Bangladesh: Greater Dhaka Sustainable Urban Transport Project

Project Administration Manual Project Number: 42169 Loan and/or Grant Number(s): LXXXX; LXXXX March 2012 Bangladesh: Greater Dhaka Sustainable Urban Transport Project

Contents ABBREVIATIONS I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLANS 2 A. Project Readiness Activities 2 B. Overall Project Implementation Plan 3 III. PROJECT MANAGEMENT ARRANGEMENTS 4 A. Project Implementation Organizations Roles and Responsibilities 4 B. Key Persons Involved in Implementation 4 C. Project Organization Structure 5 IV. COSTS AND FINANCING 6 A. Detailed Cost Estimates by Expenditure Category 7 B. Allocation and Withdrawal of {Loan/Grant} Proceeds 8 C. Detailed Cost Estimates by Financier 9 D. Detailed Cost Estimates by Outputs/Components 10 E. Detailed Cost Estimates by Year 11 F. Contract and Disbursement S-curve 12 G. Fund Flow Diagram 13 V. FINANCIAL MANAGEMENT 14 A. Financial Management Assessment 14 B. Disbursement 14 C. Accounting 15 D. Auditing 15 VI. PROCUREMENT AND CONSULTING SERVICES 17 A. Advance Contracting and Retroactive Financing 17 B. Procurement of Goods, Works and Consulting Services 17 C. Procurement Plan 18 D. Consultant's Terms of Reference 18 VII. SAFEGUARDS 18 VIII. GENDER AND SOCIAL DIMENSIONS 20 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, COMMUNICATION 21 A. Project Design and Monitoring Framework 21 B. Monitoring 21 C. Evaluation 21 D. Reporting 22 E. Stakeholder Communication Strategy 22 X. ANTICORRUPTION POLICY 23 XI. ACCOUNTABILITY MECHANISM 24 XII. RECORD OF PAM CHANGES 25 ANNEXES A. FINANCIAL MANAGEMENT ASSESSMENTS 27 B. PROCUREMENT PLAN 34 C. DRAFT OUTLINE TERMS OF REFERENCE FOR CONSULTANTS 38 D. DESIGN AND MONITORING FRAMEWORK 77

Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Roads Division (RD) and implementing agencies, the Roads and Highways Department (RHD), the Bangladesh Bridges Authority (BBA), the Local Government Engineering Department (LGED), and the Special Project Organization (SPO) are wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB s policies and procedures. ADB staff is responsible to support implementation including compliance by RD and implementing agencies of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At Loan Negotiations the borrower and ADB shall agree to the PAM and ensure consistency with the Loan and grant agreements. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan and Grant Agreements, the provisions of the Loan and Grant Agreements shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

Abbreviations ADB = Asian Development Bank ADF AFD = = Asian Development Fund Agence Française de Développement AFS BBA BRT = = = audited financial statements Bangladesh Bridges Authority Bus Rapid Transit CQS = consultant qualification selection DMF DTCA = = design and monitoring framework Dhaka Transport Coordination Authority EARF = environmental assessment and review framework EIA = environmental impact assessment EMP EPCM = = environmental management plan Engineering, Procurement and Construction Management ESMS = environmental and social management system GACAP = governance and anticorruption action plan GDP = gross domestic product ICB = international competitive bidding IEE = initial environmental examination IPP = indigenous people plan IPPF = indigenous people planning framework LAR LGED = = land acquisition and resettlement Local Government Engineering Department LIBOR = London interbank offered rate NCB = national competitive bidding NGOs NMT = = nongovernment organizations non-motorized transport PAI = project administration instructions PAM = project administration manual PIU PMU = = project implementation unit project management unit QBS = quality based selection QCBS RHD = = quality- and cost based selection Roads and Highways Department RRP = report and recommendation of the President to the Board SBD = standard bidding documents SGIA = second generation imprest accounts SOE = statement of expenditure SPS = Safeguard Policy Statement SPRSS TGPA = = summary poverty reduction and social strategy Tongi and Gazipur Pourashavas Area TOR UTS = = terms of reference Urban Transport System

Project's rationale, location and beneficiaries: I. PROJECT DESCRIPTION The project will contribute to develop a sustainable Urban Transport System (UTS), within the Gazipur City Corporation (GCC) and Dhaka North City Corporation (DNCC) which forms part of north Greater Dhaka, through the delivery of a 20 kilometer Bus Rapid Transit (BRT) corridor. This pilot project provides a holistic solution for integrated urban mobility, bearing a demonstration effect as no modern mass-transit system exists in Bangladesh yet. Impact and Outcome: The project impact will be to develop a sustainable UTS in GCC and DNCC. The project outcome will be to improve GCC and DNCC s public transport system, benefiting a population of 1 million. Outputs: 1. GCC and DNCC s main urban transport corridor is restructured: 1.1 A 20 kilometer Bus Rapid Transit (BRT) route designed and built following international best practices and quality standards; 1.2 Two mixed-traffic lanes and one NMT lane per direction, and sidewalks along the BRT; 1.3 An efficient high-capacity drainage system along the restructured corridor; 1.4 A BRT terminal and depot facilities in Gazipur; 1.5 155 access feeder roads improved over a 100 meter stretch in favor of non-motorized transport (NMT); and 1.6 The BRT airport terminal is developed as part of an intermodal hub through a PPP/BOT scheme. 2. Project management is effective and BRT operations are sustainable: 2.1 SPO created to support project management, organize and monitor future BRT operation; 2.2 Transformation of Dhaka Transport Coordination Board (DTCB) into DTCA is supported, to undertake planning, regulation and coordination of all mass-transit systems; 2.3 Operations and business model for the BRT system are designed; 2.4 Negotiations are conducted to facilitate consolidation of the existing bus industry; 2.5 SPO, DTCA and selected private operators capacity to operate the BRT is built; 2.6 A compensation mechanism and fleet scrapping program for non participating operators is set up; 2.7 50 articulated buses are procured and leased to selected private bus operators; 2.8 Intelligent Transport Systems (ITS) for the BRT are procured and installed; 2.9 Bus drivers are trained and BRT system is tested before starting the operations; 2.10 Media and community awareness campaigns are conducted. 3. Urban quality of the corridor is improved: 3.1 1000 energy-efficient street lighting are procured and installed along the corridor; 3.2 Municipal infrastructures (10 local markets, 9 drains and 141 feeder roads, 2 pedestrianfriendly pilot roads, etc.) are improved; 3.3 Equipment for the Traffic Police to improve traffic management, such as 70 BRT-priority traffic lights, 150 closed-circuit television (CCTV) cameras at main junctions, and mobile vehicle emission testing devices, are procured and installed. 1

II. IMPLEMENTATION PLANS A. Project Readiness Activities Action Due Responsibility DPP clearance Submission of DPP to PC 6 February 2012 MOC PC recommendation on DPP 23 February 2012 PC ECNEC approval of DPP 25 March 2012 PC Establishment of PIUs and PMU Notification to establish PIUS are issued 26 March 2012 RHD, BBA, LGED Notification to establish PMU is issued 26 March 2012 RD Appointment of Project Director and Project Managers 26 March 2012 RHD, BBA, LGED Consultancy recruitment Issuance of request for EOI for 4 consulting packages 29 June 2011 ADB Deadline of EOI 29 July 2011 ADB Draft RFP and shortlist proposed to RD 14 November 2011 ADB RFP issued 25 January 2012 ADB Technical evaluation committee March 2012 ADB Financial evaluation April 2012 ADB Evaluation proposed to RD April 2012 ADB Contract negotiations May 2012 RD Consultants mobilization May 2012 Consulting firms Safeguard documents clearance Drafting of RPs and IEEs 20 April 2011 ADB Government endorsement 22 July 2011 RHD, BBA, LGED Loan processing Management review meeting 22 September 2011 ADB Loan negotiations 14 March 2012 ERD, ADB ADB Board's project approval 17 April 2012 ADB Loan signing May 2012 ADB, ERD Government legal opinion provided May 2012 ERD Loan effectiveness June 2012 ADB 2

B. Overall Project Implementation Plan 3

III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations Roles and Responsibilities Project implementation organizations Inter-ministerial Project Steering Committee Executing Agency Roads Division (RD) (PMU) Management Roles and Responsibilities Provide policy guidance during project implementation Ensure smooth inter-ministry/agency coordination Supervise overall project implementation, and coordinate PIUs Engage and manage consulting services Ensure compliance with covenants and safeguard requirements Consolidate PIU s progress reports and submit audit, progress and other reports to ADB and the government Monitor use of all funding provided by ADB and other financiers Ensure that any complaints received are addressed adequately Coordinate with ADB review missions Implementing Agencies Implement respective project components, including carrying out RHD, BBA, LGED, SPO procurement and supervising contractors (PIUs) Submit withdrawal applications for funds (imprest account for LGED / SPO, direct payment and reimbursement for RHD / BBA) Liaise and coordinate with the PSC, PMU and other PIUs Participate in capacity development programs Special Project Organization (SPO) ADB Recruit and train staff with support of project consultants Design business model, negotiate with private operators, and organize future operations of BRT Operate imprest account and submit withdrawal applications Procure equipments and supervise installation Monitor and advise overall project implementation Select project consultants (as requested by the government) Review and issue no-objection to procurement and documents Provide funding for eligible claims B. Key Persons Involved in Implementation Executing Agency RD ADB South Asia Urban Development and Water Division Mission Leader Officer's Name: Mr. M. A. N. Siddique Position: Secretary Telephone No.: +88 02 951 1122 Email address: secretary@moc.gov.bd Staff Name: M. Teresa Kho Position: Director, SAUW Telephone No.: +632 632 6858 Email address: mtkho@adb.org Staff Name: David Margonsztern Position: Urban Development Specialist (Transport) Telephone No.: +632 632 57 87 Email address: dmargonsztern@adb.org 4

C. Project Organization Structure PSC Public agencies BD (MoC) RD [EA] (MoC) LGD (MoLGRDC) Consulting packages PMU DTCA BBA RHD LGED SPO PIU PIU PIU PMCCB EPCM RPI ODBM Project Office BBA = Bangladesh Bridges Authority; DTCA = Dhaka Transport Coordination Authority; EA = Executing Agency; EPCM = Engineering Procurement and Construction Management and Supervision; LGED = Local Government Engineering Department; MOLGRDC = Ministry of Local Government and Rural Development and Cooperatives; ODBM = Operational Design and Business Model; PIU = Project Implementation Unit; PMCCB = Project Management Coordination and Capacity Building; PSC = Project Steering Committee; RHD = Roads and Highways Department; RPI = Resettlement Plan Implementation; RD = Roads Division (Executing Agency); SPO = Special Project Organization. Source: ADB 5

IV. COSTS AND FINANCING 1. To help finance the project, the government has requested the following loans from ADB: (i) A $100 million loan from ADB s Ordinary Capital Resources (OCR). This loan will have a 25-year term, including a grace period of 7 years, an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year, (the interest and other charges during construction to be capitalized in the loan), and such other terms and conditions set forth in the OCR loan agreement. The government has provided ADB with (i) the reasons for its decision to borrow under ADB s LIBOR-based lending facility based on these terms and conditions, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB. (ii) Two loans in various currencies, one in an amount equivalent to SDR29,179,000 (or $45 million equivalent) from ADB s Special Funds resources with soft terms, and another in the amount equivalent to SDR9,726,000, (or $15 million equivalent) from ADB s Special Funds resources with hard terms. The two loans will have a 32-year term including a grace period of 8 years, an interest charge of 1.0% per annum during the grace period and 1.5% per annum thereafter, and other terms and conditions set forth in the ADF loan agreement. 2. ADB loans in the amount of $160 million, or 62.7% of the total project investment cost, will be used to finance (i) large civil works packages for the corridor restructuring, such as those described under output 1; (ii) vehicles and equipment; (iii) consulting services including surveys and capacity building; (iv) compensation mechanism and fleet scrapping program for private bus operators; (v) SPO s recurrent operating costs during the construction period; (vi) media and community awareness campaigns; (vii) interest charge during implementation; and (viii) transportation and insurance costs. The government's financing of $45.4 million, or about 17.9% of the total project cost, will be used to finance land acquisition and resettlement, taxes and duties, and small part of civil works and SPO operating costs. 3. The government has also sought a loan from AFD of approximately $45 million equivalent to finance part of the project. The AFD loan will have the following conditions: (i) a 20-year maturity, including a grace period of 5 year, (ii) an annual interest rate determined in accordance with EURIBOR-based lending facility plus 150 base points per annum. A commitment charge and a front-end fee are included in the proposed interest rate. The AFD cofinancing will be administered by ADB on a joint basis, and partially administered with regards to disbursement (ADB reviews the withdrawal application and advises AFD to make the disbursement). 1 4. The government has also requested a $4.6 million grant from GEF to help finance part of the project. The GEF grant co-financing will be administered by ADB, and will be used mostly to finance energy-efficient street lighting, and part of the acquisition of the BRT bus fleet. 2 1 AFD will confirm its participation to the project financing tentatively one month after ADB Board approval. 2 GEF and AFD may finance transportation and insurance costs. 6

A. Detailed Cost Estimates by Expenditure Category Item Total Cost % of Total Base Cost A. Investment Costs 1 Civil Works 127.1 56.9% 2 Mechanical and Equipment 21.4 9.6% a. Street Lights 1.6 - b. Rolling Stock (Buses) 8.3 - c. Other Equipment (ITS, fare collection, etc.) 11.5-3 Environment and Social Mitigation 17.7 7.9% a. Environmental and Resettlement Plan 8.1 - b. Compensation and Fleet Scrapping Program 9.7-4 Consultants 13.2 5.9% 5 Taxes 26.6 - Subtotal (A) 206.0 92.3% B. Recurrent Costs 1 SPO, PMU and PIUs' Operating Costs 17.3 - Subtotal (B) 17.3 7.7% Total Base Cost 223.3 100.0% C. Contingencies 1 Physical 11.9 5.3% 2 Price 12.8 5.7% Subtotal (C) 24.7 11.1% D. Financing Charges During Implementation 1 Interest During Implementation 6.7 3.0% 2 Commitment Charges 0.4 0.2% Subtotal (D) 7.1 3.2% Total Project Cost (A+B+C+D) 255.0 114.2% Note: Numbers may not sum precisely because of rounding. 7

Number B. Allocation and Withdrawal of Loan Proceeds ALLOCATION AND WITHDRAWAL OF OCR LOAN PROCEEDS (Greater Dhaka Sustainable Urban Transport Project) Item CATEGORY Total Amount Allocated for ADB Financing ($) Category 8 ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account 1 Civil Works 84,400,000 59% of total expenditure claimed 2 Interest & Commitment Charges 2,500,000 100% of amounts due 3 Unallocated 13,100,000 Total 100,000,000 Number ALLOCATION AND WITHDRAWAL OF ADF LOAN (SOFT TERMS) PROCEEDS (Greater Dhaka Sustainable Urban Transport Project) Item CATEGORY Total Amount Allocated for ADB Financing ($) Category ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account 1 Mechanical & Equipment Other Equipment 9,500,000 83% of total expenditure claimed* 2 Environment and Social Fleet Scraping Prog. 9,650,000 100% of total expenditure claimed 3 Consulting Services 7,860,000 60% of total expenditure claimed* 4 SPO Operating Costs 14,010,000 81% of total expenditure claimed 5 Interest Charges 1, 060,000 100% of amounts due 6 Unallocated 2,920,000 Total 45,000,000 *Exclusive of taxes and duties imposed within the territory of the Borrower Number ALLOCATION AND WITHDRAWAL OF ADF LOAN (HARD TERMS) PROCEEDS (Greater Dhaka Sustainable Urban Transport Project) Item CATEGORY Total Amount Allocated for ADB Financing ($) Category ADB FINANCING Percentage and Basis for Withdrawal from the Loan Account 1 Mechanical & Equipment Other Equipment 2,000,000 17% of total expenditure claimed* 2 Mechanical & Equipment Buses 5,500,000 66% of total expenditure claimed* 2 Consulting Services 5,300,000 40% of total expenditure claimed* 3 Interest Charges 400,000 100% of amounts due 4 Unallocated 1,800,000 Total 15,000,000 *Exclusive of taxes and duties imposed within the territory of the Borrower

Number ALLOCATION AND WITHDRAWAL OF GEF GRANT PROCEEDS (Greater Dhaka Sustainable Urban Transport Project) Item CATEGORY Total Amount Allocated for GEF Financing ($) Category GEF FINANCING Percentage and Basis for Withdrawal from the GEF Grant Account 1 Mechanical & Equipment Street lights 1,600,000 100% of total expenditure claimed* 2 Mechanical & Equipment Buses 2,800,000 34% of total expenditure claimed* 3 Unallocated 200,000 Total 4,600,000 *Exclusive of taxes and duties imposed within the territory of the Borrower Number ALLOCATION AND WITHDRAWAL OF AFD LOAN PROCEEDS (Tentative 1 ) (Greater Dhaka Sustainable Urban Transport Project) Item CATEGORY Total Amount Allocated for AFD Financing ($) Category AFD FINANCING Percentage and Basis for Withdrawal from the AFD Loan Account 1 Civil works 39,200,000 28% of total expenditure claimed 2 Unallocated 5,800,000 Total 45,000,000 1 This table is only tentative, and based on ADB s own estimates, as the Loan will be directly negotiated and provided by AFD to the Borrower. 9

A. Investment Costs C. Detailed Cost Estimates by Financier ($ million) ADB OCR ADB H-ADF ADB ADF AFD a GEF b Government % of Cost % of Cost % of Cost % of Cost % of Cost Non Amount Category Amount Category Amount Category Amount Category Amount Category Tax Tax Amount % of Cost Category Item {A} {A/G} {B} {B/G} {C} {C/G} {D} {D/G} {E} {E/G} {F} {F/G} {G} 1 Civil Works 84.4 59.3% - 0.0% - 0.0% 39.2 27.6% - 0.0% 15.2 3.5 18.7 13.1% 142.3 2 Mechanical and Equipment - 0.0% 7.5 28.7% 9.5 36.2% - 0.0% 4.4 16.7% 4.8-4.8 18.4% 26.2 a. Street Lights - 0.0% - 0.0% - 0.0% - 0.0% 1.6 81.6% 0.4-0.4 18.4% 2.0 b. Rolling Stock (Buses) - 0.0% 5.5 54.2% - 0.0% - 0.0% 2.8 27.6% 1.9-1.9 18.2% 10.2 c. Other Equipment (ITS, fare collection, etc) - 0.0% 2.0 14.2% 9.5 67.6% - 0.0% - 0.0% 2.5-2.5 18.2% 14.0 3 Environment and Social Mitigation - 0.0% - 0.0% 9.7 54.4% - 0.0% - 0.0% - 8.1 8.1 45.6% 17.7 a. Environmental and Resettlement Plan - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 8.1 8.1 100.0% 8.1 b. Compensation and Fleet Scrapping Prog. - 0.0% - 0.0% 9.7 100.0% - 0.0% - 0.0% - - - 0.0% 9.7 4 Consultants - 0.0% 5.3 32.2% 7.9 47.8% - 0.0% - 0.0% 3.3-3.3 20.0% 16.5 Subtotal (A) 84.4 41.6% 12.8 6.3% 27.0 13.3% 39.2 19.3% 4.4 2.2% 23.3 11.6 34.9 17.2% 202.7 B. Recurrent Costs 1 SPO, PMU and PIUs' Operating Costs - 0.0% - 0.0% 14.0 81.0% - 0.0% 0.0% - 3.3 3.3 19.0% 17.3 Subtotal (B) - 0.0% - 0.0% 14.0 81.0% - 0.0% - 0.0% - 3.3 3.3 19.0% 17.3 Total Base Cost 84.4 38.4% 12.8 5.8% 41.0 18.6% 39.2 17.8% 4.4 2.0% 23.3 14.9 38.2 17.4% 220.0 C. Contingencies 13.1 47.0% 1.8 6.6% 2.9 10.5% 5.8 20.8% 0.2 0.9% 3.2 0.7 4.0 14.3% 27.9 D. Financing Charges During Implementation 2.5 35.7% 0.4 5.0% 1.1 15.0% - 0.0% - 0.0% - 3.1 3.1 44.3% 7.1 1 Interest During Implementation 2.1 31.8% 0.4 5.3% 1.1 15.9% - 0.0% - 0.0% - 3.1 3.1 46.9% 6.7 ADB (OCR, HADF and ADF) 2.1 60.0% 0.4 10.0% 1.1 30.0% - 0.0% - 0.0% - - - 0.0% 3.5 AFD - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 3.1 3.1 100.0% 3.1 2 Commitment Charges and Front End Fee 0.4 100% - 0.0% - 0.0% - 0.0% - 0.0% - - - 0.0% 0.4 ADB (OCR) 0.4 100.0% - 0.0% - 0.0% - 0.0% - 0.0% - - - 0.0% 0.4 AFD - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - - - 0.0% - Total Project Cost (A+B+C+D) 100.0 39.2% 15.0 5.9% 45.0 17.6% 45.0 17.7% 4.6 1.8% 26.5 18.7 45.4 17.8% 255.0 % Total Project Cost 39.2% 5.9% 17.6% 17.7% 1.8% 17.8% Note: Numbers may not sum precisely because of rounding. a Administered by ADB on a joint basis (partial administration). b Fully administered by ADB. Total Cost 10

D. Detailed Cost Estimates by Outputs a ($ million) Output 1 Output 2 Output 3 Item Total Cost Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category A. Investment Costs b 1 Civil Works 127.08 116.04 91.3% - 0.0% 11.04 8.7% 2 Mechanical and Equipment 21.40-0.0% 15.67 73.2% 5.73 26.8% a. Street Lights 1.63-0.0% - 0.0% 1.63 100.0% b. Rolling Stock (Buses) 8.3-0.0% 8.3 100.0% - 0.0% c. Other Equipment (ITS, fare collection, etc.) 11.5-0.0% 7.34 67.3% 4.10 32.7% 3 Environment and Social Mitigation 17.73 8.08 45.6% 9.65 54.4% - 0.0% a. Environmental and Resettlement Plan 8.08 8.08 100.0% - 0.0% - 0.0% b. Compensation and Fleet Scrapping Prog. 9.65-0.0% 9.65 100.0% - 0.0% 4 Consultants 13.17 7.86 59.7% 5.31 40.3% - 0.0% 5 Taxes 26.58 18.26 68.7% 5.46 20.5% 2.86 10.8% Subtotal (A) 205.95 150.24 72.9% 36.09 17.5% 19.62 9.5% B. Recurrent Costs 1 SPO, PMU and PIUs' Operating Costs 17.30-0.0% 17.30 100.0% - 0.0% Subtotal (B) 17.30-0.0% 17.30 100.0% - 0.0% Total Base Cost 223.25 150.24 67.3% 53.39 23.9% 19.62 8.8% C. Contingencies 1 Physical c 11.88 9.28 78.2% 1.25 10.6% 1.34 11.3% 2 Price d 12.80 9.14 71.4% 2.46 19.3% 1.20 9.3% Subtotal (C) 24.68 18.42 74.7% 3.72 15.1% 2.54 10.3% D. Financing Charges During Implementation e 1 Interest During Implementation 6.67 4.87 72.9% 1.17 17.5% 0.64 9.5% 2 Commitment Charges 0.40 0.29 72.9% 0.07 17.5% 0.04 9.5% Subtotal (D) 7.07 5.15 72.9% 1.24 17.5% 0.67 9.5% Total Project Cost (A+B+C+D) 255.00 173.81 68.2% 58.35 22.9% 22.84 9.0% a Exchange rate of 1$ = BDTs 70 has been used. b In 2011 prices. c Computed at 8% for civil works; and 1.5% for field research and development, training, surveys and studies. d Computed at 1.5% per annum. e Includes interest and commitment charges. Interest during construction for ADB loans has been computed at 1% for ADF (both soft and hard terms), and 0.9% for OCR. There is a 0.15% commitment charge for ADB OCR loan, and no commitment charges for ADB ADF loans. All charges for AFD loan are included in the interest ratio. 11

A. Investment Costs E. Detailed Cost Estimates by Year Item ($ million) Total Cost Year 1 Year 2 Year 3 Year 4 Year 5 1 Civil Works 127.08-4.2 25.9 71.1 25.8 2 Mechanical and Equipment 21.40 - - 9.2 12.2 - a. Street Lights 1.63 - - 0.7 1.0 - b. Rolling Stock (Buses) 8.2 - - 3.9 4.3 - c. Other Equipment (ITS, fare collection, etc.) 11.5 - - 4.6 6.9-3 Environment and Social Mitigation 17.73 0.0 4.8 3.2 7.2 2.4 a. Environmental and Resettlement Plan 8.08 0.0 4.8 3.2 - - b. Compensation and Fleet Scrapping Prog. 9.65 - - - 7.2 2.4 4 Consultants 13.17 7.7 2.4 2.8 0.3-5 Taxes 26.58 1.4 1.9 6.0 12.9 4.4 Subtotal (A) 205.95 9.1 13.4 47.1 103.8 32.6 B. Recurrent Costs 1 SPO, PMU and PIUs' Operating Costs 17.30 3.5 3.5 3.5 3.5 3.5 Subtotal (B) 17.30 3.5 3.5 3.5 3.5 3.5 Total Base Cost 223.25 12.6 16.8 50.6 107.2 36.0 C. Contingencies 24.68 0.3 0.8 5.3 13.4 4.8 D. Financing Charges During Implementation 7.07 0.3 0.5 1.1 2.4 2.8 1 Interest During Implementation 6.67 0.1 0.3 1.0 2.4 2.8 2 Commitment Charges 0.40 0.1 0.1 0.1 0.0 - Total Project Cost (A+B+C+D) 255.00 13.2 18.1 57.0 123.0 43.7 % Total Project Cost 100% 5% 7% 22% 48% 17% Note: Numbers may not sum precisely because of rounding. 12

F. Contract and Disbursement S-curve 13

G. Fund Flow Diagram The following diagrams show how the funds will flow from ADB and the MOF to implement project activities: (iv) (xiii) (vi) AFD (xi) (xii) (xiv) ADB (iii) PMU (RD) MOF (Treasurer Office) BBA and RHD PIUs (ii) Counterpart fund accounts (ix) (viii) SPO and LGED PIUs (vii) 2 imprest accounts (1 each) for ADF and 1 (LGED) for H-ADF, all in USD Counterpart fund accounts Foreign Consulting Services and foreign currency payments for procurement of goods and works (ICB) Legend for Fund Flow Mechanism (x) IAs National Consultants, Civil Works Contractors and other experts 14 (v) Fund Flow (i) Document Flow For Direct Payment foreign Consultant and Foreign currency payments for procurement of goods and works (i) Contractors and consultants issue claims to PIUs/PMU; (ii) PIUs check the claims and make payment for the Government counterpart portion; (iii) PIUs sends request to ADB for direct payments together with contractors and consultants invoices; (iv) ADB makes direct payment to contractors and consultants; For Other Expenditures (v) National consultants and Contractors issue claims to PIUs; (vi) LGED s PIU send statement of expenditures and requests ADB for replenishment; (vii) Consolidated expenditures statement from PIUs to MOF (Treasury Office) on monthly basis; (viii) ADB makes replenishment to imprest account; (ix) MOF makes quarterly budget release for the counterpart funding; (x) PIUs make payment; (xi) PIUs send a copy of withdrawal application to AFD for information and review; (xii) ADB checks withdrawal application submitted by PIUs and requests AFD to make payment; (xiii) AFD makes payment; (xiv) PIUs send copy of withdrawal application to PMU for information and review.

V. FINANCIAL MANAGEMENT A. Financial Management Assessment 6. Financial management assessments (FMAs) have been conducted recently, covering all three implementing agencies (RHD, LGED and BBA). The instrument used for the assessment was ADB's FMA questionnaire. The financial management systems are assessed as satisfactory, with appropriate procedures and standard of funds flow, accounting, reporting, and audit. The executing agency (EA) and most implementing agencies (IAs) have experiences in managing ADB projects, and staff were trained under those projects. The Project will provide further training to strengthen the financial management capacity as necessary. Notably, the capacity of the SPO for financial management, procurement and disbursement procedures will be built by the project consultants, as shown in the detailed terms of reference of the Project Management, Coordination and Capacity Building (PMCCB) consultants (see para. 23 and 29). 7. Detailed results of the FMAs conducted for the three IAs are in Annex A. B. Disbursement 8. The Loans and grant proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2007, as amended from time to time), 3 and detailed arrangements agreed upon between the Government and ADB. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS), 4 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. 9. The Loans and grant proceeds will be disbursed through direct payment, reimbursement, imprest fund procedure, and statement of expenditures (SOEs) procedure. Project implementation units (PIUs) of each IAs, including SPO, are responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) preparing supporting documents, (iv) preparing and sending withdrawal applications (WAs) to ADB, and (v) submitting to the project management unit (PMU) of the EA and the Ministry of Finance a copy of all WAs sent directly to ADB, for information, review and consolidation. 10. Immediately after loan effectiveness, LGED will establish two imprest accounts for both hard and soft terms ADF loans, and SPO will establish an imprest account for soft terms ADF loan. The 3 accounts will be established at Bangladesh Bank to receive funds from ADB in US dollar. 5 LGED and SPO may also open other local currency accounts at a commercial bank acceptable to ADB, to receive funds converted into Bangladesh Taka from the imprest accounts. The maximum aggregate ceiling of each imprest account will not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first 6 months of project implementation, or (ii) the equivalent of 10% of the respective ADF loans amount allocated to LGED ($5 million, exclusive of taxes and duties and contingencies) and SPO ($40 million, exclusive of taxes and duties and contingencies). LGED and SPO will be responsible for managing and administering their respective imprest accounts, and SOEs (in the case of LGED), in accordance with ADB s Loan Disbursement Handbook. LGED and SPO will submit a WA to ADB for an initial advance based on approved contracts and planned expenditures for the first 6 months of the project, which is not to exceed the approved ceiling. 3 Available at: http://www.adb.org/documents/handbooks/loan_disbursement/loan-disbursement-final.pdf 4 Available at: http://www.adb.org/documents/policies/safeguards/safeguard-policy-statement-june2009.pdf 5 Bank charges in relation to the operation of the imprest accounts may be financed by ADB. 15

11. RHD and BBA will follow current practices for ADB-financed road projects, and accordingly will not establish an imprest account or use SOE procedure. They will generally follow direct payment and/or reimbursement procedures, notably for large civil works contracts under their administration. 12. The SOE procedure will be adopted to reimburse eligible expenditures or liquidate advances provided into LGED s imprest accounts. Any individual payment to be reimbursed or liquidated under SOE procedure will not exceed the equivalent of $100,000. Payments in excess of the SOE ceiling should be accompanied with full supporting documentation. SOE records should be maintained and made readily available for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. 6 As the SPO is a new entity, with no FMA performed, its use of SOE procedure is not supported. Full supporting documentation will be submitted to ADB for reimbursements and in liquidating/replenishing of the SPO imprest account. Once the SPO capacity is built during project implementation, the project team may request the use of SOE procedure. 13. Payments for consultants, goods suppliers and contractors may be paid directly by ADB, which requires PMU and PIU s direct submission of approved invoices and documentation to ADB in accordance with the ADB's Loan Disbursement Handbook. 14. Before the submission of the first WA, the EA (RD) should submit to ADB sufficient evidence of the authority of the person(s) who will sign the WAs on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. Project Directors (Heads of PIUs) will be the signatories for WAs. The minimum amount per WA is US$100,000, unless otherwise approved by ADB. PIUs will consolidate claims to meet this limit for reimbursement and replenishment of imprest account claims. WAs and supporting documents will demonstrate that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. 15. The disbursement arrangements for AFD funds under the partial administration modality will be as such: the PIUs will simultaneously submit 2 WAs (1 to ADB and 1 to AFD for their records) for AFD financing. ADB will review the WA, and then will advise AFD to make the disbursement. As AFD funds will be partially administered by ADB, commitment letter procedures should not be used for those costs that are jointly financed by AFD. C. Accounting 16. IAs will maintain separate project accounts and records by funding source for all expenditures incurred on the project. Project accounts will follow international accounting principles and practice. D. Auditing 17. RD will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing, by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 6 months of the end of the fiscal year by the RD. The annual audit report will include a separate audit opinion on the use of the imprest accounts, and SOE procedures. The government has been made aware of ADB s policy on the requirements Checklist for SOE procedures and formats are available at: http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf http://www.adb.org/documents/handbooks/loan_disbursement/soe-contracts-100-below.xls http://www.adb.org/documents/handbooks/loan_disbursement/soe-contracts-over-100.xls http://www.adb.org/documents/handbooks/loan_disbursement/soe-operating-costs.xls http://www.adb.org/documents/handbooks/loan_disbursement/soe-free-format.xls 16

for satisfactory and acceptable quality of the audited accounts and their timely submission. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB s financing is used in accordance with ADB s policies and procedures. 17

VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 18. All advance contracting and retroactive financing will be undertaken in conformity with ADB s Procurement Guidelines (2010, as amended from time to time) (ADB s Procurement Guidelines) 7 and ADB s Guidelines on the Use of Consultants (2010, as amended from time to time) (ADB s Guidelines on the Use of Consultants). 8 The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The government, RD, and the IAs (RHD, BBA and LGED) have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the ensuing Project. 19. Advance contracting will be allowed upon ADB's approval for selection of consulting services, including (i) request for EOI, (ii) short-listing, (iii) request for proposals, and (iv) evaluation of proposals; and (v) recruitment of consultants. 20. A retroactive financing scheme has been accepted by the government and ADB, to cover first expenses under the consulting services and the SPO operating costs, before the loan is declared effective. BBA will advance and disburse the necessary amount, and will be reimbursed by RHD after loan effectiveness. The amount to be retroactively financed will not exceed the equivalent of 20% of the ADB loan, and may finance costs incurred before loan effectiveness but not more than 12 months before the signing of the loan agreement. Once the loan is declared effective, BBA will send a reimbursement request to RHD. RHD will then send the WA to ADB, and ADB will directly send the funds on BBA project account, for reimbursement. B. Procurement of Goods, Works and Consulting Services 21. All procurement of goods and works will be undertaken in accordance with ADB s Procurement Guidelines. Goods and civil works procured using NCB will follow national procedures acceptable to ADB. To this end, NCB procurement will follow the Public Procurement Act, 2006 and Public Procurement Rules, 2008, subject to the conditions specified in the NCB Annex incorporated in the Procurement Plan (as updated from time to time). 22. The most relevant sections of PAI 9 for the Project are as follows: Procedure and flow charts for NCB: PAI 3.04 Procedure and flow chart for ICB: PAI 3.03 23. All consultants and nongovernment organizations (NGOs) will be recruited according to ADB s Guidelines on the Use of Consultants. 10 An estimated 1224 person-months of consulting services (392 person-months of international consultants and 832 person-months of national consultants) are required. Four consulting packages will be procured under the project: (i) the Project Management, Coordination and Capacity Building (PMCCB) consultants will support the PMU and the SPO, and will be responsible for selecting, supporting and training the staff of the SPO, including its management; (ii) the Engineering, Procurement, Construction management and supervision (EPCM) consultants will be engaged to undertake detailed design, draft bidding documents and supervise the construction under output 1; (iii) the Operational design and Business 7 Available at: http://www.adb.org/documents/guidelines/procurement/guidelines-procurement.pdf 8 Available at: http://www.adb.org/documents/guidelines/consulting/guidelines-consultants.pdf 9 Available at: http://www.adb.org/documents/manuals/pai/default.asp 10 Checklists for actions required to contract consultants by method available in e-handbook on Project Implementation at: http://www.adb.org/documents/handbooks/project-implementation/ 18

Model (ODBM) consultants will be hired to undertake all tasks under output 2; and (iv) an NGO will assist the IAs in implementing the resettlement plan (RPI). All packages will include capacity building, notably for DTCA, the staff of the SPO and the staff of selected private bus operators. At the government s request, the selection of the consulting services has been delegated to ADB until final evaluation (technical and financial) stage. Contracts negotiation will be held by the executing agency. All consultants should be mobilized tentatively by June 2012. 24. Most consultants will be engaged through consulting firms (international). Consulting firms will be engaged using the quality- and cost-based selection (QCBS) method with a quality/cost ratio of 90/10 and full-technical proposals. 25. The most relevant sections of PAI 11 are as follows: Procedure and flow chart for QCBS: PAI 2.02, Part E Procedures and flow chart for individual consultants: PAI 2.03, Part B 26. An NGO will be engaged for community-based activities, such as awareness campaign and resettlement assistance. For selection of the NGO, the Quality-Based Selection (QBS) will be used and Biodata Technical Proposal (BTP) will be requested, as there are only a few qualified NGOs due to specific requirement for the assignment, such as experience in particular municipalities or areas. 27. EA and IAs procurement capacity. The capacity of the three IAs to carry out proper procurement, including advance contracting, has been assessed as satisfactory for LGED and BBA. Those two governmental agencies have extensive experiences in procurement of ADB and other development partners-funded projects. Staff has received training under previous projects and has adequate knowledge on procurement in accordance with ADB's guidelines. For RHD, procurement activities may need to be monitored closely. All new staff in the three PIUs will receive additional training on procurement under the Project, as required. C. Procurement Plan 28. An 18-month procurement plan indicating threshold and review procedures, tentative contract packages, and national competitive bidding guidelines is in Annex B. D. Consultant's Terms of Reference 29. Detailed TORs of the 4 consulting packages are in Annex C. 11 http://www.adb.org/documents/manuals/pai/default.asp 19

VII. SAFEGUARDS 30. Environmental Safeguards. A draft Environmental Management Plan (EMP) was prepared for the Project as part of the Initial Environmental Examination (IEE) report. The following are institutional roles and responsibilities to ensure the EMP is implemented during design and construction stages: 31. Project Management Unit: The PMU will contain an Environmental and Social Safeguards Unit (ESSU) staffed with two qualified deputed officials (1 Environmental and Safety Officer, and 1 Social Safeguard Officer). With assistance from the environmental specialists on the Engineering, Procurement, Construction Management and supervision (EPCM) team, the PMU is responsible for the following activities related to environmental safeguards: (i) confirm that existing IEE/EMP is updated in accordance with ADB s Safeguard Policy Statement (SPS, 2009) and based on detailed designs submitted to ADB for review and approval prior to contract award; (ii) confirm whether the EMP and specific EMPs (SEMPs) which are prepared by EPCM are included in the bidding documents and civil works contracts; (iii) provide oversight on environmental management aspects of the Project and ensure the EMP is implemented by PIU and contractors; (iv) establish a system to monitor environmental safeguards of the project including monitoring the indicators set out in the monitoring plan of the EMP; (v) facilitate and confirm overall compliance with all Government rules such as the Environmental Conservation Rules (ECR 1997) and obtain all required location and environmental clearances as well as any other environmental permits prior to contract award; (vi) supervise and provide guidance to the PIUs to properly carry out the environmental assessments as per the IEE/EMP; (vii) review, monitor and evaluate the effectiveness with which the SEMPs are implemented, and recommend necessary corrective actions to be taken as necessary; (viii) consolidate quarterly environmental monitoring reports from PIUs and submit semi-annual environmental monitoring report to ADB; (ix) ensure timely disclosure of final IEE/EMP in locations and form accessible to the public, and (x) address and record and report on any grievances brought about through the Grievance Redress Mechanism in a timely manner as per the IEE. 32. Project Implementation Units: The three PIUs will have a deputed Environmental Officer (EO) and with the assistance of EPCM environmental specialists will do the following: (i) ensure the draft IEE/EMP prepared during the feasibility study is updated during detailed design stage; (ii) ensure EMP and SEMP which are prepared by EPCM are included in bidding documents and civil works contracts; (iii) ensure overall compliance with all Government rules such as the Environmental Conservation Rules (ECR 1997) and obtain all required location and environmental clearances as well as any other environmental permits prior to contract award; (iv) oversee implementation of EMP and SEMPs (assisted by EPCM) including environmental monitoring by contractors; (v) take corrective actions when necessary to ensure no environmental impacts; (vi) submit quarterly environmental monitoring reports to the PMU, and; (vii) address any grievances brought about through the Grievance Redress Mechanism in a timely manner as per the IEEs. 33. Civil Works Contracts: The PMU and PIUs will ensure that civil works contracts and bidding documents prepared under the Project include specific provisions requiring contractors to comply with all environmental mitigation and monitoring measures specified in the EMPs and SEMPs and environmental clauses of contract documents. EMPs and SEMPs are to be included in these documents and verified by the PIUs and PMU. The PMU and PIUs will ensure that sufficient financial and human resources are separately identified in the civil works tenders so that the cost of specific provisions for environmental mitigation and monitoring measures specified in the EMPs and SEMPs and environmental clauses of contract documents are adequate for contractors to comply with all contact requirements with respect to environmental 20

management. Contractors are to carry out all environmental mitigation measures outlined in their contract including any environmental monitoring requirements. 34. Social Safeguards (Involuntary Resettlement). 12 The project will have significant resettlement impacts and is classified as Category A as per ADB s Safeguards Policy Statement (SPS, 2009). A draft Resettlement Plan (RP) was prepared for the Project in accordance with ADB s SPS and the government s Acquisition and Requisition of Immovable Property Ordinance 1982 (ARIPO). All costs related to land acquisition and resettlement/rehabilitation will be borne by the government. The PMU is to ensure that any physically or economically displaced persons (DPs) are compensated prior to commencement of civil works. The following are institutional roles and responsibilities to ensure RPs are well implemented during design and construction: 35. Project Management Unit: The PMU will contain an Environmental and Social Safeguards Unit (ESSU) staffed with two qualified deputed officials (1 Environmental and Safety Officer, and 1 Social Safeguard Officer). With assistance from the resettlement specialists on the EPCM team, the PMU is responsible for the following activities related to social safeguards: (i) conduct internal monitoring of the resettlement process to ensure smooth implementation; (ii) ensure PIUs with assistance from EPCM and NGO 13 update the draft RP during the detailed design stage; (iii) ensure timely payments of compensation and other entitlements as per the RP are made before displacement occurs; (iv) consolidate quarterly PIU resettlement monitoring reports into semi-annual monitoring reports to be submitted to ADB; and (v) establish the grievance redress mechanism (GRM) and facilitate the quick redressal of all grievances in coordination with contractors, PIUs, NGO, and affected persons. 36. Project Implementation Units: All PIUs will have a Resettlement Officer (RO) who will, with the assistance of EPCM resettlement specialists: (i) ensure that the RP is updated based on detailed designs and updated census data from NGO; (ii) engage in ongoing meaningful consultations with stakeholders and affected persons; (iii) implement RPs with support from consultants and NGO; (iv) provide timely payments to affected persons before displacement occurs; (v) ensure all training and capacity building activities are provided to affected persons by linking them to relevant Department of Youth Development (DoYD) training programs; (vi) ensure the development of resettlement sites and with support from the NGO facilitate smooth relocation of DPs to the new sites; (vii) ensure all grievances are addressed and when necessary activate the Grievance Redress Committee; (viii) take corrective actions where necessary; (ix) submit monthly monitoring reports to PMU and clearly communicate the implementation status of RPs and the status of DPs throughout the project period; and (x) provide relevant information to PMU. 37. Civil Works Contracts: The Government will ensure that civil works contracts and bidding documents under the Project include specific provisions requiring contractors to comply with all applicable labor laws and core labor standards on (a) prohibition of child labor as defined in national legislation for construction and maintenance activities, (b) equal pay for equal work of equal value regardless of gender, ethnicity or caste, and (c) elimination of forced labor, and (d) the requirement to disseminate information on sexually transmitted diseases including HIV/AIDS to employees and local communities surrounding the Project sites. In addition, the contractor shall ensure that displaced persons from are given priority for construction related jobs or other employment avenues during implementation depending on the skill sets. 12 The project will have no impacts on indigenous peoples and so ADB's Indigenous People's requirements are not applicable. 13 An NGO will be engaged to implement the RP including carrying out surveys of affected persons based on detailed designs, ensuring all APs are compensated and relocated prior to construction in relevant sections, leading the ongoing consultation and resettlement implementation process. 21

VIII. GENDER AND SOCIAL DIMENSIONS 38. The Gender Action Plan (GAP) below was prepared for the project to address gender inequality issues in public transportation systems. The GAP contains specific targets to improve access and safety issues for women in the project corridor. The GAP ensures representation and participation of women in the project design, implementation and in monitoring stages. Awareness raising on core labor standards with gender specific measures will be provided to the SPO, PIU, EPCM, contractors and laborers. The sex disaggregated data collection system will be developed in the PMU to monitor the achievement of the gender targets. This will be done with the help of the EPCM Social and Gender Expert. 39. A separate consultation awareness and participation plan (CAPP) prepared for the project provides methodology and processes for continued consultations with various stakeholders particularly the poor and vulnerable groups during the course of project implementation. The communities will be involved in consultations for project planning, implementation and for any safeguard issues with special attention given to include the poor and female headed households. Orientation on HIV/AIDs and other safety measures will be provided to the contractors and laborers in package training. 40. SPO is to ensure implementation of the GAP and CAPP and will be supported by the PMCCB, EPCM and NGO consultants. A Social Development Specialist in EPCM and a Gender Specialist in the NGO will support in monitoring and reporting on gender and social aspects in close coordination with the PMU and PIUs. Adequate budget is allocated for these various firms to implement these strategies. 22