The World Bank Local Government COVID-19 Response & Recovery Project (P174937) REPORT NO.: RES51632 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF LOCAL GOVERNMENT COVID-19 RESPONSE & RECOVERY PROJECT APPROVED ON FEBRUARY 24, 2022 TO PEOPLE'S REPUBLIC OF BANGLADESH URBAN, RESILIENCE AND LAND SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Mercy Miyang Tembon Regional Director: John A. Roome Practice Manager/Manager: Meskerem Brhane Task Team Leader(s): Shenhua Wang, Asmita Tiwari The World Bank Local Government COVID-19 Response & Recovery Project (P174937) ABBREVIATIONS AND ACRONYMS ECNEC Executive Committee of National Economic Concil ESCP Environment and Social Commitment Plan ESMF Environmental and Social Management Framework GoB Government of Bangladesh LGCRRP Local Government COVID-19 Response & Recovery Project LGD Local Government Division LGED Local Government Engineering Division LGI Local Government Institution PFM Public Financial Management PIC Project Implementation Committee PIU Project Implementation Unit PMU Project Management Unit POM Project Operations Manual RMSU Regional Municipal Support Unit ULGI Urban Local Government Institution WBG World Bank Group The World Bank Local Government COVID-19 Response & Recovery Project (P174937) BASIC DATA Product Information Project ID Financing Instrument P174937 Investment Project Financing Environmental and Social Risk Classification (ESRC) Moderate Approval Date Current Closing Date 24-Feb-2022 30-Jun-2026 Organizations Borrower Responsible Agency Local Government Division, Ministry of Local Government, Rural Development, and Cooperatives, People's Republic of Bangladesh Local Government Engineering Department, Ministry of Local Government, Rural Development and Coopera Project Development Objective (PDO) Original PDO To strengthen urban local governments’ response to the COVID-19 pandemic and preparedness for future shocks. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-70330 24-Feb-2022 30-Jun-2026 300.00 0 298.93 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Local Government COVID-19 Response & Recovery Project (P174937) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Bangladesh Local Government COVID-19 Response and Recovery Project (LGCRRP) was approved by the World Bank Board on February 24, 2022, and by the Executive Committee of National Economic Council (ECNEC) of the Government of Bangladesh on March 22, 2022. 2. In its letter to the Bank, dated April 13, 2022, the Economics Relations Division (ERD) of the Ministry of Finance stated that ECNEC, during its deliberations, has made the decision to change the project implementating agency from the Local Government Division (LGD) to the Local Government Engineering Department (LGED) and to change the end of project implementing time from June 30, 2026 to December 31, 2025.1 The ERD requested the Bank for amending the approved Financing Agreement (FA) to reflect these changes. These changes are acceptable to the Bank as (i) both LGD and LGED fall under the purview of the Minsity of Local Government, Rural Development & Cooperatives, and the LGED has a long experience of effectively managing World Bank projects; and (ii) changing the implementing period ending on December 31, 2025 is not likely to cause any major change in project implementation. 3. This Restructuring Paper aims at addressing the request of the ERD to change the implementing agency from the LGD to LGED, and move the project closing date to December 31, 2025. Upon completion of these amendments, the FA will be signed by the Bank and the Government of Bangladesh (GoB). Upon signing, the FA can proceed to be declared effective. II. DESCRIPTION OF PROPOSED CHANGES Project implementation at the client level is in the preparatory stage. 1 Other minor changes requested are: two edits in draft Financing Agreement: (i) Article V (5.03) to be chagned to Article V (5.02); and definition of City Corporation in Appendix Section I (4) to be updated to say city corporation means a municipal corporation created by the Local Government (City Corporation) Act, 2009 instead of Amended Act. The World Bank Local Government COVID-19 Response & Recovery Project (P174937) Changes to implementation arrangements 4. The LGED, with rich expericence in managing the World Bank and other doners financed projects, will be responsible for project implementation. There will be no change in the implementation structures under this Project. The LGED will establish a Project Management Unit (PMU), headed by a Project Director (PD), and assisted by two Deputy Project Directors (DPDs), all of whom will be officials deputed by LGED. In addition LGED will depute one qualified officer to act as Procurement focal person for monitoring, supporting, and reporting on PIU’s and ULGI procurement. The PMU will be responsible for core project management functions and the coordination of project activities, including: (a) credit administration, credit disbursement and compliance monitoring; (b) project monitoring & evaluation (M&E); (c) financial management (FM) and reporting; and (d) supervising and supporting the Regional Municipal Support Units (RMSUs). 5. As a result of change of the implementation agency from LGD to LGED, senior official from LGED will be added to the Project Steering Committee (PSC) and to chair the Project Implementation Committee (PIC). There are also some adjustements in the regional implementation arrangements as suggested by the LGED. This includes the engagement of the existing Regional Municipal Support Units (RMSUs) instead of estabilishing new Regional Support Centers (RSC). The project will engage the RMSUs of LGED in each of the eight administrative divisions of Bangladesh. These RMSUs will have the role as envisaged for the RSCs and be accountable to the PMU, work under the supervision and guidance of the two DPDs and senior regional LGED officials, and will be staffed by LGED staff and consultants. Within its divisional jurisdiction, each RMSU will: (a) ensure project coordination with administrative authorities and sector departments; (b) provide Urban Local Government Institutions (ULGIs) with backstopping and technical assistance; and (c) provide quality assurance with respect to technical issues, environmental and social safeguards, procurement and financial management. Financial Management The World Bank Local Government COVID-19 Response & Recovery Project (P174937) 6. According to the most recent FM assessment of LGED, carried out under WeCARE project2, the residual FM risk is substantial. Appropriate measures have already been put in place under the Project to mitigate the fiduciary risks, including digitized systems for accounting, financial reporting, and annual audit of ULGI and the PMU under LGED. IDA funds will flow to a Designated Account (DA) to be opened in a nationalized commercial bank and will be operated by the Project Director. Funds will then be disbursed to the operational accounts to be opened for the grant by the ULGIs in nationalized commercial banks. Funds to be transferred to ULGIs will be considered as advances. Monthly/quarterly fund utilization reports will be considered as the documentation needed to adjust such advances. Unspent IDA funds at the level of ULGIs shall be returned to the DA upon completion of the project. 7. The Project Director in LGED, as Drawing and Disbursement Officer (DDO) will be responsible for all the fiduciary arrangements agreed upon under the project. FM consultants will be supporting DDO for accounting, record keeping, financial reporting, and auditing purposes. The project will continue to follow report-based disbursement. The existing financial reporting system will be used for the project unless there is a major challenge in terms of consolidating financial reports in the agreed format on a quarterly basis for onward submission to the Bank. In such a case, an off-the-shelf accounting software will be procured which should be able to generate financial reports in the agreed formats. Eligibility criteria, external auditing, operations manual and other fiduciary controls agreed upon in the original project design will remain the same. However, all the financial management related contracts will follow the Bank’s prior review method irrespective of value thresholds. Procurement 8. The LGED, through the PMU, will be responsible for carrying out all procurement activities under Component 2. Procurement under Component 2 entails mainly consulting services by firms and individual consultants. Procurement of consulting services packages for the selection of firms will follow Quality and Cost-Based Selection, Consultant’s Qualifications Based Selection, or Fixed Budget-Based Selection methods, while individual consultants will mostly be hired through competitive selection procedures. 9. The procurement risks remain the same and will be addressed through: (a) assignment of qualified LGED officers to act as focal persons for monitoring, supporting, and reporting on project and ULGI procurement; (b) designation of a procurement focal point in each participating ULGI; (c) recruitment of appropriately qualified and experienced consultants in the PMU to be responsible for coordinating and supporting project and ULGI procurement; (d) procurement planning at all levels, in accordance with the Project Operations Manual (POM), which will be monitored and reported on by the PMU; (e) detailing in the POM the procurement procedures and time standards for bid validity periods, evaluation of bids, review by the World Bank/PMU, and the approval process to be followed by ULGIs as stipulated in the ULGI participation agreements, to ensure that contracts are signed within the original bid validity period; (f) use of the Government’s electronic procurement system; (g) regular World Bank reviews of project-related procurement activities; and (h) use of the Systematic Tracking of Exchanges in Procurement (STEP) for all procurement activities. Environmental and Social Safeguards 2 Western Economic Corridor and Regional Enhancement (WeCare) Program (P169880) The World Bank Local Government COVID-19 Response & Recovery Project (P174937) 10. The project environmental and social (E&S) risks rating remains the same – “moderate” since no change in PDO and project activities or implementation approach are made. All the Environmental and Social Management Framework (ESMF) documents including the Environmental and Social Commitment Plan (ESCP), cleared and disclosed at appraisal, have been revised and re-disclosed for change in implementing agency from LGD to LGED. LGED is more experienced than LGD in ESF implementation and requires no additional support. The E&S risks and impacts will be managed following the E&S planning documents as negotiated in ESCP including the Stakeholders Engagement Plan, the Labor Management Procedures and the E&S Management Framework. 11. In summary, the LGD will be replaced by LGED in FM, Procurement and Safeguards paragraphs and Annex 1 of Project Appraisal Document. As a result of the project implementing period change, disbursement arrangements, institutional arrangements will be amended. In addition, as the Regional Support Center (RSC) will be replaced by the existing Reginal Municipal Support Unit of LGED, RSC will be dropped from the legal covenants. The amended Financing Agreement that reflects the proposed changes in implementation arrangements are attached to this restructuring paper. III. SUMMARY OF CHANGES Changed Not Changed Implementing Agency ✔ Results Framework ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Legal Covenants ✔ Institutional Arrangements ✔ Implementation Schedule ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Financial Management ✔ The World Bank Local Government COVID-19 Response & Recovery Project (P174937) Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action Local Government Division, Ministry of Marked for Deletion Implementing Local Government, Rural Development, and Agency Cooperatives Local Government Engineering Department, New Implementing Ministry of Local Government, Rural Agency Development and Coopera OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-70330 Not Effective 30-Jun-2026 31-Dec-2025 30-Apr-2026 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action 1. Schedule 2, Section I.A.2 - The Recipient shall establish within three (3) months of the Effective Date IDA-70330 Not yet due No Change and maintain, throughout the period of implementation of the Project, the Project Steering Committee ("PSC") The World Bank Local Government COVID-19 Response & Recovery Project (P174937) with a mandate, composition, and resources as provided for in the Project Operations Manual. 2. Schedule 2, Section I.A.3 - Within four (4) months of the Effective Date, the Recipient, shall establish and maintain at all times during the implementation of the Project, the PMU within the LGD, with functions and IDA-70330 Not yet due No Change resources satisfactory to the Association, and with staff in adequate numbers and with qualifications, experience and terms of reference satisfactory to the Association. 3. Schedule 2, Section I.A.4 - Within four (4) months of the Effective Date, the Recipient shall establish Regional Support Centers (“RSCs”) in each of the administrative Marked for IDA-70330 Not yet due divisions of the Recipient, with staff in adequate Deletion numbers and with qualifications, experience and terms of reference satisfactory to the Association. 4. Schedule 2, Section I.A.5 - Within four (4) months of the Effective Date, the Recipient shall establish Project Implementation Units (PIUs) within each participating IDA-70330 Not yet due No Change ULGI, with staff in adequate numbers, responsible for the planning, budgeting, implementation of the Project and coordination of the activities with the PMU. 5. Schedule 2, Section I.A.6 - Within eighteen (18) months of the Effective Date, the Recipient shall recruit a consultancy firm or such number of individual IDA-70330 consultants, with the qualifications, experience and Not yet due No Change terms of reference satisfactory to the Association to provide technical assistance to the ULGIs for the preparation of local preparedness plans. 6. Schedule 2, Section I.B.1 - Within three (3) months from the Effective Date, the Recipient shall prepare and IDA-70330 Not yet due No Change adopt a Project Operations Manual in form and substance satisfactory to the Association. The World Bank Local Government COVID-19 Response & Recovery Project (P174937) 7. Schedule 2, Section I.C.2 - For the provision of Covid- 19 Response Grants under Part 1 of the Project, the IDA-70330 Recipient shall cause LGD to enter into an agreement Not yet due No Change with each Eligible ULGI (“Participation Agreement”) on terms and conditions satisfactory to the Association. 8. Schedule 2, Section I.E. - The Recipient shall ensure that the following expenditures are financed exclusively out of its own resources and not out of the proceeds of the Credit: (i) all land required for the purposes of the Project, and provide, promptly as needed, the resources IDA-70330 Not yet due No Change needed for this purpose; (ii) taxes exceeding 15%; (iii) recurrent expenditures such as workshop allowances, sitting allowances, cash per diems, honoraria and fuel;(iv) salaries of the Recipients’ civil servants; and (v) . purchase of vehicles. The World Bank Local Government COVID-19 Response & Recovery Project (P174937) . Results framework COUNTRY: Bangladesh Local Government COVID-19 Response & Recovery Project Project Development Objectives(s) To strengthen urban local governments’ response to the COVID-19 pandemic and preparedness for future shocks. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target (i) Strengthened urban local governments’ response to the COVID-19 pandemic Person days of temporary work provided under public work 0.00 1,500,000.00 schemes (Number) Person days of temporary work provided under public work 0.00 750,000.00 schemes - Female (Number) People provided with improved urban living conditions (CRI, 0.00 5,000,000.00 Number) People provided with improved urban living conditions - 0.00 2,500,000.00 Female (RMS requirement) (CRI, Number) (ii) Strengthened urban local governments’ preparedness to future shocks Urban local governments with local climate and disaster preparedness plans developed and adopted in a participatory 0.00 240.00 manner (Number) Municipal infrastructure construction or maintenance works that 0.00 80.00 incorporate climate risks under the LGCRRP (Number) The World Bank Local Government COVID-19 Response & Recovery Project (P174937) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Component 1: COVID-19 Response Grants Public hand-wash and toilets, primary health care clinics 0.00 100.00 rehabilitated, updated, or constructed (Number) Length of roads and drains maintained and/or rehabilitated 0.00 200.00 through labor-intensive public works schemes (Kilometers) ULGIs that undertake interventions on local economic 0.00 10.00 development (Number) ULGIs that implement labor-intensive public works schemes 0.00 25.00 (Percentage) Women provided with paid employment under public works 0.00 10,000.00 schemes (Number) ULGIs that undertake interventions on improving safety of 0.00 50.00 municipal/local markets (Number) Annual CRG utilization rate of participating ULGIs for financing 0.00 80.00 COVID response and recovery plan priorities (Percentage) Component 2: Implementation and capacity development support, digital technology, and project manage ULGI officials benefitting from COVID-19 response and recovery 0.00 1,980.00 specific trainings and technical support (Number) ULGIs using MIS grant monitoring web-based portal (Number) 0.00 339.00 ULGIs that have developed and adopted Own-Source Revenue 0.00 10.00 Improvement Plans (Number) The World Bank Local Government COVID-19 Response & Recovery Project (P174937) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Number of ULGIs that receive technical training to incorporate climate, disaster and disease outbreak mitigation measures in 0.00 341.00 annual plans and municipal projects (Number) IO Table SPACE . The World Bank Local Government COVID-19 Response & Recovery Project (P174937)