Document of The World Bank FOR OFFICIAL USE ONLY Report No: 81976-ZM INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR33.9 MILLION (US$52.0 MILLION EQUIVALENT) AND A GRANT IN THE AMOUNT OF US$15 MILLION FROM THE MULTI DONOR TRUST FUND FOR HEALTH RESULTS INNOVATION TO THE THE REPUBLIC OF ZAMBIA FOR A HEALTH SERVICES IMPROVEMENT PROJECT February 28, 2014 Health, Nutrition and Population – Eastern and Southern Africa Country Department AFCS3 Africa Region 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. CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2014}) Currency Unit = Zambian Kwacha ZMW 5.57499992 = US$1 US$ 1.53420000 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AFTFM Africa Region Financial Management AFTHE Africa Health, Nutrition & Population Unit, Eastern & Southern Africa AFTHW Africa Health, Nutrition & Population Unit, Western & Central Africa AIDS Acquired Immune Deficiency Syndrome ANC Antenatal Care ARI Acute Respiratory Infection AWP Annual Work Plan BCC Behavioral Change Communication BOZ Bank of Zambia BP Bank Policy CHA Community Health Assistant CHW Community Health Worker CP Cooperating Partner CPD Continuing Professional Development CPR Contraceptive Prevalence Rate CPS Country Partnership Strategy DA Designated Account DALY Disability Adjusted Life Year DfID UK Department for International Development DHIS-2 District Health Information System DLI Disbursement Linked Indicator DLR Disbursement Linked Result DMO District Medical Office EEP Eligible Expenditure Program EmONC Emergency Obstetric and Newborn Care eZICS Electronic Zambia Inventory Control System FM Financial Management GAC Governance and Corruption GMCSP Governance and Management Capacity Strengthening Plan GMP Growth Monitoring and Promotion GNC General Nursing Council GRZ Government of the Republic of Zambia HIV Human Immunodeficiency Virus HMIS Health Management Information Systems HRH Human Resources for Health HRITF Health Results Innovation Trust Fund i IBRD International Bank for Reconstruction and Development ICT Information and Communication Technology IDA International Development Association IFMIS Integrated Financial Management System IFR Interim Financial Report IHP+ International Health Partnership plus IMCI Integrated Management of Childhood Illnesses ITN Insecticide Treated Nets IYCF Infant Young Child Feeding JMT Joint Management Team KPI Key Performance Indicators LCMS Living Conditions Monitoring Survey LY Life Year M&E Monitoring and Evaluation MCDMCH Ministry of Community Development, Mother and Child Health MDG Millennium Development Goal MNCH Maternal, Newborn, and Child Health MOF Ministry of Finance MOH Ministry of Health MSL Medical Stores Limited NCHWP National Community Health Worker Program NFNC National Food and Nutrition Commission NHA National Health Accounts NHC Neighborhood Health Committee NHSP National Health Strategic Plan NICC Nutrition Inter-Agency Coordinating Committee OAG Office of Auditor General OP Operation Policy ORAF Operational Risk Assessment Framework ORT Oral Rehydration Treatment PAD Project Appraisal Document PDO Project Development Objective PER Public Expenditure Review PHC Primary Health Care PIM Project Implementation Manual PNC Postnatal Care QALY Quality Adjusted Life Year RBF Results Based Financing SAG Sector Advisory Group SBA Skilled Birth Attendant SOE Statement of Expenditure SUN Scaling Up Nutrition SWAp Sector Wide Approach TFR Total Fertility Rate UHC Universal Health Coverage UNICEF United Nations Children’s Fund WB The World Bank WHO World Health Organization ZDHS Zambia Demographic and Health Survey ZMW Zambian Kwacha ii Regional Vice President: Makhtar Diop Country Director: Kundhavi Kadiresan Acting Sector Director: Tawhid Nawaz Sector Manager: Olusoji O. Adeyi Task Team Leader: Netsanet W. Workie iii ZAMBIA Health Services Improvement Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context ................................................................................. 1 C. Higher Level Objectives to which the Project Contributes .......................................... 6 II. PROJECT DEVELOPMENT OBJECTIVE (PDO) ......................................................7 A. PDO............................................................................................................................... 7 Project Beneficiaries ........................................................................................................... 7 PDO Level Results Indicators ............................................................................................. 8 III. PROJECT DESCRIPTION ..............................................................................................8 A. Project Components ....................................................................................................... 8 B. Project Financing ........................................................................................................ 15 C. Lessons Learned and Reflected in the Project Design ................................................ 16 IV. IMPLEMENTATION .....................................................................................................18 A. Institutional and Implementation Arrangements ........................................................ 18 B. Results Monitoring and Evaluation ............................................................................ 19 C. Sustainability............................................................................................................... 19 V. KEY RISKS AND MITIGATION MEASURES ..........................................................20 A. Risk Ratings Summary Table ..................................................................................... 20 B. Overall Risk Rating Explanation ................................................................................ 20 VI. APPRAISAL SUMMARY ..............................................................................................21 A. Economic and Financial Analysis ............................................................................... 21 B. Technical ..................................................................................................................... 24 C. Financial Management ................................................................................................ 25 D. Procurement ................................................................................................................ 27 E. Social (including Safeguards) ..................................................................................... 28 F. Environment (including Safeguards) .......................................................................... 28 G. Governance and Corruption (GAC) ............................................................................ 28 iv Annex 1: Results Framework and Monitoring .........................................................................30 Annex 2: Detailed Project Description .......................................................................................35 Annex 3: Implementation Arrangements ..................................................................................57 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................75 Annex 5: Implementation Support Plan (ISP) ..........................................................................81 Annex 6: Economic and Financial Analysis ..............................................................................84 Annex 7: Country map ................................................................................................................93 LIST OF FIGURES Figure A.2: Distribution network of drug supply ......................................................................... 40 Figure A.3: High impact MNCH and nutrition interventions ....................................................... 43 Figure A.4: RBF model and flow of funds ................................................................................... 52 Figure A.5: Project Implementation mechanisms ......................................................................... 58 Figure A.6: Flow of funds ............................................................................................................. 63 Figure A.7: Presence of the private health sector – Zambia by province ..................................... 90 Figure A.8. Economic growth in Zambia and SSA countries....................................................... 91 LIST OF TABLES Table 1: Selected health status and utilization indicators ............................................................... 2 Table 2: Estimated number of project beneficiaries (rounded) ...................................................... 7 Table 3: Project costs and financing by component ..................................................................... 15 Table A.1: Summary – Definition and Interpretation of PDO and Intermediate Indicators......... 33 Table A.2: Schools and number of graduates ............................................................................... 37 Table A.3: Disbursement linked indicators .................................................................................. 45 Table A.4: Detailed Distribution of project components by implementing agencies ................... 59 Table A.5: Financial management action plan ............................................................................. 61 Table A.6: Summary assessment of procurement capacity, risks and mitigation measures......... 65 Table A.7: Prior review and procurement method thresholds – Zambia ...................................... 67 Table A.8: Timeline of main focus of implementation................................................................. 83 Table A.9: Skill mix required ....................................................................................................... 83 Table A.10. Number of beneficiaries in project provinces ........................................................... 87 Table A.11. Expected impact on child maternal mortality and maternal mortality ...................... 87 Table A.12. Cost-benefit analysis results ..................................................................................... 88 Table A.13. Historical trend of government budget for health sector .......................................... 92 v . PAD DATA SHEET Zambia Health Services Improvement Project (P145335) PROJECT APPRAISAL DOCUMENT . AFRICA AFTHE Report No.: PAD812 . Basic Information Project ID EA Category Team Leader P145335 B - Partial Assessment Netsanet Walelign Workie Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 25-Mar-2014 30-Jun-2019 Expected Effectiveness Date Expected Closing Date 01-Jul-2014 30-Jun-2019 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Olusoji O. Adeyi Tawhid Nawaz Kundhavi Kadiresan Makhtar Diop . Borrower: Ministry of Finance Responsible Agency: Ministry of Health Contact: Dr. Davy Chikamata Title: PS, Ministry of Health Telephone 260-211-252989 Email: ps@moh.gov.zm No.: Responsible Agency: Ministry of Community Development, Mother and Child Health Contact: Prof. Elwyn Chomba Title: PS, Ministry of Community Development Mother & Child Health Telephone 260-211-235327 Email: echomba@zamnet.zm No.: . vi Project Financing Data(in USD Million) [ ] Loan [X] Grant [ ] Guarantee [X] Credit [ ] IDA Grant [ ] Other Total Project Cost: 67.00 Total Bank Financing: 52.00 Financing Gap: 0.00 . Financing Source Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 46.91 Health Results-based Financing 15.00 IDA recommitted as a credit 5.09 Total 67.00 . Expected Disbursements (in USD Million) Fiscal Year 2015 2016 2017 2018 2019 0000 0000 0000 0000 Annual 12.10 13.58 13.67 13.28 14.37 0.00 0.00 0.00 0.00 Cumulative 12.10 25.68 39.35 52.63 67.00 0.00 0.00 0.00 0.00 . Proposed Development Objective(s) The project development objective is "to improve health delivery systems and utilization of maternal, newborn and child health and nutrition services in project areas." . Components Component Name Cost (USD Millions) Component 1: Strengthening capacity for primary and 27.50 community level MNCH and nutrition services Component 2: Strengthening utilization of primary and 24.00 community level MNCH and nutrition services through results based financing approaches Component 3: Strengthening project management and policy 15.50 analysis . Institutional Data Sector Board Health, Nutrition and Population . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Health and other social services Health 100 vii Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Human development Health system performance 30 Human development Nutrition and food security 20 Human development Child health 20 Human development Population and reproductive health 20 Human development Malaria 10 Total 100 . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . 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 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . viii Legal Covenants Name Recurrent Due Date Frequency Engagement of independent verification 30-Dec-2014 agent. FA Schedule 2. Section I. C 1.(e) Description of Covenant For purposes of carrying out each such verification, engage not later than December 30, 2014, in accordance with the provisions of Section III of this Schedule 2, the independent verification agent referred to under Part C (7) of the Project, under terms of reference, qualifications and experience satisfactory to the Association. Name Recurrent Due Date Frequency Health Care Waste Management Plan. 30-Dec-2014 Financing Agreement Schedule 2. Section I. F.5 Description of Covenant Not later than December 30, 2014, the Recipient shall; (i) in accordance with terms of reference acceptable to the Association, update the said HCWMP and furnish said updated HCWMP to the Association for its approval; (ii) thereafter disclose the updated HCWMP in country and at the Infoshop; (iii) thereafter ensure that the Project is carried out in accordance with the provisions of the update Name Recurrent Due Date Frequency Audit committee in MCDMCH. 30-Dec-2014 Financing Agreement Ref. Schedule 2 Section II. B .4 Description of Covenant The Recipient shall: (a) not later than December 30, 2014, set up and operationalize the audit committee in MCDMCH, with composition and terms of reference acceptable to the Association; and (b) thereafter maintain the said audit committee through-out the implementation of the Project. . Conditions Name Type HRITF Grant Agreement cross-effectiveness: Financing Agreement Section Effectiveness 4.01 (a) Description of Condition The MDTF for Health Results Innovation Grant Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. Name Type Project Implementation Manual: Financing Agreement 4.01 (b) Effectiveness Description of Condition The Recipient has adopted the Project Implementation Manual in accordance with the provisions of Section I.B of the Schedule 2 to this Agreement. ix Team Composition Bank Staff Name Title Specialization Unit Liba C. Strengerowski- Operations Analyst Enviornmental Specialist AFTN2 Feldblyum Yvette M. Atkins Senior Program Senior Program AFTHE Assistant Assistant Luis M. Schwarz Senior Finance Officer Senior Finance Officer CTRLA Richard M. Seifman Consultant Consultant AFTHE Hocine Chalal Lead Environmental Lead Environmental AFTN1 Specialist Specialist Gandham N.V. Ramana Lead Health Specialist Lead Health Specialist AFTHE Wedex Ilunga Senior Procurement Procurement AFTPE Specialist Carolyn J. Shelton Senior Operations Senior Operations AFTHE Officer Officer Jumana N. Qamruddin Senior Health Specialist Operations Officer AFTHE Edit V. Velenyi Economist Economist AFTHE Ziauddin Hyder Sr Nutrition Spec. Nutrition AFTHE Musonda Rosemary Senior PHN Specialist Senior PHN Specialist AFTHE Sunkutu Christopher H. Herbst Health Specialist Human Resources for AFTHW Health Netsanet Walelign Sr Economist (Health) Team Lead AFTHE Workie Dinesh M. Nair Senior Health Specialist Senior Health Specialist HDNHE Stephen Mugendi Counsel Counsel LEGAM Mukaindo Collins Chansa E T Consultant Health Systems AFTHE Specialist John Bosco Makumba Operations Officer Operations Officer AFTHE Huihui Wang Economist (Health) Economist (Health) AFTHE Paivi Koskinen-Lewis Social Development Social Development AFTCS Specialist Specialist Lingson Chikoti E T Consultant Financial Management AFTME Charity Inonge Temporary Program Assistant AFCS3 Mbangweta . x Locations Country First Location Planned Actual Comments Administrative Division Zambia Western Western Province X Zambia North-Western North-Western X Province Zambia Northern Northern Province X Zambia Northern Northern Province X Muchinga is identified as Northern Province since it is a new province and is not yet appearing in the portal. We have requested this to be updated by ISGIS- OPS by email exchange on Feb. 4, 2014. Zambia Luapula Luapula Province X xi I. STRATEGIC CONTEXT A. Country Context 1. Zambia is a lower-middle income country (per capita gross national income (GNI) US$1,350 in 2012), with a population estimated at 14.08 million in 2012. Sixty percent of the population lives in rural areas. Zambia has a vast land area of 752,612 square kilometers and the population is sparsely distributed (average density of 18 people per square kilometer). This density is particularly low in rural areas, making service delivery a challenge. Annual economic growth has been sustained at about six percent in recent years. The country has had a long period of political stability and experienced five successful multiparty elections since 1991. 2. Despite political stability and robust annual economic growth in the last decade, poverty, particularly in rural areas, remains stubbornly high. The effect of economic growth on overall poverty reduction has been small and urban centered growth has not generated higher incomes and better basic services for Zambians living in rural areas. Rural poverty at 78 percent is more than double compared to urban poverty of 28 percent.1 Over the past decade, the Gini coefficient worsened from 0.47 to 0.52, especially in rural areas. 3. Zambia has defined its development agenda through its Vision 2030 and the revised Sixth National Development Plan (2013-2016). Specific development goals include fostering a competitive and outward-oriented economy, significantly reducing hunger and poverty, and reaching high middle income status. Recognizing that there are benefits in bringing decision making and implementation closer to the people, the Government of Zambia (GRZ) is moving towards greater transfer of authority and resources to local government. In this regard, the national decentralization policy has been revised and approved in early 2013. Primary health care (PHC) is among those activities prioritized for decentralization. B. Sectoral and Institutional Context 4. In the last decade, Zambia has made notable progress in improving selected health outcomes. Incidence and death rates from HIV/AIDS and malaria have dropped for all age groups 2 . However, progress is insufficient to achieve health and nutrition Millennium Development Goals (MDGs) by 2015. There has been a very remarkable decrease in under-five mortality, from 192 to 89 deaths per 1,000 live births between 1990 and 2012.3 However, it is still high compared to the average for lower middle income countries (61 deaths per 1,000 live births), and insufficient to achieve MDG 4 target of 64. The maternal mortality ratio also fell from 470 to 440 deaths per 100,000 live births between 1990 and 2010, but this seven percent reduction is insufficient to achieve the MDG 5 target 4 . Zambia has one of the highest total fertility rates (TFR) in the world (5.9 births in 2010), contributing to both under-five and 1 Central Statistics Office, 2010. Living Conditions Monitoring Survey, Lusaka. 2 Zambia Country Report: monitoring the declaration of commitment on HIV and AIDS and the universal access, Biennial Report, submitted to the United Nations General Assembly Special Session on HIV and AIDS, March 31, 2012 3 Levels &Trends in Child Mortality, 2013. Estimates Developed by the UN Inter-Agency Group for Child Mortality Estimation, Geneva. 4 Trends in Maternal Mortality: 1990-2010, 2012, Estimates by WHO, UNICEF, UNFPA and the World Bank. 1 maternal mortality, and to increased malnutrition. Although stunting in under-five children has decreased from 53 percent in 2002 to 45 percent in 2007, it remains high compared to regional averages (35 percent) and is far from the MDG 1c target of 23 percent. An estimated one-third of under-five mortality and almost a quarter of maternal mortality are associated with malnutrition, which affects immune status, physical and cognitive development, learning performance and productivity in adult life. 5. Zambia’s coverage and utilization of high impact maternal, newborn and child health (MNCH) and nutrition interventions present a number of challenges, particularly high urban-rural disparities. Rural areas are worse off for many indicators (Table 1). For example, TFR is 7.0 per woman in rural and 4.6 in urban areas; and deliveries assisted by a skilled birth attendant are 31.3 percent in rural and 83.0 percent in urban areas. The only exception where rural areas are performing better than urban areas is in the Insecticide Treated Nets (ITN) indicators – children who slept under an ITN is 60.1 percent in rural areas and 50.9 percent in urban areas. Although measles immunization coverage is 83 percent (versus 75 percent regionally), full immunization coverage for children aged 12-23 months has been stagnant during the past decade at around 70 percent. While overall ITN coverage has increased substantially in recent years, 43 percent of under-five children still do not sleep under an ITN. Sixty percent of under-five children with suspected malaria do not receive antimalarial drugs, and only 36 percent receive deworming tablets. Whereas 60 percent of women receive four antenatal care (ANC) visits (better than the regional average of 43 percent5), the quality of ANC is doubtful. With HIV prevalence at 14.3 percent among adults aged 15-49 years, the figure is higher in women (16.1 percent) than men (12.3 percent). Contraceptive prevalence rate (CPR) is low (32.7 percent), contributing to poor reproductive health outcomes, such as high fertility, high teen pregnancy and low birth spacing. Table 1: Selected health status and utilization indicators Urban Rural National Outcome indicators Total fertility rate (births per woman)* 4.6 7.0 5.9 Contraceptive prevalence (% of women ages 15-49) ** 42.0 27.6 32.7 Chronic malnutrition prevalence (% of under-5 children) ** 39.0 47.9 45.4 HIV prevalence (% of adults aged 15-49 years who are HIV positive) ** 19.7 10.3 14.3 Service coverage indicators Delivered by skilled providers (% of pregnant women) ** 83.0 31.3 46.5 Full immunization coverage (% of children aged 12-23 months) ** 71.2 66.2 67.6 ARI treatment coverage (% of under-5 children) ** 63.4 38.9 46.6 Children with diarrhoea who received ORT or increased fluid (% of under-5 75.7 73.6 74.3 children) ** Children with fever who sought treatment from a facility/provider same day/next 25.2 24.3 24.5 day (% of under-5 children) *** Children who slept under an ITN last night (% of under-5 children) *** 50.9 60.1 57.0 Women who slept under an ITN last night (% of pregnant women) *** 52.3 60.9 58.2 Sources: *** 2012 Zambia National Malaria Indicator Survey; ** 2007 Zambia Demographic and Health Survey, and * 2010 Zambia Census of Population and Housing. 5 Average for lower middle income, WDI 2012 2 6. Low coverage and utilization of MNCH and nutrition services are attributed to demand as well as supply side constraints. On the demand side, communities often lack information on preventive practices, including early detection of health and nutrition complications. In addition, long distances to health facilities and lack of transportation often limit access to services and delay in seeking care. On the supply side, despite the increase in the number of health facilities, including primary care, service utilization remains low due to bottlenecks such as: (i) stock-outs of essential health and nutrition supplies and consumables due largely to supply chain issues; (ii) insufficient and inequitable distribution of skilled health workers to carry out facility-based and outreach activities especially in the management of childhood illnesses and severe malnutrition, midwifery, and obstetric complications; and (iii) compromised efficiency of health workers due to tardiness, low morale, and absenteeism. The for-profit private sector owns about 14 percent of the total number of health facilities, reflecting Zambia’s limited experience with public - private partnerships in the health sector. 7. Fiscal constraints and allocative inefficiencies in health financing, exacerbate the challenges in the health sector. According to the 2010 National Health Accounts (NHA), Zambia’s total health expenditure per capita was US$59 (50 percent from Government, 39 percent from donor funding, and 7 percent from out-of-pocket payments). An analysis of changes over time in Zambia and other Africa comparators in health outcomes (e.g. under five mortality, maternal mortality and life expectancy), and system capacity (e.g. beds, physicians) shows poor health returns despite relatively high health sector expenditures. 8. There are proven, cost effective high impact interventions and life-saving technologies to reduce morbidity and mortality in Zambia. 6 The challenge is to improve access, quality and utilization of basic MNCH and nutrition services. Some of the constraints can be relieved by: (i) enhancing productivity of the health work force by linking rewards to results; (ii) skill enhancement of existing health workers; (ii) ensuring better availability of life-saving technologies; (iii) targeting resources to selected diseases with high burden and impact; (iv) promoting family planning by choice; and (v) promoting nutrition in women and children. 9. The Government is committed to improving maternal and child health as reflected in policy documentation and wide ranging institutional reforms. The Vision 2030, the revised Sixth National Development Plan (2013-2016), the National Health Policy, the National Health Strategic Plan (NHSP, 2011-2015), and the Roadmap for Accelerating Reduction of Maternal, Newborn and Child Mortality (2013-2016), all specifically identify maternal and child health as a priority. The National Food and Nutrition Strategic Plan (2011-2015) emphasizes the importance of reducing all forms of malnutrition and is operationalized through the “Scaling-Up Nutrition (SUN)” First 1000 Most Critical Days Implementation Plan. Commitment to strengthening service delivery at the community and primary levels of care is reflected in wide ranging institutional reforms including the Human Resources for Health (HRH) Strategic Plan (2011-2015) and the national decentralization policy that aims to devolve responsibility of service delivery from central and provincial levels to districts and communities. These policies reflect the importance of ensuring skilled care: (i) across the continuum of care (pre-pregnancy, pregnancy, childbirth, postnatal, and childhood), and (ii) at all levels of the health care delivery 6 Close to two-thirds (64.2 percent) of all deaths in Zambia are caused by communicable diseases, poor maternal and child health and nutrition conditions. Source: World Development Indicators. 3 system, including at individual, family and community levels to improve MNCH and nutrition outcomes. The country is in the process of formulating health and social insurance schemes which amplifies their commitment to move to universal health care and shared benefits. 10. Furthermore, consistent with its focus on broadening social and health services to the poor and under-served, the GRZ supports its renewed health sector vision of “equity of access to assured quality, cost-effective and affordable health services as close to the family as possible” by taking a more strategic approach to community-based health care and strengthening the National Community Health Worker Program (NCHWP).7 The aim is to reduce the workload of scarce clinicians in the provision of basic preventive, promotive and curative MNCH and nutrition services primarily in underserved rural areas. Created based on a national situation analysis and lessons learned from other countries in the region (notably, Malawi and Ethiopia), the major guiding principle of the NCHWP is to empower Neighborhood Health Committees (NHC) and maximize skills and potentials of the existing cadre of Community Health Workers (CHWs) in Zambia. The NCHWP specifies CHW’s role which includes community empowerment, demand generation, and provision of basic MNCH and nutrition services during pregnancy, childbirth and post-natal period and infancy and childhood, assisted by the NHC. 11. Health services are delivered through the MOH and MCDMCH, and are organized into three levels: (i) the PHC level (promotive, preventive, curative, and rehabilitative health services based on a basic health care package at health posts, health centers, and district/first level referral hospitals); (ii) the secondary level that consists of more than twenty (20) general/second level referral hospitals providing curative care in internal medicine, pediatrics, obstetrics and gynecology, and general surgery; and (iii) the tertiary level that consists of six (6) central hospitals (including the University Teaching Hospital) providing specialized and sub-specialized care. 12. GRZ has shifted the responsibility for MNCH and nutrition at PHC and community level to the MCDMCH, reflecting commitment to scale up community access to these services. Recognizing that the formal health sector confronts a formidable range of communicable and non-communicable disease priorities, and that community development and social welfare have strong links to maternal, newborn, and child well-being, GRZ decided that the ministry best positioned to provide access to preventive and basic care would be MCDMCH, given its community-focused mandate. This shift provides a great opportunity to embark on a more integrated approach at the community level, as the same Ministry is responsible for Community Development, Social Welfare and Primary Health Care. 13. The Government, in collaboration with Cooperating Partners (CPs), is forging a concerted effort to remove systemic bottlenecks hampering the delivery and scaling up of MNCH and nutrition services. The GRZ has been committed to the Sector-Wide Approach (SWAp) since the health reforms of 1991. Health reforms helped catalyze donor harmonization and alignment through initially pooled financing (basket funding) of district health plans whose 7 Ministry of Health, Republic of Zambia. National Community Health Worker Strategy in Zambia, August 2010. 4 focus was on primary health care, recognition that 80 percent of diseases could be dealt with at PHC level. More recently, a National Aid Policy and an overall national development policy framework (Vision 2030) are in place. Through the health SWAp, the CPs have generously responded with financial, technical and in-kind material resources to improve health service delivery in Zambia. 14. Through the Joint Assistance Strategy for Zambia (JASZ), and the Health Sector Memorandum of Understanding (MOU), the Zambian Government has provided leadership and ownership to improved coordination and collaboration. In line with the JASZ and MOU, Cooperating Partners are committed to a coordinated approach to support: (i) a package of high impact MNCH and nutrition interventions; (ii) health systems strengthening including HRH, health financing, supply chain management, monitoring and evaluation systems, and health information systems; (iii) strengthening fiduciary capacity at national and down to district levels; (iv) strengthening community health, namely demand generation and service provision at community level, including social accountability mechanisms; and (v) strengthening evidence generation and policy analysis and formulation. The major CPs providing support or planning future support to MNCH and nutrition include: the World Bank, Ireland, the European Union, Sweden, the United Kingdom, United Nations agencies (UNFPA, UNICEF, WFP, WHO), and the United States. 8 15. While improved coordination and collaboration is essential, there is an urgent need for enhanced results-oriented service delivery, geared towards enhancing both quantity and quality of services, coupled with means to accelerate attainment of Universal Health Coverage and equity in utilization. Increasingly, and partly as a lesson from the Zambia health sector experiences on results-based financing, the need to refocus policy dialogue on results is imperative. This is a timely opportunity to utilize relatively recent demand, supply and combined side approaches, ones which have been applied in multiple country settings to obtain better results, and to some degree already piloted in Zambia (such as Results Based Financing), and Disbursement Linked Indicator financing, to accelerate health service delivery and utilization by the under-served and less responsive populations. 8 U. S. Government through USAID, PEPFAR, CDC, and other implementing partners support which inter alia, has projects for MNCH and nutrition services including health systems strengthening program, family program and reproductive health, Saving Mother Giving Life program, water and sanitation, HIV/AIDS, malaria and TB from 2014-2016 and new heath support program under preparation; The Global Fund is supporting HIV/AIDS, Malaria, TB through 2016; The UN support to MNCH led by UNICEF through the H4+ Canada Grant; The European Union is implementing two projects focusing on MNCH, pharmaceutical services, and health policy development during the period 2013-2017; The United Kingdom has committed financing for HRH, family planning, nutrition and HIV prevention through 2016 and preparing additional support to MNCH, HRH, and nutrition; Sweden support for health system strengthening and HRH, also in the process of launching additional support to MNCH, HRH, and nutrition; WHO support to reproductive health and safe motherhood; UNFPA support through family planning; WFP – nutritional support; and Irish AID support to nutrition. 5 C. Higher Level Objectives to which the Project Contributes 16. The proposed project will support the first strategic objective of the Country Partnership Strategy (CPS) for the period FY2013-16, “reducing poverty and the vulnerability of the poor,” by targeting areas where income poverty is higher, a significantly larger proportion of under-5 children suffer from chronic malnutrition, and the coverage of high impact health and nutrition interventions is lower. Furthermore, the Project will make direct contributions to the reduction of maternal and child mortality by scaling up high impact MNCH and nutrition interventions, all key elements in a healthier and more productive society. The CPS, under Outcome 1.2 “Improved access to resources for strengthening household resilience and health in targeted areas,” indicates continued support from the Bank on health system strengthening to accelerate improvement in maternal and child health outcomes, and building on lessons from the Malaria Booster and Health Results Based Financing (RBF) projects. In addition, the CPS recognizes chronic malnutrition as an urgent human development challenge and calls for strengthening institutional capacity in support to scaling up nutrition interventions. The proposed project fits well within these objectives. The Project is particularly responsive to service delivery to needy populations and will contribute towards the UHC aspirations of Zambia. In addition, the Africa Strategy– Africa’s Future and the World Bank’s Support to it, is founded on strengthening governance and public sector capacity, including through enhancement of incentives within the civil service. In particular, the Africa Strategy recognizes that critical services are too often either not delivered or delivered poorly due to weak management of public funds. Importantly, the Strategy supports initiatives to empower citizens to get information on their entitlements, as well as voice their grievances when services are not properly delivered. This is fully consistent with the Bank’s twin goals to end extreme poverty and promote shared prosperity 17. The Bank has long been engaged with the GRZ in macroeconomic management and sectoral support, including agriculture and transportation. It has been a leading participant in the Zambia Health SWAp, providing financial, material, and technical support to the sector, with major contributions to HIV/AIDS and malaria programs. Engagement with other CPs in the JASZ has resulted in significant progress in addressing priority communicable and non- communicable diseases, including nutrition. 6 II. PROJECT DEVELOPMENT OBJECTIVE (PDO) A. PDO 18. “To improve health delivery systems and utilization of maternal, newborn and child health and nutrition services in project areas”. This will be achieved by addressing immediate as well as systemic and medium term bottlenecks to service delivery for pregnant women, lactating mothers, newborns and young children especially at primary care and community levels. The PDO is well aligned to GRZ’s key national and health sector policies and strategies that emphasize the importance of improving MNCH and nutrition services. Project Beneficiaries 19. The project beneficiaries are pregnant and lactating women, and under-5 children who are located in five of the country’s ten provinces: Luapula, Muchinga, Northern, North - Western, and Western provinces. These provinces are identified based on: (i) high poverty levels, (ii) low human opportunity index – immunization, (iii) high under-five mortality, (iv) low coverage of skilled birth attendance, (v) high prevalence of stunting in under-5 children, and (vi) complementarity with both geographic and program-based initiatives supported by other CPs. Complementarity will be emphasized to the greatest extent possible to optimize benefits from other initiatives by GRZ and CPs in the health sector. 20. Individuals will benefit from a package of MNCH and nutrition services provided at district hospitals, health centers, health posts, outreach posts and communities (through community and public health initiatives carried out by CHWs). In total, the proposed project will directly benefit about 1.2 million women of reproductive age including pregnant and lactating women and about 1.1 million under-5 children. Table 2: Estimated number of project beneficiaries (rounded) Province Population Children Children Women in Expected Expected Expected 0 –11 < 5 yrs* child bearing pregnancies* deliveries* live months* age* births* Luapula 992,000 40,000 198,000 218,000 54,000 52,000 49,000 Muchinga 712,000 29,000 142,000 157,000 38,000 37,000 35,000 Northern 1,106,000 44,000 221,000 243,000 60,000 58,000 55,000 North-Western 727,000 29,000 145,000 160,000 39,000 38,000 36,000 Western 903,000 36,000 181,000 199,000 49,000 47,000 45,000 TOTAL 4,440,000 178,000 887,000 977,000 240,000 232,000 220,000 Source: 2010 Census of Population and Housing * Calculated based on proportions provided under Zambia HMIS 7 PDO Level Results Indicators 21. Progress towards achieving the PDO will be monitored by the following key performance indicators (KPIs): i. Deliveries attended by skilled health providers (percent); ii. Under-2 children received monthly growth monitoring and promotion (percent)9; iii. Health Centers offering Integrated Management of Childhood Illnesses (percent); iv. Health Centers with essential medicines and commodities in stock10 (percent); and v. Children 0-11 months fully immunized (percent) III. PROJECT DESCRIPTION A. Project Components 22. The proposed project will support GRZ’s efforts to accelerate progress towards maternal and child health MDGs and for it to be better prepared to tackle emerging challenges. The Project will support strengthening service delivery, while focusing on results and reducing inequities, particularly in five low performing and poorer provinces selected by the GRZ, but of potential benefit and replication throughout the country. Activities will be targeted to provinces that are poorer and underserved, with a combination of innovations to scale-up coverage of high impact MNCH and nutrition interventions. Specifically, the Project will support supply side interventions such as improving the availability of skilled care, increasing the availability of health and nutrition commodities, and strengthening referral linkages, including quality enhancement of existing mother waiting homes. This will be complemented by community- based demand side approaches to enhance utilization of services. Institutional capacities of MOH and MCDMCH will be supported to enhance evidence-based policy analysis, health systems performance, and management of adjustments to changing roles and responsibilities in light of the decentralization process. The Project will also support the management and implementation of competencies, particularly in targeted provinces, as well as an independent mechanism to verify results. The Project will be structured under three components, and implemented over five years. (See Annex 2 for detailed Component descriptions). Component 1: Strengthening capacity for primary and community level MNCH and nutrition services (US$27.5 million IDA) 23. The objective of this component is to strengthen health systems in project areas through: (i) Enhanced training capacity and standards for nursing and midwifery; (ii) Improved supply chain systems for essential commodities; and (iii) Improved referral system and linkages across levels of care. The Project will accomplish these objectives using a Disbursement Linked Indicator (DLI) approach which pays for achievement of results, and is responsive to KPI achievements. A DLI approach shifts the focus of payments from inputs to results. DLIs are a series of output and 9 Baseline will be established through a survey immediately after project effectiveness and targets will be set based on baseline coverage. 10 The tracer drugs will include Oxytocin, Iron Folic Acid tablets, Sulfadoxine-Pyrimethamine (for IPT), Vitamin A, Oral Rehydration Salt, Pentavalent vaccine and Depo-Provera/Norplant 8 process indicators against which funds will be disbursed to GRZ on an annual basis upon the achievement of indicators and targets listed in the DLI matrix (presented in Annex 2). 24. A DLI approach is aimed at supporting government programs using the program’s institutions and systems, thereby building their capacity, and linking disbursements to achievement of results. The approach aims to enhance the effectiveness of total public spending for such programs and strengthen their results orientation. Three key elements to define DLIs include: (i) agreeing on DLI indicators including defining success measures, means for verification and delivery schedules; (ii) defining the price of each indicator and payment modalities; and (iii) defining the eligible expenditures that will be verified for payment. DLIs are not 'tranched', meaning that if one is missed it does not affect the payment of others that were met. Each DLI is individually priced at the capped amount of the maximum payment available. The following box describes the DLI approach. For this project, the Project Implementation Manual will provide more details on the means of verification. Global lessons from DLI approaches The Disbursement Linked Indicators (DLIs) approach has been used as a mode of financing by the World Bank in over 50 countries during the last decade, starting with Brazil, Argentina, Pakistan, and Nigeria. Operating within a sector investment lending mode, DLIs are linked to key results and indicators established for measuring those results. The necessary data collection systems for those indicators are strengthened or put in place to facilitate timely and accurate reporting. Each DLI has a credible verification protocol that is acceptable to the Bank. Verification mechanisms depend on the nature of the indicator at hand and can include program data if that is deemed acceptable, data provided through audits or by other parts of GRZ (e.g. Central Bureau of Statistics), or by other bodies independent of the health sector. The DLIs and their verification, as well as updates on their progress, are often made available in the public domain. The achievement of DLIs is the basis for disbursements. The indicators need to be tangible, transparent, and verifiable, and will have been generated by expenditures supported by the project. An agreement is reached between the Bank team and the implementing Ministries on choice of indicators, timeline and amounts to be linked to each DLI. While DLIs could vary in nature, they will be driven by results. While desirable for DLIs to be primarily results, they can also be complemented by intermediate outputs or process indicators. Major criteria for a DLI approach include: (i) clearly defined and measurable indicators; (ii) under the control of implementing entities; (iii) data sources credible and independently verified; and (iv) timely availability of data is ensured. Sub-component 1.1: Enhance training capacity and standards for nursing and midwifery (US$10 million IDA) 25. This sub-component supports GRZ's effort to address the shortage of health workers with sufficient MNCH and nutrition skills at first level district hospitals and health centers in the five target provinces. The lack of adequately trained health workers is negatively impacting the delivery of critical health services to the poor and is contributing to unsatisfactory MNCH and nutrition outcomes. A key concern is the limited capacity of nursing schools to deliver a comprehensive package of training in MNCH and nutrition [in particular Emergency Obstetric 9 and Newborn Care (EmONC), midwifery skills, nutrition and Integrated Management of Childhood Illnesses (IMCI)]. Registered and enrolled nursing schools often lack sufficiently trained faculty, teaching equipment and supplies, particularly in remote parts of the country. Lack of on-site clinical supervision capacity means that teaching is primarily theoretical and classroom based, with little practical training provided in nearby health facilities. As a result, nursing graduates are often inadequately prepared to address MNCH and nutrition service delivery challenges presented to them. Once posted to these facilities, limited opportunity for Continuing Professional Development (CPD) training in MNCH and nutrition further negatively impacts their competence, motivation and ultimately their retention. 26. To address these challenges, this sub-component will support GRZ’s human resources for health strategy and national training operational plan (NTOP), and the plans of the General Nursing Council (GNC), to strengthen pre-service, in-service as well as professional development opportunities for nurses and midwives. Specifically, the Project will finance results aimed at GRZ efforts to: (i) strengthen the capacity of eight training institutions in the five target provinces (institutional listing in Annex 2) to deliver an integrated and comprehensive pre- service education package on MNCH and nutrition to nursing students; (ii) deliver a three-month practical in-service training to nurse and midwifery graduates (delivered at provincial hospitals) who are posted to primary health facilities in the five target provinces as part of their induction before they commence their posts; and (iii) support CPD training development and roll out to nurses and midwives already working in primary level facilities in the five target provinces. Funding will be disbursed against achievement of agreed results through the DLIs (See Annex 2 Table A.2 for the list of DLIs, DLI#1-3). Sub-component 1.2: Improve supply chain systems and availability of essential commodities (US$10 million IDA) 27. This sub-component will support and contribute to the implementation of the National Supply Chain Strategy focusing on increasing availability of selected essential commodities, supplies and equipment to support service delivery for high impact MNCH and nutrition interventions in project areas. Medical Stores Limited (MSL) has been responsible for central storage and primary distribution of essential medical supplies and equipment to all the districts in the country. Whereas significant improvements have been noted in primary distribution, little progress has been made in secondary distribution, resulting in significant shortages at service delivery level. Recently, the GRZ has introduced the Regional Hubs concept and allowed MSL to distribute products up to the health facility in an effort to improve secondary distribution. Partly due to procurement challenges and the need to rationalize the provision of essential medicines and medical supplies, the MOH uses a push system to distribute pre-packed Health Centre Kits. Though the kit system has ensured some level of availability at service delivery points, challenges still exist and the MOH has been making efforts to review the contents of the Kit to improve its relevance to the prevailing disease burden. 28. This sub-component will support existing systems and pay for results that: (i) improve availability of essential health and nutrition commodities, supplies and equipment; (ii) strengthen storage and distribution capacity, particularly for the "last mile" with enhancement of regional hubs and/or staging posts and to the service delivery points, and employing a hybrid distribution system (combining Push and Pull systems); and (iii) improve stock visibility and accountability 10 through implementation of an electronic Zambia Inventory Control System (eZICS). A rapid assessment of stock levels, storage and distribution capacities, and staff competencies at health centers will be undertaken to provide baseline data. Funding will be disbursed against DLIs (See Annex 2 Table A.3 for the list of DLIs, DLI #4-6). Sub-component 1.3: Improve referral system and linkages across levels of care (US$7.5 million IDA) 29. This sub-component aims to strengthen the extent and quality of primary health care (district hospital, heath center and health post) as well as community level service delivery platforms to effectively scale-up a package of high impact MNCH and nutrition interventions, along the continuum of care. By bringing services as close to the family as possible and reducing the workload of scarce clinicians in the provision of basic preventive, promotive and curative facilities, primarily in underserved rural areas, this sub-component will address the issue of inequitable access to and poor utilization of quality, cost-effective and affordable basic MNCH and nutrition services. While this sub-component focuses primarily on the supply of services, it is linked to the incentive demand efforts to be developed under Component 2. 30. Specific results that this sub-component will contribute to include: (i) development of an agreed package of evidence-based high impact MNCH and nutrition interventions, which will be delivered through primary care and community levels; (ii) revitalization and harmonization of community structures through strengthening linkages with community based service delivery structures, specifically linkages between community development committees, social welfare committees and NHC, and CHWs. This effort includes an agreed and defined framework, protocols, norms and guidelines. (iii) quality checklists for supervision and mentorship across service delivery levels including district hospitals, health centers, health posts and communities; and (iv) enhanced referral systems across different levels of service delivery points through increased provision of equipment (including transport and communications), refurbishment and renovation of waiting homes and their timely maintenance. 31. Special emphasis will be provided to mobilize local Chiefs and engage them actively in social mobilization and day-to-day activities at primary care and community levels. Given that the populations in the selected provinces are sparsely distributed, community level service delivery mechanisms will have high potential to bring services closer to the people mainly through expansion of and strengthening service delivery at outreach posts. Eventually community-based MNCH and nutrition service delivery will be incorporated in the formal health system. Based on lessons learned from the five provinces, this model will be adapted and extended to the rest of the country. Funding will be disbursed against DLIs (See Annex 2 Table A.3 for the list of DLIs, DLI #7-9). 11 Component 2: Strengthening utilization of primary and community level MNCH and nutrition services through results based financing approaches (US$12 million IDA; US$12 million HRITF). 32. Zambia has been implementing a Results Based Financing (RBF)11 project through a facility based pilot initiated in 2008. Early findings from the HMIS and on-going process evaluation have documented a number of positive results including more efficient allocation and use of resources as a result of increased autonomy, strengthened supervision, higher utilization and better quality of services, and improved data collection. An impact evaluation is scheduled for July 2014 12 and will further inform Government’s decision in fine-tuning the RBF approach, including scale-up. In the interim, the Government would like to ensure continuity until the impact evaluation is completed and the results are available. 33. This component’s objective is to build on the on-going RBF pilot to strengthen MNCH and nutrition service delivery, with a specific focus on increasing supply and demand side efficiency and reaching the underserved population. Phased expansion of the facility-based RBF will allow for the completion of the impact evaluation of the ongoing pilot and capacities to be built in new targeted districts. In addition to geographical expansion to cover the five project provinces, the next phase of the RBF will seek to stimulate demand for services by extending the results based approach to community level and strengthen the referral system and the quality of care by the inclusion of a district hospital RBF. The expansion phase will specifically aim to mainstream RBF implementation arrangements into the Government structures. To enable this process, MOH/MCDMCH will: (i) create a dedicated team with core skills and competencies in RBF management, monitoring and evaluation, including financial management; (ii) expand the platform for dialogue and joint financing of RBF expansion; and (iii) align RBF with other health service purchasing arrangements in Zambia, particularly to the proposed National Social Health Insurance and the forthcoming National Health Financing Strategy. Figure A4 in Annex 2 shows the proposed RBF model and funding flows. The Project Implementation Manual (PIM), currently being developed by a joint MOH/MCDMCH team, will reflect the institutional arrangements for this mainstreaming and coordination opportunities. The sub-components under Component 2 are: Sub component 2.1: Expand results based financing at primary facility level (US$10 million IDA; US$10 million HRITF) 34. The project will expand RBF to targeted health facilities (health centers and district hospitals), and District Medical Offices (DMOs) across the five provinces. Health Centers will be rewarded for the quantity and quality of MNCH and nutrition services they provide. In order to incentivize improvements in quality of care at district hospitals, including referral from health centers, this component will also extend a similar RBF approach for quality of care for MNCH and nutrition services at selected district hospitals in each of the five provinces. Performance will 11 The Zambia Results Based Financing is a Facility Based Performance Based Financing where: (i) incentives are directed only to providers, not beneficiaries; (ii) awards are purely financial--payment is fee for service; and (iii) payment depends explicitly on the degree to which services are of approved quality. 12 Results of the Facility based RBF impact evaluation are expected to be available in January 2015. 12 be verified using robust internal and external evaluation methods. The facilities will be given considerable autonomy in how they use the funds they earn to cover: (i) health facility operational costs (at least 50 percent); and (ii) performance bonuses for health workers (up to 50 percent). 35. DMOs will be responsible for supervising health centers. The quantity of services delivered at each health center will be verified prior to making payments. Each RBF health center will report quarterly on the delivery of agreed outputs through a standard invoice. The quantities reported will be initially verified by the DMOs. The DMO will also contract the District Hospital to verify quality of service delivery at health centers. The DMO will then compile data on the quantity and quality performance for submission to the District RBF Steering Committee for further verification. Based on performance data (both quantity and quality), the District RBF Steering Committee will recommend the quarterly amounts to be paid to each RBF health center. Counter verification will be carried out by an independent verification agency (see sub- component 3.3). ICT solutions including on-line entry of information and cloud computing to improve transparency will allow faster processing and facilitate continuous monitoring. Government research / training institution or University (outside the Ministry of Health and Ministry of Community Development Mother and Child Health) will be eligible to compete for the external verification assignment. 36. DMOs and District Hospitals will also enter into performance contracts with the Provincial Medical Office and will be paid based on results against a graded performance framework. For DMOs, the performance framework will measure performance against availability of protocols and guidelines, meeting supervision standards, provision of technical support, maintenance of equipment, human resource management, implementation of medical waste management guidelines, and other measures. For District Hospitals, the performance framework will include indicators on referrals for MNCH and nutrition services, and quality improvement. Assessment of quality at District Hospitals will be conducted by Provincial (General) Hospitals who will be contracted by the Provincial Medical Office. Payments will be made on a quarterly basis according to the quantity and quality of outputs delivered. Provincial RBF committees will be the purchaser of health services at DMOs and District Hospitals and will recommend amounts to be paid. The Project Implementation Manual will provide a detailed description of the operational modalities and reporting arrangements. Sub-component 2.2: Introduce results based approaches at community level (US$2 million IDA; US$2 million HRITF) 37. This sub-component will support the design, piloting and evaluation of community based RBF activities aimed at increasing utilization of MNCH and nutrition services at community level. This is in line with government’s national decentralization policy, and the National Community Health Worker Program Strategy and long standing practice of channeling funds to community level structures. The sub-component will also complement and provide a more robust delivery system for the social protection program, and the planned introduction of a National Social Health Insurance Scheme. This will be achieved by supporting government’s effort to improve the referral system by strengthening linkages between communities and health facilities, boosting service delivery at community level, increasing accountability of CHWs, and 13 strengthening the role of Community-Based Organizations in monitoring and evaluation of MNCH and nutrition services. 38. Specific activities will include: (i) early registration of women of reproductive age; (ii) Provision of a complete antenatal care and delivery package (e.g. iron tablets supplementation, malaria intermittent preventive treatment (IPT), distribution of bed nets, assisted deliveries, referrals, etc.); (iii) counseling of women of reproductive age, follow up home visits, and provision of commodities (e.g. nutrition and family planning); (iv) outreach activities to improve management of childhood illnesses at household level; (v) mobilization of community members for growth monitoring and promotion, immunization of children, and nutrition education, and (vi) incentivizing Community-Based Organizations for submission of timely and quality data reports on the stipulated MNCH and nutrition indicators. Health Centers will carry out supervision in communities implementing RBF with the assistance of DMOs. Results will be counter verified on an annual basis through independent organizations. 39. To support learning and inform the planned introduction of social health insurance, with an additional World Bank-executed US$1.5 million HRITF grant, a three arm Impact Evaluation testing three different approaches: (i) vouchers, (ii) conditional cash transfers linked to the current social cash transfer program, and (iii) social health insurance will be piloted in nine districts from January 2015.To allow proper design of the pilot and ensure it is rooted within the Zambian context, a pre-pilot will be implemented in one district, with an additional recipient executed US$0.85 million HRITF grant. Lessons from the community level impact evaluation will be used to guide future expansions. The PIM will provide a detailed description of the operational modalities and reporting arrangements. Component 3: Strengthening project management and policy analysis (US$12.5 million IDA; US$3 million HRITF) 40. The objectives of this Component are to strengthen project management, implementation, monitoring and evaluation; provide technical assistance for evidence-based policy analysis and health financing innovations, and appoint an independent verification agent to verify the Project results. Sub-component 3.1: Project management and implementation, monitoring and evaluation (US$6.5 million IDA) 41. This sub-component will strengthen project implementation capacity of MOH and MCDMCH with particular attention to the Province and District levels. Support will include: (i) expert technical support for implementation of the DLI and the RBF approaches; (ii) building capacity for day-to-day administration of Project activities (monitoring resource use, procurement processing activities, administering withdrawal and disbursement procedures, consolidating financial management aspects of implementation, reporting; as well as coordinating with relevant sector ministries, departments, health professional training institutions and associations, civil society organizations and the private sector); and (iii) strengthening the HMIS, roll out and integration of community level MNCH and nutrition information into DHIS- 2. 14 Sub-component 3.2: Support evidence-based policy analysis and health financing innovations (US$4 million IDA) 42. This sub-component will: (i) Support Government's efforts to produce evidence-based analytical studies in health and nutrition, including health financing, planning and budgeting, human resources for health, and drugs and medical supplies. The focus of these studies will be to determine the performance of the health system in light of the intermediate performance measures (access, efficiency, equity, and quality), and attainment of health systems goals (health status, citizen satisfaction, and financial protection). A national rational drug use study is identified as priority and subsequent analytical work will be identified by Government; and (ii) Provide training and technical support to mid-level health managers to enhance their analytical and operational knowledge in health financing, planning and budgeting. Sub-component 3.3: Institute independent verification arrangements (US$2 million IDA; US$3 million HRITF) 43. For results-based financing as well as disbursement-linked indicators, payments will be made after an independent verification exercise is conducted. The verification process has to ensure the accuracy and consistency of reporting on qualitative and quantitative performance indicators before funding is released. This sub-component will support the design and setting up of the verification mechanism for all results-based activities under the Project, including those supported by Components 1 and 2, as well as costs to be incurred to support the selected independent verification agent in carrying out this responsibility. This sub-component will also finance the Project baseline, midline and endline surveys. B. Project Financing 44. Lending Instrument: The proposed lending instrument is Investment Project Financing (IPF). An IDA credit of US$52.5 million will finance the Project, and will be complemented by a US$15 million grant from the HRITF. The Project implementation period is five years, from July 2014 to June 2019. An additional US$1.5 million HRITF grant will support the community level RBF impact evaluation (sub-component 2.1). Project Cost and Financing: Project costs and associated financing are outlined in Table 3 below. Table 3: Project costs and financing by component HRITF Project IDA Credit % IDA Financing Project Components Cost (US$ Financing Financin (US$ million) (US$ million) g million) Component 1: Strengthen capacity for 27.5 27.5 100% primary and community level MNCH and nutrition services 1.1 Enhance training capacity and standards 10.0 10.0 100% for nursing and midwifery 1.2 Improve supply chain systems and 10.0 10.0 100% availability of essential commodities 1.3 Improve referral system and linkages 7.5 7.5 100% 15 HRITF Project IDA Credit % IDA Financing Project Components Cost (US$ Financing Financin (US$ million) (US$ million) g million) across levels of care Component 2: Strengthen utilization of 24.0 12.0 12.0 50% primary and community level MNCH and nutrition services with results based financing approaches 2.1 Expand results based financing at primary 20.0 10.0 10.0 50% facility level 2.2 Introduce results based approaches at 4.0 2.0 2.0 50% community level Component 3: Strengthen project 15.5 12.5 3.0 81% management and policy analysis 3.1 Project management and implementation, 6.5 6.5 100% Monitoring and Evaluation 3.2 Support evidence-based policy analysis and 4.0 4.0 100% health financing innovations 3.3 Institute independent verification 5.0 2.0 3.0 40% arrangements Total Baseline Costs Physical contingencies Total Financing Required 67.0 52.0 15.0 77% C. Lessons Learned and Reflected in the Project Design 45. Lessons from the Africa Region HRH Program. Implementing a rural pipeline approach to train health workers is closely linked to rural job opportunities after graduation. Lessons from the World Bank’s Africa Region HRH Program 13 highlight that training health workers from rural areas, in rural areas, and according to curricula adapted to rural contexts, have the potential to increase the likelihood that they take on a rural job after graduation. Combining such a strategy with sufficient available funding to absorb graduates, and targeted deployment efforts by GRZ, providing career development opportunities, including skill improvement through mentoring and supervision, are critical components of any longer term comprehensive human resources retention strategy, which GRZ could develop and support over time. 14 Sub-component 1.1 will enhance training capacity and standards for nursing and midwifery, and incorporates these specific lessons. 13 The WB Africa HRH Program began in 2008, and is partly funded by GRZ of Norway, and aims to assist governments in the Africa Region develop and implement their strategies and policies on human resources for health. A large part of this program has been to support governments to develop the necessary evidence on HRH on which to base policy development 14 Lessons are captured in a book by Soucat, A. Scheffler, R (2013): “The Labor Market for Health Workers in Africa: A New Look at the Crisis”, Directions in Development, World Bank) 16 46. Lessons on Community Health Workers (CHWs): A 2012 review of Global CHW programs15 noted that services offered by CHWs have contributed to the decline of maternal and child mortality rates and assisted in decreasing the burden and costs of TB and malaria. A 2012 review of CHW cadres in Ethiopia, Malawi and Rwanda, further demonstrates that CHWs can be highly effective in providing basic MNCH and nutrition services, but supervision support is a key factor in improving their efficacy. 16 Other system requirements for successful CHW programs would include a careful selection of CHWs and realistic and appropriate levels of expected services, taking into account cultural context; high quality training, regular remuneration, and a reliable supply chain.17 Sub-component 1.3 and Component 2 incorporate these specific lessons. 47. Lessons from the Malaria Booster Project: GRZ and the World Bank have had a long and successful collaboration in the health sector. Support to GRZ has evolved over time and has responded to the needs and priorities of the country. Lessons learned from this operational experience which have been integrated into the design of the proposed project include: (i) sufficient institutional capacity to carry out the fiduciary elements of a Project ensures timely implementation; (ii) maintaining support to and empowering decentralized levels of the health system in delivering services is critical; (iii) communities play an important role in increasing demand and utilization of services as well as bringing services closer to the people; (iv) a mix of input- and results-based financing initiatives can maximize impact; (v) supporting GRZ in implementing evidence-based decision making can lead to broader health sector reforms; (vi) increased autonomy at decentralized levels is a critical element for more efficient use of resources and brings a degree of transparency and accountability to the system; and (vii) the need for an electronic Zambia Inventory Control System (eZICS), designed under the Malaria Booster project (currently being piloted through UNICEF support), whose main focus is to ensure availability of drugs and medical supplies through stock visualization, and initiation of orders based on consumption and pipeline data. 48. Lessons from the RBF Project: Given Zambia’s poor health outcomes, and its population’s low access to, and utilization of PHC services, the proposed Project’s strategic approach is highly relevant. Findings from RBF programs in Cambodia, Haiti, and Afghanistan, as well as a randomized controlled study in Rwanda have shown that RBF can be effectively deployed to: (i) clearly signal health priorities to all levels of the health system; (ii) ensure that health facilities focus on delivering basic health services to the population not yet reached; (iii) focus efforts on producing tangible results on the ground, and to monitor them stringently; and (iv) empower decision-makers closest to the communities they serve to set priorities according to local needs. 15 Zulfiqar A. Bhutta, Zohra S. Lassi, George Pariyo* and Luis Huicho (2012) Global Experience of Community Health Workers for Delivery of Health Related Millennium Development Goals: a Systematic Review, Country Case studies, and Recommendations for Scaling Up: A Systematic Review, Country Case Studies, and Recommendations for Integration into National Health Systems. GHWA/WHO Publication 16 McGorman L. et al (2012) A Health Systems Approach to Integrated Community Case Management of Childhood Illness: Methods and Tools. Journal of Tropical Medicine and Hygiene. Going to press in 2012. 17 WHO (2007) Community Health Workers: What do we know about them? The state of evidence on programmes, activities, costs and impact on health outcomes of using community health workers , WHO 2007. Geneva, Switzerland. 17 Early findings from the RBF pilot project in Zambia have shown improvements in health service utilization. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 49. The Project will be implemented by two ministries - MOH and MCDMCH - under an inter-ministerial framework for project management. Each Ministry will be given the responsibility to execute specified activities in line with their gazetted portfolio functions, recognizing that such assignments may be modified as GRZ reviews and revises how it delegates, budgets, and integrates local government authorities in the provision of services. The Permanent Secretaries from the two Ministries will each be responsible for the execution and management of the Project activities assigned to their Ministries. The respective Directorates of Policy and Planning in each Ministry, who will be responsible for overall coordination. Designated Directorates and Units will be accountable for the implementation of Project activities (see Annex 3). 50. To effectively coordinate implementation, a Joint Management Team (JMT), co-chaired by the Permanent Secretaries of the MOH and MCDMCH, will be established under the Zambia Health SWAp which has been in existence since 1993, to which the World Bank has been one of the founding and key members, and to which the commitment was reaffirmed by signing the 2013 Memorandum of Understanding. Membership to the JMT will comprise Directors from the two ministries. The JMT will meet monthly at a predetermined date and time. The role of the JMT will be to oversee Project implementation by the two Ministries which will present and discuss data and information related to activity level, review annual plans, identify challenges or difficulties in implementing project responsibilities, follow up on previous decisions, and resolve issues as they arise (The organogram for Project Administration Mechanisms is provided in Annex 3). 51. The two Ministries will be selectively supported by the Project to enhance: (i) capacity to provide leadership for MNCH and nutrition project efforts, particularly at decentralized levels; (ii) capacity for the day-to-day administration of project activities (including RBF), monitoring resource use, processing all central procurement activities, administering withdrawal and disbursement procedures, consolidate the FM aspects of Project implementation and consolidate reporting; and (iii) monitoring and evaluation of implementation activities. This includes collection, analysis, reporting and dissemination of the data on inputs, outputs, outcomes and impact from various sources; and (iv) support to strengthen the national and district level M&E system based on the identified gaps and weaknesses. 52. The arrangements for the co-ministerial institutional structure, the principles for governing project coordination, implementation and management, as well as technical advisors/specialists to be provided under the Project are outlined in Annex 3 and will be elaborated in detail in the PIM. 18 B. Results Monitoring and Evaluation 53. A comprehensive description of the Project’s results framework and the arrangements for monitoring and evaluation (M&E) are described in Annexes 1 (Results Framework and Monitoring) and 3 (Implementation Arrangements), respectively. The results framework will be tracked and a mid-term review will provide the opportunity to assess progress and make appropriate mid-course corrections. The Directorates of Policy and Planning of the MOH and/or MCDMCH will be responsible for monitoring Project implementation and results. The agreed PDO KPIs and a set of key intermediate outcome indicators, including DLIs, are to be monitored during the life of the Project. 54. Sources of data and data collection mechanisms: The National Health Management Information System (HMIS) will be primarily used to collect monitoring data, with additional support provided by the Project to integrate community level information.18 During the Project implementation period, two Demographic and Health Surveys (DHS) will be undertaken, with one to be available in 2014, and the second expected in five years. Results from the DHS and other population-based surveys will be used to recalibrate results of key services used and outcome indicators. In addition, Project implementation agencies will also collect additional key information specific to the Project, including annual facility surveys to be conducted by an external entity for measuring and verifying agreed results for the DLIs and the RBF, Component 1 and 2. 55. Data Evaluation and verification: An independent survey at the beginning, mid and project end will be planned to provide baseline information and measure the contribution of the Project to the achievement of outcomes. The baseline survey will provide baseline information for all DLIs. Further, independent, third party verification of activities under Components and 1 and 2, will be financed by the Project under sub-component 3.3. For timely feedback and unbiased monitoring, other process monitoring systems including operational research will be incorporated. C. Sustainability 56. GRZ has historically shown a willingness to finance health sector and social welfare efforts from its own resources, and continues to do so, through partnership within the SWAp with roughly 50 percent of per capita health expenditure from public sector resources. GRZ will finance most recurrent costs such as salaries for health workers and health and nutrition supplies from the regular budget envelops of both the MOH and MCDMCH. Furthermore, CPs are committed to provide longer-term support to nutrition under the Scaling Up Nutrition (SUN) 1000-day program initiative. 57. The Project will mainstream a comprehensive package of MNCH and nutrition services interventions in the health system by using existing institutional mechanisms, improve HRH capacity, complemented with provision of critical inputs, and improve supply chain and logistics management to reach the "last mile" and serve the intended beneficiaries. Enhancing the capacity 18 Data mechanisms for Component 1 are identified in Annex 2, Table A.3. 19 of community, district and provincial health workers, efficient provision of health consumables, and strengthening supervision of CHWs are all fully consistent with GRZ's objectives to pursue a decentralized policy. Community empowerment will be a major contribution to better basic health and nutrition care, especially in under-served areas. GRZ recognizes that over the medium to long term, as experience grows with the Project interventions, and as the evidence of improvements in health and nutrition outcomes obtained in the Project areas become available, it will integrate project interventions into programs, scale-up such efforts nationwide as appropriate. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Risk Category Rating Stakeholder Risk Substantial Implementing Agency Risk -Capacity Substantial -Governance Substantial Project Risk -Design Moderate -Social and Environmental Low -Program and Donor Moderate -Delivery Monitoring and Sustainability Substantial Overall Implementation Risk Substantial B. Overall Risk Rating Explanation 58. Overall implementation risk is Substantial. The Project seeks to strengthen primary care and community level health service delivery systems, introduction of training programs at central, provincial and district levels, and incentive mechanisms. The two ministries are going through a transition phase in dealing with significant changes in implementing MNCH and nutrition interventions, including sorting out primary responsibilities and coordination between themselves and across the entire sector. Additionally, GRZ is actively pursuing devolution of responsibilities to local authorities and this will impact MOH and MCDMCH mandates and responsibilities. The Project will introduce results based approaches: at a higher level paying for results through the DLIs and at facility level through the RBF. The fiduciary management capabilities of the MOH and MCDMCH are vulnerable to varying degrees, and depth. The objective of bringing services closer to communities will depend on governance structures at various levels, taking into account the decentralization process. Finally, prospects for public sector recruitment and timely deployment of new nursing and midwife graduates pose a further implementation risk element, given GRZ's announcement of a hiring freeze for 2014. 59. These implementation challenges will be mitigated by a number of factors: (i) there is a history of delivering MNCH and nutrition services at community level supported by faith-based organizations, non-governmental organizations, and external donors that can be strengthened; (ii) where there are new activities that depend on strengthened capacity and the sequencing of actions, the intention is to plan for gradual scale-up, training and technical assistance; (iii) Government assurances were provided that new nursing graduates will be absorbed because 20 vacancies can be filled (and attrition annually represents a significant number of vacated posts), additional MCH positions in 2013 were secured and will require new hires, and that the hiring freeze is limited to 2014; (iv) there is significant and relevant CP technical and financial assistance, inter-CP technical coordination mechanisms to exchange information and plans; (v) the Project design provides for extensive investment in information systems from the district to the community levels, and to monitor performance on a regular basis; (vi) a JMT will be put in place to effectively coordinate the various activities under the Project. The intention is to hold monthly joint project reviews to assess successes, challenges, and to implement mitigating measures; and (vii) provision of technical support to the MOH and MCDMCH in fiduciary management. 60. The Project will introduce additional RBF performance based financing in the health sector. Experience suggests that risks associated with the RBF include: (i) an enhanced focus on quantity of services over quality; (ii) gaming the system by inflating service delivery records or inflating the results of the quality evaluation or establishing too easily achieved DLIs; (iii) favoring service delivery to easier reach populations; and (iv) focusing on only targeted services to the detriment of other equally important health interventions. In addition, community based RBF is particularly challenging given the dispersed nature of activities, the difficulty in verification and capacity challenges. The Project will mitigate these risks by: (i) incorporating quality measures as an integral part of the process of determining payouts to facilities/health workers; (ii) establishing strong internal and external verification systems to ensure that records are authentic; (iii) involving communities in the verification process; and (iv) regularly monitoring service delivery to the most disadvantaged, and making the necessary adjustments to service tariffs to favor service delivery in remote areas. VI. APPRAISAL SUMMARY A. Economic and Financial Analysis 61. The proposed project was appraised from an economic and financial perspective. Specifically, the appraisal assesses the development impact of the proposed project based on global evidence and Zambia specific parameters, estimates the economic return of the investment through a cost-benefit analysis, provides rationale for working with the public sector, and analyzes the financial sustainability given the prevailing macroeconomic, and health financing situation (See details for Annex 6). The analysis was informed by recent studies conducted in the health sector in Zambia, and complemented by other international and regional studies. Economic Analysis 62. Health is an important dimension of employability, and a key determinant of economic growth and development. However, despite remarkable improvements in maternal and child health outcomes between 2000 and 2012, the status of the health sector in Zambia is a major constraint to productive employment for many Zambians, especially the poor.19 Human capital in Zambia has not benefited much from the high economic growth and widespread poverty remains 19 Ianchovichina and Lundstrom (2009). Inclusive Growth Analytics: Framework and Application 21 a major economic challenge. 20,21 As such, poor-health is both a cause and effect of poverty. Furthermore, Zambia is unlikely to achieve the health related Millennium Development Goals (MDGs) by 2015, as the annual rates of reduction (2.1 percent for U5MR and 2.5 percent for MMR) for the period 1990-2011 are significantly lower than the annual rates of reduction required (4.4 percent for U5MR and 5.5 percent for MMR)22 necessary to achieve the MDGs. 63. One of the key issues in health service delivery in Zambia is low coverage of essential services, coupled with poor quality of health service provision. For example, access to basic MNCH and nutrition services depends substantially on the socioeconomic status of the household and geographical location. Rural parts of the country are worse-off in both service provision and health outcomes (Table 1). This can be attributed to both supply and demand side factors. On the supply side, the numbers and skills of clinical health workers are insufficient, and at the same time inequitably distributed to deliver quality MNCH and nutrition services. Against the official staff establishment, there is a gap of 59 percent in the number of clinical health workers countrywide (doctors, clinical officers, nurses, midwives, and paramedics). Furthermore, low productivity of the available health workers, inequitable distribution of health infrastructure, and erratic supply of essential drugs and nutrition supplies are the other major challenges. 64. On the demand side, communities often lack information on preventive practices, including early detection of health and nutrition complications. In addition, long distances to health facilities and lack of transportation often limit access to health services in rural areas, leading to delays in seeking care. For example, the percentage of households living within a radius of 5Km to the nearest health facility is 54 percent and 99 percent for rural and urban households, respectively.23 Strengthening the linkages between the primary and community levels would help bridge long distances and bring services closer to the people. However, the use of communities in Zambia has been challenging due to a plethora of community based organizations and CHWs who work in a fragmented manner. 65. The project will contribute to Zambia’s development by promoting equity and shared prosperity in five provinces with the highest concentration of the poor, and low human development. These provinces are identified based on: (i) high poverty levels, (ii) low human opportunity index – immunization, (iii) high under-five mortality, (iv) low coverage of skilled birth attendance, (v) high prevalence of stunting in under-5 children, and (vi) complementarity with both geographic and program-based initiatives supported by other CPs. 20 World Bank (2012). Zambia Economic Brief – Issue 1: Recent Economic Developments, and the State of Basic Human Opportunities for Children 21 Despite recent economic growth averaging 6% since 2006, poverty levels in Zambia still remain high. Rural poverty at 74% is more than double the urban poverty at 35%. In 2011, Zambia’s HDI was 0.430, a rank of 164 out of 187 countries and below the average for Sub-Sahara Africa. Income inequality has also been growing. Over the period 1990 to 2010, the Gini coefficient declined from 0.47 to 0.52. 22 Lozano et al 2011; Rajaratnam et al 2010; Hogan et al 2010 23 Living Conditions Monitoring Survey III of 2002/2003 (CSO, 2004) 22 66. The project will support scaling up of the coverage of a defined package of MNCH and nutrition services that has been proven across many countries in Africa to be cost effective and of high impact. MNCH and nutrition services can provide economic benefits in the form of averted deaths, in particular maternal and child deaths, increased labor force and productive years, as well as contribution to economic growth. Existing evidence shows that about 70 percent of under-5 deaths are preventable through interventions such as vaccination, adequate nutrition and proper management of childhood illnesses. Maternal mortality also has a negative effect on per capita GDP in Africa, and studies suggest that an increase in MMR by one death decreases per capita GDP by US$0.36 per year on average. This is critically important for Zambia given the high MMR, high fertility, high unmet need for family planning, and high prevalence of HIV/AIDS among women. 67. Results from a cost-benefit analysis shows that the proposed project will be a sound investment for the country. The present value of benefits related to improved maternal and child health is estimated to be US$152.7 million. The present value of costs based on the expected disbursement is estimated to be US$63.1 million. As a result, the net present value of benefits is estimated to be US$89.6 million, while the benefit-cost ratio is estimated to be US$2.42 (152.7/63.1 = 2.42). This implies that for every US$1 invested through this project, the benefit will be US$2.42. Sensitivity analysis suggests that the benefit-cost ratio will be higher than 1.7 even if the project only achieves 70 percent of the expected impact (See Annex 6 for assumptions, methods, data and results in details). 68. It is likely that the real benefit and efficiency have been underestimated by this analysis. Conservative assumptions have been used for the expected impact of this project. Only economic growth benefits related to increased productive years is considered in this analysis. This analysis does not include the benefit of increased life-years of children saved before they become active in the labor force. Many other benefits are also excluded because they cannot be measured or easily translated to monetary value e.g., efficiency improvement. 69. The project will also contribute to improved efficiency and productivity at health facility and community levels. Firstly, the project will support the use of primary and community-based approaches which have been identified as among the key cost effective strategies of promoting health, even under very poor economic conditions. The use of community level approaches under Sub-components 1.3 and 2.2 is expected to generate additional benefits as it will help shift the focus from the traditional facility level supply-side interventions towards the demand side, with the objective of balancing incentives that target both the providers and the consumers. Secondly, the project will support the country’s systems to be more results-focused and productive through the supply chain, and MNCH and nutrition results-based approaches. Thirdly, the project will enable managers at all levels to use evidence in policy analysis, planning, and budgeting by supporting the country’s M&E system, analytics, and capacity buil ding in evidence-based decision making. 70. Working with the public sector through this project is economically justified based on a necessity to correct market failures, and the scarcity of private providers. Firstly, public intervention is necessary when there is market failure. The focus of this project is on high-impact and cost-effective MNCH and nutrition interventions, which have positive externalities through the consumption and/or production of goods. Without public intervention, these services would 23 otherwise not have been consumed or produced. Secondly, in Zambia, health services are predominantly provided through the public sector. The Zambian Government owns 81 percent of the total number of health facilities countrywide. In the five targeted provinces, there are only 9 private health facilities out of 811 in total, accounting for only one percent (Figure A.7 24). As such, it would be enormously inefficient and ineffective to expand coverage of high impact cost- effective interventions through the private sector in the five provinces. Financial Sustainability 71. Zambia spends 6.3 percent of its gross domestic product (GDP) on health. As a proportion of the total government budget, the health budget has been on average 9.5 percent for the past five years (2010-2014), which is lower than the Abuja target of 15 percent. In nominal terms, the government health sector budget has been growing by an average of 30 percent per annum between 2010 and 2014, and by 16 percent between 2013 and 2014. On the other hand, the flow of financial resources from external sources has been on a decline since 2006. For example, disbursement by CPs to the basket funding at MOH declined from 103 percent in 2006 to zero percent in 2010. Nonetheless, CPs are still present in the health sector in Zambia and are funding numerous vertical projects, particularly in HIV/AIDS, Malaria, MNCH, and Nutrition. Hence, fiscal space for health in Zambia critically depends on the sustainability of external funding, the extent to which the GRZ and other domestic resources can be used to finance health services, harmonization of all funding sources, and efficient use of the money available. 72. It is, therefore, expected that this project will be financially sustainable. The proposed project investment, US$13.4 million per year during a five-year period, accounts for a small portion of the annual government budget on health. In 2014, the proposed annual investment of US$13.4 million is 1.7 percent of the 2014 government health budget (US$798 million). This estimate will become smaller over time given that the government budget is expected to grow with economic growth, and the proportion of total government budget on health has been increasing during the past year. In addition, the Ministry of Health and Ministry of Community Development, Mother and Child Health, have been actively engaged during project preparation, and have had strong ownership of the project. B. Technical 73. The Project supports MNCH and nutrition interventions, principally aimed at reducing maternal and child mortality and morbidity including chronic malnutrition in selected provinces in the country. In Zambia, inadequate health worker knowledge in MNCH and nutrition is a serious constraint to deliver quality services, and more so outside the main urban settings. Investing in these interventions is supported by a large body of evidence, including a series of articles in The Lancet Maternal and Child Nutrition Series (2013), the SUN document, as well as World Bank health and nutrition studies and policy documents, including the recent analysis of benefits from connecting sectors and systems to achieve health results (World Bank Public Health Policy Note "Connecting Sectors and Systems for Health Results", December 2012). In sum, there is global consensus and solid longstanding evidence to support the premise that 24 Figure A.7 is found on page 90. 24 provision of competent service delivery to these cohorts can have a major positive effect on health outcomes. 74. The continuum of care, from pre-pregnancy to childhood, from community to district hospital, is the basic premise for this operation (The list of interventions across the continuum of care is provided in Annex 2 under sub-component 1.3). The Project design draws on this framework, building on best practices both in Zambia and in other countries. There is implicit recognition that the mandates of MOH, which has national health responsibility, and MCDMCH, with its community development, social welfare, and now MNCH activities, working in a complementary and coordinated fashion, can better provide basic health services to beneficiary in remote areas. This is an important feature of the Project. Further, reaching the community and paying attention to the "last mile" of the supply chain, improving the theoretical and practical knowledge base of health workers in areas such as skilled birth attendance, along with providing incentives for both supportive supervision and community pro-activity, are well tried, tested, and recognized techniques to increase health coverage and quality to mothers, newborns and young children. 75. The technical design of the Project is also based on a growing global understanding that transforming the input-based health systems to result-based systems can change the persistent under-performance of countries' health services. In Zambia, poor health outcomes have persisted despite substantial investments over several decades. RBF has emerged as a widely implemented strategy to strengthen access to and supply of quality health services through the adoption of financial or other rewards as an alternative to the traditional input-based approach.25 This design benefitted specifically from the performance based financing and the disbursement linked indicator approaches. The objectives, implementation institutions and levels of implementation are well aligned. C. Financial Management 76. With regard to Bank investment in the health sector, past project funds have been used to strengthen fiduciary systems, an Independent Fiduciary Review Agent was contracted, and assistance given to install and deploy an Independent Financial Management Information System. For the proposed project, the World Bank team conducted FM assessments of both the MOH and MCDMCH to determine whether the FM arrangements: (i) are capable of correctly and completely recording all transactions and balances relating to the Project; (ii) will facilitate the preparation of regular, accurate, reliable and timely financial statements; (iii) will safeguard the Project’s entity assets; and (iv) will be subjected to auditing arrangements acceptable to the World Bank. The assessment complied with the FM Manual for World Bank-Financed Investment Operations that became effective on March 1, 2010, as well as with AFTFM Financial Management Assessment and Risk Rating Principles. 77. With respect to funds flow and disbursement arrangements, both MOH and MCDMCH will use a system under which funds will flow from the World Bank to a Designated Account (DA) 25 Final consensus definition of the PBF google groups forum; August 2010. 25 or a Holding Account, denominated in United States Dollars at the Bank of Zambia (BOZ), to be operated by the Project. At the time of project execution, both ministries on behalf of the Project will transfer funds from the DA to their respective ministerial Control Accounts. Once funds are transferred to the ministerial control accounts, the funds will then be transferred to the Project’s sub-accounts held at BOZ. From the sub-accounts, all payments would be made through the mirror accounts (zero balance) held at a commercial bank. 78. MOH and MCDMCH will use both transaction-based method of disbursements (Statements of Expenditure – SOEs) as well as disbursement linked indicators discussed in detail in Annexes 2 and 3 and to be addressed in the PIM. Other methods of disbursing to the Project will include reimbursements, direct payment, and use of special commitments (e.g., letters of credit). The details of the FM assessment and aspects of the financial arrangements are detailed in Annex 3 and will be included in the PIM. 79. The assessment concluded that the FM arrangements in place meet the World Bank’s minimum requirements under OP/BP10.00, and therefore are adequate to provide, with reasonable assurance, accurate and timely information on the status of the Project required by the World Bank. The overall FM residual risk rating of the Project is Substantial for both MOH and MCDMCH. 80. The main capacity constraints in the MOH are that the Project module Integrated Financial Management and Information System (IFMIS) is not functioning well, the audit unit concentrates on pre-audits instead of carrying out risk-based auditing, has weak control environment and lacks or fails to follow-up on outstanding audit queries. In the case of MCDMCH, the capacity constraints include inadequately qualified staff with little or no Bank experience, IFMIS is not connected, no qualified staff in the audit unit, audit committee not functional, weak internal control environment and lack of follow-up of audit queries. At the national level, the following constraints were identified: inadequate supervision by government’s controlling officers; poor accountability culture and inadequately funded watchdogs; internal audit unit lacks adequate resources to carry out their work effectively; and weak audit committee to follow up the recommendations of both internal and external audit reports. 81. As a result of the FM capacity constraints, this project will require: (i) agreement on the format and content of the Interim Financial Report for the Project with the Bank, (ii) agreement on the audit Terms of Reference (TORs); (iii) training of accountants in World Bank FM and disbursement procedures; (iv) strengthening of internal audit functions through training including risk-based internal auditing; (v) functionalizing the audit committee in MCDMCH; and (vi) addition of FM section for the PIM. The Interim Financial Report format and the audit TORs have been agreed during negotiations. Other activities will be pursued during implementation. 26 D. Procurement 82. Procurement of goods, works26 and non-consulting services under this Credit and Grant will be carried out in accordance with the Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits”, January 2011. Selection of consultants will be carried out in accordance with Guidelines: Selection and Employment of Consultants by World Bank Borrowers, January 2011. Procurement of goods, works and non-consultant services under NCB will follow Government of Zambia Procurement Procedures as outlined in the Public Procurement Act number 12 of 2008 and the accompanying Public Procurement Regulations of 2011 subject to modifications detailed in Annex 3 to make them acceptable to the World Bank. The Bank’s Anti-corruption Guidelines: "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loan and IDA Credits and Grants" dated October 15, 2006, and updated January 2011 shall apply to the project. 83. The MOH and MCDMCH Procurement Units will be responsible for carrying out their Ministry's procurement tasks, with the JMT responsible for assuring proper reporting coordination, and resolution of issues affecting project performance. Procurement capacity assessments of the MOH and MCDMCH identified areas and needs for strengthening of capacity. These have been shared with GRZ and are also provided in the Table A.727 “Summary assessment for procurement capacity risks and mitigation measures.” The implementation of the risk mitigation measures will be supported with Project financing. 84. Component 1: Strengthen capacity for primary and community level MNCH and nutrition services (US$27.5 million IDA) will be implemented on the basis of DLIs. Their verification, as well as updates on their progress, will be made based on pre agreed periods and will be reported on and made available in the public domain. DLIs will be primarily based on outcomes or outputs and will be complemented by intermediate outputs or process indicators. No procurement is envisaged under this component as discreet goods, works or services are not anticipated to be procured under this component. However, should any be identified procurement will be carried out using the Bank’s Procurement and Consultants Guidelines referred to in paragraph 83 above. 85. Component 2: Strengthen utilization of primary and community level MNCH and nutrition services with results based financing approaches (US$12 million IDA; US$12 million HRITF). From the procurement standpoint, it is observed that whilst the majority of the activities will be implemented using results based approach, payments will be linked to attainment of results based on pre-agreed targets or indicators which will be verified by an independent verification agent. It is also expected that some input activities such as medical goods and equipment and minor rehabilitation works will be procured. Such Procurement will be carried out using NCB procurement procedures subject to modifications provided in Annex 3.. These modifications will be further elaborated in the legal agreement particularly for the use of National Competitive Bidding (NCB). Where needed, based on cost estimates and the limits for prior review 26 As described under Paragraph 25, the Project will finance only rehabilitation of existing infrastructure. 27 Table A.7 is found on page 67. 27 thresholds, use will be made of the provisions of the applicable Bank’s procurement and consultant guidelines. 86. Component 3: Strengthen project management and policy analysis (US$13 million IDA; US$3 million HRITF). Procurement under component 3 is expected to cover activities for strengthening project management, implementation, monitoring and evaluation; provide technical assistance for evidence-based policy analysis and health financing innovations, and appoint an independent verification agent to verify the Project results. Bank’s procurement and consultant guidelines will apply to the engagement of consultants. E. Social (including Safeguards) 87. There will be no land acquisition under this project, and no losses of assets or restriction of access to resources is anticipated. The MOH, MCDMCH and training institutions have acceptable proof of ownership of the existing project activity sites and there are no disputes in this regard. Thus, no involuntary resettlement issues are associated with this project, and OP 4.12 will not be triggered. The Project also seeks to mitigate RBF-specific risks. These risks include: (i) favoring service delivery to easier to reach populations and not targeting those who are most in need; (ii) focusing on delivering incentivized services to the detriment of other equally important health programs; and (iii) involuntary participation in selected health services, particularly in the context of the supply-side RBF proposed in the Project. F. Environment (including Safeguards) 88. This is an environmental Category B project. GRZ developed the first Health Care Waste Management Plan (HCWMP) in 2003 under the Zambia National Response to HIV/AIDS Project (ZANARA). Due to capacity constraints in safeguards, finalization of the HCWMP took longer than envisaged, and was only partially implemented by the end of the Project in 2008 (with procurement of incinerators that were distributed to hospitals and training of staff on medical waste management). In 2006, under the Zambia Malaria Booster Project, the HCWMP plan was updated and disclosed. Unfortunately, this plan was also not effectively implemented, mainly due to the non-availability of qualified staff in safeguards in the MOH. In 2010, the plan was further updated with support from other CPs. To ensure that the plan is implemented under the new project, attention will be given during implementation to review and update the HCWMP as necessary and ensure availability and adequacy of the capacity to implement under the new project. The Project will support minor repair of existing infrastructure under Component 2; therefore no negative environmental or social impacts in the areas of project intervention are expected (For additional details see Annex 3). G. Governance and Corruption (GAC) 89. The MOH and MCDMCH fiduciary environment is satisfactory and measures for improvement have been completed while others are ongoing and will be monitored throughout Project implementation, and include targeted health sector GAC training and mentorship. 90. The Office of the Auditor General (OAG), found that funding from several CPs was misused, with GRZ subsequently reimbursing over US$3.2 million to the CPs. As a result, steps 28 were taken to strengthen health sector governance and accountability, initially with a Governance Action Plan, and subsequently a Governance and Management Capacity Strengthening Plan (GMCSP) designed to address financial management weaknesses over the medium to long-term. The GMCSP has been incorporated into the operational plans for the Medium Term Expenditure Framework and linked to the National Strategic Plan (2011-2015). In 2010, as a result of a Bank audit, Government repaid the Bank US$1.3 million for expenditures adjudged to have been ineligible, pending a complete audit of the pooled funds by the OAG. The OAG completed the additional audits and determined that out of the US$1.3 million, US$813,489.89 was confirmed as eligible expenditure and was therefore refunded to GRZ in November 2013. 29 Annex 1: Results Framework and Monitoring . Country: Zambia Project Name: Health Services Improvement Project (P145335) Results Framework Project Development Objectives PDO Statement The project development objective is "to improve health delivery systems and utilization of maternal, newborn and child health and nutrition services in project areas." These results are at Project Level . Project Development Objective Indicators Data Responsibility Cumulative Target Values Source/ for Unit of Methodol Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 End Target Frequency Measure ogy Collection Deliveries attended by skilled health Percentage 27.00 33.00 39.00 45.00 51.00 57.00 Annually HMIS MOH providers Under-2 children MOH & Facility and received monthly Percentage Annually MCDMC community growth monitoring H survey. and promotion Health Centers offering integrated Facility Percentage 13.00 21.00 51.00 77.00 100.00 Annually MOH Management of Survey Childhood Illnesses Health Centers with Health Verification Percentage Annually essential medicines Facility Entity 30 and commodities in Survey stock (percent) Children 0-11 months fully Percentage 80.00 82.00 84.00 86.00 88.00 90.00 Annually HMIS MOH immunized . Intermediate Results Indicators Data Responsibility Cumulative Target Values Source/ for Unit of Methodol Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 End Target Frequency Measure ogy Collection Health workers Project trained in MNCH data and Verification Number 400.00 800.00 1200.00 1600.00 2000.00 Annually and nutrition supervisio Entity competencies n report. Percentage of Project trained health data and Verification workers deployed Percentage 70.00 75.00 80.00 85.00 85.00 Annually supervisio Entity to facilities in the n report. five provinces. Health facilities (health centers and district hospitals) Project using electronic data and Number 0.00 94.00 151.00 376.00 565.00 734.00 Annually MSL inventory control supervisio and logistics n report management system Regional hubs and Project staging posts data and Number 1.00 2.00 4.00 5.00 8.00 Annually MSL equipped in target supervisio areas n report 31 Protocols and guidelines at Project MOH, community and data and Number 1.00 2.00 3.00 4.00 4.00 Annually MCDMCH primary care levels Supervisio and NFNC updated and n Reports disseminated Districts with Project community data and MOH and Number 0.00 10.00 20.00 30.00 39.00 Annually information system supervisio MCDMCH integrated DHIS-2 n reports Health facilities Project (health centers and data and MOH and district hospitals) Number 70.00 92.00 149.00 275.00 365.00 545.00 Annually supervisio MCDMCH implementing the n report. RBF approach Project Health policy records analysis conducted Number 3.00 3.00 Annually and MOH and results supervisio disseminated n reports HMIS and Direct project MOH and Number 3,300,000.00 Annually Facility beneficiaries MCDMCH Survey Percentage Female Sub-Type 55.00 beneficiaries Supplement al . 32 Table A.1: Summary – Definition and Interpretation of PDO and Intermediate Indicators . Results Framework . Project Development Objective Indicators Indicator Name Description (indicator definition etc.) Deliveries attended by skilled health providers Numerator: Number of deliveries conducted by skilled personnel (medical doctors and registered midwife) in health facilities in project areas. Denominator: Expected deliveries in project areas. Under-2 children received monthly growth monitoring Numerator: Number of children under-2 who received monthly growth monitoring and and promotion promotion in project areas. Denominator: Population of children under -2 years in project areas. Health Centers offering integrated Management of Numerator: Number of Health Centers offering Integrated Management of Childhood Childhood Illnesses Illnesses in project areas. Denominator: Total number of Health Centers in project areas. Health Centers with essential medicines and commodities Numerator: Number of Health Centers with essential medicines and commodities in in stock (percent) stock in project areas. Denominator: Total number of Health Centers in project areas. Children 0-11 months fully immunized Numerator: Number of children 0-11 months fully immunized (new) in project areas. Denominator: Population of children 0-11 months in project areas. . Intermediate Results Indicators Indicator Name Description (indicator definition etc.) Health workers trained in MNCH and nutrition Number of health workers trained in MNCH and nutrition competencies in the targeted competencies provinces. Percentage of trained health workers deployed to Numerator: Number of health workers trained in MNCH and nutrition competencies 33 facilities in the five provinces. deployed to facilities in the five provinces. Denominator: Total number of Health workers trained in MNCH and nutrition competencies under the project. Health facilities (health centers and district hospitals) Numerator: Number of health centers and district hospitals using electronic inventory using electronic inventory control and logistics control and logistics management system in project areas. management system Denominator: Total number of health centers and district hospitals in project areas. Regional hubs and staging posts equipped in target areas Number regional hubs and staging posts equipped in target areas. Protocols and guidelines at community and primary care Number of protocols and guidelines at community and primary care levels updated and levels updated and disseminated disseminated. Districts with community information system integrated Number of districts in project areas with community information system integrated into DHIS-2 into DHIS-2. Health facilities (health centers and district hospitals) Number of health centers and district hospitals implementing the RBF approach. implementing the RBF approach Health policy analysis conducted and results Number of health policy analysis conducted and results disseminated. disseminated Direct project beneficiaries Direct beneficiaries are people or groups who directly derive benefits from an intervention (i.e., children who benefit from an immunization program; families that have a new piped water connection). Please note that this indicator requires supplemental information. Supplemental Value: Female beneficiaries (percentage). Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female. This indicator is calculated as a percentage. Female beneficiaries Based on the assessment and definition of direct project beneficiaries, specify what percentage of the beneficiaries are female. 34 Annex 2: Detailed Project Description 1. The proposed project will support GRZ’s efforts to accelerate progress towards maternal and child health MDGs and for it to be better prepared for emerging challenges, especially non- communicable diseases. The Project will support strengthening service delivery, while focusing on results and reducing inequities. Activities will be targeted to provinces that are poorer and underserved to scale-up coverage of high impact MNCH and nutrition interventions. Specifically, the Project will support supply side interventions such as improving availability of skilled care, increasing availability of related health and nutrition commodities, and strengthening referral linkages. This will be complemented by community-based demand side approaches to enhance utilization of services. Institutional capacities of MOH and MCDMCH will be supported to enhance evidence-based policy analysis, health systems performance, and management of adjustments to changing roles and responsibilities in light of the decentralization process. The Project will also support project management and implementation competencies, particularly in the targeted provinces, as well as the establishment of an independent verification mechanism. The Project will be structured under three components and implemented over five years. Component 1: Strengthening capacity for primary and community level MNCH and nutrition services (US$27.5 million IDA) 2. The objective of this component is to strengthen health systems in project areas through: (i) enhanced training capacity and standards for nursing and midwifery; (ii) improved supply chain systems for essential commodities; and (iii) improved referral system and linkages across levels of care. The Project will do this using a Disbursement Linked Indicators (DLIs) approach which pays for achievement of results (see matrices below for each sub-component28). Sub-component 1.1: Enhance training capacity and standards for nursing and midwifery (US$10 million IDA). 3. This sub-component supports Government’s effort to address the shortage of health workers with sufficient MNCH and nutrition skills at first level district hospitals and health centers in the five targeted provinces. The lack of adequately trained health workers is negatively impacting 28 Measurement is through the HMIS/DHIS information, surveys and reports provided by the MOH, MCDMCH, General Nursing Council, which are verified by an independent entity. The Results Framework include the DLIs, which are responsive to the KPIs, and will be tracked and reported. Eligible Expenditures can be paid for results which exceed a given year's DLI output objective. On the other hand, if a DLI is missed, the amount is not paid but does not affect payment for other DLIs that have been met (indicators are not "tranched'). A waiver is possible at the Bank's discretion. The waiver will require GRZ to explain why the DLI was missed and present a work plan and date for complying with the DLI. The decision regarding what will ultimately be paid--amount and timing--is at the Bank's discretion. The Bank may, inter alia, withhold the amount or pay only partly depending on the progress made, and complete the payment when the indicator is met. It may also withhold payment until the indicator is met paying at that time or at the time of the next 12 month payment period. The purpose of the waiver is to maintain incentives to meet indicators and reward conscientious efforts to meet a DLI. At the same time a program of Eligible Expenditures (principally health sector salaries and operating costs) will be used to reconfirm funds were expended to achieve the results. 35 the delivery of critical health services to the poor and is contributing to unsatisfactory maternal and child health outcomes. Only 39 percent of posts for Skilled Birth Attendants (SBAs) for example are filled29, and of those many lack additional MNCH and nutrition competencies (Box A.1). The more remote provinces in Zambia are worse off. Whilst Lusaka for example is home to 0.58 SBAs per 1000 population, Eastern province is home to 0.23, Luapula 0.21 and Northern Province 0.21 (compared to the desired WHO benchmark of 2.23 per 1000 population). Box A.1: Skilled birth Attendants with MNCH and nutrition skills in Zambia Skilled birth attendants are health workers (usually doctors, nurses and midwives) who have been trained to proficiency in the skills necessary to diagnose, manage or refer obstetric complications. These same providers would also be expected to have good competencies related to broader MNCH and nutrition skills, including IMCI, Family Planning, ANC and PNC skills to name but a few. In Zambia: Doctors are very few in number (there are only two, urban based medical schools), and the cadre least likely to take up rural employment (given the opportunity cost associated to rural job uptake). Clinical officers (trained in Lusaka) , a cadre with competencies between a nurse and a doctor, trained for posting at the district hospital level, are frequently not considered SBAs, due to their weak competencies particularly in delivering EmONC services. Nurses (Registered and Enrolled), the single largest cadre in Zambia (trained across the country, with the majority in Lusaka and Copperbelt Province), are currently not considered SBAs due to insufficient training in EmONC and midwifery skills. Furthermore, many nurses lack critical competencies related to MNCH and nutrition, including critical IMCI, Family Planning, ANC and PNC related competencies. Registered midwives (RM) and enrolled midwives (EM) (trained in select training institutions) are very few in number. Midwives are considered SBA’s however the quality of some of their MNCH and nutrition skills (as with nurses) could benefit from improvement. Midwifery training programs are one year in-service training programs for nurses (RN or EN) following mandatory work experience. This is a lengthy requirement and makes the midwifery program unpopular. 4. A key problem that can help explain the deficiency in relevant competencies is the limited capacity of nursing schools to deliver a comprehensive package of nurse/midwifery training in MNCH and nutrition (in particular on EmONC, nutrition and IMCI related skills). Beyond a new pilot (supported by the USAID Nurse Education Partnership Initiative (EPI), there are currently no combined pre-service nurse/midwifery training programs. Registered and enrolled nursing schools found in many provinces in Zambia, particularly in the more remote provinces, often experience significant constraints in physical capacity (teaching aides, skill laboratories, and other infrastructure), technical capacity (faculty and instructors) and organizational capacity (leadership and management skills) to be able to beef up their training capacity. 5. Lack of on-site clinical supervision capacity moreover means that teaching is primarily theoretical and classroom based, with little practical training provided in nearby health facilities. As a result, nursing graduates are often inadequately prepared to address MNCH and nutrition related service delivery challenges they face particularly in more remote or rural facilities. Once nurses or midwives are posted into facilities moreover, provision of in-service training is sporadic and non-transparent, often donor driven and focused on vertical instead of horizontal skills building. Such training sessions are not linked to re-certification and they disrupt service delivery: they are a major cause of staff absenteeism and/or discontent. To date, limited opportunity for on-site continued professional development (CPD) training in MNCH and 29 2012 MOH Payroll data 36 nutrition related competencies exist. A streamlined mentorship and on-site skills building program, one that is linked to re-certification requirements and keeps staff motivated and up to date does currently not exist. 6. To address these challenges, this sub-component will support GRZ’s strategy to strengthen pre-service, in-service as well as professional development opportunities for nurses and midwives in Zambia. GRZ’s Human Resources for Health Strategy, the National Training Operational Plan, and the General Nursing Council all emphasize the need for intervention to strengthen quality of nursing/midwifery training and ultimate the quality of services delivered by skilled providers at the facility level in Zambia. Specifically, sub-component 1.1 will support GRZ to: 7. Strengthen the capacity of eight training institutions in the five target provinces (see table) to deliver an integrated and comprehensive pre-service education package on MNCH and nutrition to nursing students. GRZ’s National Training Operational Plan (2011) assessed the capacity constraints of the health training institutions targeted by the Project. Using the DLI approach (see Table A.330), funding under this project can be used by the Ministry of Health (MOH) to fund Eligible Expenditures for example those related to finalizing and certifying the comprehensive pre-service education curricula for nurses/midwives (through the GNC) and to strengthen the capacity of these schools to deliver the new curricula. This could include reimbursements for costs related to strengthening teaching capacity of the nursing schools including faculty and clinical instructor salaries and overheads, costs linked to training of trainers, upgrading of equipment and supplies and other operational costs and administrative expenses. Whilst each current cohort will already benefit from the strengthened capacity and improved curricula, the first full cohort graduating from a combined nurse/midwifery program with particular emphasis on MNCH and nutrition skills is expected to occur in 2019 (assuming they enroll by 2016). Table A.2: Schools and number of graduates Nursing schools to be supported by the Project 2015 2016 2017 2018 2019 Luapula Mansa School of Registered Nursing 48 48 48 48 48 St Pauls Enrolled Nursing Training School (Nchelenge 32 32 32 32 32 District) Muchinga Chilonga: Our lady enrolled Midwifery and nursing school 70 70 70 70 70 North-Western Kalene School of Nursing 26 26 26 26 26 Mukinge School of Nursing and Midwifery 55 55 55 55 55 Solwezi School of Nursing 50 50 50 50 50 Northern Kasama School of Registered Nursing 66 66 66 66 66 Western Lewanika Enrolled Nursing/midwifery School (Mongu) 85 85 85 85 85 Total 432 432 432 432 432 30 Table A.3 is found on page 45. 37 Note: These numbers are based on the current capacity of the schools to graduate students. These numbers will change based on additional investments provided by partners on infrastructure (not funded under the Project). 8. Deliver a three month applied in-service training to nurse and midwifery graduates as part of their induction before they commence their posts at primary facilities in the target provinces. Funding under this project will support GRZ’s plan to provide a short yet intensive period of practical training in MNCH and nutrition to nursing and midwifery graduates before they enter into primary level posts in the five provinces. Such training, carried out for three months at the (provincial) hospital in the target provinces will be provided to registered and enrolled nurses and midwives as part of their induction requirement. Such applied training, primarily delivered by clinical instructors, will also include significant outreach training at primary health facilities to equip students with the skills necessary to succeed in particularly challenging environments (to address health complications without the adequate medicine, supplies or equipment available, or tackle more complex interventions in the absence of staff). Recent graduates, from training institutions within the target provinces or other provinces, will commence their in-service training only after they have been accredited and sent their letter of appointment for a posting in a primary level facility in one of the five target provinces (approximately 3 months after their graduation). The letter of appointment will specify the need for the 3 month applied in-service training as part of their induction before their primary level posting/deployment. During their training they are hence already absorbed onto MCDMCH payroll. Using the DLI approach, funding under this project can be used by the MCDMCH to fund Eligible Expenditures related to developing the in-service training modules, and obtain reimbursement for costs associated with the provision of training in the provincial hospital, for example the operational costs and expenses linked to the required clinical faculty and supervision. The Project will continue to support this “temporary” in-service training requirement until the combined and comprehensive nurse/midwifery pre-service training bears its first cohorts. Box A.2: Example of the 3 month in-service training 1. Expanded applied program of Immunization (EPI) - 5 days 2. Applied Integrated Management of Childhood Illness (IMCI) - 6 days 3. Applied Emergency Obstetric care EmONC - 21 days 4. Applied Adolescent health - 10 days 5. Applied Family Planning (FP) - 12 days (reduced to 12 days) 6. Applied Reproductive Health cancers – 10 days 7. Applied Infant and Young Child Feeding (IYCF) – 5 days 8. Applied Sexual and Gender Based Violence - 7 days 9. Applied Prevention of Mother to Child Transmission (PMTCT) – 12 days 10. Interpersonal communication skills 9. Support the development and roll out of continued professional development training to nurses and midwives already working in primary level facilities in the 5 target provinces. This component will support the GNC and the MCDMCH in developing and implementing its continuing professional development program for nurses and midwives already posted at primary level facilities in the five target provinces. The Continuing Professional Development (CPD) modules supported under this project will be those related to MNCH and nutrition. Using the DLI approach, funding under this project can be used to fund Eligible Expenditures related to developing and certifying the CPD training program (by the GNC), and obtain reimbursement 38 for costs associated with the provision of CPD to targeted primary health workers, including for example salaries or operational costs linked to the funding of mentors, or the implementation of innovative ICT-CPD training solutions. CPD will contribute towards strengthening the motivation, skills building and retention of health workers at primary level in the target provinces. Sub-component 1.2: Improve supply chain systems and availability of essential commodities (US$10 million IDA) 10. This component will support and contribute to the implementation of the Zambia Supply Chain Strategy focusing on increasing availability of selected essential commodities, supplies and equipment to support service delivery for high impact MNCH and nutrition interventions in project areas. Relying on country systems and an independent verification mechanism, it will finance results related to improved: (i) procurement of health commodities, supplies and equipment; (ii) distribution capacity of MSL, particularly the “last mile” distribution of essential medicines and supplies from the regional hubs and staging posts to health facilities; and (iii) deployment of an electronic inventory control and logistics management information system to improve stock visibility and accountability. The elements are discussed in more detail below: 11. Under this sub-component, the Project will support existing systems to: (i) improve availability of essential health and nutrition commodities, supplies and equipment; (ii) strengthen storage and distribution capacity, particularly for the "last mile" with enhancement of regional hubs and/or staging posts and to the service delivery points and employing an hybrid distribution system (combining a Push and Pull systems); and (iii) improve stock visibility and accountability through implementation of an electronic Zambia Inventory Control System (eZICS). Resources will be disbursed to MOH/MCDMCH on achieving agreed upon performance targets, verified by an independent entity. A rapid assessment of stock levels, storage and distribution capacities, and staff competencies at health centers will be undertaken to provide baseline data. 12. The activities to be considered for Disbursement Linked Indicators (DLI) approach include the following:  Provision of essential health and nutrition commodities, supplies and equipment: The Project will pay for eligible outputs/results for selected essential commodities to support high impact MNCH and nutrition interventions at primary health care level. This will cover prevention (nutrition supplementation, malaria prophylaxis, deworming tablets, vaccines, and reproductive health commodities); treatment (selected essential tracer drugs, ready to therapeutic food and specialized milk, diagnostic test kits and reagents); and equipment (ambulances, EmONC equipment, GMP and cooking demonstration kits). The Project will also support provision of incremental critical transportation for supervision, logistics and supply management, and ambulances at the different levels of primary health care and community level.  Strengthening storage and distribution capacity of MSL, particularly the “last mile”: The Project will strengthen the storage and distribution systems from the central level to the Regional Hubs and/or the staging posts and to the service delivery points (i.e., rural health center) in the Project areas. Currently the MSL distributes up to the district level 39 and the district is responsible for the “last mile”. It is the secondary distribution, which has largely been responsible for significant shortages at service delivery level. Recently, GRZ introduced Regional Hubs and allowed MSL to distribute products up to the health facility in an effort to improve secondary distribution. The new distribution network structure has six regional hubs (in Chipata, Mongu, Kitwe, Kasama, Lusaka and Choma) and seven staging posts as temporary holding points for facilities that are a long way away from the main hubs (Livingstone, Solwezi, Chama, Zambezi, Kabompo, Mkushi and Mansa). Two of the regional hubs (Kasama and Mongu) and five of the staging posts (Chama, Mansa, Solwezi, Kapompo and Zambezi) will be hosted in the Project provinces. The Staging Posts in North Western Province (Solwezi, Kapompo and Zambezi) will be serviced by the Kitwe hub. In this respect, consideration will be made to support the upgrading of the Kitwe hub although it is not in the target province. The eligible expenditures to strengthen storage and distribution capacity will include: (i) vehicles and warehouse mechanical handling equipment; (ii) racking of regional hubs, some staging posts and where practicable, health facility stores in order to improve storage capacity at this level; (iii) supply chain management staff who have been trained to efficiently run a good supply chain system; and (iv) public/private partnership contractual arrangements especially for the last mile distribution of drugs and medical supplies. Figure A.2: Distribution network of drug supply Source: Medical Stores Limited  Support to the development and implementation of an ICT based logistics and inventory control system to be able to: (i) take seasonal changes in demand and disease patterns into consideration; (ii) determine optimal facility orders in a situation of rationing at MSL; and (iii) maintain and transfer accurate inventory data as the system is paper based and susceptible to errors. The implementation of the electronic Zambia Inventory Control System (eZICS), developed under the previous WB project, will focus on improving 40 visibility of stock at each level of care as well as instituting rational optimization of orders, taking into account consumption as well as pipeline data. The piloting of the system is scheduled in three Districts, and a Cooperating Partner, DfID, has provided funding to meet the costs. Specific Bank support will be directed towards necessary ICT equipment, software licenses, and the relevant data transmission costs to the system as well as system user training, the using the DLI approach. 13. Specific DLIs that progressively link to the achievement of the objectives in the three areas discussed above, including the proposed payment value are detailed in Table A.3 (DLI #4 – DLI #6) below. Sub-component 1.3: Improve referral system and linkages across levels of care (US$7.5 million IDA) 14. This sub-component aims to strengthen the extent and quality of primary health care (district hospital, heath center and health post) as well as community level service delivery platforms to effectively scale up a package of high impact MNCH and nutrition interventions, along the continuum of care. By bringing services as close to the family as possible and reducing the workload of scarce clinicians in the provision of basic preventive, promotive and curative facilities, primarily in underserved rural areas, this sub-component will address the issue of inequitable access to and poor utilization of quality, cost-effective and affordable basic MNCH and nutrition services. 15. Specific results that will be contributed by this sub-component include: (i) development of an agreed package of evidence-based high impact MNCH and nutrition interventions, which will be delivered through primary care and community levels; (ii) revitalization and harmonization of community structure through strengthening of linkages with community based service delivery structures, specifically linkages between the community development committees, social welfare committees, and NHCs, and CHWs. This includes an agreed and defined framework, protocols, norms and guidelines; (iii) quality checklists for the supervision and mentorship across different service delivery levels including district hospitals, health centers, health posts and communities; and (iv) enhanced referral systems across different levels of service delivery points through increased provision of equipment and timely maintenance. 16. Special emphasis will be provided to mobilize local Chiefs and engage them actively in social mobilization and day-to-day activities at primary care and community levels. Given that the populations in the selected provinces are sparsely distributed, community level service delivery mechanisms will have high potential to bring services closer to the people mainly through expansion of and strengthening service delivery at outreach posts. Eventually community-based MNCH and nutrition service delivery will be incorporated in the formal health system, and based on lessons learned from the five target provinces; the model will be adapted and extended to the rest of the country. DLIs which are linked to the sub-component 1.3 results achievement are provided in Table A.3 (DLI #7 – DLI #9) below. 17. Figure A.3 below provides a list of evidence-based high impact MNCH and nutrition interventions that will be delivered at primary care and community levels. However, this list will 41 be reviewed further by MCDMCH and MOH and a final list will be developed and disseminated to scale up in the Project provinces and beyond. 18. The system for improved referral of patients would be strengthened by activating Neighborhood Health Committees and establishing formal links with Health Centers, acquiring ambulances, motorcycles/bicycles and communication equipment including radios and batteries. Service at the Health Centers and residence of Health Center staff would also be improved by providing better lighting. Efforts will be made to ensure energy at night at least, in delivery rooms and in emergency outpatient rooms, and to provide water in delivery rooms, children's wards and outpatient clinics, plus one water point for the general use of other patients. Districts would be provided with Motor vehicle ambulances. 42 Figure A.3: High impact MNCH and nutrition interventions Pre-pregnancy Pregnancy and child birth care Newborn and childcare  Promotion of  FANC plus All of the below  Immediate newborn care (resuscitation if required, Adolescent  Essential Nutrition Actions thermal care, hygienic cord care, early initiation of health Youth-  Identification of high risk breastfeeding) friendly services pregnancy and management of  Exclusive breastfeeding Thermal care Hygienic (HIV and complications of pregnancy cord care Extra care of LBW infants Prevention of District Hospital prevention, STI  Monitoring progress during labor mother-to-child transmission of HIV Management screening and Social support (companion) of newborn illness Immunization Treatment, during birth  Management of severe newborn illness Essential  Clinical management of obstetric  Immunizations Vitamin A supplementation nutrition complications Standard case management including: - ORT and actions).  Referral of complicated delivery zinc for diarrhea - Antibiotics for dysentery -  Family Planning- to higher levels Antibiotics for pneumonia - Antimalarial Care for Long-term  Prevention of mother-to-child HIV-exposed and HIV-infected children - Co- permanent transmission of HIV Detection of trimoxazole prophylaxis – ART methods. obstetric complications  Management of severe infant and childhood illness  Cancer screening  Weekly IFA  FANC Plus All of the below  Neo-natal infection management supplements  Skilled birth attendance  Management of complicated and uncomplicated  Bi-annual  Post-partum Vitamin A severe acute malnutrition Health Center deworming supplement  IMCI (Integrated Management of Childhood  BCC and  Provision of treatment (to high illness) provision of risk pregnant women)  ETAT (emergency triage assessment & treatment) contraceptive  Post-natal services for mothers  Referral including infection management of complicated delivery (Emergency Obstetric Care)  Referral of complicated delivery  Weekly IFA  Early pregnancy screening  Growth Monitoring & Promotion   Outreach/Health Post supplements ANC services Vitamin A supplementation  Bi-annual  IFA supplementation  ORS with zinc for diarrhea treatment deworming  Malaria prophylaxis  Cooking demonstration and use of Micronutrient  BCC and  Deworming Powder (6-24 months) provision of  Pregnancy weight gain monitoring  Neo-natal infection management contraceptives  Sensitization for skilled birth  Integrated Community Case Management attendance  Immunization  Post-natal services for mother  Referral of severe acute malnutrition & children  Referral with infections  BCC for MNCH  Early pregnancy screening  Growth Monitoring & Promotion   Vitamin A supplementation Family & Community and nutrition Promotion of nutritious diet services  Sensitization to access ANC and  ORS with zinc for diarrhea treatment skilled birth attendance  Cooking demonstration and use of Micronutrient  Male involvement in promotion Powder (6-24 months) activities for MNCH and nutrition  Referral of severe acute malnutrition and children services with infections Home-based newborn care  Promotion and support for Exclusive Breastfeeding  Community-based management of uncomplicated acute malnutrition Intersectoral: Water, sanitation, hygiene, iodized salt promotion, nutrition education, empowerment Adolescence/Pre- Pregnancy Birth Newborn /postnatal Childhood pregnancy 43 19. . District hospitals would receive technical support to improve planning and supervision. Training will: (i) help improve the quality of supervision and service provision, particularly in the areas of MNCH and nutrition with the strengthening of IMCI and safe motherhood; and (ii) improve the skills of health personnel to ensure that cases in need are timely referred to the next level of care (District and Provincial hospital). Key bottlenecks in the supply of MNCH and nutrition services would be addressed, principally by increasing the number of trained nurses and midwifes to ensure that the expected increase in demand for institutional deliveries can be satisfied. The Project would help develop and expand a network of outreach teams by broadening the staffing of existing outreach teams that are now limited and largely focused on fewer number of service provision. New outreach teams would provide a continuum of services from MNCH to nutrition as presented in Figure A.3. Outreach teams would also be responsible to supervise CHWs. To ensure the proper functioning of outreach teams, Training Institutions and District Hospitals would provide Continuing Professional Development (CPD) training to existing nurses, and train additional ones. Teams would be provided with adequate vehicles, fuel and per diem. Additional personnel would be recruited and trained to ensure that health centers remain staffed when the outreach team is on the road. All districts in each project province will be covered. 20. Teams of CHWs would be developed in each village, coordinated by Neighborhood Health Committees. They will not replace the existing network of community volunteers; rather, they are meant to supplement and enhance their efforts. CHWs will be accountable to the health system and to their communities. They would be trained to undertake early pregnancy screening, promotion of nutritious diets, sensitization to access ANC and skilled birth attendance, encouragement of males to promote MNCH and nutrition services, Growth Monitoring & Promotion, Vitamin A supplementation, ORS with zinc for diarrhea treatment, cooking demonstrations and use of micronutrient powder (6-24 months), Referral of severe acute malnutrition and children with infections home-based newborn care, Promotion and support for Exclusive Breastfeeding, and Community-based management of uncomplicated acute malnutrition, female education including the use of bed nets, family planning, good hygiene such as washing hands, avoidance of risky sexual behavior, and increasing the capacity of families to recognize the early danger signs of some common diseases so to as search for help sooner. The complete list of services is presented in Figure A.3. Outreach teams would provide technical support to CHWs when visiting their area. All CHWs would receive information, education, and communication (IEC) materials. CHWs would report on technical matters to the Health Posts (where available) and Health Centers and to the outreach team, and to Neighborhood Health Committees on the quality of their interaction with the community. 21. As outlined in the National Community Health Worker Strategy in Zambia, Health Centers will provide technical supervision and guidance to CHWs and neighborhood health committees (NHCs). Specifically health centers will: (i) identify challenges and solutions for CHWs and NHCs in implementing their day-to-day community activities; (ii) assist CHWs and NHCs in identifying, prioritizing and solving health issues in their communities; (iii) identifying weakness in the provision of community-based services as well as factors influencing services; (iv) ensure the collation of relevant data for the DHIS; and (v) providing mentorship to CHWs. 44 Table A.3: Disbursement linked indicators Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula DLI #1: Capacity to DLR#1.1: An updated pre-service training curriculum on 3,000,000 DLR 1.1: 450,000 Annual report implement comprehensive MNCH and nutrition for the training of nurses and midwives provided by pre-service training program has been adopted in FY 2014 and all Targeted Training DLR 1.2: MOH verified on MNCH and nutrition for Institutions have prepared their capacity building plans 1,350,000 by nurses and midwives independent strengthened DLR#1.2: At least four (4) of the Targeted Training DLR 1.3: agency Institutions have addressed the capacity gaps identified in their 1,200,000 respective Capacity Building Plans in FY 2015 DLR#1.3: All Targeted Training Institutions have addressed the capacity gaps identified in their respective Capacity Building Plans in FY 2016 DLI #2: The number of DLR#2.1: Consolidated staffing profiles for nurses and 4,000,000 DLR 2.1: 600,000 MCDMCH vacancies for nurses and midwifes in primary health facilities in Targeted Provinces and MOH data midwifes in primary health prepared in FY 2014 and training modules for the three (3) DLR 2.2: 800,000 verified by facilities in Targeted months induction in-service training on MNCH and nutrition independent Provinces filled by newly for newly recruited nurses and midwifes developed DLR 2.3: 800,000 verification recruited nurses and agency midwifes who have DLR#2.2: At least 10% of the number vacancies for nurses DLR 2.4: 800,000 completed the three (3) and midwifes in primary health facilities in Targeted Provinces month induction in-service filled by newly recruited nurses and midwifes who have DLR 2.5: training on MNCH and completed the three (3) month induction in-service training on 1,000,000 nutrition increases MNCH and nutrition in FY 2016 DLR#2.3: At least 20% of the number vacancies for nurses and midwifes in primary health facilities in Targeted Provinces filled by newly recruited nurses and midwifes who have completed the three (3) month induction in-service training on MNCH and nutrition in FY 2017 DLR#2.4: At least 30% of the number vacancies for nurses and midwifes in primary health facilities in Targeted Provinces 45 Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula filled by newly recruited nurses and midwifes who have completed the three (3) month induction in-service training on MNCH and nutrition in FY 2018 DLR#2.5: At least 40% of the number vacancies for nurses and midwifes in primary health facilities in Targeted Provinces filled by newly recruited nurses and midwifes who have completed the three (3) month induction in-service training on MNCH and nutrition in FY 2019. DLI # 3: The number of DLR# 3.1: Training modules for the continuing professional 3,000,000 DLR 3.1: 350,000 Annual report nurses and midwives in development training in MNCH and nutrition developed in FY of GNC and primary health facilities in 2015 DLR 3.2: 850,000 MCDMCH Targeted Provinces who verified by have completed the DLR# 3.2: At least 10% of the number of nurses and midwives DLR 3.3: 600,000 independent continuing professional in primary health facilities in Targeted Provinces have agency development training in completed the continuing professional development training in DLR 3.4: 600,000 MNCH and nutrition MNCH and nutrition in FY 2016 increases DLR 3.5: 600,000 DLR# 3.3: At least 20% of the number of nurses and midwives in primary health facilities in Targeted Provinces have completed the continuing professional development training in MNCH and nutrition in FY 2017 DLR# 3.4: At least 30% of the number of nurses and midwives in primary health facilities in Targeted Provinces have completed the continuing professional development training in MNCH and nutrition in FY 2018 DLR# 3.5: At least 40% of the number of nurses and midwives in primary health facilities in Targeted Provinces have completed the continuing professional development training in MNCH and nutrition in FY 2019 46 Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula DLI #4: The number of DLR#4.1: A national supply chain strategy adopted in FY 2014 4,000,000 DLR 4.1: 400,000 Health Facility primary health facilities in Survey Targeted Provinces stocked DLR#4.2: A baseline survey carried out to establish the DLR 4.2: 600,000 with all tracer drugs number of primary health facilities in the Targeted Provinces increases with all tracer drugs in FY 2015 DLR 4.3: 600,000 DLR#4.3: The number of primary health facilities in Targeted DLR 4.4: 800,000 Provinces project area stocked with all tracer drugs increases by 5% from the Baseline in FY 2016 DLR 4.5: 800,000 DLR#4.4: The number of primary health facilities in Targeted DLR 4.6: 800,000 Provinces project area stocked with all tracer drugs increases by 10% from the Baseline in FY 2017 DLR#4.5: The number of primary health facilities in Targeted Provinces project area stocked with all tracer drugs increases by 15% from the Baseline in FY 2018 DLR#4.6: The number of primary health facilities in Targeted Provinces project area stocked with all tracer drugs increases by 20% from the Baseline in FY 2019 DLI #5: Regional essential DLR#5.1: The regional essential commodities storage and 3,000,000 DLR 5.1: 300,000 MOH / commodities storage and distribution hub for Western Province established at Mongu in MCDMCH distribution hubs established FY 2014 DLR 5.2: inspection in Targeted Provinces 1,350,000 report DLR#5.2: The regional essential commodities storage and distribution hub for the North-Western Province established at DLR 5.3: Kitwe in FY 2015 1,350,000 DLR#5.3: The regional essential commodities storage and distribution hub for the Northern Province established at Kasama in FY 2016 47 Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula DLI #6: The electronic DLR# 6.1: MOH adopts an implementation plan for the 3,000,000 DLR 6.1: 300,000 Annual report Zambia Inventory Control national supply chain strategy in FY 2014 provided by System (eZICS) is piloted DLR 6.2: 450,000 MCDMCH and implemented in DLR# 6.2: The eZICS is piloted in selected Districts and verified by Targeted Provinces upgraded on the basis of the results of the pilots in FY 2015 DLR 6.3: 900,000 independent agency DLR# 6.3: The eZICS is implemented in Western and North DLR 6.4: 900,000 Western Provinces in FY 2016 DLR 6.5: 450,000 DLR# 6.4: The eZICS is implemented in Muchinga and Northern Provinces in FY 2017 DLR# 6.5: The eZICS is implemented in Luapula Province in FY 2018 DLI #7: The number of DLR#7.1: An updated community health workers strategy 2,000,000 DLR 7.1: 200,000 Health Center women registered during the adopted and disseminated in FY 2014 and first trimester of their DLR 7.2: 400,000 MCDMCH pregnancy in targeted DLR#7.2: Guidelines for the delivery of community-based records Provinces increases MNCH and nutrition services adopted in FY 2015 DLR 7.3: 500,000 DLR#7.3: The number of women registered during the first DLR 7.4: 500,000 trimester of their pregnancy in targeted Provinces increases by 5% in FY 2016 DLR 7.5: 300,000 DLR#7.4: The number of women registered during the first trimester of their pregnancy in targeted Provinces increases by DLR 7.6: 100,000 10% in FY 2017 DLR#7.5: The number of women registered during the first trimester of their pregnancy in targeted Provinces increases by 15% in FY 2018 DLR#7.6: The number of women registered during the first trimester of their pregnancy in targeted Provinces increases by 48 Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula 20% in FY 2019 DLI #8: The number of DLR#8.1: The list of CHWs, Neighborhood Health 3,000,0000 DLR 8.1: 300,000 Health Center mothers who delivered at Committees and Outreach Centers updated in FY 2014 and health facilities in Targeted DLR 8.2: 600,000 MCDMCH Provinces and who received DLR#8.2: The Recipient acquires adequate numbers of records post-natal care increases ambulances and motorcycles for facilitating patient referrals in DLR 8.3: 750,000 targeted Provinces in FY 2015 DLR 8.4: 750,000 DLR#8.3: The number of mothers who delivered at health facilities in Targeted Provinces and who received post-natal DLR 8.5: 450,000 care increases by 5% in FY 2016 DLR 8.6: 150,000 DLR#8.4: The number of mothers who delivered at health facilities in Targeted Provinces and who received post-natal care increases by 7% in FY 2017 DLR#8.5: The number of mothers who delivered at health facilities in Targeted Provinces and who received post-natal care increases by 10 % in FY 2018 DLR#8.6: The number of mothers who delivered at health facilities in Targeted Provinces and who received post-natal care increases by 15 % in FY 2019 DLI #9: The number of DLR# 9.1: Guidelines for conducting GMP monitoring 2,500,000 DLR9.1: 250,000 Health Center Outreach Centers in adopted in FY 2014 and Targeted Provinces DLR 9.2: 500,000 MCDMCH conducting GMP monitoring DLR# 9.2: Checklists and protocols for the supervision of records following national standards GMP monitoring at different service delivery levels adopted in DLR 9.3: 625,000 and guidelines increases FY 2015 DLR 9.4: 625,000 DLR# 9.3: The number of Outreach Centers in targeted Provinces conducting GMP monitoring following national DLR 9.5: 375,000 standards and guidelines increases by 10% in FY 2016 DLR 9.6: 125,000 49 Disbursement Linked Action to be Completed Amount in Disbursement Means of Indicator US$ Calculation Verification Formula DLR# 9.4: The number of Outreach Centers in Targeted Provinces conducting GMP monitoring following national standards and guidelines increases by 20% in FY 2017 DLR# 9.5: The number of Outreach Centers in Targeted Provinces conducting GMP monitoring following national standards and guidelines increases by 30% in FY 2018 DLR# 9.6: The number of Outreach Centers in targeted Provinces conducting GMP monitoring following national standards and guidelines increases by 40% in FY 2019 50 Component 2: Strengthening utilization of primary and community level MNCH and nutrition services through results based financing approaches (US$12 million IDA; US$12 million HRITF). 22. The RBF has traditionally been implemented within and through the different levels of the Zambia public health care delivery system. Over the past few years, Zambia has gained valuable experience from the on-going health facility RBF pilot, supported by the HRITF grant. An impact evaluation, scheduled for July 2014, will inform Government’s decisions on fine-tuning the RBF approach including scale-up. This will include refinement of the institutional arrangements to increase sustainability and government ownership, integration of the national decentralization process, consideration of institutional arrangements and provider payment mechanisms under the Social Protection Programme and the proposed National Social Health Insurance Scheme, and extension of the RBF to District Hospitals and community levels. This Sub-component will therefore support the expansion of the ongoing RBF pilot to targeted health facilities (health centers and district hospitals), District Medical Offices (DMOs), and the community level across the five provinces. 23. The expansion of the facility-based and community RBF will be phased to allow for the completion of the impact evaluation of the ongoing pilot and capacities to be built in new targeted districts. The expansion phase will specifically aim to mainstream RBF implementation arrangements into the Government structures. To enable this process, MOH will: (i) create a dedicated team with core skills and competencies in RBF management, monitoring and evaluation, including financial management; (ii) expand the platform for dialogue and joint financing of RBF expansion; and (iii) align RBF with other health service purchasing arrangements in Zambia, particularly the National Social Health Insurance. Figure A.4 shows the proposed RBF model and funding flows. The Project Implementation Manual (PIM), currently being developed by a joint MOH/MCDMCH team, will reflect the institutional arrangements for this mainstreaming and coordination opportunities. 24. As highlighted in Figure A.4, the MOH at national level will be the fund holder, while the Provincial RBF Steering Committees in the five provinces will be the verifier and purchaser of services delivered by the DMOs and District Hospitals on a quarterly basis. On the other hand, the District RBF Steering Committees in the respective districts will be the verifier and purchaser of health services delivered at health centers and community levels. The health centers and Community Based Organizations (CBOs) will be the providers of health services. Quantity audits and quality assessments at health centers will be conducted by DMOs and district hospitals, respectively. At district hospitals, quantity audits and quality assessments will be conducted by Provincial Medical Offices, and Provincial (General) Hospitals, respectively. Health Centers will carry out supervision in communities implementing RBF with the assistance of DMOs. 51 Figure A.4: RBF model and flow of funds * Government research / training institution or University (outside the Ministry of Health and Ministry of Community Development Mother and Child Health) will be eligible to compete. for the external verification assignment. 25. In addition to the internal verification process, an independent external verification agent will be contracted to conduct periodic external verification at all levels (community, health centers, district hospitals, DMOs, and provinces). See sub-component 3.3. The main role of the external verification agent will be to independently verify the accuracy of reported data, patient tracing, and quality of health services provided. ICT solutions including on-line entry of information and cloud computing to improve transparency will allow faster processing and facilitate continuous monitoring. Government research / training institution or University (outside the Ministry of Health and Ministry of Community Development Mother and Child Health) will be eligible to compete for the external verification assignment. The Project Implementation Manual will provide more details on the means of verification. 52 26. Sub component 2.1 Expand results based financing at primary facility level (US$10 million IDA; US$10 million HRITF). 27. RBF will be implemented at health centers, District Hospitals, and DMOs in selected districts in the five targeted provinces in January 2015 after completion of the impact evaluation. From August to December 2014, the RBF will only be implemented in five districts 31 currently on the RBF pilot in the five targeted provinces. From January 2015, the revised model (Figure A.4) and new Project Implementation Manual will take effect. 28. Performance-based payments at health centers and hospitals will be conditional upon the attainment of pre-agreed MNCH and nutrition indicators on quantity and quality so that there are improvements in both utilization and quality of health services provided. The idea is to embed quantity with quality, and thus, the quality measure will add conditionality to the RBF payment. The higher the quality attained, the more the health centers and hospitals will earn and vice versa. In this manner, the quality checklist will have a system strengthening effect by necessitating all health facilities on RBF to adhere to national norms and guidelines on both structural and clinical quality improvement. Further bonuses for facility remoteness will also be provided. 29. Health centers will be contracted by the DMOs to deliver a clearly articulated package of MNCH and Nutrition services at agreed prices. The quantity of services delivered at each health center will be verified prior to making payments. Each RBF health center will report quarterly on the delivery of agreed outputs through a standard invoice. The quantities reported will be initially verified by the DMOs. The DMO will also contract the District Hospital to verify quality of service delivery at health centers. The DMO will then compile data on the quantity and quality performance for submission to the District RBF Steering Committee for further verification. Based on performance data (both quantity and quality), the District RBF Steering Committees will recommend the quarterly amounts to be paid to each RBF health center. 30. In Zambia, district hospitals have an important role as apex institutions for referrals for higher levels of MNCH and nutrition care from health centers. The district hospital RBF initiative aims to strengthen the referral system and quality of care by incentivizing payments for the delivery of a complementary package of MNCH and nutrition services such as assisted deliveries, caesarean sections, severe malnutrition, cerebral malaria etc. District hospitals will be contracted by Provincial Medical Offices (PMOs) to deliver the stipulated package of MNCH and Nutrition services. Similar to the health center RBF, costs of services enumerated on checklists would be reimbursed conditional on the quality of care. The basis for remuneration will be informed by the costs estimated through the hospital records. Internal verification for quantity and quality will be conducted by the Provincial Medical Offices and Provincial (General) hospitals, respectively. Verified invoices will then be submitted to the Provincial RBF Steering Committee for further verification and approval for payment. 31 The five districts currently on RBF in the five targeted provinces are Mwense, Mporokoso, Isoka, Mufumbwe, and Senanga. The current RBF Model will be maintained in these districts from August to December 2014. 53 31. Once verification and purchasing are completed, money will be disbursed directly from the MOH headquarters to the bank accounts of the health centers and district hospitals. All the health facilities (health centers and hospitals) will be expected to use a maximum of 50% of the money for staff motivation bonuses while at least 50% of the money will be used for recurrent operational activities (maintenance and repair, drugs and consumables, outreach and other quality enhancement measures, cleaning materials, stationery; transport, recruitment of retired nurses and midwives on contract, etc.). 32. To enhance health systems performance at district management level, DMOs will be paid based on results against a graded performance management framework. The performance management framework will measure the DMO’s performance against: (i) undertaking quality assessments, (ii) development and application of standard protocols, guidelines and quality checklists, (iii) supervision and on-site mentorship, (iv) functioning of the referral system, (v) maintenance of equipment, (vii) human resource management and optimal distribution, and (vi) implementation of medical waste management guidelines. Provincial RBF Steering Committees will recommend the amounts to be paid to each DMO on a quarterly basis according to the level of achievement. 33. The Project Implementation Manual will provide a detailed description on the operational modalities and reporting arrangements, including the performance assessment framework, quality checklist, indicators on quantity and quality that will be used to trigger payments, internal and external verification, and sanction process. Sub-component 2.2 Introduce results based approaches at community level (US$2 million IDA; US$2 million HRITF) 34. This is premised on the theory that demand exists for MNCH and nutrition at community levels but the situation requires integrated support across the building blocks of the health system. Also, given the Zambian country context, communities play an essential role in demanding and delivering quality services. Trained CHWs and other health cadres at the community level can play a great role in stimulating community level demand, and delivering basic services. This sub-component will, therefore, introduce the results-based approach at the community level aimed at improving the referral system by strengthening the linkage of the communities to health facilities, boosting service delivery at community level, increasing accountability of CHWs, and strengthening the role of Community-Based Organization in monitoring and evaluation of MNCH services. This will be achieved by revitalizing and strengthening the roles of community-based organizations32 in: (i) Early registration of women of reproductive; (ii) Provision of a complete antenatal care and delivery package (e.g. iron tablets supplementation, malaria IPT, distribution of bed nets, assisted deliveries, referrals etc.); (iii) Counseling of women of reproductive age, follow up home visits, and provision of commodities (e.g. nutrition and family planning); (iv) Conducting outreach activities to improve management of childhood illnesses at household level; (v) Mobilization of community members for growth monitoring, immunization of children, and nutrition education, and (vi) Submission of timely 32 Examples are Safe Motherhood Action Groups (SMAGs), Neighborhood Health Committees (NHCs), Health Center Committees (HCCs), Community Welfare Assistance Schemes (CWACs) etc. 54 and quality data and reports on pre-agreed MNCH and nutrition indicators. The community level RBF will also align the RBF with the national decentralization process, and other health service purchasing arrangements in Zambia, particularly the Social Protection Programme, and the proposed National Social Health Insurance scheme. 35. To be able to achieve the above, health centers will enter into performance contracts with community-based organizations to deliver a defined package of community level MNCH and nutrition services, and to conduct monitoring and evaluation activities. Health Centers will carry out supervision in communities implementing RBF with the assistance of DMOs. Results will be counter verified on an annual basis through independent organizations. The community approach will be implemented in a phased manner in order to strengthen the design and learn lessons with a potential for scaling-up. A pre-pilot will be implemented in one district to design the approach, with an additional grant from HRITF. The first phase of implementation of the community RBF pilot will be overlaid in the existing facility intervention districts 36. To support learning and inform the planned introduction of social health insurance, with an additional World Bank-executed US$1.5 million HRITF grant, a three arm Impact Evaluation testing three different approaches: (i) vouchers, (ii) conditional cash transfers linked to the current social cash transfer program, and (iii) social health insurance will be piloted in nine districts from January 2015.To allow proper design of the pilot and ensure it is rooted within the Zambian context, a pre-pilot will be implemented in one district, with an additional recipient executed US$0.45 million HRITF grant. Lessons from the community level impact evaluation will be used to guide future expansions. The PIM will provide a detailed description of the operational modalities and reporting arrangements. Component 3: Strengthening project management and policy analysis (US$12.5 million IDA; US$3 million HRITF) 37. The objectives of this Component are to strengthen project management, implementation, monitoring and evaluation; provide technical assistance for evidence-based policy analysis and health financing innovations, and appoint an independent verification agent to verify the Project results Sub-component 3.1: Project management and implementation, monitoring and evaluation (US$6.5 million IDA). 38. This sub-component will strengthen project implementation capacity of MOH and MCDMCH with particular attention to the Province and District levels. Support will include: (i) addressing technical gaps and building capacity for the day-to-day administration of project activities (monitoring resource use, procurement processing activities, administering withdrawal and disbursement procedures, consolidating the financial management aspects of project implementation, project reporting; as well as coordinating all relevant sector ministries, Government departments, health professional training institutions and associations, civil society organizations and the private sector); and (ii) strengthening the HMIS, roll out and integration of community level MNCH and nutrition information into DHIS-2. This sub-component will support: (a) Development and implementation of the community health and nutrition information system and its integration into the District Health Information System Version 2 (DHIS-2); (b) 55 roll-out of the DHIS-2 through the provision of material (revision of HMIS tools, provision of ICT equipment to health facilities and districts); and (c) capacity building in data management, analysis, and use for decision making for improved service delivery at the various levels. This will require training of trainers, service providers, and data management specialists; and support to data audit exercises. Sub-component 3.2: Support evidence-based policy analysis and health financing innovations (US$4 million IDA) 39. This sub-component will support GRZ's efforts to produce evidence-based analytical studies in health and nutrition, including health financing, planning and budgeting, human resources for health, and drugs and medical supplies. The actual studies to be conducted will be decided by the Zambian Government annually. The overall focus of these studies will be to determine the performance of the health system in light of the intermediate performance measures such as access, efficiency, equity, and quality, and to propose remedial actions towards the attainment of the health systems goals (health status, citizen satisfaction, and financial protection). The evidence and recommendations will be used to inform the development of policies, medium and long term strategic plans, and annual plans and budgets. Secondly, training and technical support will be provided to mid-level health managers aimed at enhancing their analytical and operational knowledge in health financing, planning and budgeting. This will be achieved through a combination of approaches including peer-to-peer learning through existing Technical Working Groups, international discussion through face-to-face, video, web, and audio seminars; and through short-term courses. Sub-component 3.3: Institute independent verification arrangements (US$2 million IDA; US$3 million HRITF. 40. For results-based financing as well as disbursement linked indicators, payments are made based on an independent verification that the agreed-upon results have been attained. The verification process has to ensure the accuracy and consistency of reporting on qualitative and quantitative performance indicators before funding is released. This sub-component will support the design, setting up of the verification mechanism for all results-based activities under the Project as well as costs to be incurred by the selected independent verification entity in carrying out this responsibility. Baseline, midline and endline surveys for the Project will also be financed out of this sub-component. 56 Annex 3: Implementation Arrangements A. Project Administration Mechanisms 1. The Project will be implemented by two ministries - the Ministry of Health (MOH), and the Ministry of Community Development Mother and Child Health (MCDMCH). Within the components and sub-components of the Project, each Ministry will be given the responsibility of executing specified activities in line with the gazetted portfolio functions of each Ministry. The Permanent Secretaries from the two ministries will both be responsible for the execution and effective performance of the Project activities assigned to their Ministries including the budget. In line with the Public Finance Act No. 15 of 2004, the two Permanent Secretaries will be the “controlling officers” for the Project. As Controlling Officers, the Permanent Secretaries will be the chief accounting officers in respect of all the monies received or disbursed, and all the goods and services received under the Project. This implies that they will ensure that project resources are used for the intended purposes and accounted for. 2. While the direct supervision of all Directorates and officials under the respective Ministries will lie with the Permanent Secretaries, the overall coordination of the Project will be the responsibility of the Directorates of Policy and Planning in the two Ministries. Each Ministry will designate its Director of Planning to provide overall coordination during the implementation process. Actual implementation of project activities will be the responsibility of a number of designated Directorates and Units from the two Ministries. In light of this, all designated heads of Directorates and Units will be responsible for project implementation. Each Directorate or Unit may appoint focal point persons to manage specific activities in line with its mandate. See the overall project administration arrangements in Figure A.5 below. 3. To effectively coordinate the various activities under the Project, a Joint Management Team (JMT) will be established and will be co-chaired by the Permanent Secretaries of the MOH and the MCDMCH. Membership to the JMT will comprise Directors from the two ministries. The JMT will meet monthly at a predetermined date and time. The role of the JMT will be to oversee the implementation of the Project by the two Ministries which will present and discuss data and information related to activity level, review existing annual plans, identify challenges or difficulties in implementing project responsibilities, follow up on previous decisions, and resolve any issues as they arise. Given that the DLI approach is being introduced under this project, the JMT will follow the DLI performances with the intention to identify early and then mitigate any problems, and will participate in joint supervision missions. 4. The JMT will be organized under the Zambia Health SWAp which has been in existence since 1993, and of which the World Bank is one of the founding and key members. The Zambia Health SWAp is consistent with the principles of the Paris Declaration on Aid Effectiveness (2005), the International Health Partnerships (IHP+), Accra Agenda for Action (2008), and the 2011 Bussan Partnership Agreement. Having re-affirmed its commitment to the Zambia Health SWAp by signing the 2013 Memorandum of Understanding (MoU), the World Bank will ensure that project implementation is consistent with the MoU. This includes the use of government systems for making financial disbursements, accounting, procurement, implementation, and reporting. Further, it will be the responsibility of the JMT to provide periodic reports to the 57 Senior Management of the MOH and MCDMCH as well as the MNCH and Nutrition Inter- Agency Coordinating Committee (NICC). This arrangement will ensure coordination and harmonization of policy proposals and decisions which affect the implementation of the Project specifically and the health sector generally. Figure A.5: Project Implementation mechanisms 5. The table A.4 below provides additional details on how each Component and Sub-component will be implemented: 58 Table A.4: Detailed Distribution of project components by implementing agencies Project components and sub-components Targeted Province Responsible Implementing Ministry (or Directorate Entity) Component 1: Strengthening capacity for primary and community level MNCH and nutrition services Sub-component 1.1: Enhance training capacity Western, North- MOH, Nursing Directorates of Human and standards for nursing and midwifery Western, Luapula, & Midwifery Resources & Northern, Schools, GNC, Administration Muchinga MCDMCH Sub-component 1.2: Improve supply chain Western, North- MOH, MSL Directorate of Clinical systems and availability of essential commodities Western, Luapula, Care & Diagnostic Northern, Services Muchinga Sub-component 1.3: Improve referral system and Western, North- MCDMCH Directorate of Mother & linkages across levels of care Western, Luapula, Child Health; Department Northern, of Community Muchinga Development; Department of Social Welfare Component 2: Strengthening utilization of primary and community level MNCH and nutrition services through results based financing approaches Sub-component 2.1 Expand results based Western, North- MOH Directorate of Policy & financing at primary facility level Western, Luapula, Planning; Directorate of Northern, Disease Control, Muchinga Surveillance & Research; Directorate of Technical Support Services MCDMCH Directorate of Planning; Directorate of Mother & Child Health; Department of Community Development; Department of Social Welfare Sub-component 2.2 Introduce results based Western, North- MOH Directorate of Policy & approaches at community level Western, Luapula, Planning; Directorate of Northern, Disease Control, Muchinga Surveillance & Research; Directorate of Technical Support Services MCDMCH Directorate of Planning; Directorate of Mother & Child Health; Department of Community Development; Department of Social Welfare Component 3: Strengthening project management and policy analysis Sub-component 3.1: Project management and Nation-wide MOH Directorate of Policy & implementation, monitoring and evaluation Planning MCDMCH Directorate of Planning Sub-component 3.2: Support evidence-based Nation-wide MOH Directorate of Policy & policy analysis and health financing innovations Planning MCDMCH Directorate of Planning 59 Project components and sub-components Targeted Province Responsible Implementing Ministry (or Directorate Entity) Sub-component 3.3: Institute independent MOH Directorate of Policy & verification arrangements 33 Planning; Directorate of Disease Control, Surveillance & Research; Directorate of Technical Support Services MCDMCH Directorate of Planning; Directorate of Mother & Child Health; Department of Community Development; Department of Social Welfare B. Financial Management Assessment 6. The World Bank Financial Management (FM) team conducted FM assessments of MOH and MCDMCH which will be implementing the Project. The objective of the FM assessments was to determine whether the FM arrangements: (i) are capable of correctly and completely recording all transactions and balances relating to the Project; (ii) will facilitate the preparation of regular, accurate, reliable and timely financial statements; (iii) will safeguard the Project entity assets; and (iv) will be subjected to auditing arrangements acceptable to the World Bank. The assessment complied with the Financial Management Manual for the World Bank-Financed Investment Operations that became effective on March 1, 2010, as well as with AFTFM Financial Management Assessment and Risk Rating Principles. 7. The main MOH capacity constraints are that the Project module of IFMIS is not functioning, the audit unit concentrates on pre-audits instead of carrying out risk-based auditing, has weak control environment and lacks or fails to make follow-up on outstanding audit queries. In the case of MCDMCH, the capacity constraints include inadequately qualified staff with little or no Bank experience, the IFMIS is not connected, there are no qualified staffs in the audit unit, audit committee not functional, weak internal control environment and lack of follow-up of audit queries. At the national level, the following constraints were identified: inadequate supervision by GRZ controlling officers; poor accountability culture and inadequately funded watchdogs; internal audit unit lacks adequate resources to carry out their work effectively; and weak audit committee to follow up the recommendations of both internal and external audit reports. As a result of the FM capacity constraints, the Project will require from the MOH: (i) agreement on the format, content, and timing of the Interim Financial Report for the Project with the Bank, and (ii) agreement on the audit terms of reference. In the case of MCDMCH: (i) training of accountants in World Bank FM and disbursement procedures, (ii) the internal audit function to be strengthened through training including risk-based internal auditing, (iii) functionalization of the audit committee, and (iv) a FM section in the PIM. 33 Selection of the independent verification agent will be coordinated by MOH, MCDMCH, MSL, and GNC, guided by pre-determined Terms of References 60 8. The conclusion of the assessment is that the FM arrangements in place meet the World Bank’s minimum requirements under OP/BP10.00, and therefore are adequate to provide, with reasonable assurance, accurate and timely information on the status of the Project required by the World Bank. The overall FM residual risk rating of the Project is Substantial for both MOH and MCDMCH. FM supervision will be conducted based on the risk rating of each entity. Two on- site supervisions per year will be carried out for MOH and quarterly on-site supervisions for MCDMCH until capacity is built. Other forms of supervision will include desks reviews of IFRs and audit reports. Table A.5: Financial management action plan Action Date due by Responsible 1 Agree on Interim Financial Report format Agreed at negotiations MOH, with the Word Bank MCDMCH and World Bank 2. Agree on audit Terms of Reference with Agreed at negotiations MOH, the World Bank MCDMCH and World Bank 3 Finalize with World Bank the FM By effectiveness MOH, Chapter of the Project Implementation MCDMCH Manual) 4 Train Accountants and planning officers During project implementation MOH, in World Bank Financial Management and MCDMCH Disbursement Procedures 5 MCDMCH internal audit function to be During project implementation MCDMCH strengthened through training in order to effectively follow up internal and external audit issues to ensure they are resolved. 6 Make MCDMCH audit committee December 30, 2014 MCDMCH functional 7 Provide training in risk-based internal During project implementation Ministry of auditing to strengthen the internal audit Finance function. Financial Management 9. Budgeting arrangements: The budget preparation and monitoring will follow national procedures. Both ministries will prepare Annual Work Plans (AWPs), which will be the basis for budget preparation. GRZ’s current budget preparation process will be followed. The activity budgets will be prepared by MOH and MCDMCH using existing national budget classifications of programs and subprograms linked to the IFMIS Chart of Accounts, with the Ministry's Project activities separately identified. The approval process will follow GRZ procedures and will be expanded in the Project Financial Procedures Manuals (chapters in the PIM). Capacity within MCDMCH to monitor project budgets in compliance with World Bank FM procedures is weak, and therefore Project staff will receive training from the World Bank Financial Management Specialist to strengthen their skills. 61 10. Accounting arrangements: (i) Staffing: MOH has two dedicated accountants within the accounting department who are responsible for donor funding. The staffing arrangements are adequate, and the Bank will train these accounting staff in World Bank Financial Management and Disbursement Procedures, including the DLI procedures, before as part of negotiation. (ii) Financial management manuals: MCDMCH will develop a project FM Procedures Manual as part of the PIM that will document the accounting policies and procedures to be used for the Project, and a substantially acceptable draft shall be ready before negotiation. MOH accounting procedures are spelled out in the organization’s policies and procedures, which were approved by the Board in May 2012. (iii) Information systems: Both MOH and MCDMCH will use Government’s IFMIS to prepare Project accounts. (iv) Accounting basis: Both MOH and MCDMCH will use cash basis accounting, in line with International Public Sector Accounting Standards. 11. Internal control and internal auditing arrangements: (i) Internal auditing: MOH is serviced by the Internal Audit Unit with positions filled up to provincial level only. Positions at district level have not been filled as all the districts have been transferred to MCDMCH. However, internal audit work is concentrated on pre-auditing payment transactions. The internal auditing function is weak and will need to be strengthened through training of the Internal Audit Unit and the Audit Committee to give them the capacity to follow up and resolve both internal and external auditing issues. The training should be completed within six months after effectiveness. Although MCDMCH has an internal audit unit; it is understaffed with three staff only. The audit committee is also dormant. Therefore, both the internal audit unit and the audit committee will need strengthening through staffing, training. (ii) Internal control systems: MOH will process transactions using the rules and regulations specified under the existing Finance Act 2004 and Financial Regulations 2006. While the current accounting regulations are adequate to assure a strong control environment, risks identified include lack of compliance and enforcement; and to mitigate these risks, the FM procedure manual will have to be revised to strengthen control measures. Although MCDMCH has adequate staffing, there are only two qualified accountants (Principal Accountant and Accountant) with little World Bank project accounting experience, therefore, mitigate these risks and ensure compliance with World Bank procedures, a financial management procedures module acceptable to the World Bank will be produced as part of the Project Implementation Manual to provide guidance to staff. The module will document policies and procedures that are specific to the Project and will identify expenditures that are ineligible for financing under the Project. 62 Funds flow, disbursement and reporting arrangements 12. Funds flow: Both MOH and MCDMCH will use a system under which funds will flow from the World Bank to a Designated Account (DA) or a Holding Account, denominated in United States Dollars at the BOZ, to be operated by the Project. The flow of funds is depicted below. At the time of project execution, both ministries on behalf of the Project will transfer funds from the DA through Control 99 (treasury account) to their respective ministerial Control Accounts held at BOZ. The funding slips are then issued to the ministries showing the Kwacha equivalent that has been transferred. Once funds are transferred to the ministerial control accounts, the funds will then be transferred to the Project’s sub-accounts held at BOZ. From the sub-accounts, all payments would be made through the mirror accounts (zero balance) held at a commercial bank. All the bank accounts that will be involved in the flow of funds will be reconciled on a monthly basis, and all non-reconciled items will be dealt with expeditiously. Figure A.6: Flow of funds World Bank Bank of Zambia MOH MCDMCH DA in USD DA in USD Bank of Zambia Treasury Control 99 Account in ZMW Bank of Zambia Bank of Zambia MOH sub control a/c in ZMW MCDMCH sub control a/c in ZMW Bank of Zambia Bank of Zambia MOH project operational a/c MCDMCH project operational a/c Commercial Bank Commercial Bank MCDMCH sub control mirror a/c in MOH sub control mirror a/c in ZMW ZMW ZMW denominated payments ZMW denominated payments to various suppliers to various suppliers 13. Disbursement arrangements: Both MOH and MCDMCH will use two disbursement methods: (i) Disbursement Linked Indicators (DLIs) under Component 1 and (ii) the transaction- based method of disbursements (Statements of Expenditure – SOEs) under Component 2 and 3. Other methods of disbursing to the Project will include reimbursements, direct payment, and use of special commitments (e.g., letters of credit). Further disbursement details will be provided in the disbursement letter. The possibility of retroactive financing disbursements will be considered for project activities as long as the appropriate World Bank procurement and financial processes and documentation are adhered to. 63 14. Disbursement linked indicators method under Component 1: In the first year, both MOH and MCDMCH will receive DLI-zero grants as reflected in the DLI Matrices (Annex 2). At the end of each year (year 2-5), both MOH and MCDMCH will prepare a report justifying the correspondence value of each DLI as agreed with the Bank in the DLI matrices. This report will be supported by a financial report on the Eligible Expenditure Programs (EEPs) from the Ministry of Finance based on the Audited Financial Statement. The EEPs will be agreed with both Ministries during negotiation. This financial report will be audited (audited financial statements take up to 9 months to conclude). The JMT through an Independent Verifier will verify the legitimacy of the report and whether the targets have been met by comparing the report to actual results on the ground. Payments of DLIs will be in proportion to the targets met, and the unutilized funds will be carried forward. 15. Financial reporting arrangements: Both MOH and MCDMCH will submit quarterly IFRs, in a format agreed with the World Bank, within 45 days of the end of each calendar quarter reported on. These quarterly reports will include: (i) statement of sources and uses of funds, and (ii) detailed statement of uses of funds by project activity/component. All implementing entities will prepare annual accounts within three months after the end of the financial year in accordance with accounting standards acceptable to the World Bank. All implementing entities will be responsible for ensuring their reports are audited and submitted to the World Bank within six months after the end of the financial year. 16. Auditing arrangements: The Project audits will be audited by the Office of the Auditor General (OAG), who is the Supreme Audit Institution in Zambia, who may contract acceptable private audit firms to the World Bank to conduct the Project audits on their behalf. All audits should be carried out in accordance with International Standards on Auditing. All Terms of Reference for audits of the implementing entities should be agreed by negotiations. Audit reports together with management letters should be submitted to the World Bank within six months after effectiveness. Audit reports will be publically disclosed by the World Bank in accordance with the World Bank disclosure policy. C. Procurement Risk Assessment 17. Procurement risk assessments of MOH and MCDMCH were separately conducted in September 2013 using the Bank’s Procurement Risk Assessment Management System (P- RAMS) and the risks were found to be Substantial in both cases. Mitigation measures have been identified and when implemented, could reduce the overall risk to Moderate. 18. Major risks identified as substantial include: (i) lack of accountability for procurement decisions; (ii) staff with limited experience to carry out procurements under World Bank procedures using competitive methods, (iii) inadequate bidder’s complaints mechanism, (iv) absence/inadequate due diligence check on bidders; and (v) inadequate contract management arrangements. Based on the Procurement Risk Assessment, the main risks and risk mitigation measures are provided in the table below. 64 Table A.6: Summary assessment of procurement capacity, risks and mitigation measures (a) MOH Issues Risks Mitigation Measures Date Due by Accountability Inadequate linkage between Procurement chapter of the By effectiveness for technical and procurement staff PIM which detail roles and procurement leading to inefficient responsibilities of all players decisions procurement system. in the procurement system Staffing Although staff levels are Agree on, and implement a During project adequate, there is lack of training (Internal and implementation mentorship and on the job External) and mentorship capacity building, lack of program based on identified assignment of staff to specific gaps and MOH needs procurements Review of No effective Bidder complaints Complaints handling By effectiveness Procurement mechanism - could erode mechanism included in the Decisions and bidders’ confidence and reduce procurement manual and participation publicized Resolution of Complaints Evaluation and Due diligence is not routinely Routinely carry out due Immediate Award of conducted on the winning bidder diligence on the winning Contract to ensure that it a legitimate, bidder to ensure that it is reputable, technically capable legitimate, reputable, company technically capable (b) MCDMCH Issues Risks Mitigation Measures Date Due by Accountability Relatively low experience and Develop a Procurement By effectiveness for Procurement capacity in implementing Bank chapter of the PIM to detail Decisions financed projects; No manual roles and responsibilities of in place outlining new all the players in the Institutional arrangements, procurement system accountabilities and internal including internal governance governance structures Staffing Inadequate staff with Increase key procurement During project inadequate experience in Bank staff (consultant options) and implementation financed operations; an aggressive training and recruitment freeze – No mentorship program procurement experience in competitive high value and complex procurements Review of No effective complaints Include complaints handling By effectiveness Procurement mechanism - could erode mechanism in the Decisions and bidder confidence and reduce procurement manual and participation widely disseminate Resolution of Complaints Evaluation and Due diligence is not routinely Routinely carry out due Immediate and throughout Award of conducted on the winning diligence on the winning the life of the Project contract bidder to ensure that it a bidder to ensure that it is legitimate, reputable, legitimate, reputable, technically capable company technically capable 65 Issues Risks Mitigation Measures Date Due by Contract Absence/inadequate procedures Include in the Manual Immediately and Management to monitor deliverables – receipt, inspection and throughout the life of the and quantity, quality, timeliness monitoring procedure to Project Administration and inventory control ensure compliance with the contract provisions 19. Procurement manual (chapter of the PIM): Procurement arrangements will be both those which are standard World Bank lending for goods and services and GRZ procurement systems for the DLI approach. Appropriate clarity of accountability over procurement, record keeping, and frequency and scope of prior and post review will be elaborated in the PIM procurement module and in the procurement plans. The procurement modules will be prepared, reviewed during negotiations and finalized within three (3) months of project effectiveness, to be ready for project implementation. Other than for Component 1 which will disburse against Eligible Expenditures drawn from annual GRZ audited statements, the procurement modules will address the needs of the various implementation entities at national level MOH, MCDMCH, MSL), as well as the needs and procedures for procurement at decentralized levels (Districts, Training Institutions and Community levels). The procurement modules will outline the identified risks and provide risk mitigation actions. It will cover the legal and regulatory framework, roles and responsibilities of the institutions (including that of the Coordinating Committee) and staff involved in procurement, internal and external controls (including but not limited to complaints mechanism, due diligence checks) and quality assurance checks or systems, approval systems and accountability, and contracts registration. It will spell out the roles and responsibilities of various players in contract management, based on both Government regulations and as required for prior review of IDA contracts. 20. Procurement decentralization: Since January 1, 2013, all procuring entities are carrying out procurement in a decentralized environment. This means that the Zambia Public Procurement Agency (ZPPA) is no longer involved in reviewing bidding documents and bid evaluation and contract award recommendations except those procured under direct contracting (Goods and Works) and Single Sourcing for consulting assignments. All procurement activities are being carried out internally by the procuring entities using their own institutional arrangements, controls and quality checks, without ZPPA participation. ZPPA is in the process of transforming itself into a regulatory and oversight body for public procurement in Zambia. 21. Procurement Post Reviews (PPRs) and Independent Post Reviews (IPRs) by the World Bank. Based on the assessed agency implementation risk for procurement, which is substantial, the World Bank will carry out PPRs or IPRs for all contracts that will be based on the procurement plan not having been subject of prior review by the World Bank using a sample of 15 percent. Based on continuing assessment of risk and the success of risk mitigation measures implemented, the sample size will be reduced as risk mitigation measures are successfully implemented. Moderate risk represents 10 percent and Low risk 5 percent. These changes will be communicated to the respective Ministries as outcomes of the PPR / IPR exercise, which also could result in the revisions of the prior review and National Competitive Bidding thresholds as applicable. The review thresholds are shown in Table A.7 below. 66 Table A.7: Prior review and procurement method thresholds – Zambia Expenditure Contract Value Threshold For Contracts Subject to Procurement Method Category use of Method (US$) Prior Review (US$) 1. Works ICB(Works/Supply & Installation) ≥ 10,000,000 All contracts NCB ≥ 200,000 - <10,000,000 As in procurement plan Shopping <200,000 None Direct Contracting All values All contracts Community Participation All values As in Procurement Plan Procedures 2. Goods ICB ≥ 2,000,000 All contracts NCB ≥ 200,000 - <2,000,000 As in procurement plan Shopping <200,000 (motor vehicles only) None Shopping <100,000 (rest not motor vehicles) None Direct Contracting All values All contracts Procurement from UN Agencies All values None Community Participation All values As in Procurement Plan Procedures ≥ 200,000 QCBS, QBS ≥ 300,000 (Engineering & All contracts 3. Consulting Contract Management only) Firms CQS, LCS, QBS, FBS <200,000 As in procurement plan SSS All values All Contracts Competitive selection ≥ 100,000 All contracts 4. Individual Consultants <100,000 ? None? (IC) IC Single Source Selection All values All contracts NOTE: Contracts selected on basis of CQS should not exceed US$200,000 equivalent. This same value will constitute the limit up to which a short list may comprise entirely national firms. 22. Applicable legal and regulatory framework for National Competitive Bidding: The procurement procedure to be followed for National Competitive Bidding (“NCB”) shall be the open bidding procedure set forth in the Public Procurement Act, 2008, Act. No.12 of 2008, as amended by the Public Procurement (Amendment) Act, 2011, Act No. 15 of 2011 (the “PPA”), and the Public Procurement Regulations, 2011, Statutory Instrument No. 63 of 2011 (the “Regulations”); provided, however, that such procedure shall be subject to the provisions of Section I and Paragraphs 3.3 and 3.4 of Section III, and Appendix 1 of the “Guidelines for Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” (January 2011) (the “Procurement Guidelines”), and the additional provisions in the following paragraphs: a) Eligibility: Eligibility to participate in a procurement process and to be awarded an IDA- financed contract shall be as defined under Section I of the Procurement Guidelines; accordingly, no bidder or potential bidder shall be declared ineligible for contracts financed by IDA for reasons other than those provided in Section I of the Procurement Guidelines. No restriction based on nationality of bidders and/or origin of goods shall apply, and foreign bidders shall be allowed to participate in NCB without application of restrictive conditions, such as, but not limited to, mandatory partnering or subcontracting with national entities. 67 b) Domestic preference: No margins of preference of any sort shall be applied in the bid evaluation. c) Bidding documents: Procuring entities shall use bidding documents acceptable to IDA. d) Bid validity: An extension of bid validity, if justified by exceptional circumstances, may be requested in accordance with Appendix 1 of the Procurement Guidelines. A corresponding extension of any bid guarantee shall be required in all cases of extension of bid validity. A bidder may refuse a request for extension of bid validity without forfeiting its bid guarantee. e) Qualification: Qualification criteria shall be clearly specified in the bidding documents. All criteria so specified, and only such specified criteria, shall be used to determine whether a bidder is qualified. Qualification shall be assessed on a “pass or fail” basis, and merit points shall not be used. Such assessment shall be based entirely upon the bidder’s or prospective bidder’s capability and resources to effectively perform the contract, taking into account objective and measurable factors, including: (i) relevant general and specific experience, and satisfactory past performance and successful completion of similar contracts over a given period; (ii) financial position; and where relevant (ii) capability of construction and/or manufacturing facilities. Prequalification procedures and documents acceptable to IDA shall be used for large, complex and/or specialized works. Verification of the information upon which a bidder was prequalified, including current commitments, shall be carried out at the time of contract award, along with the bidder’s capability with respect to personnel and equipment. Where pre-qualification is not used, the qualification of the bidder who is recommended for award of contract shall be assessed by post-qualification, applying the qualification criteria stated in the bidding documents. f) Bid evaluation: All bid evaluation criteria other than price shall be quantifiable in monetary terms. Merit points shall not be used, and no minimum point or percentage value shall be assigned to the evaluation criteria or significance of price in bid evaluation. No negotiations shall be permitted. g) Guarantees: Guarantees shall be in the format, shall have the period of validity and shall be submitted when and as specified in the bidding documents. h) Cost estimates: Detailed cost estimates shall be confidential and shall not be disclosed to prospective bidders. No bids shall be rejected on the basis of comparison with the cost estimates without IDA’s prior written concurrence. i) Rejection of bids and re-bidding: No bid shall be rejected solely because it falls outside of a predetermined price range or exceeds the estimated cost. All bids (or the sole bid if only one bid is received) shall not be rejected, the procurement process shall not be cancelled, and new bids shall not be solicited without IDA’s prior written concurrence. j) Fraud and corruption: In accordance with the Procurement Guidelines, each bidding document and contract shall include provisions stating IDA’s policy to sanction firms or individuals found to have engaged in fraud and corruption as set forth in the Procurement Guidelines. k) Inspection and audit rights: In accordance with the Procurement Guidelines, each bidding document and contract shall include provisions stating IDA’s policy with respect to inspection and audit of accounts, records and other documents relating to the submission of bids and contract performance. 68 23. Procurement plan: A draft Project Procurement Plan for the first 18 months was presented at negotiations and agreed to be finalized before Board submission. The plan will be updated as required at least once a year throughout the life of the Project or as required to reflect project implementation needs and improvements in institutional capacity. Given the different facets of the procurement for the Project, the Bank will provide intensive implementation support during missions, annual reviews, including annual post-procurement reviews. Procurement arrangements 24. Goods, Non-Consulting Services and Works: Particular methods of procurement of goods, non-consulting services and works (other than for Component 1) are as follows: (a) International Competitive Bidding: Except as otherwise provided in the next paragraph, goods and works shall be procured under contracts awarded on the basis of International Competitive Bidding (ICB); (b) Other methods of procurement of goods and works. The following list specifies the methods of procurement, other than International Competitive Bidding, which may be used for goods and works. The Procurement Plan shall specify the circumstances under which such methods may be used. (i) National Competitive Bidding, (ii) Shopping, (iii) UN Agencies, (iv) Community Participation, and (v) Direct Contracting. 25. Schedule for goods and works: Procurement of works: The Project will not finance civil works. Under Components 2 and 3 only rehabilitation and fixtures to expand, inter alia health waste management, mother waiting homes, or health supply storage capacity. It is unlikely there will be any International Competitive Bidding (ICB) under works and National Competitive Bidding (NCB) will follow Zambia Procurement Regulations and with the exceptions listed above, may be used for contracts estimated to cost less than US$10,000,000 equivalent per contract. Small value works estimated to cost less than US$200,000 per contract may be procured under the shopping procedures based on comparing price quotations obtained from several contractors, with a minimum of three, to assure competitive prices. 26. Procurement of goods and non-consulting services: Goods to be procured under the Project are likely to include: drugs, nutrition and medical supplies; vehicles, IT equipment, office equipment, teaching and laboratory equipment, office furniture, among others. The procurement will be done using the World Bank’s Standard Bidding Documents for all International Competitive Bidding contracts. National Competitive Bidding (NCB) documents, in accordance with the Zambia Procurement Regulations and with the exceptions listed above, may be used for contracts estimated to cost less than US$2,000,000 equivalent per contract. Small value goods estimated to cost less than US$200,000 for motor vehicles and US$100,000 for the rest of the goods per contract may be procured under the Shopping procedures based on comparing price quotations obtained from several suppliers, with a minimum of three, to assure competitive prices, and is an appropriate method for procuring readily available off-the-shelf goods. 27. Consulting services: Particular methods of procurement for consulting services are: (a) Quality and Cost-Based Selection (QCBS). Except as otherwise provided in the paragraph below, consultants services shall be procured under contracts awarded on the basis of Quality and Cost- Based Selection. (b) Other methods of procurement of consultants’ services. The following list specifies selection methods, other than Quality and Cost-Based Selection, which may be used for 69 consultant services. The Procurement Plan shall specify the circumstances under which such methods may be used: (i) Quality-based Selection (QBS), (ii) Selection based on the Consultant’s qualifications (CQS), (iii) Least-cost selection (LCS), and (iv) Single-source selection (SSS) for firms and Individual Consultants (IC). Specific consulting services will be identified at the time of appraisal. 28. Schedule for Consulting Services: The Project will finance technical assistance towards strengthening project management, implementation, monitoring and evaluation and evidence- based policy analysis and health financing innovation approaches. To undertake independent verification of both RBF and Disbursement Linked Indicator Results, the Government will select an independent verification agent to verify these results. Government Research / Training Institution or University (outside the Ministry of Health and Community Development Mother and Child Health) will be eligible to compete. The selection will be based on the quality of the proposals and will utilize Quality Based Selection (QBS) procedures which allow firms and institutions with different business objectives to compete. D. Environmental and Social (including safeguards) 29. This is an environmental category B project. The Project will be implemented in rural and peri-urban districts in five provinces: Luapula, Muchinga, Northern and North-Western and Western. These provinces have been selected based on set criteria including: (i) poverty levels, (ii) two key indicators-skilled birth attendance coverage and malnutrition prevalence, (iii) complementarity with other cooperating partners supported initiatives, and (iv) implementation capacity of districts. Project activities do not involve land acquisition for project activities. There will be no land acquisition under this project, no losses of assets or restriction of access to resources is anticipated. The MOH, MCDMCH and training institutions have acceptable proof of ownership of the existing project activity sites and there are no disputes in this regard. Thus, there are no involuntary resettlement issues associated with this project, and OP 4.12 is not to be triggered. Assessment of the implementation of the Health Care Waste Management Plan (HCWMP) for the period of 2010-2014 30. The current HCWMP covers the period of 2010-2014. Many of the critical issues identified in this assessment, remain the same as the ones identified at the time of the preparation of this plan, such as inter alia: (i) inadequacies of the regulatory framework; (ii) poor health-care waste practices; (iii) poor information systems on health care waste generation and disposal; (iv) inadequate knowledge and practical skills of those involved in health care waste management; (v) lack of appropriate equipment and technologies; (vi) lack of regional/centralized disposal facilities in non-urban areas; (vii) low segregation of waste according to categories such as by type, color of p\bags and bins and size. 31. In 2009, the General Auditor’s report on medical waste management in the health institutions revealed serious weaknesses. In June 2013, a national assessment of the HCWM was carried out to assess legislative, institutional and infrastructural challenges. The assessment was carried out in Lusaka, Copperbelt, Southern, North-Western, Northern and Muchinga provinces. The assessment took into consideration issues in generation, storage, transportation, final disposal, knowledge gap for members of staff and expenditure for HCWM. 70 32. Due to poor implementation performance, the MOH, on its own initiative, decided that a review of the current HCWMP was deemed necessary and the plan is currently being reviewed. The Bank commends GRZ for this initiative. 33. The findings and recommendations are presented below. a) Legislative, regulatory and policy relating to sound management of HCW. Inadequacies remain in the legal regulatory, policy and administrative framework of health care waste management and treatment. b) Health care waste management practices with regard to handling waste collection, storage transportation and final disposal. The key to minimization and effective management of health care waste is identification and segregation of the waste. Segregation of health care waste is not consistent, and funding is a big issue. Absence of appropriate equipment such as bins, bin liners, colored plastic bags and appropriate labeling, makes it difficult to adequately segregate the waste. (Transportation and disposal is also an issue, in particular from peri-urban to central sites). Segregating waste should be done according to the following categories: (i) infectious or clinical waste (Hazardous waste), (ii) non-infectious or general waste; and (iii) sharp waste. Recommendations: For effective segregation, handling and disposal the following practices should be followed:  Segregation should be done as close to the point of generation as possible;  HCW receptacles shall be readily available at the point of generation, located away from patient areas to avoid cross infections; should be safe; and should be monitored regularly to ensure that the procedures are respected;  Receptacles of appropriate color, size and number should be used, to accommodate and label the different waste types being generated ;  Staff involved in health care waste management must ensure that the waste bags are properly labeled, sealed, and separated;  Loading and unloading of waste shall take place within the designated collection area ;  Separate schedules and separate collection times for different colour coded containers, and separate vehicles should be used for different types of waste;  Transportation must be done only by accredited Waste Management Contractors;;  Health care waste must be transported directly to the disposal or treatment site within the shortest possible time; treatment and disposal of HCW should focus in minimizing negative impacts on health and on the environment;  Capacity building of health facility workers in health-care waste management at all levels; and  Segregation system should be uniformly applied throughout the country and should be maintained throughout the entire waste cycle up to disposal. c) Providing support on equipment and appropriate technology for those handling waste. In September 2012, a report on the status of macro burn incinerators (funded by various donors such as the World Bank Project, WHO/UNICEF; VII health facilities in Zambia) was issued. The situation is grime. Out of 45 incinerators, only 16 are in good working condition (36%), 4 are 71 working but are not in good working condition (10%); 19 incinerators are not working (42%) and 6 are not yet installed (12%). Some of the issues identified are: (i) lack of adherence to current legislation; (ii) appropriate funding leading to poor maintenance of the incinerators country wide; (iii) lack of health workers’ training and skills to identify and report problems related to the operation and working conditions of the generators; and (iv) lack of evidence of ownership of incinerators. Recommendations:  Funding needs to be allocated to repair all the defective incinerators;  Maintenance of the generators should be performed and budgeted on a regular basis;  Preparation of a training program on key aspects of management of health care waste;  Budget line for the training of staff dealing with health-care waste; management;  Designation of a focal point staff to be in charge of the operation of the incinerators;  Budget e to re-train hospital workers handling health care waste in standard procedures;  Strengthen communication and awareness for better management;  Develop communication plans for health care waste management and support the implementation of this plan;  Fencing and signage in areas where the incinerators are located; and  Adequate spill kit and protective gear such as gloves, overall, masks and boots must be provided at the storage sites. d) Improving the health care waste management information system within the context of Health Management Information System (HMIS) and Strengthening its Monitoring and Evaluation. There is no evidence that there is a health care waste system within the HMIS. For most part, existing reports are inaccurate, non-reliable, and incomplete. Recommendations:  Reliable health care waste information system should be created and integrated in the HMIS, to enable the preparation of timely reports that will allow timely interventions;  Strengthen monitoring and coordination with an M&E position, and regular reporting;  Enhance public awareness in health care waste management e) Promoting public private partnership (PPP) for better health care waste management. As an innovative activity, the Project could promote a PPP with the private sector to improve national health-care waste management practices and create a sustainable health-care waste management system. Recommendation: Design and develop a PPP for testing the system at facilities in districts that are in close proximity to Lusaka. The main idea is to develop and test a pilot program to collect, treat and dispose of hazardous medical waste, by contracting services of a local service provider. The minimum requirements for the contractor will be: (i) experience in providing transportation services for a period of at least two years and conversant with handling of hazardous wastes; and (ii) compliant with country norms and standards for operating transport fleet including required licenses and certificates. 72 E. Monitoring & Evaluation 34. The logical framework for the proposed project has been developed in a consultative manner with Government, joint performance indicators agreed, and a detailed performance monitoring plan is to be developed on the basis of the logical framework and the selected indicators. It will be detailed with specific indicators before project effectiveness, and include monitoring and evaluation plans for each level and structure, incorporating monitoring and evaluation across a number of dimensions: (i) technical, (ii) operational, (iii) financial and procurement, and (iv) learning. Monitoring and Evaluation systems will collect data broadly categorized into two groups: a) Operational data: This will be derived from the day-to-day project activities, including project inputs, supervisory information and the outputs resulting from project's activities. This category of information will focus on the process aspects of project implementation and align those processes with the overall project development objectives. The information will be collected by the M&E units in MOH and MCDMCH from the various health facilities, training institutions and other implementing agencies such as Medical Stores Limited (MSL) and the General Nursing Council (GNC). b) Health data: These data relate to the outcomes on MNCH and nutrition. These data will track the performance of strengthened MNCH and nutrition in project target areas. 35. The Project will support project M&E systems in the Directorate of Policy and Planning in MOH and Directorate of Planning in MCDMCH. The M&E units in MOH and MCDMCH will be the central clearing houses for this information. The units will synthesize the information to:  Provide easily accessible, timely information on the Project inputs, outputs and outcomes so that project management can be more responsive and proactive.  Identify intra-country variations in MNCH and nutrition health data and coverage of services.  Facilitate CP engagement by sharing information on progress done, lessons learned and improvements to be done through a participatory evaluation of project activities at all levels. 36. M&E institutional capacity within the two Ministries at national and sub-national levels will be strengthened early on during project implementation by providing specific technical assistance. Continuous monitoring, annual reviews, midterm review and end of project evaluation will be based on pre-determined indicators, which will measure inputs, outputs, and outcomes. Program performance and monitoring indicators (set forth in Annex 1), will be refined during appraisal. A geographic mapping approach will be incorporated into the M&E system. 37. The M&E systems will build on past experiences, including what has and is being done under the health SWAp, and with the RBF pilot project. With the engagement of the MCDMCH and the emphasis on being closer to the districts, and communities, the need to improve information feedback and the loop between the national health information management system and District health information management systems will be part of the Project effort. With the shift to disbursement linked indicators, the Project will be providing resources for an independent verification mechanism, one which will closely monitor outputs under Component 1 73 and Component 2, and possibly for other project sub-components. As this results-based financing approach is a new dimension for Zambia, the operational aspects will be closely scrutinized during the first two project years. As described in the financial and procurement sections, measures are to be supported which will monitor fiduciary arrangements to assure satisfactory performance. 38. For all aspects of the Project, the Joint Coordination Committee co-leaders (MOH and MCDMCH) will bear responsibility for regular and reliable information. Reports on the progress of each sub-component will be provided on a timely basis including updated information on project implementation, highlighted problems and recommended actions to be taken. Because this is a new mechanism and requires close coordination between two Ministries, intention is to provide intensive assistance and guidance in the early phases of JMT operations. At the national level, the M&E Unit will consolidate the information from all the sources and use it as a valuable monitoring tool on an on-going basis for project management. The linkages between the Project reporting mechanisms and the national program level M&E have been clearly established. 74 Annex 4: Operational Risk Assessment Framework (ORAF) Zambia: Health Services Improvement Project (P145335) Project Stakeholder Risks Stakeholder Risk Rating Substantial Risk Description: Risk Management: Roles and responsibilities of MOH and MCDMCH, as well as MSL for the project will Unfamiliarity and lack of clarity on new roles and be clarified in the PIM and closely followed by the Bank team. The mechanism for responsibilities following the transfer of primary mother resolving working relationships will be a task of the project Joint Management Team. and child health services from the MOH to the This will include Provincial and District level oversight for operational coordination. MCDMCH, the health supply functions of the MSL, and devolution of decision authority. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Both Coordination of the large number of MNCH and nutrition Risk Management: cooperative partners in Zambia and avoidance of There is an established mechanism for donor coordination under the SWAp mechanism duplication of effort. and key partners have a track record in working together. Moreover, there is already a broad agreement on the appropriateness of the proposed interventions and close linkage to national plans. Efforts will be made to strengthen Government-led donor coordination mechanisms. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Both Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating Substantial Risk Description: Risk Management: Inadequate financial and procurement management Hands-on technical assistance and capacity building support will be provided by the capacity, as well as M&E capacity at MOH and Bank to implementing bodies (of the MOH and the MCDMCH), on all aspects of MCDMCH could pose the risk that financial management, managing and implementing the project, at the central level, district level and facility procurement, and reporting tasks as well as fiduciary level. Technical assistance will be provided by Bank fiduciary specialists in working covenants are not adequately complied with. MOH and with GRZ counterparts to understand and execute the DLI mechanism. MCDMCH may not have sufficient technical knowledge and operational capacity to lead and manage all aspects of 75 the project at centralized and decentralized levels. Resp: Status: Stage: Recurrent: Due Date: Frequency: Introduction of the Disbursement Linked Indicator (DLI) Bank Not Yet Due Implementation approach represents a challenge. Governance Rating Substantial Risk Description: Risk Management: The Bank, together with other CPs, will continue to be actively engaged in helping the The health sector has shown considerable governance government implement its Governance Management Strengthening and Capacity progress since the 2009 corruption scandal but there Building Plan, and support local government capacity to manage health sector remains further need to strengthen structures and responsibilities. processes to improve the governance within the health sector. Related is the evolving decentralization to local Resp: Status: Stage: Recurrent: Due Date: Frequency: authorities for decision making, financial resources, and Both In Progress Implementation implementation of activities. Risk Management: Effective coordination issues between MOH and Clear definition of roles and responsibilities of the implementation agencies, at national, MCDMCH, and their decentralized offices, may cause Provincial, and District levels will be developed and written into the PIM. Monitoring delays to project implementation. of performance of these roles will be strengthened with active involvement of the Joint Management Team Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Implementation Risk Management: The task team will closely monitor the procurement and financial processes. In addition, based on the findings of a fiduciary assessment and implementation experiences of earlier Bank projects, specific remedial measures may be agreed with the government. They could be - either in the form of a "governance action plan" or through complementing the audits/procurement report reviews with "external fiduciary oversight agencies" on a periodic basis rather than waiting for the annual audit. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Implementation Risk Management: The Bank and GRZ have significant experience in managing RBF related mechanisms, 76 experience in other countries with DLIs, and lessons learned will be applied to ensure that gaming is minimized throughout including by: closely monitoring the procurement processes; and establishing appropriate verification systems to ensure that records are authentic. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Implementation Project Risks Design Rating Moderate Risk Description: Risk Management: Project design was undertaken through an extended participatory process with the GRZ, The project is multi-sectoral and complex, with different training institutions, professional associations, and other cooperating partners. Reliance activities in different geographic areas and with multiple will be on existing institutions and implementing mechanisms, to the extent possible. implementing entities. Capacity-building and coordination mechanisms activities will be provided at national, provincial, and district level, and to communities, to assist in effective delivery, use and The focus is on geographic regions with high poverty, low monitoring of services. MNCH and nutrition outcomes and to benefit very vulnerable populations at community level is difficult Incentive mechanisms will be provided for supportive supervision and community where capacity is limited. engagement to enhance the quality of services provided and to motivate community volunteers and the active engagement of communities. It is possible that one project component or another may not perform well. Mechanisms will be put in place between the ministries and various components to ensure progress is made along the various dimensions of the project. Further, the design With results based financing under Component 2, some includes a process to reallocate resources among project components, if necessary. well-performing aspects could be adversely affected. RBF and DLI disbursements will allow for partial payment against targets, depending on There is a risk that the newly trained ENs and RNs will performance. not be fully absorbed on the payroll once they graduate, or significant delays in absorption or deployment to project Resp: Status: Stage: Recurrent: Due Date: Frequency: areas because of the Wage freeze (2 years) and Hiring Both In Progress Implementation Freeze (1 year, expected to end by December 31, 2014). Risk Management: Consultations with the MOH and MDCMCH have provided initial assurance this will Health workers may not be retained because of the wage not significantly affect deployment in the next two years. The project team will closely 77 freeze and more attractive offers from CPs or the private follow hiring and wage freeze developments as they could impact project success. sector. Health worker salaries have been raised in recent years, and the public sector dominates Health supply chain policy and operational aspects, the Zambian health sector, with limited options for workers to go elsewhere including system reform to move to a "pull" system, domestically, if they stay in health. improving the distribution system of essential health Resp: Status: Stage: Recurrent: Due Date: Frequency: commodities and other supplies, as well as delegation of responsibilities, have not been fully resolved. Client In Progress Both Medical Stores Limited (MSL) is under new management Risk Management: and its operational role vis-a-vis the MOH needs to be Confirm with Government the medium to long term plans for its National Health Supply clarified. Chain Strategy. This will include: (i) dialogue with MOH to introduce a more evidence based rationing system to ensure small health facilities in underserved areas are not disadvantaged by big institutions that are close to the MSL; (ii) contribute to ensuring improved availability of health commodities; and (iii) support associated plans and reforms to make supply chain systems being implemented by MSL, including the regional hubs strategy, more efficient and effective. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Both Social and Environmental Rating Low Risk Description: Risk Management: The proposed activities are not expected to entail major The project is to be covered by the current Zambia Healthcare Waste Management Plan safeguard issues, but some aspects, including related to (2010-2014), which will be updated in 2014. skills labs upgrading and minor rehabilitation of training institutions nevertheless require attention. Moreover, the management and disposal of medical waste is associated Resp: Status: Stage: Recurrent: Due Date: Frequency: with primary health care services and therefore OP/BP 4.01 applies. Client In Progress Both Program and Donor Rating Moderate Risk Description: Risk Management: Zambia is an IHP+ country and there is recognition by government and partners to In 2010 approximately 39 percent of total health improve aid harmonization and predictability. The GRZ is actively exploring ways to 78 expenditures came from donors. Continued external improve the efficiency and effectiveness of health sector resources; for example, through support at this level is dependent on both donor resource a focus on training more cost effective cadres for better impact to the poor (to serve the ability and Zambian needs as well as performance community and primary health level), improving efficiency of the supply chain, service delivery (through RBF in the previous project), exploring better use of volunteers to Expected complementary support to the program lessen impact of demand on health services, and efforts to expand fiscal space and components, from donors and TA agencies does not efficiency in spending through plans to develop a solid health financing strategy. materialize, or is less than expected. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Both Risk Management: Bilateral and multi-lateral donors, TA entities, and professional associations, have shown significant interest in harmonizing approaches as well as potential for supporting and complementing key components through various mechanisms including joint technical support. This will be further pursed during project implementation. Resp: Status: Stage: Recurrent: Due Date: Frequency: Bank In Progress Both Delivery Monitoring and Sustainability Rating Substantial Risk Description: Risk Management: The project will include technical assistance support specifically on monitoring aspects, National, district and community level data collection, and will encompass enhancement of the national HMIS to the DHIS-2 and to connect monitoring, and reporting are in need of strengthening. with communities. The project will draw on the lessons learned from supervision Particularly this is needed for community and primary incentives work done under the RBF pilot project. level service delivery given that community HMIS are not yet fully developed, and there is limited capacity in Resp: Status: Stage: Recurrent: Due Date: Frequency: monitoring and reporting such a scheme at the local level Both Not Yet Due Implementation The Government depends heavily on external resources Risk Management: but this funding going forward may be less predictable. The Bank team will work closely with the government and other cooperating partners to While this project, in combination with support from other develop and implement a strategy to ensure long-term financial sustainability of the cooperating partners, will improve the situation for a different project components, including improving efficiency of current resources specific population, sustainability cannot be guaranteed unless the GRZ particularly, and other donors are prepared . 79 to continue and scale up the project approach. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both Not Yet Due Implementation Overall Implementation Risk: Rating Substantial Risk Description: Overall implementation risk is Substantial. The Project seeks to strengthen primary care and community level health service delivery systems, introduction of training programs at central, provincial and district levels, and incentive mechanisms. The two ministries are going through a transition phase in dealing with significant changes in implementing MNCH and nutrition interventions, including sorting out primary responsibilities and coordination between themselves and across the entire sector. Additionally, GRZ is actively pursuing devolution of activities to local authorities and this will impact MOH and MCDMCH mandates and responsibilities. The Project will introduce results based approaches: at a higher level paying for results through the DLIs and at facility level through the RBF. The fiduciary management capabilities of the MOH and MCDMCH are vulnerable to varying degrees, and depth. The objective of bringing services closer to communities will depend on governance structures at various levels, taking into account the decentralization process. Finally, prospects for public sector recruitment and timely deployment of new nursing and midwife graduates pose a further implementation risk element, given GRZ's announcement of a hiring freeze for 2014. These implementation challenges will be mitigated by a number of factors: (i) there is a history of delivering MNCH and nutrition services at community level supported by faith-based organizations, non-governmental organizations, and external donors that can be strengthened; (ii) where there are new activities that depend on strengthened capacity and the sequencing of actions, the intention is to plan for gradual scale-up, training and technical assistance; (iii) Government assurances were provided that new nursing graduates will be absorbed because vacancies can be filled (and attrition annually represents a significant number of vacated posts), additional MCH positions in 2013 were secured and will require new hires, and that the hiring freeze is limited to 2014; (iv) there is significant and relevant CP technical and financial assistance, inter-CP technical coordination mechanisms to exchange information and plans; (v) the Project design provides for extensive investment in information systems from the district to the community levels, and to monitor performance on a regular basis; (vi) a JMT will be put in place to effectively coordinate the various activities under the Project. The intention is to hold monthly joint project reviews to assess successes, challenges, and to implement mitigating measures; and (vii) provision of technical support to the MOH and MCDMCH in fiduciary management. The Project will introduce additional RBF performance based financing in the health sector. Experience suggests that risks associated with the RBF include: (i) an enhanced focus on quantity of services over quality; (ii) gaming the system by inflating service delivery records or inflating the results of the quality evaluation or establishing too easily achieved DLIs; (iii) favoring service delivery to easier reach populations; and (iv) focusing on only targeted services to the detriment of other equally important health interventions. In addition, community based RBF is particularly challenging given the dispersed nature of activities, the difficulty in verification and capacity challenges. The Project will mitigate these risks by: (i) incorporating quality measures as an integral part of the process of determining payouts to facilities/health workers; (ii) establishing strong internal and external verification systems to ensure that records are authentic; (iii) involving communities in the verification process; and (iv) regularly monitoring service delivery to the most disadvantaged, and making the necessary adjustments to service tariffs to favor service delivery in remote areas. 80 Annex 5: Implementation Support Plan (ISP) 1. The approach for implementation support has been developed based on the nature of the Project, including its risk profile. It will aim to make such support flexible and efficient, and address the risk mitigation measures defined in the ORAF. The ISP will be reviewed annually to assure it is responding to Project needs. 2. The Project will require intensive supervision given the geographic spread of the proposed operation (five provinces and multiple districts within the provinces), and given the implementation capacity at national, provincial, and district levels, reaching into the communities. The Project will be implemented principally at two levels: the central MOH and MCDMCH; and at provincial and district levels. With service delivery to be focused on health facility and community levels, multiple training institutions involved, and innovation programs such as the performance based approach for essential commodities and the supply chain and other innovations for results at the community level, the breadth of implementation tasks are significant. 3. Implementation support by the Bank will be leveraged or coincide with supervision carried out by MOH and MCDMCH personnel on a regular basis. In addition to their onsite staff, each Ministry will have teams visiting the districts several times per year, and jointly on some occasions, producing action-oriented implementation support reports which will be provided to the Joint Coordination Committee, and subsequently the Bank. This system will allow the implementing entities to distinguish better and lesser performing areas (provinces, districts, health facilities, and communities), and the ability to provide more technical support or possibly reallocate funds. A much more intensive than normal supervision program should be carried out during the first year of the Project to put in place a sound and functioning institutional structure, attention to the DLI process, and responsive guidance so that interventions to be undertaken by the Project start as planned and any unanticipated questions quickly resolved. A separately contracted independent verification entity will be in place for the supply chain system component. Sufficient funds for such purposes will be included in the Project design to over the five-year life span of the Project. The GRZ also recognizes the need for intensive oversight and is prepared to commit staff for this purpose. 4. The overall implementation supervision of the Project will be the responsibility of each of the Ministries for the specific activities assigned to it. Within each Ministry the units in charge of planning, procurement, financial management, monitoring and evaluation will carry out the necessary functions. The health SWAp will provide the basic operating procedures to be followed both in the MOH and the MCDMCH. 5. Bank implementation support management will be the responsibility of the Task Team Leader to assure that the skill mix of qualified staff or consultants is available, and responsive to effective project implementation. Some of the skills required by the Bank team will be needed on a regular basis, while others will be resourced based on need. It is proposed to establish a core implementation support group that will emphasize financial, procurement, RBF, and operational basic needs, complemented by specialists in human resources for health, nutrition, health systems and financing, and monitoring and evaluation. 81 6. The Implementation Support team includes the following members: (i) the Task Team Leader, (ii) an HNP specialist who has extensive knowledge of the Zambian health system, (iii) a health systems specialist who has extensive knowledge of the Zambian health system, (iv) an HRH specialist with familiarity with HRH challenges in providing non-urban MNCH training, (v) a nutrition specialist, (vi) an RBF specialist, (vii) a monitoring and evaluation specialist whose experience includes national and sub-national health information systems and utilization of generated data, (viii) a financial management specialist who will review adherence to Bank procedures, (ix) a procurement specialist who will similarly review adherence to Bank procedures as well as provide advice on supply chain management and performance-based procurement reporting aspects. 7. While regular Bank implementation support will take place at least twice a year, this will be leveraged by country-based Bank staff in more frequent meetings with the JMT, MOH and MCDMCH staff, as well as field visits by country-based Bank health sector, procurement, and financial management specialists who will review progress and provide ongoing assistance to the GRZ implementing entities. They will also stay in close touch with the main CPs engaged in MNCH and nutrition, reviewing with them project development areas, lessons learned, as well as draw from the experience of other CP programs. 8. Financial Management. The Bank will provide support in the drafting of the FM chapter of the Project Implementation Manual, and through the regular review of quarterly reports, internal audits, and audit reports of the Office of the Auditor General or its designated private firm, and will follow up on any issue as the need arises. Given the risk rating, and that the DLI process is new to Zambia, intensive FM support will be provided with two FM onsite visits per year (possibly more in the first year), as well as desk reviews of documents. There will be regular interaction with the country-based Bank Financial Specialist in terms of guidance and training with regard to Interim Financial Reporting, Bank disbursement and procurement procedures, internal auditing and strengthening of the audit committees. MCDMCH budget monitoring capacity is weak and its staff will be provided with Bank training. In sum, intensive support will be provided during the first year to ensure that the financial systems are functioning effectively. 9. Procurement. The Bank will provide support in assisting the MOH and MCDMCH procurement staff in understanding what is needed in the procurement chapter for the Project Implementation Manual, and in its application. In this regard, the in-country Procurement Specialist will provide training and mentoring in areas such as the appropriate roles and responsibilities of those in the procurement chain, internal governance processes, including bidder selection and monitoring of contract compliance. Procurement specialists in results based operations will be made available to assure this innovative aspect of the Project performs as planned. The country based Bank Procurement Specialist will undertake onsite visits per year and desk reviews of procurement documents. Intensive Bank support will be provided during the first year to ensure timely delivery and distribution of goods and services. 10. Coordination with other Cooperating Partners. Implementation support will include: (i) close coordination with other CPs, health training institutions, professional associations as well as other non-government organizations active in the health and community development spheres in Zambia. 82 Implementation support plan 11. The Project will require substantive technical support given the complex and technical nature of the activities to be financed. Most of the World Bank team members are based in Zambia or the region, which will ensure timely, efficient and effective implementation support to the client. Formal implementation support missions and field visits will be carried out at least every six months and there will be a mid-term review. A detailed time line and skills required from the Bank team, are outlined below: Table A.8: Timeline of main focus of implementation Time Focus Skills Needed Resource Partners and Partner Roles Estimate First 12 Institutional Team leadership, HNP a) Partners: European Union, months modalities, training Specialist, Health Systems Ireland, Sweden, United Kingdom, and mentoring, sub- Specialist, HRH, specialist, United States, UNICEF, WHO, component supply chain specialist, RBF and WFP implementation and outputs approach b) Role: Technical knowledge specialist, M&E specialist, sharing and training, resource finance management and contributions, scaling up of procurement specialists approaches, implementation knowledge 12- 36 Same as above for Same as above Same as above months ongoing supervision and mid-term review 36-60 Same as above for Same as above Same as above months ongoing supervision and implementation completion report preparations Table A.9: Skill mix required Skills Needed Number of Trips Comments Team Leader 3 trips each of the first two years; 2 trips thereafter Washington based HNP Specialist 2 field trips more as needed Based in country Health Systems Specialist 2 field trips more as needed Based in country HRH Specialist 2 trips annually (includes MTR) Washington based Nutrition Specialist 2 trips annually (includes MTR) Washington based RBF Specialist 3 trips the first year, then 2 trips annually (includes Washington based MTR) M&E Specialist 2 trips annually (includes MTR) Washington based Supply Chain/Operations 2 field trips, and more as needed Based in country Financial Specialist 3 field trips, multiple MOH and MCDMCH onsite Based in country visits, with more as needed Procurement Specialist 2 field trips, multiple MOH and MCDMCH onsite Based in country visits, with more as needed 83 Annex 6: Economic and Financial Analysis 1. The Zambia Health Service Improvement Project aims to improve health delivery systems and utilization of maternal, newborn and child health and nutrition services in the five targeted provinces. The main project activities include: (i) strengthening capacity for primary and community level MNCH and nutrition services, (ii) strengthening primary MNCH and nutrition service delivery using Results Based Financing Approaches, and (iii) strengthening project management, and policy analysis. Project development impact 2. The proposed project will contribute to Zambia’s development through the following pathways: improving child survival, saving unnecessary health care costs and social care costs, increasing productive labor force, promoting equity and shared prosperity and improving health system efficiency. 3. The project will contribute to improving child survival by decreasing the incidence of malnutrition, increasing the coverage of effective child health interventions such as vaccinations, post-natal care and integrated management of childhood illnesses, and improving child care by decreasing maternal deaths. According to WHO, around 70 percent of early childhood deaths are due to conditions that can be prevented or treated with access to some simple and affordable interventions. Malnutrition is the underlying contributing factor in about 45 percent of all child deaths and this can be prevented through improved nutrition practices. 4. The project will contribute to saving health care costs related to disease treatment by focusing on cost-effective preventive measures, and save social economic burden that is related to extra care needed for children who are stunted or have lost their mother at birth. Globally, nearly 10 million women per year who survived childbirth suffer from pregnancy related injuries, infections, diseases and disabilities, often with lifelong consequences. Research has shown that 80 percent of these deaths could be averted if women had access to essential maternity and basic health care services. As part of the service continuum, reproductive health, including family planning, saves infant lives by spacing planned births and limiting unintended births. Family planning also saves maternal lives by reducing exposure to the risks of pregnancy and childbirth, including recourse to unsafe abortion, one of the main causes of deaths among young women. 5. This project will generate long-term economic benefit by increasing active and productive labor force who can potentially contribute to economic growth and poverty elimination. With improved health and nutrition status, more children will survive into adulthood and work more productively as a result of better cognitive development. Women who are saved from maternal deaths will contribute directly to productive activities or relieve household members who would have had to provide child care without their presence. 84  The most recent empirical estimates of the negative effects of stunting on worker productivity and adult earnings range from about 10 percent per year34, to as high as 20 percent per year 35 . Anemia is associated with a 2.5 percent reduction in wages. Productivity losses at the individual level are estimated to be more than 10 percent of life-time earnings, which at the macro level can lead to a 2‐3 percent loss in GDP.  One study that estimates the effect of maternal mortality on GDP in Africa shows that maternal mortality has a statistically significant negative effect on per capita GDP. An increase in MMR by one death decreases per capita GDP by US$ 0.36 per year on average. 6. This project will promote equity and shared prosperity by targeting areas that are poor and human development is behind. The five project provinces were selected on the basis of: (i) high poverty levels, (ii) low human opportunity index–immunization, (iii) high under-five mortality, (iv) low coverage of skilled birth attendance, and (v) high prevalence of stunting among children aged below five. 7. The project will contribute to improvement of technical efficiency of health service delivery system. Shortages of key inputs that are necessary to deliver the defined package of basic health services will be addressed through increased availability of skilled frontline and community health workers, increased availability of critical drugs and commodities, and enhanced supervisions from higher level. By putting the key elements together at the same time and in the same location, more facilities will be pushed to the production function frontier, and therefore, deliver better services to the extent possible at a given cost. 8. The project will also contribute to improvement of allocative efficiency at health facilities and community levels. It focuses on primary health care with active community participation, which is the most cost-effective modality to provide a defined package of high impact services. It will support the Zambia health system to be more results-focused and to get value from the money invested by supporting a Results-based-financing approach. It will enable decision makers and managers at all levels to be more evidence-based in policy analysis, planning, and budgeting by supporting the country’s M&E system, analytics, and capacity building in evidence-based decision making. In addition, it will facilitate efficiency improvements by allocating resources to where marginal benefits and utility are highest by focusing on areas that are lagging behind. For example, this project aims to strengthen human resources for health through the rural pipeline by strengthening capacity of rural training institutions and enhancing measures to retain rural health workers. It is expected to contribute to the scarcity of health workers in rural areas that is exacerbated by geographical remoteness of these areas. Cost-benefit analysis focusing on selected benefits 9. Cost-benefit analysis provides a basis for comparing projects by comparing the total expected cost of each option against the total expected benefits, and examining whether the 34 Hoddinott 2003, World Bank 2006, Quisumbing, Gillespie and Haddad 2003, Alderman Hoddinott and Kinsey 2002, Ross and Horton 2003 35 Granthan-McGregor.S et al 2007 85 benefits outweigh the costs, and by how much. Such approach fits well with Bank’s projects in earlier decades, because projects at that time were typically of the “bricks-and-mortar” variety — physical rehabilitation of a road, for example. In such cases, expected project costs and benefits could usually be readily monetized at least to a reasonable approximation. Consequently the analyst could quickly arrive at an estimate of the rate of return. 10. Cost-benefit analysis may not capture all aspects of the potential development impact related to the proposed project because some of them cannot be easily translated to monetary values given constrains of existing data and methodology, e.g., efficiency improvement and equity improvement. This is not unique to this proposed project. As a matter of fact, the Bank’s current portfolio comprises more complex and innovative operations involving institutional redesign, incentive restructuring, decentralized decision-making, and so on. 11. A cost-benefit analysis nevertheless, is conducted for project appraisal by focusing on some selected benefits to demonstrate the soundness of the proposed project investment. Specifically, in the cost-benefit analysis for this project, only economic growth benefits from lives saved are estimated and discounted as present values. The present value of benefits is then compared with the present value of the total cost of the project, yielding a benefit-cost ratio and net present value of benefit for this proposed project. The result of this analysis should be interpreted as an underestimation of the return of this project given the fact that it does not include all expected benefits. 12. There are three potential measures for estimating benefits from saving lives: Life Years (LYs), Quality Adjusted Life Years (QALYs) or Disability Adjusted Life Years (QALYs). LYs is a pure measure of mortality, while QALYs and DALYs are measures that combine mortality with morbidity in single numerical units, an exercise involving trade-offs between quantity for quality of health (Robberstad 2005). 13. LYs saved rather than QALYs and DALYSs were chosen for the main following reasons. First, LYs saved is as indicated a relatively easy and transparent method for measuring population health, and there are few value choices involved. Second, QALYs and DALYS request Health Related Quality of Life (HRQoL) weights to be defined to take into account a potential impaired quality of life after the interventions. Regarding the complex combination of interventions of the project, HRQoL weights are highly difficult to define. 14. The analysis uses population data (Table A.10), under-five mortality rate (89 per 1,000 live births), maternal mortality ratio (440 per 100,000 live births), and a number of assumptions for estimated effect on reducing child and maternal mortality. 86 Table A.10. Number of beneficiaries in project provinces – 2014 estimates Province Population Children Children Women in Expected Expected Expected 0 –11 < 5 yrs* child bearing pregnancies* deliveries* live months* age* births* Luapula 992,000 40,000 198,000 218,000 54,000 52,000 49,000 Muchinga 712,000 29,000 142,000 157,000 38,000 37,000 35,000 Northern 1,106,000 44,000 221,000 243,000 60,000 58,000 55,000 North-Western 727,000 29,000 145,000 160,000 39,000 38,000 36,000 Western 903,000 36,000 181,000 199,000 49,000 47,000 45,000 TOTAL 4,440,000 178,000 887,000 977,000 240,000 232,000 220,000 Source: 2010 Census of Population and Housing * Calculated based on proportions provided under Zambia HMIS  Given that 70 percent of child deaths are preventable through MNCH and nutrition actions supported by this proposed project, it is assumed that this project will lead to an extra decline of under-five mortality (Table A.11) on top of counterfactual decline over time (e.g., through economic development, education improvement and regular health intervention activities).  Literature shows that up to one-third of maternal death may be prevented through the presence of skilled birth attendance. It is assumed that this proposed project will lead to an extra decline of maternal mortality (Table A.11) on top of counterfactual decline over time. Table A.11. Expected impact on child maternal mortality and maternal mortality 2015 2016 2017 2018 2019 Under-5 mortality 1.0% 1.5% 2.0% 2.5% 2.5% Maternal Mortality 1.0% 1.5% 2.0% 2.5% 2.5%  For simplicity, it is assumed the average age of each saved children cohort is two years old, and their life years will only be counted as benefit after 13 years when they become active labor force. It is assumed the average age of saved delivering women is 20 years old. 15. In order to assess benefits in monetary value, GDP per capita and life expectancy are used. Benefits represent the value of the difference between the number of lives saved by implementing project activities and the number of lives saved only through the status quo scenario, all other things being equal. Beyond the philosophical and social considerations, each death is a loss for the national economy. The annual value of a life lost is roughly equivalent to the Gross Domestic Product per capita. Data for GDP as well as all other macroeconomic indicators are extracted from official International Monetary Fund (IMF) documents. For this specific purpose, only productive labor years are considered as project benefits, i.e., 15-49 years old. The upper limit of 49 years old is selected because that is the current life expectancy at birth in Zambia. This assumption represents a very conservative estimate, knowing the country will experience significant increase in this indicator during next few decades. For the purpose of this analysis, US$1,350, per capita gross national income (GNI) for Zambia in 2012 is used. 87 16. The analysis uses a five-year time frame that is consistent with the project implementation period. However, understanding that investment in human development produces long term economic benefit, the analysis only counted working age years as benefit. Both cost and benefits are discounted with a 3 percent discounting rate. Discounting is the process of converting future costs and benefits to their present value, to reflect the fact that, in general, society prefers to receive benefits sooner rather than later, and pay costs later rather than sooner. A number of guidelines recommend a 3 percent discount rate, both for cost and benefits (WHO guide to CEA, 2003). 17. The results in Table A.12 show that this proposed project in health sector is a sound investment for the country. The present value of benefit related to improved maternal health and child health is estimated to be US$152.7 million. The present value of cost based on expected disbursement is estimated to be US$63.1 million. As a result, net present value of benefit is estimated to be US$89.6 million and benefit-cost ratio is estimated to be US$2.42 (152.7/63.1 = 2.42). This implies that for every US$1 invested through this project, there will be a yield of US$ 2.42. Sensitivity analysis suggests that the benefit-cost ratio is as high as 1.7 even if the project only achieves 70 percent of the expected impact. 18. It is likely that the real benefit and efficiency have been underestimated by this analysis. Conservative assumptions have been used for the expected impact of this project. Only economic growth benefit related to increased productive years is considered in this analysis. This analysis does not include benefit of increased life-years of saved children before they become active labor force. Many other benefits are also excluded because they cannot be measured or translated to monetary value easily, e.g., efficiency improvement. Table A.12. Cost-benefit analysis results 2015 2016 2017 2018 2019 Total Child Health Benefit Number of children under-five 887,000 914,522 941,957 970,216 999,322 Saved children under-five 789 1221 1677 2159 2223 8,069 Gained productive life-years per child under-five 14.82 14.39 13.97 13.56 13.17 70 (present value) Total gained productive life-years (present value) 11,693 17,570 23,428 29,276 29,277 111,244 Economic gains related to improved child health (US$, million, present value) 15.8 23.7 31.6 39.5 39.5 150.2 Maternal Health Benefit Number of women delivering babies 232,000 238,960 246,129 253,513 261,118 Saved women from Maternal Death 10 16 22 28 29 105 Gained productive life-years per saved women 19.19 18.63 18.09 17.56 17.05 91 (present value) Total gained productive life-years (present value) 192 298 398 492 494 1874 Economic gains related to improved maternal 0.3 0.4 0.5 0.7 0.7 2.5 health (US$, million, present value) Total Health Benefit Total gained productive life-years (present value) 11,885 17,868 23,826 29,768 29,771 113,118 88 Economic gains related to improved child and maternal health (US$, million, present value of 16.0 24.1 32.2 40.2 40.2 152.7 benefits) Total Cost (nominal, US$, million) 12.1 13.58 13.67 13.28 14.37 67 Total Cost (present value, US$, million) 12.1 13.19 12.85 12.16 12.82 63.1 Net Present value of benefits (US$, million) 3.9 10.9 19.3 28.0 27.4 89.6 19. A number of low and middle income countries have been exploring the role of communities as well as results based approaches in improving health outcomes. Zambia has not been an exception in considering the feasibility, potential benefits and costs of these innovative approaches. The main thrust of the community‐based program is behavior change, which can be implemented as a lower cost yet effective alternative, and which also has favorable pro-poor properties. The community‐based platform aims to improve utilization of essential services that have previously been underutilized, partly, as a result of information asymmetries between the consumer and the provider. Given that approximately 60 percent of Zambia’s population lives in rural areas and a significant share 36 of communities are beyond 5 km from a facility, the community‐based platform is expected to substantively contribute to coverage expansion and do this in a cost‐effective manner. RBF is an intervention that is gaining significant momentum as a solution to poor performance and the health worker crisis in low‐income countries, particularly in Africa. Results indicate that RBF can play a role in increasing the productivity of health workers and have positive effects on health service utilization. However – given the novelty, heterogeneity, and context‐specificity of RBF – to date the evidence base has been limited, especially so in the context of community performance‐based financing, where the incentive regime design goes beyond the facility staff and must include considerations regarding community dynamics. To inform project design, implementation, and policy decisions operational research will be valuable to gather evidence on the effectiveness, cost ‐effectiveness, and equity implications of the proposed community-based and RBF interventions. Rationale for working with public sector 20. Working with the public sector through this project is economically justified because public intervention is necessary when there is market failure. The focus of this project is on high impact and cost effective MNCH and nutrition interventions, which have positive externalities through the consumption and/or production of goods. Without public intervention, these services would otherwise have not been consumed or produced. 21. Although public-private partnership is a feasible idea to provide critical public health interventions based on its demonstrated effectiveness elsewhere, it is not feasible in Zambia. In Zambia, it is the overwhelmingly the public sector which provides health services. Only 13 percent of the health facilities are owned by for-profit private health providers. In the five- targeted provinces, there are only 9 private health facilities out of 811 in total, accounting for only one percent (Figure A.7). Therefore, it is neither effective nor efficient to rapidly expand 36 46 percent based on the LCMS Survey III of 2002/2003 89 coverage of high impact cost-effective interventions through the private sector in the five provinces. Figure A.7: Presence of the private health sector – Zambia by province 100% 75% 53% 50% 27% 25% 1% 1% 2% 3% 3% 5% 1% 0% 0% 0% Source: MOH, 2012 List of Health Facilities Financial analysis Macroeconomic situation 22. Zambia has been recording high economic growth and capital inflows in the past few years just like other Sub-Saharan countries. High commodity prices have induced large foreign direct investment (FDI) flows, mainly in extractive industries but also in service sectors, mostly infrastructure-related projects. In 2012, the Gross National Income per capita37 is US$1,350, and the IMF projects economic growth in Zambia at an average of seven percent per annum in real terms in the next few years. General government revenue as a proportion of the GDP is expected to grow from 20 percent in 2010 to 23 percent in 2016.38 37 Atlas method (current US$). 38 IMF 2012 90 Figure A.8. Economic growth in Zambia and SSA countries 23. Despite the positive economic outlook, the 2013 budget came under stress due to several unplanned expenditures and a shortfall in revenue collection. Additional expenditures include public sector wage awards (0.8 percent of GDP), accumulated fuel supply losses not initially budgeted for (1.0 percent of GDP), and expected high spending on the Farm Input Supply Program (0.4 percent of GDP). Preliminary data on domestic tax collection for the first half of 2013 suggests an estimated shortfall of 1.0 percent of GDP. As a result, the fiscal deficit is expected to be higher than the budgeted 4.5 percent of GDP even after the government’s a ctive adjustments, including cutting recurrent spending (such as on travel and motor vehicles), cutting capital projects, and stepping up revenue collection. 24. According to the recently published Economic Brief, the main economic challenges in Zambia remain to be widespread poverty and systemic youth unemployment. Overall, 60.5 percent of the population lives below national poverty line, but it is much higher in rural areas, about 77 percent as of 2010. Formal jobs are being created at a very slow pace that is nowhere close to being able to absorb the new cohorts of youth that enter the labor market. While the revenues from mining have grown, they have not contributed much to the human capital building because they have gone mostly to consumption. The same study also pointed out that disadvantaged youth would need equitable opportunities to improve their basic skills. Currently, the poor youth, particularly girls in rural areas, cannot benefit much from the broad efforts of improving job environment because they are unable to transcend the barriers of poverty, gender and location. Health sector expenditure 25. Zambia spends 6.3 percent of its gross domestic product (GDP) on health. As a proportion of the total government budget, the health budget has been on average 9.5 percent per annum for the past five years (2010-2014). In nominal terms, the government health budget has been growing by an average of 30 percent per annum between 2010 and 2014, and by 16 percent between 2013 and 2014. On the other hand, flow of financial resources from external sources has been declining since 2006. For example, disbursement by CPs to the basket funding at MOH declined from 103 percent in 2006 to zero percent in 2010. Nonetheless, CPs are still present in 91 the health sector in Zambia and are funding numerous vertical projects particularly in HIV/AIDS, Malaria, MNCH, and Nutrition. Hence, fiscal space for health in Zambia critically depends on the sustainability of external funding, the extent to which additional Government and other domestic resources can be used to finance health services, harmonization of all funding sources, and efficient use of the money available. Table A.13. Historical trend of government budget for health sector Health budget (nominal, US$, Proportion of health budget Year million) out of total GRZ budget 2007 166.0 9.6% 2008 194.8 11.2% 2009 220.0 11.8% 2010 280.0 8.2% 2011 360.0 8.8% 2012 516.0 9.3% 2013 686.4 11.3% 2014 797.8 9.9% 26. Within the Health Sector it is possible to track resources from MOH to districts (as records are kept up-to-date). What happens to these resources when they are received and allocated to the different lower level health centers and district hospitals by the District Health Management Team (DHMT) is not clear, as it is hard to “decipher” the actual expenditures because of lack of new information. However, available data from the 2009 Public Health Expenditure Review showed that more than 33 percent of the DMOs delay the release of district grants to health facilities39. And almost 20 percent of the health facilities reported receiving less than the budgeted amounts. 27. It is expected that this project will be financially sustainable, because the proposed project investment, US$13.4 million per year during a five-year period, accounts for a small portion of the annual government budget on health. Taking 2014 as an example, the proposed annual investment of US$13.4 million per year is 1.7 percent of the government budget for health sector, US$798 million. This estimate will become smaller over time given the government budget is expected to grow with economic growth and an overall increasing trend has been observed for the proportion of health budget out of total budget. In addition, the Ministry of Health and Ministry of Community Development, Mother and Child Health, have been actively engaged during project preparation, and have had strong ownership of the project. 39 World Bank 2009 92 Annex 7: Country map 93