively There are two road corridors from Kamdini: (a) to DRC through Goli and Vurra and onward to South Sudan through Oraba in north western Uganda; and (b) to South Sudan through Nimule in northern Uganda Thus, the project road is feeding traffic from the Mombasa port to South Sudan, DRC and Uganda The road traverses mainly a flat to rolling terrain through the districts of Tororo, Mbale, Bukedea, Kumi, Ngora, Soroti, Kaberamaido, Dokolo, Lira, Kole and Oyam 25 Component 2 - Institutional Support to UNRA (US$14 million) To ensure sustainability, technical assistance to UNRA will focus on designing, awarding, and managing OPRC In addition, local stakeholders, including regulatory bodies, auditors, and the local construction industry need support to help build awareness in order to contribute towards the change process in the way the road network is planned, developed and maintained The following will be provided as a package to bring about sustained and lasting culture change to deliver the benefits of OPRC a) Asset Management Support and Road Safety (US$75 million) Technical Assistance (TA) support will be provided in data collection, lifecycle cost analysis, development of output specifications for the long term contracts, monitoring and evaluation, and reporting on the performance of pavements and bridges This component will also finance consultancy services that will prepare asset management contracts for future 7

20 projects The road safety activities are aimed at the reduction of road traffic injuries and fatalities by strengthening the road safety management capacity, and reducing road crashes in the project corridor The safety interventions under the NERAMP will build on the lesson learned from Safe Way Right Way (SWRW) initiative 12 The component will support the road safety audit, monitoring and evaluation exercise and road safety enhancement measures It will be closely coordinated with the ongoing activities supported under the TSDP to implement the National Road Safety Policy, the establishment of a NRSA, and development of the National Road Crash Database b) Support in Contract Supervision and Management of OPRC (US$55 million) UNRA s contract management setup is predominantly for managing admeasurement contracts Consultancy services will be provided to reorganize the contract management and administration systems and practices in UNRA to ensure that OPRC contracts are appropriately supervised and monitored The component will also provide consultancy services in the areas of safeguards, financial management, and enhancing the contract monitoring system Support will also be given to the implementation of the CoST initiative which is intended to reinforce good governance and accountability in the road sub-sector UNRA needs to influence planning, charging, enforcement, control, and information on the national road network in order to operate the network effectively The management of traffic flow, safety and axle load control must be enhanced in partnership with contractors and other key stakeholders Thus to improve UNRA s network management capabilities, support will be provided to improve customer services, charging, and enforcement This will also entail the preparation and implementation of a project communication strategy to disseminate useful information to the public as well as generate and secure a sustained feedback from all stakeholders to maintain or improve the services As OPRC is a new initiative, a robust training program is an integral part of the project This will entail, among others, secondment of graduate engineers during implementation and specialists training for senior UNRA staff in the planning and supervision of output and performance-based contracts Training will also be provided in building the capacity of local contractors in undertaking such output-based contracts c) Operating Costs (US$10 million) This component will finance incremental project implementation expenses based on agreed annual work plan and budget The operation cost will consist of, audit fees, expenditures for office supplies, vehicle operation and maintenance, maintenance of equipment, communication and insurance costs, office administration costs, utilities, rental, consumables, accommodation, travel and per diem, and salaries of Project staff, 12 Safe Way Right Way (SWRW) initiative is a road safety program carried out in the Northern corridor with the partnership of the World Bank and TOTAL Group closely working with private sector companies, several members and program activities under a registered NGO umbrella called Safe Way Right Way 8

21 B Project Financing 26 The total cost of the project is estimated at US$25500 million equivalent The share of IDA financing amounts to US$24380 million equivalent (SDR million) and the remaining US$1120 million is financed by the GoU The proposed lending instrument is Investment Project Financing (IPF) Table 1 below shows the project cost by component, and the details are provided under Annex 2 Table 1: Project Costs by Component (US$ million) Project Components Total % of IDA % IDA Project cost total Financing Financing Road Rehabilitation, Operations and Maintenance Institutional Support to UNRA Total Lessons Learned and Reflected in the Project Design 27 The lessons learned and reflected in the design of the project are based upon implementation of completed projects that have supported the RSDP in Uganda and the ongoing TSDP; and the Bank s global experience with OPRC contracts elsewhere 28 Procurement Delays In other projects, the cost of the civil works has varied substantially from that at the feasibility and detailed engineering design stages, mainly due to delays in the procurement process (which in some cases took up to four years) These delays led to several parameters affecting bid prices and/or variations under the contracts (from estimates made at appraisal) Under the proposed operation, major works contracts will be carried out on post qualification basis The early launch of procurement processing will be complemented with TA support to expedite the bid evaluation process 29 Cost Increases In past projects, cost overruns under civil works contracts were mainly attributed to: (a) inadequate or absolute road designs, weak contract management, inefficient planning and timely implementation of environmental and social impact mitigation measures, resulting in variations, and major claims under the contracts; (b) unexpected or sudden increases in the cost of fuel, construction materials and other inputs; and (c) low cost estimates These factors have affected project implementation and resulted in reducing the scope or dropping of project components The OPRC approach proposed under this project addresses most of the issues including variations related to inadequate road designs Furthermore, the technical assistance will augment the support provided to the contracts manager and enhance the capacity of UNRA, including for environmental and social management 30 The project will build up on the lesson learned from the implementation of the ISIES, under the TSDP, including the use of an Independent Parallel Bid Evaluation (IPBE) system, timely actions by internal audit and improved contract management procedures The project will 9

22 also build up on the Construction Sector Transparency (CoST) Initiative 13 In October 2013, Uganda became the tenth CoST country CoST will be working directly with UNRA, which will lead the implementation of CoST within Uganda 31 Asset Management Experience elsewhere has shown that the use of OPRC needs to go hand in hand with good road asset management In the case of UNRA, the asset management concept has been adopted and RAMS developed Furthermore, the duration of the OPRC contract was proposed based on lessons learned from the implementation of similar projects IMPLEMENTATION C Institutional and Implementation Arrangements 32 The project will be implemented by UNRA, which is the Recipient s legal entity established by law, to be responsible for the maintenance, development and management of the national road network, under the supervision of the MoWT Proceeds of the Credit will be availed by MoFPED to UNRA as a grant The Executive Director (ED) of UNRA will be the Accounting Officer for the project The ED of UNRA will delegate the function of the day-today management of the project to the NERAMP Project Coordinator The project is fully mainstreamed UNRA will implement the project through existing systems UNRA has three technical Directorates: (a) Directorate of Planning responsible for planning, programming, budgeting, designing, and social and environment management, monitoring and evaluation; (b) Directorate of Projects responsible for implementation of construction and rehabilitation works; and (c) Directorate of Operations, responsible for maintenance, operations, axle load control and ferry services As the implementation of the OPRC will cut across the functions of the three Directorates, the project coordinator will be working with specialists assigned from the different Directorates The details of the working arrangements will be included in the Project Implementation Plan (PIP) UNRA will submit the final PIP that is acceptable to IDA, which is a condition of effectiveness 33 UNRA has been implementing various World Bank and other DPs financed projects and has a well-established finance unit to manage the proceeds of the IDA credit UNRA will maintain the designated account and will ensure compliance with all financial requirements of IDA UNRA will be responsible to present consolidated progress reports and consolidated unaudited Interim Financial Reports (IFRs) to IDA in a timely manner 34 The procurement function will be executed by the Procurement Directorate Since its elevation to a Directorate in 2012, the TSDP has been financing the positions of one procurement consultant (who is also the acting Director of Procurement), and one procurement specialist These positions have been instrumental in building capacity of the procurement in UNRA and helping bridge the understaffing gap UNRA has started the recruitment process for the position of the Director of Procurement 13 CoST is a country centered multi-stakeholder initiative designed to promote transparency and accountability in publicly financed construction Details could be obtained at 10

23 D Results Monitoring and Evaluation 35 The Data Base Section (DBS) of the Policy and Planning Division of MoWT has the overall responsibility for monitoring and reporting on the performance of the transport sector Biannual reports are produced by the DBS, which are used to measure the performance of the different sub-sectors The Transport Sector Data Management System (TSDMS) used for this purpose has already been established under the TSDP The day-to-day monitoring and reporting function of the project will be with UNRA Other data will be generated from the Road Management System (RMS) of UNRA which was established under the Bank financed RDPP3 and the TSDP The RMS, comprises a Pavement Management System (PMS), Bridge Management System (BMS), Contract Management System (CMS), Traffic Information System (TIS), Geographic Information System (GIS) and a Routine Maintenance Management System (RMMS) These were successfully established, populated with data for the approximately 20,500 km of the National Roads The project road specific data will be obtained from the above data bases and the service level measurements that are to be defined for NERAMP The NERAMP project coordinator will produce the bi-annual status and progress reports in time for the biannual supervision missions The detailed arrangements for project monitoring, including outcome indicators, baseline data and targets planned to be achieved, are provided in Annex 1 E Sustainability 36 There is strong country commitment and ownership of the project The project was based on the GoU s stated interest of introducing OPRC in the Ugandan road sector to address some of the issues related with current practices The key stakeholders, including the MoFPED, MoWT, UNRA, the Parliamentary Committee for Infrastructure and beneficiary groups living along the roads, have all expressed their commitment to the project Many development partners have expressed their support to the project and are keen to support such an approach The institutional support that would be provided under the project will bring about the change required for the preservation of the road assets and the continued application of the OPRC 37 The sustainability of the road sector program will depend on improved road maintenance performance This will require timely and stable availability of maintenance funding, and capacity of the private sector In the past, when maintenance of the national roads was under the MoWT, the quality of maintenance was mixed, as the maintenance budgets were unpredictable and fluctuating, and as a consequence, planning was difficult and the local construction industry did not develop adequately Although maintenance funding amounts are predictable after the establishment of URF, the budget allocated has never been adequate to cover all the funding requirements It is expected that this situation will improve with URF being fully operational as a second generation road fund, as this will enable it to generate more funds for road maintenance 11

24 IV KEY RISKS AND MITIGATION MEASURES A Risk Ratings Summary Table 2: Risk Summary Table Risk Category Stakeholder Risk Implementing Agency Risk Rating Moderate - Capacity Substantial - Governance High Project Risk - Design Substantial - Social and Environmental Moderate - Program and Donor Low - Delivery Monitoring and Sustainability Substantial Overall Implementation Risk Substantial B Overall Risk Rating Explanation 38 The major risks in implementation of the project are associated with the operating environment, mainly a result of the governance challenges such as corruption Although these risks are substantial, the Bank, has been working with the Government on mitigation measures (under the High Level Financial Management Action Plan) some of which will also be applicable to the project The Government has put in place comprehensive measures to strengthen the management of public resources, and to enhance capacity of oversight institutions such as the Inspectorate of Government At the national level, the GoU is also committed to carry out regular extensive forensic audits to monitor VfM in high spending sectors including the transport sector 14 The governance related issues within the transport sector have been addressed over the last three years as part of the GAAP developed and implemented under the TSDP Lessons from implementation of the GAAP have been considered to formulate mitigation measures to be implemented under NERAMP Furthermore, as the major investment in the project goes to contracts that are under prior review by the Bank, the risks identified could be managed and may not substantially hinder project implementation 39 Although UNRA has not implemented OPRC contracts, it has an operational road asset management unit This unit has been supported by TA under the Road Development Program Phase 3 (RDPP3) and TSDP, including setting up the road database and establishing the RAMS system In addition, the Bank supported diaspora program deployed TA to identify the change 14 The High Level Government Finance Management Reform Action Plan Matrix agreed by MoFEPD and Development Partners, December

25 management process requirements and strategy for rolling out the implementation of modern road asset management in UNRA As part of project preparation and through financing under the TSDP, a major training program was organized for key stakeholders from the implementing agency, key ministries, the Parliament, PPDA, Office of the Auditor General, local construction industry representatives etc, to bring them on board Additional technical assistance will be provided under the project V APPRAISAL SUMMARY A Economic and Financial Analysis 40 The economic and financial analysis was carried out by UNRA through the support of the consultant firm M/s COWI The results of the economic analysis for the Tororo-Kamdini corridor road shows that the proposed project is economically and financially viable The analysis assumed an asphalt concrete (AC) overlay and defined maintenance interventions to determine the associated costs and benefits for each type of maintenance by year of intervention on each of the seven road sections in the Tororo-Kamdini corridor The analysis was undertaken using the Highway Design and Management Model, Version 4 (HDM4) and was based on a recent traffic survey and an assessment of both the current condition and the residual life of the pavement The economic evaluation compared the actual and estimated costs and benefits, based on present and projected traffic volume, the project road condition, the characteristics of the vehicles using the road, the vehicle operating costs, and the unit costs associated with the identified interventions 41 The conceptual design considered five possible options (scenarios) based on: (a) the thickness, timing, frequency of AC overlay activities; and (b) the different possibilities for the completion and/or termination of the current contract for the reconstruction of the Tororo-Mbale- Soroti section The details of the technical options considered are provided in Tables 23 and 24 of Annex two Comparative costs and benefits analysis of the five scenarios were calculated based on different road rehabilitation and maintenance strategies based on different service level standards, timing and packaging of interventions Findings of the analysis are shown in Table 3 below, with the details provided in Annex 6 42 The preferred scenario 3A was chosen as it returned a NPV of US$82 million and an EIRR value of 134 percent under the base case Whilst these returns were slightly lower than those for scenario 3, an NPV of US$87 million and an EIRR of 135 percent, Scenario 3A was the preferred option as it was found: (i) to provide a better residual pavement strength at the end of the OPRC contract period, (ii) provide the best value for money from the current contract; and (iii) it avoids possible costs and reputational risks associated with the termination and waiver of Defects Liability Period (DLP) under an ongoing road improvement works contract on the Tororo-Mbale-Soroti section of the road corridor 13

26 Table 3: EIRR and NPV Results of the Economic Analysis Scenario 1 (Scheduled maintenance) Scenario 2 (Scheduled Scenario 3 (3A) Scheduled maintenance) Scenario 4 (Responsive maintenance) Maintenance) Traffic NPV EIRR NPV EIRR NPV EIRR NPV EIRR scenario High % % 193 (188) 150% (150%) % All Sections Base % % 87 (82) 135% (134%) % Low % % -14 (-19) 117% (116%) % 43 Rationale for Public Involvement Road transport as the predominant mode of transport has been an engine of growth and socio-economic development in Uganda and the countries in the sub-region The road corridor under this project requires long term support to provide dependable and efficient service as one of the main corridors serving local and international traffic The project corridor, apart from providing a cost effective transport system for economic activity, especially for agricultural development in the project area, has been serving as the main access route to the northern part of Uganda, south eastern DRC and South Sudan Therefore, the project has a very strategic importance and is a public asset that needs to be preserved As the current traffic level on the corridor is not sufficient to attract private financing, the option for Public Private Partnership (PPP) for a design build, operate and transfer arrangement was not considered Road safety improvement is included in the project as it falls under the social and public responsibility of the Government 44 The Bank s Value Added The GoU gives high strategic importance to efficient, optimal and timely use of public resources allocated to the road sector, so as to develop and keep the road network in a good condition As part of this effort, the road asset management system to support the long term preservation of the transport system has been rolled out under the RDPP3 and TSDP The Bank is further responding to this need by sharing its worldwide experience in the application of good road asset management practices, including the OPRC The Bank, together with other DPs, have been engaged in continuous dialogue and has provided support to improve procurement and contract management, as well as, social and environmental management capacity of UNRA This project will build upon and enhance previous efforts B Technical 45 The conceptual design for the road, which was the basis for determining the technical viability and costs of the interventions proposed, was prepared by M/s COWI with funding under the TSDP Various surveys and investigations have been undertaken to serve as a basis for the assessment of appropriate service levels and performance indicators, conceptual design, and financing strategy The road safety assessment of the road corridor provided the list of road safety measures that will be included in the OPRC 46 As the OPRC shifts a large portion of the risk of road construction and maintenance to the contractor, 35 risks related to road design, works contract execution, and operation and 14

27 maintenance have been assessed and allocated to be borne by the contractor, employer, and a few of them to be shared by both parties The bidding documents for the OPRC and contract clauses are prepared based on this risk allocation The bidding documents also include (i) the works specifications both at the design and implementation stages, (ii) the performance specifications and level of service requirements, (iii) the financial and associated payment models, (iv) the forms and models of contract guarantees and (v) the standard drawings This would provide the bidders with background information relevant for preparing realistic bid prices for the works under the OPRC Annex 2 has further details on the risk identification and allocations under the OPRC 47 The project road corridor has three distinct sub-sections primarily due to heterogeneity both in terms of time and nature of prior rehabilitation and maintenance interventions executed These are: (a) Tororo-Mbale-Soroti section (151 km), which has substantially deteriorated due to increased traffic and has been under staged reconstruction since 2010 The road is being rehabilitated by constructing with double bituminous surface treatment (DBST) on pavement that consists of 200 mm mechanically modified base, 200 mm natural gravel, and 300 mm natural gravel sub-grade; (b) Soroti-Lira Road (123 km) that was upgraded from gravel to a paved (bitumen) standard in 2010, through an IDA financing, and is still in a good condition though some failures have started in roundabouts that were not constructed in rigid pavement; and (c) Lira-Kamdini Road (66 km) which was constructed in 1968 and which has received periodic maintenance, through a contract financed by the European Commission (EC), and completed in August 2011 The road is still in fair condition but failures have started in swamp areas The conceptual design for the Tororo-Mbale-Soroti section of the road is based on the consultant s pavement assessment for 82 km of roads completed at the end of September 2013 The pavement assessment for the remaining 69 km section of the road will be carried out after the deadline for handover of the section of road by the current contractor to UNRA The Soroti-Lira and Lira- Kamdini sections of the road are readily available for the OPRC contractors, while the Tororo- Mbale-Soroti section will be available as soon as the implementation of the ongoing contract is completed The contract completion date is June The OPRC for the project road is expected to comprise the following: (a) rehabilitation and improvement works, on the Lira Kamdini section of the road; (b) routine, periodic, and emergency maintenance works including strengthening by AC overlay for all sections of the road; (c) management services that includes testing and inspections to predict the future traffic volume, load, and road condition, in order to plan the maintenance activities; and (d) implementation of proposed safety measures, including undertaking road safety sensitizations, education and awareness campaigns and axle load control and surveys The contractor is fully responsible for the design of the works which are necessary to reach the required service levels, and the durability and performance of the roads over the prescribed life of the road The payments to be made to the contractor will not be based on quantities of works measured by unit prices for work inputs, but on measured outputs reflecting the target conditions of the roads under the contract In other words, what the roads are supposed to look like, expressed through Service Levels The duties of the contractor will include maintenance of the road at the service levels as defined in the contract, carrying out the regular maintenance operations historically undertaken by a maintenance station 15

28 C Financial Management 49 Financial Management (FM) arrangements will be based on those used for the ongoing TSDP and past IDA financed projects UNRA has implemented several projects and is currently implementing two IDA credits and a trust funded grant (totaling US$271 million) The Executive Director of UNRA will be the overall accounting officer and the day-to-day financial management operations will be handled by the Finance Department headed by the Director of Finance and Administration who supervises the overall FM arrangements including a dedicated Project Accountant 50 Previous audits and World Bank reviews have however, highlighted risks pertaining to price adjustments for ongoing road works leading to excess payments, inter-project borrowing of funds, and lack of full operation of the internal auditing function The accounting system also needs an upgrade to increase functionality The proposed action plan to be implemented by UNRA to strengthen the financial management arrangements are detailed in Annex 3 D Procurement 51 Procurement will be carried out by the UNRA Procurement Directorate with technical inputs from the Planning, Projects and Operations Directorates UNRA has well established institutional and governance structures for the processing of tenders with the Procurement and Disposal Unit (PDU), and the Contracts Committee (CC) in place The Solicitor General has the responsibility of approving contracts on behalf of the GoU UNRA has experience in managing procurement under Bank financed projects The capacity assessment of UNRA was carried out by the Bank in July and September 2013 to review staff skills, current workload, quality and adequacy of supporting and control systems, and legal and regulatory frameworks The key risks are delays in processing procurement, weak contract management, lack of sufficient number of competent procurement staff and weak coordination between Directorates (See Annex 3) 52 Procurement under the project will be carried out in accordance with the World Bank s "Guidelines: Procurement under International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits" dated January 2011; and "Guidelines: Selection and Employment of Consultants by WB Borrowers" dated January 2011; Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006 and revised in January 2011; and the provisions stipulated in the Legal Agreement E Social (including Safeguards) 53 The project involves the rehabilitation and maintenance of an existing road corridor Social impacts intrinsic to rehabilitation and maintenance works are localized and readily mitigated However, Operational Policy (OP) 412, is triggered because there could be some land acquisition for possible road re-alignment, borrow-pit areas, workers camps, equipment storage areas and quarry sites which may have substantial social impacts In addition, the road corridor that passes through urban centers and market areas may have expanded in the right of way and require temporary or permanent relocations Deviation from the present alignment will probably be for engineering reasons or to avoid or minimize resettlement 16

29 54 GoU prepared a Resettlement Policy Framework (RPF) and disclosed it in-country and at the Bank s Infoshop on February 7, 2014 The RPF will guide the land acquisition required within the right-of-way as well as extended land acquisition for the complementary activities of the road rehabilitation and maintenance over the project life The RPF was chosen as the resettlement instrument to be prepared prior to appraisal because the contract arrangements require final design to be done by the OPRC contractor During implementation, the Resettlement Action Plans (RAPs) will be prepared based on the detailed designs The RPF provides step-by-step procedures for determining the necessity of the RAP and the guidelines for its preparation, including the procedures for consultations with potentially affected individuals, households, businesses and local governments, the process for disclosure of entitlements, and the establishment of a grievance mechanism The RPF and its implementation responsibility will be included as part of the bidding documents for the OPRC contractor Construction related social impacts will be addressed within and by the Environment and Social Management Framework (ESMF) 55 The RAP will be prepared by the contractor It will be reviewed by the Project Manager who will be responsible for the administration and supervision of the contract The Project Manager will closely work with and be guided by UNRA s Safeguards unit in the review and implementation of the RAP The RAP prepared by the OPRC contractor will also be reviewed by an independent consultant to ascertain the validity and comprehensiveness of the initial RAP assessment report The RAP report(s) will then be reviewed and agreed by the UNRA safeguard unit and cleared by the Bank for disclosure to the public prior to commencement of the civil works The GoU will finance the RAP implementation activities and UNRA will ensure that the RAP compensation and resettlement costs are appropriately reviewed and approved by the Office of the Chief Government Valuer before passing it to the contractor for administration The contractor s team will include qualified staff to implement and report on social aspects including implementation of the RAP The Project Manager will be supported with a designated qualified resource person (Sociology/Social Scientist and Right of Way officer) to monitor and report on progress of the RAP implementation F Environment (including Safeguards) 56 The project has been assigned Environmental Category B because it supports the rehabilitation and maintenance works of an existing road The project triggers the safeguards policy on Environmental Assessment OP 401 because the program will support investments with potentially adverse environmental impacts The Natural Habitats OP 404 is also triggered because the works may impact on the existing ecosystems along the road including but not limited to major wetlands, forest plantations adjacent to the road; Forests OP 436 applicable because the road improvements may have impacts on the adjacent forest plantations; Physical Cultural Resources OP 411 is triggered because project investments will involve civil works that may potentially affect both known and unknown physical cultural resources (PCR) along the road corridor As result a chance find procedure for PCR has been developed as part of the ESMF and will be implemented during contract implementation Where applicable, the ESMPs will incorporate the management of impacts of the project on the forest and natural habitats 57 The Environmental and Social Management Framework (ESMF) was developed for the 17

30 project in close consultation with Government Central Agencies, and District Authorities through which the road corridor traverses The ESMF was disclosed in-country and at the Bank s Infoshop on February 7, 2014 The ESMF was chosen as the instrument because the contract arrangements require the final design to be prepared by the OPRC contractor The ESMF provides guidance for assessing the potential environmental and social impacts of the project during implementation It also established clear guidelines and methodologies for the identification and assessment of environment and social impacts It gives clear guidance for environmental screening, preparation of environmental assessments with basic TORs, as well as preparation of Environmental and Social Management Plans (ESMPs) The site specific Environmental and Social Impacts Assessments (ESIA) including site ESMPs will be prepared and disclosed before commencement of any civil/road works 58 The safeguards capacity assessment of the implementing agency UNRA indicates that the agency has sufficient experience in the implementation of World Bank financed projects and has knowledge of the environmental and social safeguards requirements There is an established Safeguards Unit under the Directorate of Planning, though it is understaffed UNRA has one environmental specialist to coordinate, supervise, monitor and report on the implementation of the environmental aspects of all road projects UNRA has experienced implementation challenges under its ongoing projects The key challenges under TSDP include, inadequate monitoring and supervision by the safeguards staff, inability to ensure timely conduct of relevant environmental assessments for stone quarries, limited management and follow-up of environmental and social impacts, and irregular submission of the required quarterly environmental reports The current staffing level is overwhelmed by the numerous projects UNRA is undertaking UNRA will recruit an additional Environmental Specialist, who will be designated to handle World Bank projects, within 12 months of project effectiveness The details on the social and environment safeguards of the project are provided under Annex 3 G Other Safeguards Policies Triggered 59 There are no other safeguards policies triggered 18

31 Annex 1: Results Framework and Monitoring UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) Results Framework Project Development Objectives The PDO is to reduce transport costs, enhance road safety, and improve and preserve the road assets sustainably by applying cost effective performance based asset management contracts, along the Tororo -Kamdini road Corridor These results are at Project Level Project Development Objective Indicators Cumulative Target Values Data Source/ Responsibility for Data Indicator Name Core Unit of Measure Baseline YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 YR 7 YR 8 YR 9 YR 10 End Target Frequency Methodology Collection Road sections in good, fair & poor condition as a share of total length of the Tororo- Kamdini road Percentage Good Percentage Fair Percentage Poor Annually Data to be generated from OPRC preparation and PM reports and reported by implementing entity UNRA Project Manager Travel time Hours Annually Same as above Project Manager / UNRA Vehicle Amount Annually Same as Project Manager 19

32 Operating Cost Reductions in Road Accidents on the project road Direct project beneficiaries Female beneficiaries (USD ) per Km/ veh equivalent Percentage Annually Number (million) Percentage Sub-Type Supplemental Annually Annually above Data from PM report, crash data base to be reported by UNRA progress report by implementing entity progress report by implementing entity Project Manager and MoWT UNRA UNRA Intermediate Results Indicators Indicator Name Annual Road Inventory to update RMS Annual network investment plan prepared using the established Core Unit of Measure Baseline YR 1 YR 2 YR 3 Cumulative Target Values YR 4 YR 5 YR 6 YR 7 YR 8 YR 9 YR 10 End Target Yes/No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Annually Yes/No NO Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Annually Data Source/ Frequency Methodology RAMS information to be reported by implementing entity Progress report by implementing entity Responsibility for Data Collection Contractor and Project Manager UNRA 20

33 asset Management system Road safety Audits carried out Roads rehabilitated, Non-rural Roads Maintained Percentage no of trucks overloaded No of People trained in asset management related areas Number Three times in project life Kilometers Quarterly Kilometers Quarterly Percentage Annually Number Annually Audit report by T&F Audit Consultant PM progress report PM progress report PM progress report progress report by implementing entity Technical & Financial Audit Consultant UNRA UNRA UNRA UNRA 21

34 Annex 1: Results Framework and Monitoring UGANDA: North Eastern Road-corridor Asset Management Project (P125590) Results Framework Project Development Objective Indicators Indicator Name Road sections in good, fair & poor condition as a share of total length of the Tororo- Kamdini road Good Fair Description (indicator definition etc) Percentage of the total project road corridor that is in good and fair condition depending on the road surface and the level of roughness The Supplemental value is the total Corridor length The conditions of the project road in good, fair and bad conditions are based on detailed inventory data carried out on the project road corridor The data are available in project files Base Data on road roughness measurements available by section of road IRI reading 2-3 m/km is classified as good Base Data on road roughness measurements available by section of road IRI reading 3-45 m/km is classified as fair Poor Base Data on road roughness measurements available by section of road IRI reading 4-65 m/km is classified as bad Travel time The travel times are showed to be reducing on the Tororo Kamdini from 6 to 42 hours Vehicle Operating Cost Reductions in Road accident on the project road The Vehicle operating Cost in US$ per km per vehicle equivalent is showed to be reducing over the 10 yr period on the road corridor to be updated by the PM of the OPRC The base line figures the average of number of fatal, serious, and minor accidents per year on the road corridor are being collected Percentage reductions for fatal, serious and minor accidents are proposed for the OPRC corridor over the 10 year period 22

35 Direct project beneficiaries Female beneficiaries Direct beneficiaries are people or groups who directly derive benefits from an intervention (ie, children who benefit from an immunization program; families that have a new piped water connection) Based on the assessment and definition of direct project beneficiaries, specify what percentage of the beneficiaries are female Population growth rate and current ratio of females to males currently living in Uganda has been considered Intermediate Results Indicators Indicator Name Annual Road Inventory to update RMS Roads rehabilitated, Non-rural Roads Maintained Reduced no of trucks overloaded Road safety Audits carried out No of people trained in asset management Description (indicator definition etc) Annual road inventory to be carried out on project road Kilometers of all non-rural roads reopened to motorized traffic, rehabilitated, or upgraded under the project Non-rural roads are roads functionally classified in various countries as Trunk or Primary, Secondary or Link roads, or sometimes Tertiary roads Typically, non-rural roads connect urban centers/towns/settlements of more than 5,000 inhabitants to each other or to higher classes of road, market towns and urban centers Urban roads are included in non-rural roads Km of the corridor that have received routine or periodic maintenance intervention Percentage of reduction in trucks overloaded considering the current percentage of overloaded trucks using the road Safety audit at the beginning, mid-year and project final stage People trained in related areas to road asset management 23

36 Annex 2: Detailed Project Description UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) Background 1 The North Eastern Road Corridor is a high priority road for the Government of Uganda (GoU), as the country aspires to serve as a land bridge to the neighboring countries This position was confirmed with the formal request from GoU for an International Development Association (IDA) support to the NERAMP to improve and preserve the 340 km Tororo Mbale Soroti-Lira- Kamdini road through a long term asset management contract The infrastructure bottleneck on the route is a major constraint for sustainable economic growth, Uganda s trade competitiveness and regional integration 2 Given that working with performance-based road contracts involves a paradigm shift from current practice of civil works contracting and management, Uganda National Road Authority (UNRA) held a sensitization workshop for three days, in August 2013 The workshop was attended by members of the Parliamentary Committees on Infrastructure and National Economy and Development, officials from different government institutions, donors, consultants, civil society and contractor representatives to boost their understanding and appreciation of the Output and Performance-based Road Contract (OPRC) concept The workshop, conducted in Kampala by the International Road Federation (IRF), helped in sensitizing the stakeholders about the OPRC initiative The feedback obtained from the workshop indicated that the project objective is now owned by the key stakeholders Furthermore, the GoU has adopted the OPRC strategy on the corridors as opposed to the earlier concept of introducing an Area-wide Performance-based Road Contracts, in response to the concerns of the local construction industry Component 1 - Road Rehabilitation, Operations and Maintenance (US$241 million) 3 This component will finance a long term OPRC on the Tororo-Mbale-Soroti-Lira- Kamdini road The works and services will include: (a) the design, rehabilitation of sections of the road corridor; (b) routine and periodic maintenance of the whole corridor; and (c) road safety measures and traffic management, and axle overload control This component will also finance consultancy services for the Project Management that will be responsible for administering and supervising the OPRC contracts 4 The conceptual design for the road formed the basis for determining the technical viability and costs of the interventions proposed over the road corridor Various surveys and investigations have been undertaken that served as a basis for the assessment of appropriate service levels, conceptual design, financing strategy etc This will provide the bidders with background information relevant for preparing realistic bid prices for the works under the OPRC 5 Surveys and investigations The following surveys and investigations have been carried out: (a) detailed road reconnaissance and inventory records to define the existing road assets; (b) traffic surveys comprising assessment of previous traffic survey data, undertaking classified traffic counts for one week (5 days of 12 hours and 2 days of 24 hours) at 9 locations along the road corridor as well as combined axle load and origin-destination survey for 3 days of 24 hours using the existing stationary weigh bridge at 462 km just south of Mbale; (c) visual pavement 24

37 condition surveys with recording at 1 km interval of 15 parameters; (d) roughness surveys by bump integrator to determine International Roughness Index (IRI) for both the north-bound and south-bound traffic lane of the entire road corridor; (e) Falling Weight Deflectometer (FWD) measurements for the paved sections of the road with measurement points at 100m staggered between the two road sides and using Standard FWD equipment; (f) Drainage Structure Inventory comprising recording of type, size, length of all cross drainage bridge; and (g) hydrological assessment with determination of catchment areas on the basis of existing 1:50,000 topographical maps and with runoff estimation 6 The project road corridor The road has three distinct sections primarily due to heterogeneity both in terms of time and nature of prior rehabilitation and maintenance interventions executed The characteristics of the different sections of the road are summarized in the Table 21 Table 21: Characteristics of the Different Sections of the Road Section Length Original Construction Previous or ongoing Treatment Toror- Mbale Mbale- Soroti Km Year Standard Surfacing End Type Standard Soroti- Dokolo Dokolo- Boroboro Boroboro- Lira incl Lira Bypass Lira- Kamidni c way +2X10m shoulders but c way in Mbale & Tororo DBST DBST c way + 2X075m shoulders Gravel DBST DBST Dec, 2013 Mar, 2014 Mar, 2010 Sept 2010 Sept 2010 Aug 2011 Staged reconstruction Staged reconstruction Upgrading to Bituminous (DBST) Standard Rehabilitation to DBST Periodic maintenance 630m c way + 2X15SBST shoulders (2X235m shoulders in urban areas) 630m way + 2X150SBST shoulders (2X200m shoulders in urban areas) Carriage Surfacing DBST DBST Shoulder surfacing SBST SBST DBST SBST DBST SBST DBST SBST DBST SBST Status Feb km SBST 0 km SBST 7 Tororo-Mbale-Soroti Road (151 km) The road failed completely, has several severe pot holes, and is currently under staged reconstruction The revised contract completion date is September 30, 2014 The works are carried out to a formation width of 93 m and the carriageway is Double Bituminous Surface Treatment (DBST) As of February 28, 2014, 475 km out of the 49 km on the Tororo-Mbale road, and 68 km out of the 103 km of the Mbale- Soroti road section have been paved with single seal while 13 km of Mbale-Soroti have received a second seal This makes a total of 1155 km However the contractor has completed 80 km of sub base works on the Mbale-Soroti road, UNRA has confirmed that the contractor has now carried out all the preparatory works and has mobilized resources to complete single seal paving works on both sections by June The asphalt concrete (AC) overlay design carried out by COWI based recommends a 50 mm AC layer, for this section of the road, for a 20 year design life The outstanding works are to be completed as per the agreed design to ensure value for money (VfM) and thus the recommendations of COWI for the AC layer could also be applicable for the remaining sections As some FWD readings have shown that there are some local weak spots in the completed section of the road, these spots will be improved under the ongoing contract to attain the required strength 25

38 9 Soroti Lira Road (123 km) Upgrading of this road from gravel to paved standard was financed by an IDA Credit Road Development Program Phase 3 (RDPP3) and the works under two contracts for Soroti to Dokolo and Dokolo-Lira road sections were completed in March 2010 and September 2010 respectively Despite the increased traffic, the road is still in a good condition but failures have started in the roundabouts that were not constructed in rigid pavement In any future development, the first intervention should be on the roundabouts and in the meantime, UNRA will be maintaining the defects noted The cost estimate for this section of the road is based on the conceptual design providing an asphalt concrete overlay along with routine and periodic maintenance during the remainder of the contract period 10 Lira-Kamdini Road (66 km) This road was constructed in 1968 and has been receiving routine maintenance up until 2009 when the periodic maintenance of the road was carried out with financing from the EC The works were completed in August 2011 Despite the increased traffic, the road is still in a fairly good condition but failures have started in the low swampy areas The cost estimate for this section is based on the conceptual design providing for its reconstruction over some sections of the road along with routine and periodic maintenance 11 Scope of OPRC The scope of the OPRC is expected to comprise the following: (a) rehabilitation and improvement works on the Lira Kamdini section of the road; (b) routine, periodic, and emergency maintenance works including strengthening by mm asphalt concrete (AC) for all sections of the road; and (c) management services that includes testing and inspections from which the contractor can predict the future traffic volume, load, and road condition, in order to plan the maintenance activities The contractor is fully responsible for the design of the works which are necessary to reach the required service levels, and the durability and performance of the roads over a longer period The payments to be made to the Contractor are not based on quantities of works measured by unit prices for works inputs, but on measured outputs reflecting the target conditions of the roads under contract ie what the roads are supposed to look like, expressed through Service Levels The duties of the Contractor will include maintain the road at the service levels as defined in the contract, carrying out the regular maintenance operations historically undertaken by a maintenance station of UNRA, together with all the necessary management Based on the test results including FWD the consultant proposes the following interventions for the different sections of the road Table 22: Proposed Interventions for the Different Sections of the Road Description AC Overlay Thickness (mm) Road Section Tororo-Mbale-Soroti Soroti - Lira Lira - Kamdini Design Life (years) Design Method ELMOD Design Method SN Methodi (70) Structural Number (SN) pavement design method 2 Overlay design based on the FWD measurements done by means of the ELMOD5 computer program 3 When taking account of the actual high quality and self-cemented crushed aggregate base a 70 mm AC overlay is required 12 Project Road Assets The specific road related assets and items that are to be maintained under the OPRC include: (a) pavements comprising carriageway, shoulders, bus bays and junctions up to the right-of-way (ROW) limits being 25 m each side of the centerline in rural areas, but reduced in urban sections; (b) Embankments and cut slopes; (c) drainage structures; (d) roadside drainage; and (e) signs, road marking and other road safety features 26

39 13 Implementation Scenarios Five implementation scenarios were considered for the rehabilitation and improvement works for the OPRC as shown on the Table 23 and 24 Under three of the scenarios, scenarios 1, 3 and (3A), the OPRC contractor will take over the entire 340 km Tororo Kamdini road at the start of the contract period Under Scenario 2 and 4 the taking over of Lot 1 (Tororo-Mbale-Soroti section) is delayed by 1 year to allow for the completion of the on-going rehabilitation of that section plus the further 12 months Defect Liability Period (DLP) According to conceptual pavement design based on the FWD measurements and 20 years design life there is a need to strengthen the pavement of the road corridor by about 35 to 85 mm AC In Scenario 1 this is done during an initial 2 year period, while it is postponed by 1 year for Scenario 2 and Scenario 3A Furthermore, staged strengthening is made in Scenario 3 and 3A with initial 35 mm followed by mm AC overlay some 6 years later The Scenario 3A has been chosen as the preferred option as the staged AC overlay will be provided within the OPRC period, and does not require the termination and modifications of the ongoing contract Table 23: Description of Options/ Scenarios Considered Scenario Overview of Scenario description Technical description of Scenario Scenario 1 AC Overlay for full 20 year design period during Year 1-3, and Termination of ongoing maintenance contract including DLP on the Tororo-Soroti section (151 km) by June mm AC Overlay placed in the different sections during Year 1-3 and Tororo-Soroti section to be completed with SBST by the current contract and/or the OPRC Contractor Scenario 2 Scenario 3 AC Overlay for full 20 year design period during Year 1-3 and Tororo-Soroti section will be included under NERAMP only after end the current Contract incl DLP by Staged AC Overlay in Year 1-3 and Year 8-9 and Termination of the current Contract including DLP by Scenario 3A Staged AC Overlay in Year 1-3 and Year 8-9 and no termination of the current contract incl DLP (to be in January and June 2015) for the different sections and with the contract processing concurrently done for the whole road corridor with a possible different hand over of road sections for OPRC Contractor Scenario 4 Stage Overlay in Year 1-3 and Year 8-9 and Lot 1 under NERAMP only after end of current Contract incl DLP (assumed by ) mm AC Overlay during Year 2-4 and Tororo-Soroti section to be completed with DBST by the current Contractor mm AC Overlay in Year 1-3 and mm in Year 8-9 and Tororo-Soroti section to be completed with SBST the current contractor and/or OPRC Contractor mm AC Overlay in Year 1-3 and mm in Year 8-9 and Tororo-Soroti section to be completed with DBST by the current Contractor In principle as Scenario 3A, but overlay of 35 mm triggered in HDM by condition responsive approach (IRI max 35 m/km ) 14 Service Level Standards The service level standards were defined based on various technical and practical parameters that include: (a) traffic volume and composition; (b) urban versus rural sections; (c) flat, hilly or mountainous terrain; (d) sub-grade quality and type; (e) quality of available construction materials; (f) capacity of available contractors; and (g) any environmental constraints, such as protected areas, parks, forest reserves, etc The most important criterion was what service level can be afforded and economically justified for the road in question 27

40 Scenario 4 Scenario 3A Scenario 3 Scenario 2 Scenario 1 Legend: Table 24: Implementation Scenarios (Rehabilitation and Improvement/Strengthening Works) Description Lot Section Length mm AC Overlay during Year 1-3 (Lot 1 to be completed w ith SBST by DOTT Services or OPRC Contractor) mm AC Overlay during Year 2-4 (Lot 1 to be completed w ith DBST by DOTT Services) mm AC Overlay in Year 1-3 and mm in Year 8-9 (Lot 1 to be completed w ith SBST by DOTT Services or OPRC Contractor) mm AC Overlay in Year 1-3 and mm in Year 8-9 (Lot tendered in 2014 and Lot 1 after end of Dott's Defects Liability Period) In principle as Scenario 3A, but overlay of 35mm triggered in HDM by condtion responsive approach (IRI max 35 m/km) 1 Tororo-Molo 210 km 50 mm 55 mm 2 Molo-Mbale 306 km 55 mm 60 mm Additional 3 Mbale-Kachumbala 144 km 55 mm 60 mm overlay only triggered in 4 Kachumbala-Soroti 850 km 55 mm 60mm Project Year 9, 10, 11 5 Soroti-Dokolo 670 km mm 75mm 6 Dokolo-Lira 560 km mm 60 mm Lot 3 7 Lira-Kamdini 662 km mm 75 mm 1 Tororo-Molo 210 km 50 mm 55 mm Dott Serv ices 2 Molo-Mbale 306 km 55 mm 60 mm Defects Lot 1 3 Mbale-Kachumbala 144 km 55 mm 60 mm Liability Additional 4 Kachumbala-Soroti Period 850 km 55 mm 60mm overlay only triggered in 5 Soroti-Dokolo 670 km mm 75mm Project Year Lot 2 11, 12, 13, 14 6 Dokolo-Lira 560 km mm 60 mm Lot 3 7 Lira-Kamdini 662 km mm 75 mm 1 Tororo-Molo 210 km 35 mm 35 mm 30 mm 30 mm 2 Molo-Mbale 306 km 35 mm 35 mm 30 mm 30 mm 3 Mbale-Kachumbala 144 km 35 mm 35 mm 30 mm 30 mm 4 Kachumbala-Soroti 850 km 35 mm 35 mm 30 mm 30 mm 5 Soroti-Dokolo 670 km mm 45 mm mm 35 mm 6 Dokolo-Lira 560 km 35-45mm 40 mm 0-35 mm 25 mm Lot 3 7 Lira-Kamdini 662 km mm * 45 mm mm 35 mm 1 Tororo-Molo 210 km 35 mm 35 mm 30 mm 30 mm 2 Molo-Mbale 306 km 35 mm 35 mm 30 mm 30 mm Defects 3 Mbale-Kachumbala 144 km 35 mm 35 mm 30 mm 30 mm 4 Kachumbala-Soroti 850 km 35 mm 35 mm 30 mm 30 mm 5 Soroti-Dokolo 670 km mm 45 mm mm 35 mm 6 Dokolo-Lira 560 km 35-45mm 40 mm 0-35 mm 25 mm Lot 3 7 Lira-Kamdini 662 km mm * 45 mm mm 35 mm 1 Tororo-Molo 210 km 35 mm 35 mm 30 mm 30 mm Dott Serv ices 2 Molo-Mbale 306 km 35 mm 35 mm 30 mm 30 mm Defects Lot 1 3 Mbale-Kachumbala 144 km 35 mm 35 mm 30 mm 30 mm Liability 4 Kachumbala-Soroti Period 850 km 35 mm 35 mm 30 mm 30 mm Additional 5 Soroti-Dokolo 670 km mm 45 mm mm 35 mm overlay only Lot 2 triggered in 6 Dokolo-Lira 560 km 35-45mm 40 mm 0-35 mm 25 mm Project Year 12, 14, 16 Lot 3 7 Lira-Kamdini 662 km mm * 45 mm mm 35 mm Note: AC Overlay * About 62 km require reconstruction (rew orking existing base,new 150mm CRR and 40mm AC ) Sectional Reconstruction Lot 1 Lot 2 Lot 1 Lot 2 Lot 1 Lot 2 AC Overlay Year 1-3 Avg AC for HDM AC Overlay Year 8-9 Avg AC for HDM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Dott Serv ices Liability Period

41 15 With a current ADT of vehicular traffic on the road varying from 509 to 872 (average about 690) and projected to increase to 990 1,725 (average about 1,360) after 10 years, it is considered appropriate to apply the Good to Very Good Service Level Standard for the entire road The current average IRI for the road varied from 36 m/km of the Toror- Mbale section 31 m/km for the Sorti-Lira section The current maximum for any one km is 48 m/km The proposed IRI for the OPRC is average of 22 m/km and maximum 35 m/km for any one-km section The details on the IRI recommendations and other level of service (LOS) requirements are included in report 2 of COWI dated October 29, Performance Criteria The OPRC specification defines three groups of performance measures: (a) road user service and comfort measures expressed in terms of - road roughness, skid resistance, road and lane width, pavement edge condition, vegetation control, availability of each lane-km for use by traffic, response times to rectify defects compromising the safety of road users, attendance at road accidents, drainage off the pavement, and road signs, and other safety furniture; (b) durability performance measures expressed in terms of - pavement strength, cracking, rutting, the extent of repairs permissible before a more extensive periodic maintenance treatment is required, paved shoulders, degree of sedimentation in drainage facilities; and (c) management performance measures which define the information the Employer requires both to govern the asset during the term of the contract, and to facilitate the next tender round These performance criteria are specified as minimum requirements/levels of Service as the Contractor may decide to construct and maintain a road using alternative solutions or materials which may initially be expensive, but will reduce the maintenance cost 17 The contractor must continuously monitor and control the road conditions and level of service for all roads or road sections under the contract This will not only be necessary to fulfill the contractual requirements, but is also an activity which will provide him with the information needed to: (a) know the degree of his own compliance with level of service requirements; and (b) define and plan, in a timely fashion, all physical interventions required to ensure that service quality indicators never fall below the indicated thresholds Together with his periodic invoice, the contractor will report the result of his own evaluation of compliance with the required level of service, based on his own monitoring system which is mandatory His statement will then be verified by the project manager on behalf of UNRA through inspections If the level of service is not met in any given month, the payment for that month may be reduced based on a schedule given in the contract or even suspended 18 Risks under the OPRC The level of risk taken by the contractor which is lowest in the input based contracts, increases significantly in the OPRC contracts The substantial risk transfer is undertaken on the premise that the contractor is in the best position to identify the risks and determine treatments to manage them The general principle is to transfer the risks associated with poor construction to the contractor while risks associated with force majeure-type events are left with the Employer The contractor is responsible for designing and carrying out the works, services and actions that are necessary in order to achieve and maintain the agreed level of service In such manner, the contractor decides when, where and what to implement, hence undertakes the majority of risks, which otherwise would stay with the Employer Therefore, he has a strong financial incentive to be both efficient and effective whenever he undertakes work The contractor needs to have professional management capability to define, optimize and carry out on a timely basis the physical interventions which are needed in the short, medium and long term, in order to guarantee that the roads comply with the agreed levels of service 29

42 19 As part of the OPRC documents preparation 35 major risks have been identified related to design, construction, maintenance, operation and management of the road during the OPRC period Other risks identified are associated with changes in laws and regulation, forced measures, damages resulting from road accidents, price escalations and exchange rate movements, and unforeseen natural phenomena etc Each of these risks is allocated to the Employer, the Contractor or is to be shared by both parties The bidding documents for the contracts are prepared based on these risks allocation The risks allocation is detailed enough for the contractors to come with a cost that would cover all the areas and thus reduce the possible lack of interest in bidding for the works in addition to minimizing claims during implementation 20 Cash Flow Models Cash-flow models have been developed for eight alternatives each with the three scenarios (1 to 3) for payment schedules for the OPRC contract for the sections and the entire project road Alternative 3 to 8 is analyzed for Scenario 3A only, which was found to be the preferred options The Table 25 below summarizes the two main alternatives for the cash-flow development resulting in different monthly payments to the contractor over the 120 month OPRC contract period Alternative 1a and 1b are almost identical as the works to be carried out and the corresponding monthly payments may not differ significantly between the two variant of Alternative 1 Alternative 3 to 8 are for scenario 3 only and include variants of advance payments and transfer of overlay cost to intermediate periods Alternative Cash-flow Models 1a 1b Table 25: Alternative Cash-flow Models Management & Maintenance Paid at the tendered fixed monthly rate over the entire 120 months contract period 3: (10% advance & 20% transfer) 4: (10% advance & 30% transfer) 5: (10% advance & 40% transfer) 6: (20% advance & 20% transfer) 7: (20% advance & 30% transfer) 8: (20% advance & 40% transfer) Overlays According to unit rates and actual nominal thickness and paid by monthly certificates by output during period where the work is undertaken Total lump sum costs of overlay according to unit rate and actual thickness and paid at equal monthly payment over the months where the work is undertaken Total lump sum costs of overlay according to unit rate and actual thickness and paid at equal monthly payment over all 120 months OPRC contract period Where the financial payments are distributed over the 10 year lifetime of the OPRC with various advance payments (10% and 20%) combined with respectively 20%, 30% and 40% transfer of overlay costs to intermediate periods Improvement & Emergency Works When work actually undertaken 21 Financial cash-flows on a monthly basis have been calculated for scheduled Scenario 1 to 3 for the two main alternatives according to the monthly payment schedules as indicated above Scenario 4 (condition responsive maintenance) is furthermore compared to these scenarios The alternative cash-flow models show that when applying Alternative 3-8, the contractor will in 30

43 certain periods during the OPRC face financial deficits resulting from the difference in the monthly payments for the alternatives based on the payments for the works undertaken and equal payments over the contract period or advance payments with transfer of overlay costs Shortterm credit facilities have been assumed to financially support the OPRC contractor when there is a mismatch in the cost of works actually undertaken and the monthly payments causing temporary cash-flow deficits The terms and condition of this credit facility will eventually be negotiated between the contractor and their commercial bank The Table 26 shows the total payments and the present value (discounted by 10 percent pa) of Scenario 3A Further detailed cash flow analysis has been prepared with a 15 percent advance and 10 percent retention has been made for the scenario 3A, that formed the basis for the Disbursement forecast the project Table 26: Total Payments and Present Value of Payments for Cash Flow USD Scenario 3A Alternative 1 (monthly payments when works are undertaken) Total monthly payments 230,393,700 Present Value of Total Payments (10% pa) 158,295,555 Alternative 2 (monthly payments over 10 years) Total monthly payments 230,393,700 Total interest expenses 3,464,434 Total payments incl interest exp 233,858,134 Present Value (10% pa) of Total payments incl interest exp 141,168,992 Alternative 3 (Advance payment 10 % plus 20% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 663,383 Advance Payments (10%) 19,015,772 Total payments incl interest exp 231,057,083 Present Value (10% pa) of Total payments incl interest exp 143,167,518 Alternative 4 (Advance payment 10 % plus 30% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 1,156,756 Advance Payments (10%) 19,015,772 Total payments incl interest exp 231,550,456 Present Value (10% pa) of Total payments incl interest exp 157,404,532 Alternative 5 (Advance payment 10 % plus 40% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 1,650,129 Advance Payments (10%) 19,015,772 Total payments incl interest exp 232,043,829 Present Value (10% pa) of Total payments incl interest exp 155,364,053 Alternative 6 (Advance payment 20 % plus 20% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 269,901 Advance Payments (10%) 38,031,543 Total payments incl interest exp 230,663,601 Present Value (10% pa) of Total payments incl interest exp 165,202,350 Alternative 7 (Advance payment 20 % plus 30% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 668,935 Advance Payments (10%) 38,031,543 Total payments incl interest exp 231,062,635 Present Value (10% pa) of Total payments incl interest exp 163,348,836 Alternative 8 (Advance payment 20 % plus 40% transfer of overlay costs to intermediate periods) Total monthly payments 230,393,700 Total interest expenses 1,107,489 Advance Payments (10%) 38,031,543 Total payments incl interest exp 231,501,189 Present Value (10% pa) of Total payments incl interest exp 161,519,327 31

44 Component 2 - Institutional Support to UNRA (US$14 million) 22 This component will finance the following activities to strengthening UNRA s capacity the areas OPRC implementation and road asset management 23 Asset Management Support and Road Safety (US$75 million) This component will finance consultancy services to carry out: (i) data collection on road assets; (ii) life cycle cost analysis; and (iii) development of output specifications for the long term contracts, monitoring and evaluation of the performance of pavements and bridges The data collection service is to carry out annual road inventory surveys to update the condition of the road asset as input to the Road Asset Management System (RAMS) The data collected on the road assets will form the basis for the life cycle cost analysis that will determine the optimal allocation of resources for preserving the road assets UNRA will be supported by technical assistance (TA) in carrying out the life cycle cost analysis This will enable UNRA to prepare the investment plan and annual budget for the national road system in an effective manner The output specifications for the long term contracts will help in defining national standards and specifications applicable to future output based contracts This component will also support UNRA in the preparation of two asset management contracts for future projects 24 The road safety component is aimed at the reduction of road traffic injuries and fatalities by strengthening the road safety management capacity, and reducing level of road crashes in the project corridor The component will finance consultancy services for road safety audit, monitoring and evaluation exercise along with road safety enhancement measures as part of the OPRC These activities will closely be coordinated with the ongoing activities supported by the Bank under the TSDP to implement the National Road Safety Policy, the establishment of a National Road Safety Authority (NRSA) and development of a National Road Crash Database The safety interventions under the NERAMP will build up on the good practices and lesson learned from Safe Way Right Way (SWRW) initiative along the Northern corridor road 25 As part of its road safety strategy of minimizing road crashes/accidents, in line with the five pillars of the UN decade of Action, UNRA s safety unit will play the leading role in the implementation of the safety interventions of the project, particularly the audit and education aspects The unit will also be coordinating and liaising with all key stakeholders, including the police, the contractor and the National Road Safety Council/ NRSA etc The unit will follow up on the NERAMP road safety performance and compliance to requirements of the national road safety standards and programs 26 The implementation strategy will include a reactive review of the available accident historical database and include investigations at those parts of the route experiencing accident clusters as spots of high accident rating To this effect, UNRA will hire a consultant with reputable road safety experience to undertake the Road Safety Audits (RSAs) on the project corridor The surveys will be carried out at least three times during the 10 year period; at commencement of project, after substantial major works are carried out and towards the end of the 10 year project The results of these RSAs will guide the safety activities to be carried out in the corridor in addition to providing an independent review of their implementation 27 The OPRC Contractor will be responsible for the overall safety performance and traffic control functions on the road corridor The implementation of the safety measures included in the 32

45 OPRC also requires drawing a safety program which will include undertaking road safety sensitizations, education and awareness campaigns The strategy should include a reactive review of the available accident data history and include investigations at those parts of the route experiencing accident clusters or links with high accident rates Most importantly, the strategy should also include proactive identification of risks; with specific interventions aimed at eliminating or minimizing the risk of injury 28 Support in Contract Supervision and Management of OPRC (US$55 million) UNRA s contracts management set up is predominantly for managing admeasurement contracts The project will finance a consultancy service to organize the contract management and administration practices in UNRA to ensure that OPRC contracts are appropriately supervised and monitored This study among others would also recommend on how asset management could be well streamlined in the current procedure of UNRA which is developed for managing input based contracts In addition, this component will also finance the cost of an Environmental Specialist, a Sociologist, and a Right of Way Officer who will follow up the day to day implementation of the ESMF and RPF This will help to reduce contractual claims arising from delays related to getting clearance for environment and social related actions, in addition to improving UNRA s capacity in safeguards The cost of financial specialists has also been included to reinforce the internal control functions of UNRA The consultancy services contract that will update contract monitoring system of UNRA, and the support that will be provided to the implementation of the Construction Sector Transparency (CoST) Initiative, to reinforce good Governance and accountability in the road sub-sector are also financed under this component 29 Road network Operations and Management UNRA needs to influence planning, charging, enforcement, control, and information on the national road network in order to operate the network effectively Particularly the management of traffic flow, safety and axle load control has to be enhanced in partnership with contractors and other key stakeholders Thus to improve UNRA s network management capabilities, support will be provided to improve customer services, axle load control and enforcement The study preparation and implementation of a project communication strategy to disseminate useful information to the public, as well as generate and secure a sustained feedback from all stakeholders, to maintain or improve the services This component will also finance a study on how to control axle overload and streamlining of load control functions in long term asset management contracts 30 Training This being a new initiative, a robust training program will be defined and prepared as an integral part of the OPRC project, to ensure that UNRA and the road sector at large, appreciate the benefits of OPRC This will entail, among others, secondment of graduate Engineers on implementation projects and specialist training to UNRA senior staffs to skill them in the planning, procurement and supervision of output and performance based contracts Training will also be provided to -develop capacity of local construction industry in undertaking such output based contracts 31 Operating Costs (US$10 million) The Project will finance the costs for the project implementation that are directly related to project management The Project s operating costs will be incremental expenses incurred based on annual work plan and budget and consisting of, financial audit fees, expenditures for office supplies, vehicle operation and maintenance, maintenance of equipment, communication and insurance costs, office administration costs, utilities, rental, consumables, accommodation, travel and per diem, and salaries of Project staff, 33

46 but excluding the salaries of civil service, meeting allowances, other sitting allowances, salary top ups and all honoraria, as further outlined in the Project Implementation Plan 32 Project Costs Table 27 shows the project costs by source of financing and component Table 27 Project Costs (US$255 million) Total (including Contingencies IDA Financing GoU Financing Ref Component Description and taxes) A: Road Rehabilitation, Operations and Maintenance A1 Output and Performance Based Road Maintenance Contract (OPRC) for Lot 1: Tororo-Mbale-Soroti Road (151 km) & Lot 2: Soroti-Lira-Kamdini (189 km) Road A2 Consultancy Services for Project Management of the Tororo-Mbale-Soroti-Kamdini OPRC Project B Institutional Support to UNRA B1 Asset Management Support and Road Safety B2 Support in Contract Supervision and Management of OPRC B3 Project Operating Costs Total

47 Annex 3: Implementation Arrangements UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) A Project Institutional and Implementation Arrangements 1 The responsibility for project implementation will be with UNRA The Executive Director (ED) of UNRA will be the Accounting Officer for the project, and would have overall responsibility for the project funds and implementation of the project UNRA will be responsible for the implementation of all the components of the project and will carry out: (a) procurement of goods, works and consulting services; (b) project monitoring, reporting and evaluation; (c) organizing supervision missions of the Bank; and (d) Financial Management (FM), maintenance of proper books of accounts, disbursements preparation of annual financial accounts and audit arrangements UNRA will also be responsible for submitting timely and consolidated progress reports and Interim Financial Reports (IFRs) to IDA UNRA will employ TA and consultants to assist to implement the project The organization structure of UNRA is shown in Figure 1 2 The preparation by UNRA of a PIP is a condition of effectiveness of this credit The PIP will contain or refer to the detailed arrangements and procedures for implementation of the Project, including, inter alia: (a) institutional coordination and day-to-day execution of the Project; (b) disbursement and FM; (c) procurement; (d) monitoring, evaluation, and reporting; (v) procedures, measure and guidelines for environmental management and implementation of the ESMF and RPF, Environmental and Social Management Programs (ESMPs) and Resettlement Action Plan (RAPs); and (e) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the project implementation 3 UNRA will have to prepare itself for the paradigm shift from its conventional way of managing road maintenance contracts from input based to output and performance based contracts; thus, ensuring the people, processes and procedures required for successfully implementing the OPRC Significant progress has been registered to this effect: (a) the newly installed RAMS which contains the road information database and a Life Cycle Cost Analysis tool that will enable the organization to make decisions based on up-to-date information, and the monitoring of the performance of the OPRC contracts, particularly the service levels; and (b) the organization has embarked on an ongoing training program to ensure management and operational staff is conversant with the OPRC initiative Training has been provided by the IRF in August 2013 to all UNRA Senior Managers as well as other stakeholders 4 Training The project will formulate an annual training plan and budget which will be submitted to the Bank for prior review and approval The training plan will, inter alia, identify: (a) the training envisaged; (b) the justification for the training, how it will lead to effective performance and implementation of the project and or sectors; (c) the personnel to be trained; (d) the selection methods of institutions or individuals conducting such training; (e) the institutions which will conduct training, if already selected; (f) the duration of proposed training; and (g) the estimated cost of the training Upon completion of training, the trainee shall be required to prepare and submit a report on the training received A copy of the training report will be kept for IDA review Additionally the NERAMP s PIP shall specify how candidates eligible for the graduate training shall be selected These procedures shall ensure equal opportunity to all eligible participants 35

48 FIGURE 1: Uganda National Roads Authority Organization UNRA Board Executive Director UNRA Contracts Committee Corporate Communications Legal Counsel Director Internal Audit Director Finance & Admin Director Procurement Director Planning Director Projects Director Operations Senior Internal Auditors Chief Accountant Manager PDU Works & Services Technical Services Unit Project Managers Maintenance Planning & Monitoring 5 Regional Maintenance Offices Information Services Manager PDU Goods and Supplies Network Strategy Unit Project Engineers Maintenance Contracts 22 Stations Human Resources Manager Monitoring & Evaluation Unit Special Projects Administration Manager Road Safety Unit Mechanical Services Bridges & Structures Unit Axle Load Control Social & Environmental Safeguards Unit 36

49 5 Although the Project will be implemented fully mainstreamed in UNRA, the ED will appoint an inter Directorate Project Management Team (PMT) comprising members from the Directorates of Planning, Projects and Operations, as the implementation of the OPRC calls for a special supervision team which will comprise members with the different competencies in Maintenance, Project Management and Monitoring Activities for which PMT members will be appointed, paying attention to the required competency matrix are shown below: FIGURE 2: NERAMP PROJECT MANAGEMENT STRUCTURE PROJECT DIRECTOR PROJECT COORDINATOR MAINTENANCE & OPERATIONS MANAGER PROJECT ENGINEERS Design Review Contract Supervision Traffic Management, Axle Load Control, Road Safety, Customer Care Services NETWORK STRATEGY MANAGER & PROJECT ENGINEERS Performance Monitoring Measurement of LoS (Condition & Traffic) and overall Reporting B Financial Management, Disbursements and Procurement B1 Financial Management 6 Financial Management Assessment An assessment of the proposed FM arrangements for the NERAMP was made to determine under OP/BP 100: (a) whether UNRA, has adequate FM arrangements to ensure project funds will be used for purposes intended in an efficient and economical way; (b) project financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entities assets will be safeguarded Under OP/BP 100, borrowers and project implementing entities are supposed to have and maintain adequate FM systems which include budgeting, accounting, internal controls, funds flow, financial reporting and auditing arrangements to ensure that they can readily provide accurate and timely information regarding the project resources and expenditures 37

50 7 UNRA is currently implementing IDA credits (US$190 million) and (US$75 million) together with TF (US$615 million) upgrading three major roads together with various consultancies and studies The existing FM arrangements satisfy the Bank s minimum requirements under OP/BP 100 and are adequate to provide, with reasonable assurance, accurate and timely information on the status of the project resources required by IDA The NERAMP is being designed to finance OPRC which, among others is intended to transfer some of the risks of construction to the contractor and hence improve value for money (VfM) to the road user Due to UNRA S previous and current experience in implementing various World Bank (WB) Projects, the preliminary assessment of the overall financial management risk rating before mitigation is Substantial and after fully analyzing identified risks and mitigating measures put in place, the residual risk will be Moderate 8 Risk Assessment and Mitigation Table 31 below identifies the key risks that the project management may face in achieving these objectives and provides a basis for determining how management should address these risks Risk Table 31: Risk Assessment and Mitigation Risk Risk Mitigating Measures Rating Incorporated into Project Design Mitigated Risk Inherent Risk Country Level-The 2005 & 2012 Public Expenditure and Financial Accountability (PEFA) reports identified weaknesses in government Public Financial Management (PFM) systems Enforcement of Procurement rules is still weak Governance issues including the scandals in the OPM and Public Service Ministry is still presenting a major challenge June 30, 2012 audit report identifies major weaknesses in FM across the Government departments H Weaknesses in accounting capacity, budget classification, payroll rules and procurement compliance are being mitigated under a government PFM reform program called Financial Management and Accountability Program (FINMAP) The High Level Matrix agreed between development partners and Government is being implemented to address the governance issues S Entity Level- The Auditor General s reports of 30 th June 2012 for UNRA was qualified with material weaknesses and accountability challenges that need to be addressed Gaps in fiduciary and technical staff at UNRA exist S UNRA has provided action plan to address the key accountability and institutional weaknesses Key accounting and internal audit staff to be in place at UNRA as agreed M 38

51 Risk Risk Rating Risk Mitigating Measures Incorporated into Project Design Mitigated Risk Project Level- Road construction costs escalation and risk of price fixing and collusion Issues with the high unit cost of road construction make project costs unpredictable Delays in project completion and variations and non-adherence to contract conditions The risk of poor quality works and premature failure on works Variation of Prices (VOP) in road works has been reported in recent audits New approach of Output and Performance Based Road Contacting (OPRC) might require special skills S The new approach for road network management and conservation as an Output and Performance Based Road Contact (OPRC) will mitigate major risks of construction by transferring responsibility to the contractor and hence improve VfM to the road user This will be a Design-Construct- Maintain contract paid on performance Detailed feasibility studies to be conducted to inform the design stage Study tours have been planned to gain skills M S Overall Inherent Risk Moderate Budgeting- Inadequate funding of approved budget and budget cuts affecting approved work plans resulting in increased outstanding payables and exposing UNRA to risk of higher cost and litigation by suppliers and contractors Budget ceilings on expenditure items by GoU not related to activities level Charging expenditure to wrong expenditure codes Undervalued land for compensation and Poor feasibility studies resulting in unrealistic budgets that calls for frequent revisions The chart of accounts as provided by the MoFPED is inconsistent with project costing as per the cost tables S Project budget will be ring fenced as to guard against diversion or reductions Detailed feasibility studies to inform realistic budgets and timely execution of budgets Being an Output and Performance Based Road Contact (OPRC), the contractor will minimize these risks by measuring accurately to avoid delays in performance Project will be 100% financed by WB except the RAP M Accounting- The June 30, 2012 Entity audit report for UNRA was qualified and identified material weaknesses and accountability challenges (i) Limitations of Pastel and IFMS in accounting requirements of UNRA (ii) Understatement of value of land and lack of respective titles, (iii) overpayment to contractors thru VOP and (iv) fraudulent practices by one staff were also noted in the report The Financial Management Manual (FMM) of UNRA requires an update S UNRA to upgrade the accounting system and update the FMM within 12 months after effectiveness M 39

52 Risk Risk Rating Risk Mitigating Measures Incorporated into Project Design Mitigated Risk Internal Control- UNRA: Management delays in response and follow up reported internal control weaknesses by the internal audit Material internal control weaknesses noted in Pastel accounting software Non adherence to the audit work plan Inadequate IA staffing and lack of budget line Weak technical audit skills and experience The Audit Manual of 2009 requires updating Computerized audits have not been undertaken due to delayed renewal of software licenses The June 30, 2012 audit reports for UNRA noted several material internal control weaknesses and management overrides of controls The capacity for internal audit to conduct technical audits on infrastructure components is limited Funds Flow- Delays or failure by the Government to provide counterpart funds to meets its part of the project costs, especially RAP costs or expenditure not eligible under Bank financing Diversion of project funds to meet other non-project activities were noted in the internal and external audit reports exposing the project to the risk of loss of funds or delay in project activities Financial Reporting- Delays in submission of accurate quarterly interim financial reports in the desired format External Audit- Delay in submission of financial statements for audit and delay in submission of audited financial statements The entity audit report for UNRA for June 30, 2012 was qualified with material accountability issues and weaknesses in both financial and technical aspects However, the audit report for the WB TSD Project implemented by UNRA was unqualified S S M S UNRA: Internal audit report to be shared with Bank within 45 days after end of quarter Provision of Internal audit budget line to be pursued Two technical auditors to be recruited Firm has been recruited to strengthen technical audits and capacity for audit staff Upgrade of the accounting system with inbuilt controls Update of Audit Manual to include financial and technical audits The audit software licenses have been renewed The government has established the Road Fund with substantial budget support to be channeled through UNRA which will mitigate the risk of government failure to meet local costs UNRA should also adhere to the Bank policy prohibiting diversion of project funds Additionally MoFPED has recently introduced reforms geared at improving fund flow to Government Ministries and agencies The reporting format has been agreed with UNRA and reporting deadlines will be part of the FA Time bound action plan on how to address pending audit issues raised in the entity audit report for the project have been agreed Overall Risk Rating S Moderate H High S Substantial M Moderate L Low M M L M 40

53 9 The overall residual risk is assessed as Moderate upon meeting the conditions in the risk assessment and mitigation table above 10 Strengths of the Implementing Unit The project FM is strengthened by the following salient features: (a) the accounting personnel within UNRA are adequately qualified and experienced; (b) UNRA has successfully implemented other WB projects while maintaining adequate FM arrangements; and (c) the accounting policies and procedures are documented in UNRA FM Manual and Treasury Accounting Instructions (TAI), 2003 issued under the Public Finance and Accountability Act (PFAA) Budgeting Arrangements Budgeting for the project will be in line with the Government of Uganda (GoU) budget cycle and as per the TAI issued under the Public Expenditure and Financial Accountability (PEFA) The RAP budgetary provision for UNRA has been inadequate in meeting planned activities resulting in increase of outstanding payables There are also budget cuts during the year which further affects implementation of planned activities Budget ceilings on expenditure items as provided by the Ministry of Finance, Planning and Economic Development (MoFPED) is not related to project activity levels resulting in combining and charging expenditure to wrong expenditure codes The chart of accounts as provided by the MoFPED is inconsistent with project costing as per the cost tables The project budget will be ring fenced to ensure project activities are not affected by budget cuts and diversions 12 Accounting System UNRA has the Financial Management Manual (FMM) which is being updated In addition, the PIP will be updated with FM arrangements specific to the WB projects UNRA is computerized and is using Pastel Partner 2007 Version accounting software which is currently inadequate resulting in several manual interventions and weak internal controls of Pastel as per the Auditor General s report UNRA will maintain similar books of accounts to those for other IDA funded projects The June 30, 2012 audit report for UNRA identified material accounting weaknesses including management override of the accounting procedures that need to be addressed to avoid spillage into the project However, the PASTEL accounting software enables maintenance of each individual Project s accounts as a stand-alone entity This helps in avoidance of commingling of Project activities and resources Arising from this strength, WB funded Projects have always got unqualified audit opinions 13 Staff Arrangements UNRA is staffed with qualified and experienced accounting personnel The UNRA Directorate of Finance and Administration is headed up by the Director Finance and Administration (DFA) who reports to the ED The DFA is supported by a Finance Manager/Chief Accountant for the finance function who, in turn, is assisted by a Financial Accountant, a Management Accountant and two Development Partners (DPs) Credit Agreement Accountants At the regional level there is one accountant per region who reports to the Chief accountant They are assisted by six Assistant Accountants at the Head Office There is also one Assistant Accountant at each station All the accounting staff dealing in projects have received refresher training on the more recent WB Financial Management and Disbursement Guidelines 14 Internal Controls The project will rely on the existing internal control framework to ensure that all procedures and controls are adequately documented as per the Treasury Accounting Instructions 2003 and UNRA Financial management Manual The June 30,

54 Entity audit report noted material internal control weaknesses and management override of the controls that need to be addressed by management 15 Internal Audit UNRA has a Directorate of Internal Audit headed by a Director assisted by two Audit Managers and three financial internal auditors Recruitment of two technical internal auditors is in the process through IDA support under the Transport Sector Development Program (TSDP) project and they are expected on board by end of December 2014 UNRA has procured the services of a firm to conduct technical audits, develop a technical audit manual and also train the technical internal auditors The Internal Audit operations are guided by the Internal Audit Charter and Internal Audit's Policy and Procedures Manual of April 2009 which needs an update The internal audit directorate does not have a line budget as approved by the Audit and Finance and Administration Committees and this has denied them full independence B2 Funds Flow and Disbursement Arrangements 16 Bank Accounts The following bank accounts will be maintained for the purposes of implementing the project: Designated Account: Denominated in US dollars, disbursements from the IDA Credit will be deposited on this account Project Account: This will be denominated in local currency Counterpart funds, other donors and transfers from the Designated Account (for payment of transactions in local currency) will be deposited on this account in accordance with project objectives These bank accounts shall be opened at Bank of Uganda in accordance with the Financing Agreement The signatories for the project will be done in accordance with the FMM 17 Flow of Funds The funds from WB will flow into the UNRA project Design Account (DA) at Bank of Uganda UNRA will request for the initial advance in line with forecasted report based format of cash flow requirements Funds can be paid from the DA Counterpart funds from GoU will only be accessed through IFMS Figure 3 shows the Funds Flow Chart 18 Disbursement and Reporting Arrangements UNRA has established FM and accounting systems, which will facilitate the use of report based disbursement where cash flow forecasts based on work plans are submitted for a period of six months every quarterly period along with Interim Financial Reports (IFRs) The IFRs will be submitted for disbursement on a quarterly basis within 45 days of the end of each reporting period Ineligible expenditures that may be found to have been made from the DA will be refunded by the borrower in full 19 IFRs The following quarterly IFRs will be produced by UNRA: (a) a statement of sources and uses of funds for the reported quarter and cumulative period (from project inception) reconciled to opening and closing bank balances; and (b) a statement of uses of funds (expenditure) by project activity/indicator/component comparing actual expenditure against the budget, with explanations for significant variances for both the quarter and cumulative period In addition to the above IFRs, UNRA will also have to submit to the Bank the following information in order to support report-based disbursement: (i) Designated Account (DA) Activity Statement; and (ii) DA Bank Statements 42

55 FIGURE 3: Funds Flow Chart IDA GoU Consolidated Fund Designated Account for UNRA (USD) Project Account for UNRA, (UGX) Project transactions paid in either USD or UGX 20 Annual Financial Statements (AFS) AFS should be prepared in accordance with International Accounting Standards for external audit These Financial Statements will comprise of: (a) A Statement of Sources and Uses of Funds / Cash Receipts and Payments; (b) A Statement of Affairs/ Balance Sheet; (c) Statement of Fund Balance; (d) Designated Activity Account Statement; and (e) Notes to the Accounts Other methods of disbursements that can be used are direct payments and special commitments using letters of credit 21 External Auditing Arrangements The Auditor General is primarily responsible for auditing of all government projects The audit may be subcontracted to a firm of private auditors, with the final report being issued by the Auditor General, based on the audit work carried out by the subcontracted firm The private firms to be sub-contracted should be acceptable to the Bank, following a review of audit firms in Uganda In case the audit is subcontracted to a firm of private auditors, IDA funding may be used to pay the cost of the audit The audits are done in accordance with International Standards on Auditing with appropriate terms of reference UNRA will submit the project Audit Report together with the Management Letter to the Bank within six months after the end of each financial year 22 Operating Costs The Project will finance costs of the implementation that are directly related to project implementation These will be procured using IDA procedures or the Borrower s procurement, financial and other administrative procedures, acceptable to the Bank 23 Financial Management Action Plan The action plan below indicates the actions to be taken for the project to strengthen its FM system and the dates that they are due to be completed 43

56 Table 32: Financial Management Action Plan Action Date due by Responsible 1 Updating Financial Management Manual (FMM) Within 12 months UNRA Upgrade the Financial management and accounting after effectiveness systems all in form and substance satisfactory to IDA 2 Updating Internal Audit Policy and Procedures Manual Within 12 months UNRA all in form and substance satisfactory to IDA after effectiveness 4 Designate key internal audit staff within 12 months after effectiveness UNRA 24 Effectiveness Conditions There are no FM conditions of effectiveness to be included in the legal agreement B3 Procurement 25 Applicable Guidelines Procurement for the proposed project would be carried out in accordance with the WB s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011; and "Guidelines: Selection and Employment of Consultants by WB Borrowers" dated January 2011, Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006 and revised in January 2011, and the provisions stipulated in the Legal Agreement The items under different expenditure categories to be procured, identified by appraisal, are indicated in the Scope of Procurement under the project section Applicable Procedures 26 Advance Contracting shall apply for this project which allows the Borrower to proceed with the initial steps of procurement before signing the related Bank loan In such cases, the procurement procedures, including advertising, shall be in accordance with the Guidelines in order for the eventual contracts to be eligible for Bank financing, and the Bank shall review the process used by the Borrower A Borrower undertakes such advance contracting at its own risk, and any concurrence by the Bank with the procedures, documentation, or proposal for award does not commit the Bank to make a loan for the project in question (a) Use of National Procurement System All contracts procured at the national level following National Competitive Bidding (NCB) and other lower procurement procedures such as Shopping, may follow the national public procurement law (the Procurement and Disposal of Public Assets Authority (PPDA) Act, 2003) and attendant regulations These procedures have been reviewed by the WB and found to be acceptable except for the provisions which will not be applicable and/or need to be modified as shown below for the purpose of this project: (b) Domestic preferences shall not apply under NCB (c) Charging of fees for dealing with bidder complaints at procuring entity level shall not apply (d) Evaluation of Goods and Works The following documentation or their equivalent shall not be treated as eligibility requirements: (i) Tax clearance certificates; (ii) Tax registration certificates; and (iii) trading licenses, which may however be included as post 44

57 qualification requirements, which the Borrower can request the Bidder to avail during the evaluation (e) Disqualification of Bidders for not purchasing the bidding documents from the Borrower shall not apply (f) Ineligibility shall in addition to firms suspended by PPDA extend to firms debarred or suspended by WB (g) In accordance with paragraph 116(e) of the Procurement Guidelines, each bidding document and contract shall provide for the following: (i) the bidders, suppliers, contractors and subcontractors shall, on request, permit the Association to inspect the accounts and records relating to the bid submission and performance of the contract; shall have the accounts and records audited by auditors appointed by the Association; and (ii) any deliberate and/or material violation of such provision by any bidder, supplier, contractor or subcontractor may amount to an obstructive practice provided for in paragraphs 116(a) and (v) of the Procurement Guidelines 27 Procurement processing Under the project, procurement processing shall also comply with the national approval system in addition to the WB guidelines, except where the two conflict, in which case the WB Guidelines will take precedence Specifically, the Contracts Committee (CC) shall perform their oversight functions at every key procurement stage as required by the PPDA Act, and contracts shall be subjected to the SG clearance where applicable 28 Procedure for Shopping Shopping shall follow the Request for Quotation (RFQ) procedures as defined in the PPDA Act and attendant regulations These procedures have been reviewed by the Bank and found to be satisfactory subject to the exceptions under paragraph 3 29 Use of Framework Agreements (FAs) There is no expected procurement for goods Common supplies, for example, stationery and consumables will be aggregated and procured through framework contracts to enable implementing agencies place orders for urgently needed supplies at short notice, at a competitive price FAs shall not restrict foreign competition, and should be limited to a maximum duration of 3 years FA procedures applicable to the project are those of the Borrowers that have been deemed acceptable by the Bank, and shall be described in the Loan Agreement 30 NCB Bidding Documents It has been agreed with the Borrower, that bidding documents under NCB procedures include a clause rendering ineligible for Bank financing a firm, or an individual, of the Borrower country that is under a sanction of debarment from being awarded a contract by the appropriate judicial authority of the Borrower country and pursuant to its relevant laws, provided that the Bank has determined that the firm, or the individual, has engaged in fraud or corruption and the judicial proceeding afforded the firm or the individual adequate due process 31 The Consultant Guidelines Shall apply for the selection of Procurement Agents and Construction Managers, as well as inspection services providers The cost or fee of the Procurement Agents and Construction Managers or inspection services providers (see paragraph 312) is eligible for financing from the Bank loan, if so provided in the Loan Agreement and in 45

58 the Procurement Plan, and provided that the terms and conditions of selection and employment are acceptable to the Bank 32 Solicitation Documents to be used - Works The Bank s Sample Bidding Documents for OPRC and standard bid evaluation form (SBEF) appropriately modified will be used for procurement under ICB 33 Use of Two-Envelope System OPRC contracts have unique features It combines engineering design and road assets management services with civil works for rehabilitation and maintenance To better address these features, a two envelope system will be adopted on a pilot basis in the procurement of the OPRC contracts under this project This approach is not prohibited by the Bank's current Procurement Guidelines The detailed procedures for applying this approach will be prepared jointly by the Borrower and Bank teams based on experience of similar approaches used under other Bank financed projects The final detailed two envelope system procedures will be subject to the Bank's review and clearance as part of the Bidding Documents for the OPRC contracts At this stage, the procedures are outlined as follows: a Bidders will be required to prepare and submit their bids in two separate sealed envelopes at the same time: the Technical envelope will include Bidder's information of eligibility and qualifications, and technical proposals, etc, while the Financial Envelope will include the filled Price Schedules etc b The Technical Envelopes will be first opened and evaluated, while the Financial Envelopes will remain sealed and kept at a secure place or deposited with a reputable public auditor or independent authority c The technical evaluation of the bids will include examination of the Bidder's eligibility and qualifications against defined criteria on pass/fail pass Methodology to evaluate the substantial responsiveness of the Bidder's technical proposal will be further discussed and agreed with the Bank d The Borrower will submit the qualification and technical evaluation report for Bank review and no-objection The Borrower will then inform the Bidders of the outcome of the evaluation For those Bidders whose bids are rejected at this stage, the Borrower shall provide clear reasons for the rejection e Prior to the opening of the Financial Envelopes, adequate time will be provided to allow opportunity for Bidders to complain, if they wish f Only the Financial Envelopes of the Bidders who have passed the qualification and technical evaluation will be publicly opened The contract will be awarded to the Bidder whose financial proposal has been determined to be the lowest evaluated 34 GoU Consulting Services The WB s Standard Request for Proposal (SRFP) document and sample form of evaluation report will be used in the selection of consulting firms The PPDA procedures for selection of Consultants including bidding documents, evaluation forms, etc, shall not apply for this project Short lists of consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 27 of the Consultant Guidelines 35 Record Keeping The UNRA Directorate of procurement will be responsible for record keeping and shall open a procurement file for each contract processed The file should contain all 46

59 documents on the procurement process in accordance with the requirements and as described in the PPDA Act UNRA will ensure that there is adequate lockable storage space for active files, and for archiving 36 Scope of Procurement under the Project Procurement activities to be financed by the Bank identified by appraisal are indicated in procurement plan, while other activities will be identified during project implementation: 37 The selection will be done using the WB s SRFP for all Consultancies Short lists of consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 27 of the Consultant Guidelines 38 Capacity Assessment of UNRA A procurement capacity assessment for UNRA was carried out on July 25, 2013 and September 25, 2013 Capacity of the Procurement and Technical staff to fulfill their role in the procurement cycle was assessed Procurement processing in UNRA is in general compliant to the PPDA procedures and the requisite structures of a Procurement and Disposal Unit (PDU) and CC are in place A detailed procurement capacity report has been prepared, but highlights of the findings are indicated below 39 Procurement Planning is done by each Technical directorate in liaison with the Procurement Framework contracts are used for Stationery, printer consumables Plans are in progress to use framework contracts for Goods commonly used for force account across the UNRA regions 40 Bid evaluation reports were prepared and duly signed by the Evaluation Committee (EC) for all the procurements reviewed Normally evaluation stage suffers major delays due to the following reasons: Understaffing where on average one staff member may be a member of 5 evaluation teams at the same time leading to delays The CC is equally overloaded with contracts from both Headquarters and the 22 stations across the country leading to delays in review, and subsequently in decisions UNRA should increase the thresholds for delegation to the regions to lower the workload on the CC at Head Quarters, and prepare a Manual on procurement processing at the regional level including service standards and performance parameters as well as a mechanism for monitoring, reporting progress at the regional offices 41 Administrative reviews in UNRA have dropped from an average of 16 in 2009/10 to 2 in 2013/2014 The drop can be attributed to increased confidence of the bidder community in the Evaluation processing in UNRA after the internal procurement reforms and introduction of the IPBE where bids being evaluated by the EC are also evaluated by an independent evaluator as an advisor to the CC 42 At Contract Management stage, understaffing affects the quality of supervision, with Project Managers assigned 4-6 roads at the same time unable to dedicate sufficient attention to adequately supervise the Consultants and contractors and timely intervene in areas considered 47

60 bottlenecks or follow actions that would address bottlenecks and thereby minimize delays However, it has also been noted that the contract management skills need to be enhanced for some of the project managers in regard to timeliness of communicating instructions and following good practice in traffic management for roads under supervision 43 Delays in payment in some cases of up to 4-5 months or more attributed to shortage in planned releases from MoFPED UNRA is preparing a proposal to MoFPED to agree on a 3 year implementation plan as one way of addressing payment delays This may not directly affect IDA funded contracts but creates credibility and reliability issues for bidding community who may build these delays into the bid prices leading to higher bid prices 44 The procurement function under NERAMP will be executed by the Procurement Directorate The PDU handles procurement for UNRA Headquarters in Kampala, the 22 stations, 7 ferry landing sites and 6 weigh bridge stations spread over the country UNRA is also in the process of setting up 5 regional offices which will co-ordinate and manage the activities of their respective stations The UNRA structure provides for 21 staff though currently 15 are in place due to the wage cap, and the resulting funding constraints The PDU has which often results in staff working for extended hours 45 The UNRA budget for FY 12/13 was approximately US$485 million for this financial year out of which 90 percent was to be expended through Procurement Based on the procurement plan of 2011/12 and 2012/13, the UNRA handles between 300 and 400 procurements in a financial year excluding contract amendments The 15 staff are inadequate in number to handle the number of procurements that are carried out by UNRA in a year leading to a heavy workload delays in processing UNRA, shall appoint/recruit five PDU staff to increase staff numbers in the PDU when funding becomes available 46 Under the ongoing TSDP, one Procurement Consultant, now acting Director Procurement and one Procurement Specialist were hired to support the PDU and have been instrumental in building capacity of the PDU staff and helping bridge the understaffing gap In order to ensure adequate procurement capacity for NERAMP it is imperative that a staff of equivalent caliber is designated in addition to a Procurement Specialist 47 Record Keeping is a principle function of the PDU There is a large amount of records, and though there is a store for active files it is nearly full and some of these are kept in the Director Procurement s office on the floor UNRA shall provide additional storage space for procurement records 48 Staffing in Technical Departments in UNRA has suffered understaffing constraint since 2008 due to the ceiling on the wage cap leading to delays in procurement processing and contract management UNRA mandate was increased from 10,000 km to 20,000 km of national roads without a corresponding increase in staff numbers to cater for the increased workload There are inadequate staff numbers and skills in Technical Departments to ensure timely support to the 48

61 procurement function and fulfill carrying out their role in the procurement cycle 15 in a timely and efficient manner constraining the performance of the procurement function especially at evaluation and contract management stages 49 The Technical Directorates that will implement the project are the Planning, Projects and Maintenance Directorates They do not have previous experience in the OPRC approach where the service provider will implement the contract from Design through Construction to Maintenance over a long term of about ten years However, UNRA has some experience in Design Build approach 16 under the 825 km Malaba Bugiri Road and the 74 km Mbarara Kikagati Road and has thus evaluated bids based on designs prepared by contractors UNRA staff are conversant with the Bank guidelines and procedures having implemented the RDPP3 project, and now implementing TSDP There are thus foreseen challenges due to the lack of any previous experience in the OPRC approach which have been included in the risk matrix Frequency of Bank Supervision 50 In addition to the prior review supervision carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended at least a bi-annual supervision mission to visit the field, at least one of which shall include carrying out post review of procurement actions 51 Prior Review Thresholds The prior review thresholds are as follows: Procurement of Goods, Works and Non-consulting services Expenditure Category Contract Value (Threshold) USD Procurement Method 1 Works >=10,000,000 ICB < 10,000,000 NCB 2 Goods and Nonconsulting services <200,000 >=1,000,000 <1,000,000 <100,000 Shopping ICB NCB Shopping Contracts Subject to Prior Review All Contracts Selected Contracts as indicated on PP First contract under this method All Contracts Selected Contracts as indicated on PP First contract under this method All categories All values Direct Contracting All Selection of Consultants17 Expenditure Contract Value (Threshold) Selection Method Contracts Subject to Prior Category USD Review 15 It is the Technical departments s role to prepare Technical specification and terms of reference, evaluation of bids, expressions of interest and Consultants technical and financial proposals during the bidding/selection process, and to supervise the Contractors and consultants 16 UNRA adopted for the Design and Build, the FIDIC Design for Building conditions of contract (yellow book) UNRA provided only preliminary designs information based on investigations results for surveying, pavement investigations, topographical survey, and hydrology as a basis for the contractors to prepare comprehensive designs and bids for construction 17 All Terms of Reference regardless of cost will be subject to clearance by the Bank 49

62 (a) Firms18 >=300,000 <300,000 QCBS, QBS, FBS, LCS Qualifications/Other Selection Methods All contracts Selected Contracts as indicated on PP (b) Individual All values IC Selected Contracts as indicated on PP Firms and All values SSS All contracts Individual 52 Procurement Plan The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods The Plan was prepared in a format acceptable to IDA This plan was agreed between the Borrower and the Project Team on March 11, 2014 and is available at the UNRA offices on Lourdel Road in Kampala It will also be available in the project s database and in the Bank s external website The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity 53 Details of the Procurement Arrangements Involving International Competition: (a) List of contract packages to be procured following ICB and Direct Contracting Ref Contract Comments No (Description) 1 Output and Performance Based Road Maintenance Contract (OPRC) for Lot 1: Tororo- Mbale-Soroti Road (140Km) & Lot 2: Soroti- Lira-Kamdini (160Km) Road 2 Estimated Cost ($ mill) excludes local taxes Procure ment Method Prequalific ation (yes/no) Domestic Preference (yes/no) Review by Bank (Prior / Post) Expected Bid- Opening Date 187 ICB post No Prior Sept 2014 Bidding Documents are being updated by UNRA 18 A shortlist of consultants for services estimated to cost less than US$ 200,000 equivalent per contract may consist entirely of national consultants in accordance with the provisions of paragraph 27 of the Consultant Guidelines 50

63 54 Selection of Consultants: (b) Consultancy Assignments with Selection Methods and Time Schedule Ref No Description of Assignment Selection Method Comments Estimated Cost (US$ mill) Review by Bank (Prior / Post) Expected Proposals Submission Date COMPONENT 1: Introduction of OPRC on a Priority Road Corridor 11 Consultancy Services 5 QCBS Prior Jun 2014 for Project Management and M&E of the Tororo- Mbale-Soroti-Kamdini OPRC Project 12 Consultancy Services 09 QCBS Prior Apr Audits for Road Safety Audit over the of North Eastern Road Corridor 10yrs COMPONENT 2: Institution Support 21 Consultancy Services 200 QCBS Prior April 2016 for Asset Management Support to UNRA 22 Consultancy Services 15 QCBS Prior Sept 2014 for Support to UNRA in OPRC Contract Management and Operations 23 Consultancy Services 100 QCBS Post Sept 2015 for Preparation of OPRC Pipeline Projects on National Road Corridors 24 Consultancy Services for Technical Support to the UNRA CMS & the CoST Initiative 05 QCBS Prior May 2014 Action Plan to mitigate overall Risk 55 Procurement Risk Assessment and Rating The key shortcomings noted in UNRA are: ( a) The lack of previous experience in UNRA in implementing the OPRC approach; (b) The CC and PDU staff heavy workload leading to delays in processing; (c) Delays at Evaluation; (d) the inadequate staff numbers in the technical Departments; (e) Delays in payment to service providers; and (f) need to enhance skills in contract management In light of the following findings, the overall risk of UNRA procurement management for the proposed NERAMP is Substantial expected to moderate after mitigation 51

64 56 Based on the Procurement Capacity Assessment report, the following Action Plan was agreed to mitigate the overall risk as indicated in the matrix below: Findings Action Completion Date Responsible Entity Delays in procurement processing due to PDU staff heavy workload (i) Appoint or recruit or designate 1 Procurement Consultant who is a Road Engineer with ToR acceptable to IDA to: (a) ensure timely procurement processing for NERAMP contracts and (b) provide hands-on coaching and mentoring of PDU staff Three months after project effectiveness UNRA Lack of substantive strategic leadership of the Procurement Directorate GoU UNRA to designate a Director for Procurement directorate under GoU funding Twelve months after project effectiveness UNRA Contracts Committee heavy workload UNRA to finalize delegation of procurement oversight to the 5 regions During Project implementation UNRA Safety in keeping of Financial envelope under the two envelope system Enhanced safe keeping of Financial Proposals by use of a safe to be opened/lockable by 3 Senior Officers appointed by the Accounting Officer, and none of whom should be part of the evaluation committees During Project Implementation UNRA Inadequate awareness on reporting fraud and corruption Procurement Notice Board to include Poster or Banner indicating telephone No in UNRA to which fraud and corruption issues should be reported as well as IDA s Integrity Department contacts and that of the IGG During Project Implementation UNRA Inadequate Contract Management practices Specialized training for Contract managers under NERAMP, UNRA to update the contract management system to include monitoring mechanism to regularly update progress during contract implementation Risks due to UNRA lack of previous experience in OPRC approach UNRA lack of proficiency in OPRC practical application and contract mechanism Lack of skills in evaluating OPRC and bias to award lowest priced bid without due consideration of qualification requirements leading to delays in implementation Enhancement of UNRA in-house capacity through hire of an experienced Project Manager to support management of the OPRC Contracts and build capacity of UNRA staff (i) Evaluation to be supported by consultants preparing OPRC Bidding Document Consultant to participate in evaluation - Consultant s team to include Team leader, Financial specialist, Procurement Expert must have experience in Road Asset Management (ii) Proposed use of Two Envelope System Evaluation of Technical and Qualification Bid Within 18 months of Effectiveness During project implementation During project implementation During project implementation UNRA UNRA UNRA UNRA 52

65 first of all bidders and only financials of technically responsive and qualifying bidders to be opened Environmental and Social (including safeguards) 57 The Project has been assigned Environmental Category B because the Environmental and Social impacts (ESIs) generic to upgrading, rehabilitation, and maintenance works of existing roads will be predictable, localized and readily mitigated The project triggered the following Environmental and Social Safeguard Policies: Environmental Assessment OP/BP 401, because the program will support investments with potential adverse Environmental impacts such as road re-alignment, borrow-pit areas, soil spoil material, workers camps, equipment storage areas and quarry sites which may have substantial ESIs; Natural Habitats OP/BP 404 triggered because the works may impact on the existing ecosystems along the road including but not limited to major wetlands, forest plantations adjacent to the road; Forests OP/BP 436 applicable because the road improvements may have impacts on the adjacent forest plantations; Physical Cultural Resources OP/BP 411 triggered because project investments will involve civil works and may potentially affect both known & unknown physical cultural resources along the road corridor; and Involuntary Resettlement OP/BP 412 triggered because the project may require land acquisition in areas of road realignment/widening At this stage and under OPRC, the specific road works required for the various sections and timing is not yet determined Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP 401 Yes Although the road corridor is known (existing), the road design is not yet known A framework approach for safeguards is recommended as the design of the road will be done by the contractor under the OPRC considering the prevailing conditions of the road An ESMF has therefore been prepared, consulted upon, and disclosed before appraisal Subsequent ESIAs (ESMPs) will be undertaken during implementation before start of any civil works Natural Habitats OP/BP 404 Yes The natural habitats along the road project include: rivers, wetlands, and forest plantations The framework for management of environmental impacts of the road asset management project on the natural habitats will be incorporated in the ESMF Where applicable, the ESMPs will incorporate the management of impacts of the project on the Natural Habitats Forests OP/BP 436 Yes There are no natural forests along the road corridor However, there are a few forest plantations of mainly eucalyptus and pine tree species The framework for management of environmental impacts of the road asset 53

66 Pest Management OP 409 No Not Applicable management project on the natural habitats will be incorporated in the ESMF Where applicable the ESMPs will incorporate the management of impacts of the project on the forest Physical Cultural Resources OP/BP 411 Yes This is triggered because project investments will involve civil works that may potentially affect both known and unknown PCR along the road corridor As result a chance find procedure for PCR has been developed as part of the ESMF and will be implemented during contract implementation Indigenous Peoples OP/BP 410 No There are no Indigenous Peoples in the project area Involuntary Resettlement OP/BP 412 Yes The project may require land acquisition in areas of road realignment/widening While the road corridor is known/exists, the design is not yet developed and therefore the exact impact on land acquisition and subsequent resettlement/ compensation cannot be defined before project appraisal Therefore, a Resettlement Policy Framework (RPF) has been prepared, consulted upon, and disclosed before project appraisal Resettlement Action Plans (RAPs) will be prepared as may be defined by the detailed design of the works Safety of Dams OP/BP 437 No The project does not involve dam related works Projects on International Waterways OP/BP 750 No The project does not affect international waterways Projects in Disputed Areas OP/BP 760 No There are no disputed areas along the project corridor 58 Both environmental and Social safeguards instruments for the project, ie ESMF and RPF were developed in close consultation with the respective Government Central Agencies such as National Environment Management Authority (NEMA), National Water & Sewerage Cooperation (NWSC), National Information Technology Authority (NITA), Ministry of Water and Environment, Electricity Distribution Company UMEME, Ministry of Tourism and Antiquities, and respective Local Governments (Districts) through which the road corridor traverses The ESMF provides guidance for assessing of the potential environmental and social impacts of project during implementation The ESMF established clear guidelines and methodologies for the identification and assessment of environmental and social impacts It gives clear guidance for environmental screening, preparation of environmental assessments with basic TORs, as well as preparation of Environmental and Social Management Plans (ESMPs) The ESMF has established basic Terms of Reference (TORs) for EA of Road Works, TORs for EA of Stone Quarries, guidelines for acquisition and operation of borrow pits, guidelines for 54

67 establishment of Equipment Storage yards/ Workers Camp, etc The ESMF also outlines a framework for managing and monitoring the environmental and social impacts of the project, including management and handling of physical cultural resources thru a Chance Finds Procedure, minimizing impacts on the natural habitats, and a mechanism for addressing grievances Complementarily, an RPF was developed to provide step by step procedure for preparing road corridor specific Resettlement Action Plans for project activities that will involve land acquisition, and this shall be the responsibility of the OPRC Contractor to be procured by UNRA The ultimate goal of the ESMF and RPF is to ensure that the proposed project will be environmentally and socially sustainable including responding to the land acquisition requirements as may arise The ESMF was disclosed in-country and at the Bank s Infoshop on February 7, 2014 Specific ESIA including site ESMPs and RAPs will be prepared by the OPRC Contractors and validated by an independent consultant as and when necessary during implementation, guided by the ESMF and RPF respectively The ESIAs and RAPs prepared will be cleared by the Bank and disclosed prior to commencement of any civil/road works In addition, the following approvals and clearances shall be obtained before commencement of road works: NEMA EIA approvals, NFA Forest areas approval, MoU with UMEME, National Information Technology Authority (NITA) & National Water and Sewage Cooperation (NWSC) to relocate any respective electricity, IT & water service infrastructure along the road reserves, Chief Government s Evaluator approval of RAP and payment of PAPs by UNRA 59 The potential environmental impacts of the proposed road corridor project include: clearance of trees and other vegetation due to realignment and road works, road cuts, fills and embankments, change in hydrology and drainage patterns and increase in sediment load of swamps and waterways as a result of widening the road embankment across wetlands, and soil and water contamination due to spillage and leakage of oils and other toxic materials, noise, dust and air pollution from road works, health & safety issues, acquisition & operation of borrow pits and stone quarries A generic ESMP has been developed giving basic guidance on mitigation measures during the construction and operation phases taking into account both environmental and social impacts However, site specific ESIAs and RAP will elaborately identify the associated impacts and develop specific ESMPs to handle the likely ESIs including land acquisition The proposed mitigation measures shall be incorporated into bidding documents to ensure their implementation through the OPRC Contractor s SEAP In addition, the Supervising Consultants shall be required to include on his team Environmental and Social Development Specialists 60 Meanwhile Safeguards capacity assessment of the implementing agency UNRA indicates they have sufficient experience in implementation of Bank financed projects and are thus acquainted with environmental safeguards requirements There is an established Safeguards Unit under the Directorate of Planning, though generally understaffed UNRA has one (01) Environmental Specialist to coordinate, supervise, monitor and report on the implementation of the environmental aspects of all road projects UNRA has experienced implementation challenges with regard to ongoing projects such as Transport Sector Development Project (TSDP) The key challenges under TSDP include inadequate monitoring and supervision by the Safeguards staff, inability conduct timely relevant environmental assessments for borrow pits and stone quarries, limited management and follow-up of environmental and social impacts, and irregular submission of the required quarterly environmental reports Apparently, the current 55

68 staffing level is overwhelmed by the numerous projects UNRA is undertaking UNRA will recruit an additional Environmental Specialist, a Sociologist, and a Right of Way Officer who will be designated among others to handle World Bank projects, within 12 months of project effectiveness The Project Manager will oversee and supervise implementation of ESMPs and RAPs including HIV/AIDS, gender and poverty reduction plans and implications of the project by the contractors and cover its monitoring and reporting activities UNRA s safeguards specialists will conduct periodical (monthly) field visits Bank safeguards specialists will participate in at least two supervision missions per year 56

69 Annex 4: Operational Risk Assessment Framework (ORAF) UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) (P125590) Risks Project Stakeholder Risks Stakeholder Risk Rating Moderate Risk Description: The project will introduce a new approach to the national road asset management system and its operation, the implementation of which will significantly affect the maintenance operation and budgeting practices in Uganda Although the OPRC concept has a strong ownership with key Government stakeholders, there could be some groups that may object or resist the long term commitment of maintenance financing to a single corridor as opposed to the conventional approach currently practiced, where available resources are thinly distributed to all roads Risk Management: The risk management lies in sensitization of stakeholders by engaging them in continued dialogue for a lasting solution towards the establishment of a long term asset management practice through sustainable road financing mechanism Resp: Both Status: In Progress Risk Management: Stage: Implementation Recurrent: Due Date: Frequency: Yearly Establish a well prioritized road development plan that would minimize the increasing rate of growth in backlog maintenance, and create enabling environment for the construction industry Resp: Both Status: In Progress Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating Substantial Risk Description: Risk Management: Stage: Implementation Recurrent: Due Date: 31- May Frequency: 57

70 The road sector annual budget steadily increasing without a commensurate increase of UNRA manpower, thus constraining the implementation capacity and calling for a substantial increase in UNRA s resources (a) Use of experienced consultants to prepare conceptual design, bidding documents including specifying service standards and evaluations of Bids The bidding documents to clearly define the roles and responsibilities of the contractor and UNRA (b) In country group training on OPRC for UNRA staff and other key stakeholders was carried out by International Road Federation in August 2013 in Kampala (c) Study tours are organized and are being under taken to countries where OPRC has been successfully implemented Both activities (b) and (c) are financed under the ongoing TSDP and the training plan is under review The established Road Asset Management Unit and System of UNRA is yet to be tested for efficient implementation Furthermore the limited technical knowledge, critical skills needed and practical experience in UNRA in the procurement and implementation of OPRC contracts will be a constraining factor Resp: Both Status: Completed Stage: Preparation Recurrent: Due Date: Risk Management: 31- Jan Frequency: UNRA s current structure is under review by a consulting firm with the ultimate aim of recommending an appropriate structure and budget to manage the increased workload When the report is approved, the Ministry of Public Service is expected to approve the new structure based on which the MoFPED would increase UNRA s wage cap (budget) Further during project implementation there will be a close follow up to ensure that UNRA is implementing the change management process to fully implement RAMS Resp: Both Status: In Progress Governance Rating High Risk Description: The overall country governance related issues noted above could affect project implementation Risk Management: Stage: Preparation Recurrent: Due Date: 31- Mar Frequency: (a) The Government developed a five year NDP based on the vision, political objectives and poverty reduction strategy of the Country There is commitment to adhere to the key priority areas and policy directions spelled out in the NDP (b) The Government is also taking steps to reverse the tarnished image of Uganda in light of DPs suspension of Budget Support following the 2012 corruption allegations in key Government Ministries and has committed to several critical actions in a High Level Action Matrix which include (i) repayment and recovery of funds lost through fraudulent acts of public officials; (ii) providing assurance of the fidelity of 58

71 Project Risks the Government's Financial Management Systems, and (iii) strengthening anti-corruption and accountability institutions and legislation The implementation of these actions will be the starting point to resume policy dialog with DPs in relation to Budget Support (c) The WB will also rethink its engagement on governance given the perceived deterioration of the governance with a focus on (i) engaging with Parliament, civil society and other non-state actors (ii) supporting anti-corruption and accountability institutions to build their capacity; (iii) fostering and supporting Development Partners coordination to strengthen the voice and dialogue impact on governance and anti-corruption; (iv) enhancing analytical rigor applied to understanding the context and causes of corruption, and (v) systematic engagement on fiduciary reforms, building payroll and wage bill management, and the pay reform agenda Resp: Both Status: In Progress Design Rating Substantial Risk Description: Risk Management: Stage: Both Recurrent: Due Date: Frequency: Yearly As the number of contractors operating in the region that have experience in OPRC implementation may be limited, small number of bidders may respond to the call for bids Promote the project with potential contractors and consultants Carry an outreach program targeting markets that have contractors experienced in OPRC prior to the bidding process This would be done as part of the efforts of introducing the RSDP 3 and Government initiated project showcasing and the OPRC contracts Resp: Client Status: In Progress Risk Management: Stage: Preparation Recurrent: Due Date: 31- Dec Frequency: Sensitization workshop will be carried out prior to launching the pre-qualification process for contracts to be included under the project UNRA will get support from the Consultant that has been hired to carry out the preparation of the pilot asset management contract It is planned to be a full-day workshop for potential bidders and other stakeholders during which the consultant will present and explain in detail on the asset management concept, and answer questions which may arise Resp: Client Status: Not Yet Due Stage: Both Recurrent: Due Date: 31- Dec Frequency: 59

72 Social and Environmental Rating Moderate Risk Description: There could be some land acquisition for possible road realignment and quarry sites which may have substantial environmental and social impacts This could raise issues associated with social and environmental impacts that need to be addressed The limited monitoring, enforcement and reporting of implementation of Social and Environmental aspects of the projects by UNRA and by some Supervising Consultants could affect project implementation Risk Management: The Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF) have been disclosed The framework approach is recommended as the design of the road will be done by the contractor under the OPRC considering the prevailing conditions of the road Resp: Client Status: In Progress Risk Management: Stage: Preparation Recurrent: Due Date: 31- Dec Frequency: Capacity assessment has been made and mitigation measures agreed as part of the preparation Mission Continuous dialogue on social and environmental compliance condition to ensure effective implementation, monitoring and reporting Resp: Both Status: In Progress Program and Donor Rating Low Risk Description: The possibility that other Donor partners may not buy in the concept of the planned projects as it requires a major shift from current practices There is a stated risk element on grounds that UNRA is not well prepared and do not have dependable capacity for OPRC based contract management Delivery Monitoring and Sustainability Risk Description: Despite increased spending on roads, there is a substantial gap between actual needs and resources Risk Management: Stage: Both Recurrent: Due Date: Frequency: Quarterly Current consultations with DPs indicate that there is a general consensus that the OPRC could provide a solution to issues related with the current contracting method of payments for works and services based on inputs which is not budget friendly due to variations and price adjustments Some Donor's has shown their interest in the application of the OPRC based contracts and to take stock of lessons learned from the experience of the pilot project as will be reported to UNRA and will also be shared to Partnering Donors In addition, they have indicated that as the Bank has pioneered the OPRC elsewhere it would be prudent that it take the lead in introducing it to the Road sector in Uganda Resp: Bank Status: In Progress Rating Substantial Risk Management: Stage: Both Recurrent: Due Date: Frequency: Yearly The DPs Group for Transport and the Joint Budget Support Framework (JBSF) will continue to dialogue with MoFPED to allow for: (a) the direct transfer of road user charges to the RF, (b) enable the RF to operate like a second generation road fund, and (c) sufficient allocation to cover the unfulfilled road development 60

73 provided for development and maintenance interventions This has resulted in a scenario whereby the road assets are not managed based on an optimized network planning approach The operationalization of URF as a second generation Road Fund has not yet materialized and maintenance activities are underfunded As such, it has been very difficult for UNRA to address the backlog maintenance on the national road network programs and commitments Resp: Both Status: In Progress Other (Optional) Rating Moderate Risk Description: UNRA has been subjected to fraudulent practices by Bidders in recent Bids This has primarily been manifested through misrepresentation of experience by contractors in order to be qualified for works contracts This has resulted in substantial delays on concluding the Bid evaluation process which affected the implementation schedule of projects which may lead to higher cost and delayed disbursement Risk Management: Project Team Proposed Rating Before Review Overall Implementation Risk: Substantial Risk Description: Stage: Both Recurrent: Due Date: Frequency: Yearly The Team will work with the INT, RPM and UNRA to establish mechanism in which Contractors previous experience could be easily tracked and confirmed without spending substantial amount of time Further the ongoing efforts to strengthen the procurement capacity of UNRA under the TSDP project would be enhanced Resp: Both Status: In Progress Stage: Both Recurrent: Due Date: Frequency: Quarterly OPRC application in the Uganda road sector is new and UNRA s systems and institutional arrangements were setup for managing input based contracts Thus the implementation capacity for OPRC contract is very limited In addition, to the increased spending on roads over the last five years was not supported by a commensurate increase in manpower, thus constraining the implementation capacity and calling for a substantial 61

74 need for strengthening UNRA s internal capacity The Ministry of Public Service is expected to approve the new structure of UNRA, to which the MoFPED may increase UNRA s administration budget In the meantime the project has planned for institutional support UNRA to ensure that the project is implemented as planned 62

75 Annex 5: Implementation Support Plan UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) Strategy and Approach for Implementation Support 1 The strategy for implementation support has been developed based on: (a) the nature of the project; (b) the lessons learned from the implementation experience of the completed projects that supported the implementation of Road Sector Development Program (RSDP) in Uganda and the on-going Transport Sector Development Program (TSDP); (c) the Banks experience in the implementation of Output and Performance-based Road Contract (OPRC) contract elsewhere; and (d) the project risk profile The strategy is designed to make implementation support to the client more flexible and efficient It will focus on the implementation of the safeguards and fiduciary aspects of project as well as on the risk mitigation measures defined in the Operational Risk Assessment Framework (ORAF), especially those with regard to governance In addition to the day to day advice to be provided by different specialists in the World Bank (WB) country office formal supervision and field visits will be carried out semi-annually, and will focus on the following 2 Technical inputs OPRC implementation is new in Uganda National Roads Authority (UNRA), engineering, procurement, and contract management inputs are required to ensure the timely award and implementation of the OPRC A very experienced highway engineer who is well conversant with OPRC will review the bidding documents for the OPRC During implementation of the contract close technical supervision will be provided to ensure the requirements for the services standards are efficiently implemented The OPRC Engineer will conduct site visits on a semi-annual basis throughout project implementation In addition intermittent technical input will be provided by a Transport Specialist and road safety expert 3 Fiduciary requirements and inputs The procurement capacity assessment of UNRA has recommended at least a bi-annual supervision mission, in addition to the prior review of contracts, at least one of which shall include carrying out post review of procurement actions Similarly the Financial Management (FM) assessment of UNRA has concluded that the need for a bi-annual supervision mission Both will focus on addressing the issues that were raised during the assessments in addition to supporting UNRA in enhancing financial management and procurement management capacity and efficiency 4 Safeguards The environment and social specialist who are based in the country office will be supporting relevant counterpart staff during the implementation of the project Field visits will be made on a semi-annual basis to identify and address any emerging and/or outstanding social and environmental issue The supervision will focus on the timely and efficient preparation and implementation of the Resettlement Action Plan (RAP) and Environmental and Social Impacts Assessment (ESIA) based on the agreed Resettlement Policy Framework (RPF) and Environmental and Social Management Framework (ESMF) for the project 5 Overall project coordination The Task Team Leader will coordinate the Bank team to ensure project implementation meets Bank requirements, as specified in the legal documents The TTL will meet with senior officials on a regular basis to keep them apprised of project 63

76 progress and issues requiring resolution at their level Implementation Support Plan 6 The implementation support plan is as follows: Time Focus Skills Needed Resource Estimate (Staff Weeks/year) First twelve Team Project Management, supervision, and Task Team Leader 8 months Leadership coordination Project Support Supervision, coordination Transport Specialist/ 4 Economist Technical OPRC road engineering, design, supervision Road Engineer/OPRC 10 and expertise Specialist Social Social safeguards, land acquisition, resettlement, HIV/AIDS and WB s Social safeguards knowledge and road safety Social Specialist Road Safety Specialist 3 2 Environment Environmental experience and WB s Environmental Specialist 3 environmental safeguards knowledge Procurement Procurement experience, and Bank s Procurement Specialist 4 procurement knowledge, Financial FM experience, knowledge of Bank FM FM Specialist 4 Management norms, training Team Project management, supervision, and Task Team Leader 6 months Leadership coordination Project Support Supervision, coordination Transport Specialist / Economist 4 Technical OPRC road engineering, technical Highway Engineer 4 supervision and expertise, Social Social safeguards, land acquisition, resettlement, HIV/AIDS and WB s Social safeguards knowledge Social Specialist Road Safety Specialist 3 1 and road safety Environment Environmental safeguards, supervision and Environmental Specialist 2 monitoring, training as needed Procurement Procurement reviews, training as needed Procurement Specialist 4 Financial Management FM reviews, training and monitoring FM Specialist 4 7 Skills mix required for implementation support is as follows: Skills Needed Number of Staff Weeks Number of Trips Comments Task Team Leader 6 Staff Weeks/year Two/year Region based Highway Engineer/ OPRC Specialist 6 Staff Weeks/year Two/year HQ/ Region based Transport Economist 4 Staff Weeks/year Two/year Country based Social Specialist 3 Staff Weeks/year Two/year Country based Environmental Specialist 3 Staff Weeks/year Two/year Country based Procurement Specialist 4 Staff Weeks/year n/a Country based FM Specialist 4 Staff Weeks/year n/a Country based Road Safety Specialist 1 Staff Week/year One/year HQ based 64

77 Annex 6 Economic Analysis UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) 1 The economic rationale of an asset management contract mainly lies on preserving the road asset value from further deteriorations through the application of an appropriate intervention in good time The benefit of a performance based Asset Management contracts, with regards to the project financial impact, is to promote innovation, efficiency and effectiveness as contractors strive to achieve the set performance standards with an optimally agreed budget/contract price 2 Traffic Studies Detailed traffic projection and growth analysis was made for the base case normal, diverted and generated traffic for the different road sections This was based on traffic count carried out for 7 days of 24 hours at nine stations An Origin-Destination survey was also carried out for a period of 3 days of 24 hour simultaneously with axle load surveys at the existing stationary weigh bridge at km 462 just south of Mbale Table 1 below summarizes the traffic count results Location Car and taxi Pickups & St Wagons Mini bus Table 61 Traffic count results Large Bus Small Trucks Medium Truck Heavy Truck Semi- Trailer Truck- Trailer Total Vehicular Traffic excl motor cycles Motor cycles Munguria Busiu Akwarkwar Alungale Awoja Primary School Awasi Village Awiro Village Alidi Amwa Hq Traffic growth estimates for the low, medium and high traffic growth scenario s considered for the four passenger and five freight transport vehicle categories The annual traffic growth rates of the base case traffic, for the periods and 2021-onwards, for each vehicle categories traffic growth assumptions (under the low, medium and high) are shown on table 62 below Table 62 Traffic growth rate by Vehicles Categories Vehicle Categories foreward Passenger Transport Freight Transport Low Medium High Low Medium High Cars 45% 56% 68% 32% 40% 48% Pick/St Wagon 45% 56% 68% 32% 40% 48% Small Bus 45% 56% 68% 32% 40% 48% Large Bus 61% 76% 91% 40% 50% 60% Small Truck 61% 76% 91% 40% 50% 60% Medium Truck 61% 76% 91% 40% 50% 60% Heavy Truck 61% 76% 91% 40% 50% 60% Semi-Trailer 61% 76% 91% 40% 50% 60% Truck Trailer 61% 76% 91% 40% 50% 60% Source: Consultants estimate based on official GDP and traffic statistics Total 65

78 4 The traffic projections of the economic analysis assumed that the generated traffic growth rate will be 10 percent in year 2016 for all sections Accordingly, the Annual Daily Traffic (ADT) for medium traffic growth scenarios for each of the road sub-sections is shown on graph below 5 The five identified scenario options for project implementation results of the Highway Design and Maintenance (HDM) analysis are shown on the table below (table 63) The economic evaluation provided a comparison of the five scenarios for a combination of maintenance strategies, for the three options including Scenario 4 of responsive maintenance assumption, against a base case scenario (do-minimum) at which the scope of maintenance is based on realistic measures applied Scenario 1-3 represents the maintenance measures that are applied for the seven road sections at specific years over the ten year Output and Performancebased Road Contract (OPRC) contract period While scenario 4 is representing responsive maintenance when IRI>45 and is therefore not taking into consideration the logistics implications in terms of mobilization and optimization of the contractors work schedule The results of the economic evaluation compared the four Scenarios for maintenance measures and expressed in terms of Economic Internal Rate of Return (EIRR), Net Present Value (NPV) Discount rate of 12 perecnt is used for the 22 year period in order to show the full analysis representing the technical lifetime of the road assets There are clear indications from the overall analysis that show the project feasibility and its financial viability will be based on appropriate selection of service level standards for cost effectiveness and ensuring its sustainability 6 Based on review comments on the study report, an HDM re-run was also made to strengthen the sensitivity analysis especially considering the 20 year design life option; in place of the 15 year base case scenario analysis of the consultant Results from the Falling Weight Deflectometer (FWD) measurement and survey results are also included in the HDM re-run sensitivity analysis; both for the seven segments of the corridor and whole sections of the road For the combined sections of the whole corridor, the table below provides the NPV and EIRR economic indicators for Scenario 1-4 for the traffic levels The summary table below presents the NPV and EIRR values obtained for Scenario 1-4 for traffic forecast levels of 20 percent reduced traffic from base case, medium or base case traffic, and 20 percent increased traffic from base case and takes up the medium base case combined result for the whole sections analysis of the project road 66

79 Table 63: EIRR and NPV Results of the Economic Analysis Scenario 1 Scenario 2 Scenario 4 Scenario 3 (3A) Scheduled (Scheduled (Scheduled (Responsive maintenance) maintenance) maintenance) Maintenance) Traffic NPV EIRR NPV EIRR NPV EIRR NPV EIRR scenario High (+20%) % % 193 (188) 150% (150%) % All Sections Base Case % % 87 (82) 135% (134%) % Low (- 20%) % % -14 (-19) 117% (116%) % Source: Consultants HDM-4 computations 7 The overall findings, as shown in the results summary tables of the analysis, justified the feasibility of the project under scenario options 3 with an EIRR value of 120 percent, for the responsive maintenance option 4, and 135 percent for the scheduled maintenance option 3 The NPV value for option 3 is US$87 million while the NPV value for option 4 is zero In addition to that it has been noted that option 4, from the point of the logistical and operational aspect, will not be a realistically preferred option for a long term OPRC contracting 8 The HDM analysis considered 15 year design life and 20 years (recommended design life for national roads) for sensitivity testing and optimal costing of the project However, the base case for the OPRC analysis is for a period of 10 years The appraisal analysis was made for an asphalt concrete (AC) overlay Results of the analysis are used to determine the level, type and year of maintenance intervention for each of the seven sections Detailed results of the economic analysis, by road segment, for each sections of the seven lots, is also shown in a summarized form in the summary table below The logistics of maintenance works as defined for Scenario 1-3, and the corresponding works advantages for the OPRC contractor, should favor those scenarios as compared to the responsive maintenance Scenario 4 However, the comparison from among Scenario 1-3, with scheduled maintenance, the more feasible scenario will be option 3, with an EIRR value of 135 percent at which maintenance of the seven road sub-sections are schedules over the periods for the respective 35 mm and 55 mm overlay 9 Scenarios options are considered to be comparable based on the development of the roughness level over time on the eight road sub-sections The condition of the different road subsection will be at the same quality level after 10 years (OPRC contract) and 22 years (for lifetime technical and economic analysis of the road) The comparative analysis of the economic analysis of the Scenarios takes into account the importance of the logistics of the maintenance works to be carried out by the OPRC contractor 10 The breakdown of the full economic costs and benefits of the project road (all sections under medium traffic growth assumption) for the respective maintenance scenarios, under the different traffic growth scenario s (+/-20 percent, against base case) are presented in summarized form in the table below It indicates that the majority of the benefits come from savings in vehicle operating costs followed by travel time savings However, the Economic analysis results 67

80 for option 3 shows that more gains obtained from Vehicle Operating Cost (VOC) savings for Lots 1 & 2, whereas time savings are higher for Lot 3 of the project IRR Table 64: Results of the Economic Analysis for Scenario 1 to 4 (EIRR & NPV (US$ million) Traffic scenario SCENARIO 1 (Scheduled maintenance) SCENARIO 2 (Scheduled maintenance) SCENARIO 3 (Scheduled maintenance) SCENARIO 3A (Scheduled maintenance) SCENARIO 4 (Responsive Maintenance) NPV EIRR NPV EIRR NPV EIRR NPV EIRR NPV EIRR Section 1 Growth % % % % % Basis % % % % % Growth % % % % % Section 2 Growth % % % % % Basis % % % % % Growth % % % % % Section 3 Growth % % % % % Basis % % % % % Growth % % % % % Section 4 Growth % % % % % Basis % % % % % Growth % % % % % Section 5 Growth % % % % % Basis % % % % % Growth % % % % % Section 6 Growth % % % % % Basis % % % % % Growth % % % % % Section 7 Growth % % % % % Basis % % % % % Growth % % % % % All Sections Growth % % % % % Basis % % % % % Growth % % % % % Source: Consultants HDM-4 computations 11 Impacts of the project As the project road serves the Northern part of the country, as major economic and regional corridor for the country, there are additional benefits not well quantifiably captured as part of the economic analysis This includes local access to market areas and social services, including the ones in the district town to be connected through the realignment The other key impact of the proposed project is the enhancement of road safety The project will reduce the negative transport externalities through improved road safety and axle overload control measures and also improved management of national roads through the strengthening of UNRA s capacity for road asset management The project will also have impact on poverty reduction and improving the livelihood of the poor along the project area, as it will help increase productivity and farm gate prices for agricultural products As well, the project will 68

81 provide income generating employment opportunities during the construction and maintenance period Table 65: Breakdown of Economic Benefits (NPV, USD million) SCENARI O 1 SCENARIO 2 SCENARIO SCENARI 3 O 3A Traffic Growth 12 SCENARIO 4 (Responsive Maintenance) Net investment Costs Maintenance Costs VOC Travel time costs NPV Basis Net investment Costs Maintenance Costs VOC Travel time costs NPV Traffic Growth 08 Net investment Costs Maintenance Costs VOC Travel time costs NPV Table 66: Distribution of cost and benefits for Lot 1 to 3 and Total for maintenance, VOC and time (NPV, USD million) Maintenance VOC Time Lot Lot Lot Total Source: Consultants HDM-4 computations 12 Sensitivity analysis Shows that the project for scenario 4 has an EIRR value of 105 percent for 20 percent reduced traffic and increased costs combination Unlike the others, scenario 4 is based on responsive maintenance option for IRI>45 and is not taking into consideration the logistics in terms of mobilization and optimization of the contractors work schedule Hence, the recommended option 3 with an EIRR of 135 percent and NPV of 87 million, based on base case traffic (normal+ generated traffic scenario) is further analyzed In case of a higher variation in traffic and cost, for 20 percent increase in traffic and percentage increase in cost, the results will go higher than the discount rate showing that long term maintenance contract would be a more economical option 69

82 Annex 7: Governance and Anti-Corruption UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) 1 The project will build upon key governance and anti-corruption measures implemented under the ongoing Technical Sector Development Program (TSDP) by Uganda National Roads Authority (UNRA) The Governance and Accountability Action Plan (GAAP) is aimed at developing a system and culture for promoting transparency and accountability in the sector UNRA took actions to establish arrangements for Institutional Support and Integrity Enhancement Services (ISIES) to support the implementation of institutional reforms that are geared towards improving governance in the road sector The ISIES consists of the following actions: (a) the use of the Independent Parallel Bid Evaluation (IPBE) System; (b) building capacity of the procurement and disposal unit, and the internal audit and financial management units; and (c) strengthening the contract management system 2 Capacity Building and Reorganization in Procurement The Procurement Disposable Unit (PDU) of UNRA has been elevated to a Directorate level and the Director of Procurement, who was appointed in November 2012, is now directly reporting to the Executive Director (ED) The Directorate of Procurement now has two Units, each headed by a Manager: The Works and Services Unit and the Goods and Supplies Unit Prior to this, procurement was undertaken by a Unit which was under the Directorate of Finance and Administration The restructuring has given the Directorate its due importance in the Entity, with more competent staff which includes Technical Assistance financed under the TSDP UNRA got accreditation from the Public Procurement and Disposal of Public Assets Authority (PPDA) in carrying out the proposed changes within the framework of the requirements of the PPDA 3 Introduction of an Independent Parallel Bid Evaluation (IPBE) System The introduction IPBE system aimed at increasing public confidence, improving and validating the quality of the decision making process and ensuring integrity in UNRA s procurement functions for works and services was instituted The DFID financed consultant commenced services in March 2012 and is carrying out an independent evaluation of bids and proposals for works: all large contracts above US$10 million equivalent; at least 30 percent of all contracts between US$1 million and US$10 million equivalent and a random sample of contracts below US$10 million, and for consultancy: all large contracts above US$2 million equivalent and 50 percent of all contracts between US$1 million and US$2 million The consultant has to date completed evaluating 79 procurements (32 consultancies and 47 works) of which apart from one evaluation, the IPBE and UNRA s process have been in agreement This process has helped UNRA s Contract Committee to benchmark UNRA s evaluation process while improving the quality of the decisions and has also increased the confidence in the UNRA procurement process 4 Enhancement of the Internal Audit Unit of UNRA During the appraisal for the additional financing under TSDP, it was agreed that UNRA strengthens capacity to undertake technical audit of projects As such a consultant financed under TSDP was appointed in October 2013 to provide technical assistance in establishing the Technical Audit Unit in UNRA s Internal Audit Directorate, to be staffed with Engineers and Contract Specialists, to enable the Directorate carry out Technical audits, in addition to the Financial Audits which they presently carry out The aim of the technical audit is to provide UNRA Management with a real time 70

83 opinion on the efficiency, cost-effectiveness and transparency of the investments that the Authority is called upon to manage This technical audit, performed by experts, shall look at the implementation of the budgeted activities of the Authority on a random basis and/or when it is called by the Management and/or other stakeholders on particular issues highlighted as affecting the implementation of the project or program activities The technical audits unit would be used as one of the mechanisms to ensure that the planned activities under the NERAMP have met the intended purposes 5 Whistle Blower s Policy UNRA has developed a Whistle blowing Disclosure Policy in line with the Whistle blowers Protection Act that was enacted by Parliament in May 2010 The Policy is aimed at increasing the catchment of complaints and to provide guidance on procedures for managing complaints within UNRA The Internal Audit Unit has installed Suggestion boxes at UNRA Headquarters and up-country Stations, Ferry Landing Sites and Weigh bridges These are open to the public and all stakeholders to forward their views to UNRA and are periodically checked and contents summarized for management information and action This system has already triggered investigations by the Internal Audit from which recommendations have been made to management 6 Other initiatives to improve transparency and stakeholder involvement in road activities UNRA maintains an (info@unragoug) available to the public through which comments, complaints or compliments are received Two additional staff members for the Corporate Communications Unit have been hired on temporary contracts, with the intention of retaining them as permanent staff and were providing support on customer service and social media The Unit is also compiling monthly Media Analysis Reports with summaries on articles - negative and positive-that are published in the print media on UNRA and its activities These include studies and projects (planned, ongoing or completed), service levels and safeguards issues, as well as performance of contractors 7 Establishment of a Contract Management System UNRA has procured a Consultant to establish a Contract Management System (CMS) The CMS containing agreed Indicators of Conformity (ICs) and Red Flag System will be crucial for internal performance management and accountability system The CMS was installed and tested at UNRA in March 2013 It is now being populated with contract data before it can be put to full use 8 Construction Sector Transparency (CoST) Initiative Whereas the above activities will enhance the capacity of UNRA and build on achievements under TSDP, they fall short of expanding the roles of citizens in ensuring transparency, accountability and participation in achieving the results of the project NERAMP will build on the transparency pillars of the CoST Initiative, for which Uganda became the 10 th Member Country in October This would involve UNRA working together with oversight agencies, private sector consultants and contractors, and civil society groups to improve transparency CoST uses the disclosure of key non-sensitive information and a multi-stakeholder approach to improve transparency and to complement other oversight bodies CoST will be working directly with the UNRA who will lead in the implementation of CoST within the country Implementation of the CoST Uganda program builds on a Multi-Stakeholder approach used by the Uganda Road 71

84 Council (URC) Under the CoST initiative UNRA will devise mechanism for working together with oversight agencies, private sector consultants and contractors, and civil society groups to improve transparency The NERAMP will finance, under the Component 2 of the project, the operational cost associated with the implementation of CoST in UNRA The Project will also benefit from social accountability measures to being developed at the Country level as part of the overall Bank demand for good governance framework 72

85 Annex 8: Letter of Sector Development Policy UGANDA: North Eastern Road-corridor Asset Management Project (NERAMP) 73

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