BHUTAN SECOND URBAN DEVELOPMENT PROJECT (Cr. 4744-BT & Cr. 5431-BT) Implementation Support Mission: July 18-27, 2016 Aide-Memoire 1. An IDA implementation support mission visited Bhutan during July 18-27, 2016 to review the implementation status of the Bhutan Second Urban Development Project (BUDP2)'. The mission' held discussions with concerned officials of the Ministry of Works and Human Settlement (MoWHS) and the Ministry of Finance (MoF) of the Royal Government of Bhutan (RGoB), the Thimphu Thromde, consultants, and contractors, and also visited the project sites in northern Thimphu. [A list of the officials met by the mission is attaeced as Annex 1.] 2. The mission would like to thank the Royal Government and officials of the concerned agencies for the cooperation and courtesies extended to it. This aide-memoire, a draft of which was discussed at a wrap- up meeting chaired by the Director, Department of Engineering Services, MoWHS on July 26, 2016, reflects the mission's findings and recommendations. The aide-memoire will be disclosed to the public, as agreed at the wrap-up meeting. Overall Project Status 3. The table below summarizes the status of the project. Summary of Project Status Key Project Data Current Ratings and Flags Effectiveness Date 08/24/2010 Development Moderately Satisfactory Objectives 08/13/2014 (AF) Closing Date 06/30/2019 Implementation Moderately Unsatisfactory Progress Project Age 72 months Problem Flags None % Disbursed 71.40% (original Cr.); 10.17% (for AF Cr.); 33.04% (combined) 4. Likelihood of Achieving the PDO. There has been slow but steady progress in achieving the targets for various outcome and intermediate indicators (see Annex 2: Results Monitoring Table). However, as all project activities are expected to be completed in the remaining period, achievement of the PDO continues to be rated Moderately Satisfactory (MS) The mission was comprised of Messrs. Zahed H. Khan (Senior Urban Specialist), Farhad Ahmed (Senior Transport Specialist), Tashi Tenzing (Senior Water Supply Engineer), Savinay Grover (Senior Financial Management Specialist), Tanvir Hossain (Senior Procurement Specialist), Md. Akhtar Zaman (Social Safeguards Specialist), and Iqbal Ahmed (Environmental Specialist). 5. Overall Implementation Progress (IP). Implementation of key project activities has progressed well since the March 2016 mission: civil works in Langjophakha are nearing completion and the contract for the Lower Taba civil works has been signed. The Royal Government had not informed the Bank of the schemes which would be funded by the extra $5 million provided under the Additional Financing. (The Bank has since been informed by government that these funds would be used to augment the central water supply scheme treatment plant and primary roads in Jungshina-Pamtsho and Hejo-Samteling LAPs. In addition, coordination and monitoring of agreed work-plans of all project components by MoWHS has improved. However, overall implementation of Components 1 and 2 remain an issue. As such, the rating for overall implementation progress is being retained as Moderately Unsatisfactory. The paragraphs below summarize the status of implementation of the project components; more details are provided in Annex 3. 6. Component 1: Municipal Finance and Management. Implementation of this component is progressing but slowly: as such, this component is rated Moderately Unsatisfactory. Thimphu Thromde has started using the property tax system for revenue collection as part of its tax administration. But only 60% of the property tax data has been uploaded in Phuentsholing Thromde. 7. Also, the annual financial statements of Thimphu Thromde for FY2014-15 and FY2015-16 have not yet been prepared using the upgraded systems. In addition, various manuals prepared by consultants now need to be finalized. incorporating comments provided by the Ministry of Finance. PPD has finalized a 12-month work-plan to carry out the implementation of Component I activities in the new thromdes of Gelephu and Samdrup Jongkhar, as well in Thimphu and Phuentsholing over the current financial year. 8. Component 2: Thimphu Northern Area Development. Implementation of Component 2 remains Moderately Unsatisfactory, despite steady progress in the implementation of on-going civil works. The Lower Taba LAP contract was signed on July 27, 2016 and the contractor is expected to mobilize by end- August, 2016. The LangJophakha LAP civil works contract is now expected to be completed in August 2016. In addition, the central water supply scheme designs have made progress on both technical and social safeguards aspects. However, preparation of detailed designs and bidding documents, as well as contract awards for the central water supply scheme are pending. (Annex 3 provides more information on component activities and status.) 9. Component 3: Capacity Building. Implementation of this component continues to be rated moderately satisfactory. Only a few courses'programs were conducted in 2015 and the budget allocation FY2016-17 has been reduced. Needs assessments for the two remaining years of the project should be undertaken soon and the capacity building program should be finalized by the Coordination Committee at MoWHS. Project Management 10. Project management has improved in respect of contract management, construction supervision, and quality assurance for civil works, as well as for municipal reforms and management, especially in Thimphu Thromde. Coordination of the Project and its three components needs to be strengthened at MoWHS (DES, DHS, and PPD) as project implementation, especially for Component 1, enters a crucial stage in all four thromdes. Monitoring and reporting on the Project has encountered some delays. MoWHS should focus on monitoring of the Results Framework and timely presentation of the required Progress Reports. Financial Management 11. Financial management of the project is rated "Satisfactory" and FM risk remains "Moderate". Interim Unaudited Financial Reports (IUFRs) for the quarter ending March 31, 2016 was submitted to the Bank on April 20, 2016, well ahead of the due date of May 15, 2016; the IUFRs are acceptable to the Bank. The project audit report for FY2014-15 was received prior to the due date of December 31, 2015. The response to the audit review letter is acceptable to the Bank. However, the response to the audit review letter for FY13-14 is awaited. It was agreed during the mission that savings, if any, from the IDA Credits will be calculated when the commitments for the large project packages are known following the award of contracts. [Annex 4 provides/fiuther details on Financial Management.] Procurement 12. Procurement under the project is rated as Moderately Satisfactory and risk is viewed as moderate. MoWHS agreed to submit the updated/revised Procurement Plan, using STEP, by August 20, 2016 for review by the Bank; the updated Procurement Plan has since been received and is attached in Annex 5. Thimphu Thromde has agreed to furnish the following documents to the Bank: draft bidding document for Central Water Supply Scheme pipeline through STEP by July 29, 2016; draft bidding document for the Water Treatment Plant through STEP by September 15, 2016; and a copy of signed contract for Lower Taba civil works through STEP by August 22, 2016. [The draft Procurement Plan is shown in Annex 5] Safeguards 13, Environment. PPD MoWHS, in consultation with the Environment Unit of Thimphu Thromde, is monitoring the implementation of the environmental management plan (EMP), including workers' health and safety issues, waste management, and spraying of water around the areas of the construction site. NEC's clearance of the EIA for Lower Taba is awaited. The EMP should be incorporated in the bid document, and the contract should be awarded only after the EIA clearance has been received. The city and the ministry will submit a joint monitoring report on compliance with the Safeguard Diagnostic Review (SCD) by June 30, 2016. 14. Thimphu Thromde has submitted the revised EIA of the schemes under the AF to the National Environment Commission (NEC). Around 300 trees would need to be cut for the central water supply scheme and, as per guidelines, 900 trees will be planted after completion of the civil works. 15. During the visit to Langjophakha LAP site the mission noted some improvements in compliance with the EMP, including environment, health and safety. Training on environmental management and health and safety needs to be organized by August 30, 2016A quarterly monitoring report (QMR) on environmental management would be prepared jointly by the PPD, MoWHS and the Environment Unit of Thimphu Thromde and will be submitted to the Bank by August 20, 2016. 16. Social. In view of the slow implementation of the RAP and lack of follow-up on in-house capacity building on social safeguards issues, including regularization of the Sociologist position in Thimphu Thromde and related data management, the rating for implementation of Social Safeguards remains Moderately Satisfactory. Thimphu Thromde has completed the final social impact assessments of the implementation of the Resettlement Action Plans (RAP) for the Dechencholing and Langiophakha LAPs under the original financing. Implementation of the RAP for the Lower Taba LAP under the Additional Financing has almost been completed; with one title-holder and a tenant remained to have been paid. Thimphu Thromde is closely following up on completion of payments to these two affected persons. 17, Central Water Supply Scheme. According to the current design, the 35mm diameter water main will be laid two meters deep into the earth and the trench cutting will temporarily affect about a six meter- wide strip of land during construction. The mission was informed that the owners do not want their lands to be acquired but have agreed to allow pipeline installation through their lands with compensation for the temporary loss of access, as permissible under the relevant national law. The Thromde is looking for a long- term lease of the land at the intake point (which is owned by the Cheri Monastery) with a provision for renewal every 30 years. 18. The Thromde will immediately engage a short-term (individual) consultant on social safeguards issues. The mission shared a sample terms of reference (ToR) for the work; the Thromde will provide the final TOR to the Bank for review and no objection. The mission recommends that the draft final report of the consultant should be ready for review and clearance by end-September 2016. 19. Occupational Health and Safety (OHS), The March 2016 mission had raised concerns on apparent non-adherence to the occupational health and safety requirements of laborers working in the Langjophakha site. A Bank technical review of these concerns in June 2016 recommended the design and dissemination of periodic orientation on occupational health and safety standards and requirements at workplaces to the laborers employed at the BUDP2 sites. The mission noted some improvements during a field visit to the work sites in Langjophakha. The mission recommends that Thimphu Thromde ensure non-discrimination on wages to the labourers engaged by the contractors. The Thromde will design the OHS training program for workers and contractors and share with the Bank by end-August 2016 for review and concurrence. The OHS training will be conducted by the Contractors at the sites every three months. Agreed Actions 20. The table below summarizes the list of agreed actions. The next implementation support mission is scheduled tentatively for November 2016. SI. Description of Action Responsible Completion date No. Agency Langjophakha LAP: 1 Fonnalize the agreement reached with the aggrieved TT end-August, 2016 traditional house owner and the 14 plot owners whose plots cannot be connected to the waste-water treatment plant by gravity 2. Complete the contract substantially before September 15, TT September 15, 2016 2016 and report the same to the Bank Lower Taba LAP: I Contractor mobilized TT August 25, 2016 2 Implement the QAP TT Continuous Central Water Supply Scheme 1 Complete the detailed design. cost estimates of the TT/MOWHS Au t 30,2016 transmission main and structures along it. ugus , 2 (i) Carry out simultaneously social and environmental safeguard studies IT/DES September 15, 2016 (ii) Obtain clearance from the NEC 3 Prepare draft-bidding documents and submit for review and TT/DES September 15, 2016 clearance from the World Bank. 4 Finalize Bidding documents TT/DES Sept. 30, 2016 5 Call for bids IT/DES October 10, 2016 6 Receive proposals from contractors and bid opening TT Nov. 30, 2016 7 Bid evaluation & presentation to award committee TT/DES Dec.30, 2016 8 Forward award recommendation to World Bank DES January 15.2017 9 No-objection from the World Bank World Bank January 25, 2017 10 Bid award and acceptance letter TT January 31, 2017 SL.no. FINACIAL MANAGEMENT -- Description of Action Due Date 1 Provide response to Bank's external audit review letter dated Feb 12, 2015 July 31, 2016 2 Submit IUFR for quarter ending June 2016 August 15, 2016 3 Update Asset register for IT equipment purchased August 31, 2016 4 Submit External audit report for FYI 5-16 December 31, 2016 Annex 1 List of Officials Met 1. Mr. Phuntsho Wangdi, Secretary, Ministry of Works and Human Settlement (MoWHS) 2. Mr. Kinlay Dorjee, Thrompon, Thimphu Thromde (TT) 3. Mr. Choiten Wangchuk, Director-genral, DPA, Ministry of Finance 4. Mr. Tenzin, Director, Department of Engineering Services (DES), MoWHS 5. Ms. Dorji Wangmo, Chief, Policy and Planning Division, MoWHS 6. Mr. Passang Doiji, Executive Secretary, Thimphu Tl-omde 7. Mr. Mahesh Pradhan, Project Manager, BUDP2, MoWHS 8. Mr. Ichharam Dulal, PMU, DES,, MoWHS 9. Ms. Chimi Pem, Program Officer, DPA, Ministry of Finance 10. Mr. Tshering Dorji, Sr. PO, PPD, MoWHS 11. Ms. Sonam Desel, DCEO, PPD, MoWHS 12. Ms. Sonam, Environmental Officer, PPD 13. Mr. Tashi Drukpa, DEE, PMU, DES 14, Mr. Tashi Penjor, Department of Human Settlement (DHS), MoWHS 15. Ms. Sonam Euden, project Accountant, BUDP2, MoWHS 16. Mr. Geley Norbu, Chief Urban Planner, Thimphu Thromde 17. Mr. Ashok Sunwar, Project Engineer, Thilphu Thromde 18. Ms. Sashikala Sharma, Engineer, Thimphu Thromde 19. Mr. Karsang, Water supply Consultant, PMU/TT 20. Mr. Omapati Luitel, IT Officer, Thiinphu Thromde 21. Mr. Udesh Chhetri, Sr. Accounts Officer, Thimphu Thromde ANNEX 2 Results Monitoring Table (Revised with figures for end-June 2016) Outcome Indicators Baseli Year 2012 Year 2013 Year 2014 Year June Year June Comments nBaseline Target Actual Target Actual arget Actual 2015 2016 I,ucal RPkenuc QCWk i L prce-ttning incrase These are the i hm T 7.58 80.19 109.2 973 9112 50 84,75 86.67 113.87 figures of forecast 108 and for the actual, a Plwent 6, t ..,nn t we need to convert in IT i into % if required. 2. Number of building pennits issued for 30 40 52 75 54 100 58 62 70 * Dechenchholing 45 55 59 65 61 75 68 73 80 * Langjophakha 0 0 0 0 0 0 0 7 21 * Taba 3. Number of households with new piped water connections 0 100 0 200 200 250 246 252 260 * Dechenchholing 0 0 0 250 0 350 0 0 0 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba 4. Number of households with new sewerage connections 0 100 0 200 0 250 21 73 75 * Dechenchboling 0 0 0 250 0 350 0 0 0 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba Intermediate Outcome/Output Indicators N. tunber of properls tax records computeri'Ld TT i1 still waiting L3 0 4000 0 4500 6200 50(A 5365 - 5642 fCr the lnali!ed t4 0 1000 0 1 500 2275 2000 - - - >RPP daa of L5 Loe 0 II changat1otC and * P.ore area fioni updl'ng inlo Includes 2. Number of staff trained 0 50 20] 75 239 100 343 0391itcre 1.6 Guidelines training under AF 5, No. of newly serviced plots for construction 0 179 0 179 0 179 0 179 179 * Dechenchholing 0 121 0 121 0 121 0 0 0 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba 6. Kilometer of internal roads constructed 0 6.3 2.0 6.3 6.55 6.3 6.55 6.55 6.55 * Dechenchholing 0 0 0 0 0 5.8 0 3.3 3.5 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba 7. Kilometer of new road-side footpath constructed 0 5 5 10 9.18 10 9.18 9.18 9.18 * Dechenchboling 0 0 0 0 0 6.5 0 1.0 1,8 * Langjophakha 0 0 0 0 0 0 0 0 0 o Taba 8. Kilometer of new off-road footpath constructed 0 0.4 0.4 0.4 0.62 0.4 0.62 0.62 0.62 o Dechenciholing 0 0 0 0 0 1.5 0 0 0 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba Note: AlIfigures are ctmulative except fo' sL no (1) 9. Kilometer of road-side drains constructed 0 4.8 4.8 6 6.89 6 6.89 6.89 6.89 " Dechenchholing 0 0 0 0 0 4.3 0 3.0 3.5 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba 10. Kilometer of water pipelines constructed 0 0 0 5 9.02 5 9.02 9.02 9.02 * Dechenchliohng 0 0 0 0 0 4 0 3.5 3.5 * Langjophakha 0 0 0 0 0 0 0 0 0 * Taba 11. Kilometer of sewage pipelines constructed 0 0 0 5 9.24 8.75 9.24 9.24 9.24 * Dechenchholing 0 0 0 0 0 4.3 0 2.5 3.0 . Langjoplhakhlia 0 0 0 0 0 0 0 0 0 * raba 12. No. of water treatment plants * Dechenchholing 0 0 0 1 0 1 1 1 1 * Langjophakha 0 0 0 0 0 1 0 0 0 * Taba 0 0 0 0 0 0 0 0 0 13. No. of sewerage treatment plants 0 0 0 1 0 1 1 1 1 * Dechenchholing 0 0 0 0 0 1 0 0 0 * Langjophakha 0 0 0 0 0 0 0 0 * Taba I I Annex 3 Implementation Status of Project Components 3.1 The Project (original as well as its Additional Financing) consists of three components, and a summary of these components, the overall rating for each, along with the current status of implementation and main issues going forward are given below: Component 1: Municipal Finance and Management 3.2 This component (US$ 1.5 million) aimed at strengthening the institutional systems and processes of the two thromdes (city corporations) of Thimphu and Phuemntsholing to enable them to function effectively as efficient, transparent, and accountable urban local governments capable of providing urban services in a sustainable manner. The component also supports the Royal Government of Bhutan to undertake further policy reforns with the objective of putting in place a sustainable policy framework for financing municipal services. 3.3 The support for the city-specific reforn measures comprise of two broad areas, namely: (i) strengthening the local revenue policies and local administrative systems and processes of Thimphu CC and Phuentsholing CC; and (ii) strengthening expenditure management systems and financial management systems and processes of TCC and PCC. The support for policy reforms will enable the relevant RGoB agencies in the design and implementation of an inter-governmental fiscal transfer system for urban local governments which is based on sound principles and is rational, predictable, and transparent. 3.4 Under the Additional Financing (US$ 0.7 million), the above-mentioned municipal finance and management improvements introduced in Thimphu and Phuemtsholing thromdes would be extended to the two other thromdes - Gelephu and Samdrup Jongkhar. The support for similar activities would include asset registration and digitization and upgraded accounting re-engineered business processes. 3.5 Implementation Status. The mission reviewed the progress of the implementation of the Component-1 activities since the previous mission in March 2016. As per the agreed actions from the previous mission, the MoWHS team provided an update on the status of the computerization at the Thimphu and Phuentsholing Thromdes based on discussions at a meeting held at MoWHS on July 15, 2016. 3.6 During the mission, the MoWHS also provided for discussion draft work-plan covering different activities,work to be undertaken at the four thromdes. [Agreed draft to be attached?] As discussed during the mission, an updated status report on the various activities included in the work-plans for the four thromdes should be provided to the Bank by September 30, 2016. 3.7 The mission also noted with that the MoWHS is yet to review the assessment report on these two new Thromdes prepared by the consultants. The work plans for Gelephu and Samdrup Jongklar Thromdes need to include the process for procuring and setting up the upgraded systems and concomitant capacity support activities for these two new thromdes. As such, the PPD needs to prepare a draft terms of reference for the implementation of the municipal finance component and the mission recommends that PPD prepare and submit a draft TOR to the Bank for review by Septemberl 5, 2016. 3.8 Also. PPDAMoWHS would need to coordinate with the two new Thrordes to designate a staff member in each Thromdes as Municipal Finance Reform Coordinator. The mission also requested the counterpart team to provide a status update on the status of the activities implemented by the Consultants (Mis Ernst & Young), including the finalization of manuals following consultations with the Ministry of Finance. 3.9 OveralL given the recent progress towards implementation of activities in the four thromdes, the component-1 is now rated as Moderately Satisiactory. Component 2: Thimphu Northern Area Development Langjophakha LAP 3.10 As reported to the mission, implementation progress on Langjophakha LAP civil works is estimated to be approximately 95%. The contractor has completed most of the major works barring road length of about 500 meters. Other incomplete activities are minor in nature (for example, road markings and signs, painting of railings, finishing touches to footpaths). The contractor would require a few days of dry weather spell in order to complete the roadworks activities, mainly bituminous concreting works. It is highly unlikely that the contractor would be able to complete the contract substantially within the current contract end date of August 17, 2016. However, because of the monsoon season rains, the mission estimates that it may take at least an extra month to complete the contract substantially, which means that this contract is most likely to be completed by mid-September, 2016. 3.11 Observation from field visits by the mission suggest that Langjophakha LAP civil works are of acceptable quality. However, neatness in finishing some civil works still remains (for example. finishing the drain edges, correct alignments railings, etc.) an issue. The mission recommends the Thromde to be extra vigilant with regard to the following: (i) erection of road signs that conforms to Bhutan standards; (ii) construction of ramps at the end of footpaths and whenever there is a difference in height between two adjoining footpaths; (iii) erection of fish-tails at the end of the crash barriers in order to minimize the collision impact; the ends could also be grounded. [Annex 3 includes a few photographs from the field visit to highlight the aforementioned points.] Langjophakha Wastewater Treatment Plant 3.12 The waste-water treatment plant works has recorded satisfactory progress with overall physical progress in the region of 35%. The contractor started the works in January 2016 and has completed water retaining structure works; the superstructure works (mainly brickork) will start soon. Progress on the physical works of Langjopakha WW treatment is on track; the contract is on target to be completed within the contract completion date of December 31, 2016. The contractor is now working on the supply of pumps and equipment. However, one issue still remains unresolved: Thimphu Thromde is yet to formalize the decision regarding connecting 12 plots to the wastewater treatment plant that cannot be connected by gravity flow. Langjophalda LAP: Summary Progress July 21, 2016 SI Descriptions of items P Remarks BILL I: WATER SUPPLY 1-a) Establishing Pumps 95% 1- Pump House 100% b) 2 D.1 pipe laying 100% 3 RCC reservoirs 95% 4-a) HDPE pipe 110mm dia 100% 4- HDPE pipe 90mm dia 100% b) 4-c) HDPE pipe 63mm dia 100% 4- Valve Chamber 100% d) 4-e) Fire hydrant and other controlling 1 75% valves BIIL II: SEWERAGE SYSTEM I uPVC Pipe laying 98% 2 Manhole laying 100% Internal finishing on-going 3 Inspection chamber others 99% 4 Care taker house 95% 5 Pipe laying for inspection chamber 99% BIL III: STREET LIGHT 1 Pole erection 85% procurement completed 2 Pipe and cable laying 85% procurement completed 3 Mini Pillar/ DB box 100% BILL IV: ROAD WORKS 1 Formation 100% 2 Subgrade 100% 3 GSB 100% 4 DBM 85% 5 Asphalt Concrete 85% 6 Retaining wall 100% 7 Footpath 92% 8 Road side drain 95% 9 Exit drain 100% 10 Cross drain 1 100% 11 Road marking and Traffic sign 25% Material procurement and fabrication complete BILL V: BHUTAN TELECOM 1 Pipe laying 100% 2 BT Chamber installation /laying at given location 100% BILL VI: BHUTAN POWER CORPORATION 1 Single Pipe laying hume pipe 100% 2 Double pipe laying hume pipe 100% 3 Chamber installation on single line 100% 4 Chamber installation on double line 100% 3.13 Lower Taba LAP. The Bank was inforned, just after conclusion of the mission, that the contract for the Lower Taba civil works package has been signed on July 27, 2016; it is expected that the contractor will be mobilized by mid-August 2016. The contract duration is 30 months and, as such, the contract is expected to be completed by mid-February 2019 if it is completed on time. This is a milestone-based contract (that is, the contractor has to achieve the agreed milestones in order to avoid paying delay damages, which is up to a maximum limit of 10% of the contract amount). The mission emphasized that the Thromde would need to diligently monitor the progress on the contract in order that its implementation is not delayed and the contract is completed well within the Credit closing date (June 30, 2019). Update of Last Review Agreed Actions Steps Activity Agency Completion Comments date I A. Langjophakha LAP 1 Continue monthly contract progress review DES / Every month share minutes with Bank MOWHS 2 Implement the QAP TT Continuous 3 Fonnalize the agreement reached with the TT Mid-August, Last review's pending aggrieved traditional house owner and the 14 2016 action plots owners whose plots cannot be connected to the waste-water treatment plant by gravity 5 Complete the contract substantially before TT September 15, September 15, 2016 and report the same to the 2016 Bank II A Lower Taba LAP 1 Contractor mobilized TT August 25, 2016 2 Implement the QAP TT Continuous Central Water Supply Scheme 3.14 Since the last mission, progress has been made on the Central Water Supply Scheme, albeit at a slower pace than the timeline agreed during the March 2016 mission. NLCS has completed the longitudinal survey of the alignment and has availed the Thimphu Thromde and its consultant water supply engineer with the longitudinal profile. The consultant WS engineer has fixed a proposed final alignment. The minutes of the Third Public Consultation Meeting, held on April 7, 2016, was shared with the Bank. It is learnt that the Thrompon and his Thimphu Thromde (TT) team reached an agreement with the landowners through whose plot the alignment of the transmission main of the Central Water Supply Scheme passes. The Thrompon and his Team along with the officiating Gup and landowners walked along the proposed alignment within the buffer zone to ensure that the plot owners were aware of the alignment and also for TT to address any of their concerns to the extent possible. The mission was infonned that a mutual agreement has been reached with the affected landowners. The agreement needs to be formalized through MoUs with the 44 affected plot owners. TT will have the MoUs signed as soon as the format is finalized. 3.15 Intake and Transmission main. The mission discussed with the TT Water Supply Consultant the design of the transmission main for the CWSS and visited the intake site too. It is learnt that the consultant had submitted his report to TT; but it is yet to be review by the TT engineers due to other pressing engagements. Based on the discussions with the consultant, the following are observations on the design of the intake and transmission main: * The consultant has completed the design of the intake structure, sedimentation tank near the intake and the transmission main, and has prepared cost estimates. * From discussions with the consultant it is evident that he has based the design on certain parameters and assumptions. However, in the absence of a proper detailed design report, it is difficult to review and comment on the design. The design report should include, inter alia, a succinct background information justifying the need for the CWSS; an explanation of the design assumption/parameters used, e.g. base year population, population growth rate, the design period; the water demand projections - the factors for maximum day demand, peak demand (and which structures are designed against which factor); and a substantiation of the use of such parameters. * The mission was informed that the practice in Bhutan is to use the Bhutan Schedule of Rates and where items are not included in the BSR, an analysis of rates is to be done. The design report should explain this too. * The mission recommends that while the TT reviews the design prepared by the water supply consultant, it should ensure that the structural design / drawings of all the proposed structures be reviewed and certified by its in-house structural experts. This applies to electrical aspects as well; competent authorities should review it. * The designer is suggested to ensure that the design is optimal and also takes into due consideration the ease of operations. The proposed single chamber sedimentation tank design is an example. * The designer has provided anchors for the DI transmission main; these should be clearly shown in the alignment. Similarly, clearly labeled layout plans should be included in the report. (Labels should coincide with the hydraulic profile of the transmission main, where appropriate). 3.16 Central Water Supply Treatment Plant. While the transmission main (from the intake to the raw water reservoir) is designed to carry 15 MLD; the treatment plant capacity is 10 MLD - an increase from 7.5 MLD. Review of the available water quality test results done in March and May 2013, show the quality of the source would need minimal treatment. However, if more recent water quality test results, as well as source yield measurement from the river gauging station are available, they should also be documented and analyzed. In addition, it is suggested that a full water quality analyses of the source at the proposed intake site be done immediately. Providing such information to the bidders would to enable them to propose treatment that is appropriate to the actual local situation. 3.17 Estimated Costs. The consultant's estimated cost for the intake structure, sedimentation tank near the source, DI transmission main (with proper anchorage, air valves, wash outs etc., where needed) is about NU 270 million. The tentative cost of the 10 MLD treatment plant is estimated at NU 242 million. The total estimated cost of the intake and transmission main and the 10 MLD water treatment plant is NU 512 million. (This estimate includes 5% for inflation and 5% for contingency). 3.18 Way forward. It has been agreed that the activities for the Central Water Supply Scheme needs to be expedited: * The legal agreements for the lease of the area at the intake with Cheri Monastery and of Memorandum of Understanding (MoU) with the 44 affected landowners in Kabesa area need to be signed as early as possible. In this regard, TT hired a local sociologist during the mission to expedite these activities since the previous consultant sociologist left for further studies. * During the mission, it was agreed that the preparation of the technical design and documents, bidding documents would be carried out as per the schedule below: Dates agreed SI. Description of action Rensb with July 2016 No. mission 4 Complete the detailed design, cost estimates of the transmission main and structures along it. August 30, 2016 5 (i) Carry out simultaneously social and environmental safeguard studies TT/DES September 15, (ii) Obtain clearance from the NEC 2016 7 Prepare draft-bidding documents and get TT/DES September 15, endorsement from the World Bank. 2016 8 Finalize Bidding documents TT/DES Sept. 30, 2016 9 Call for bids TT/DES October 10, 2016 10 Receive proposals from contractors and bid opening TT Nov.30, 2016 11 Bid evaluation & presentation to award committee TT/DES Dec.30, 2016 12 Forward award recommendation to World Bank DES January 15. 2017 13 No-objection from the World Bank World Bank January 25, 2017 14 Bid award and acceptance letter TT January 31, 2017 3.19 The mission is of the view that in order to expedite progress on this scheme, there is an immediate need to: (i) assign engineers to the Project Team; (ii) both TT and DES/MoWHS officials review the consultant's design report; (iii) constitute a steering or coordination committee to monitor progress through implementation; and (iv) where necessary to seek high-level inter-ministerial intervention and coordination to resolve any bottlenecks so as to prevent the schedule for this important Central Water Supply Scheme falling on the critical path before Credit closing (end-June 2019). Component 3: Capacity Building 3.20 Implementation of this component continues to be rated moderately satisfactory, with good progress on the policy-related activities (under additional Financing) coupled with only a few training courses/programns conducted in 2015 and with reduced budget allocation FY2016-17. 3.21 During January-June 2016, a few training activities were undertaken; these included four foreign training courses in which 24 staff/officials participated. The participants were selected from the MoWHS and the Thimphu and Phuentsholing Thromdes. The details of these activities are listed in the following tables: In-Country Training S1. Name of the Course Number of Duration Venue Agencies represented no participants (days) 1 7 habits of highly 10 3 IMS, Thimphu MoWHS effective people (management skills development training) 2 Construction & 10 5 CST/ Phuentsholing MoWHS/Dzongkhags/ Contract Thromdes Management 3 Customer care & 26 5 RIM/Thimphu MoWHS/Dzongkhags/ Public relations Thromdes Foreign Training SI. Name of the Number of Duration Venue Agencies no Course participants (days) represented 1 Water & 7 12 Malaysia & Thailand MoWHS & TT Wastewater (January Treatment 2016) Plants 2 User Training 8 9 (June South Asian Institute MoWHS, TT and on Accounting 2016) of Technology, PT (1 participant System Kathmandu, Nepal from TT was (customized financed on cost Tally software) sharing basis) 3 Project 6 8 (June Balay Paibare DES, PPD, DHS/ Management 2016) Learning Centre, MoWHS & TT Manila, the Philippines 4 Using IT for 3 6 (June Balay Paibare DES & MoWHS Strategic 2016) Learning Centre, Records Manila, the Management Philippines 3.22 Also, under the BUDP2 Additional Financing, this component provides for Policy Implementation Support for a couple of activities which are being undertaken by the Department for Human Settlement (DHS), MoWHS. These are: 3.23 Spatial Planning Act and Spatial Planning Standards: Several rounds of consultative meetings have been conducted towards the preparation of the documents following which the 'Final Draft' has been prepared for further discussion. Regional workshops are planned to be held during FY 2016-17 in Phuentsholing, Gelephu and Samdrup Jongkhar with relevant stakeholders including the Dzongkhag (dsitrict) Administration for the purpose of public sensitization and finalization of the Act by the Core group including legal representatives. Parallel presentation shall be made to the Cabinet for their views, comments and suggestions. The Act will also be translated into Dzongkha and all consultations are expected to be completed within FY 2016-17. 3.24 National Hwnan Settlement Strategy: The 'first draft' of the National Human Settlement Strategy (NHSS) was presented by the consultants (Crisil Risk Infrastructure Solution, India) to the relevant stakeholders on May 4, 2016 at the MoWHS. The presentation was chaired by the Honorable Minister, MoWHS and attended by officials from the relevant agencies. At the presentation, various comments and suggestions were provided which the consultants have agreed to incorporate and finalize the 'Draft Final' Document by end July 2016. Subsequently, following completion of the 'National Population Census' exercise by December 2016, the national population data is required to be incorporated in the Strategy document. It is expected the National Human Settlement Strategy will; be finalized June 2017. Annex 4: Financial Management 4.1. Financial management arrangements applied for the project are adequate. Financial Management of the project is rated "Satisfactory" and FM risk remains "Moderate". 4.2. Disbursements. Against the Credit allocation of SDR 19.05 million (original and additional financing), the disbursements as on July 25, 2016 stands at SDR 6.68 million, reflecting overall disbursement of 35.08%. The funds disbursed to date include Designated Account (DA) Advance of Nu. 190.5 millionand expenditures reported until March 31, 2016. Excluding the DA Advance, the disbursement stands at 21.6%. The IUFR for the quarter ending June 2016 is expected to be submitted shortly after which the disbursement numbers will stand revised. 4.3. During the mission, there were discussions on any possible savings under the project. It was discussed and concluded that the savings if any, will be calculated after December 2016/January 2017 when the commitments for the large packages under BUDP2 and the Additional Financing are expected to be known following award of contracts.. 4.4. Budgeting.-The project budget for the FY16-17 is Nu. 254.15 million, compared to FY15-16 budget of Nu. 238.72 million. The actual expenditure for FY15-16 was Nu. 128.35 million, which is 54% of the original budgeted amount. 4.5. Interim Unaudited Financial Reports (IUFR). The IUFRs for the quarter ending March 31, 2016 was submitted to the Bank on April 20, 2016, well ahead of the due date of May 15, 2016, While the TUFRs were found acceptable, there is clearly a scope for better forecasting the project expenditure. This is evident from the fact that the DA advance has been consistently increasing and now stands at Nu. 190.5 million. 4.6. External Audit. The project audit report for FY2014-15 was received prior to the due date of December 31, 2015. An audit review letter has been issued on January 4, 2016 for which an acceptable response was provided during the mission. However, the response for the audit review letter for FY13-14 is awaited. The next audit report for FY15-16 is to be submitted latest by December 31, 2016. 4.7. Transaction Review. During the mission, transaction review was carried out and a few items where management attention is required are provided below: a) Follow-up was done regarding the inadequate recording of IT equipment, such as 4 Laptops, 6 desktops, 4 printers, and 12 wireless access points Asset Register of Thromde. The entries in the asset register need to clearly state the officials to whom the assets were issued, the date of issue, signatures, etc. b) A bank draft for Nu. I million was prepared in June 2016 and kept pending for handing over to the M/s Ramkey for the Dechencholing water treatment plant apparently for some pending work. The project authorities were requested to follow FRR 2001 and could have deposited the funds in appropriate MoF account till the amount became due for payment. Sl.no. Description Due Date 1 Provide response to Bank's external audit review letter dated Feb 12, 2015 Immediate 2 Submit IUFR for quarter ending June 2016 August 15, 2016 3 Update Asset register for IT equipment purchased August 31, 2016 4 Submit External audit report for FY15-16 December 31, 2016 Annex 5 PROCUREMENT PLAN Bhutan Second Urban Development Project (BUDP2, Cr. 4744-BT) & BUDP2 Additional Financing (Cr. 5431-BT) (DRAFT as ofMay 25, 2016) Project implementing Agencies: This project will be implemented by the following agencies: (i) Thimphu Thromde (TT); (ii) Department of Engineering Services, Ministry of Works and Human Settlement (MoWHS); (iii) Department of Human Settlement, MoWHS; (iv) PPD, MoWHS; (iv) Phuentsholing Thromde; (v) Gelephu Thromde; and (vi) Samdrup Jongkhar Thromde Period covered by this procurement plan: July 2015 to June 2017 L Goods and Works and non-consulting services. 1. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement: Guidelines and prior review threshold will be determined by the Procurement Specialist /Procurement Accredited Staff based on the assessment of the implementing agency's capacity. Procurement Method Threshold Prior Review Threshold 1. ICB and LIB (Goods) USD > 200,000 USD >200,000 2. NCB (Goods) USD > 30,000 < 200,000 USD >100,000 3. ICB (Works) USD > 1,000,000 USD >1,000,000 4. NCB (Works) USD > 30000 < 1, 000,000 USD >200,000 5. Shopping USD < 30,000 Post review 6. Direct Contract All All II. Selection of Consultants 1. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants: Selection Method Prior Review Threshold Comment 1. Consulting Finn USD > 200,000 2, Individual USD > 50,000 3 Sole Source Selection All III. lnplenentineAgency Capacitv Building A ctivities with Tine Schedzle 1. In this section the agreed Capacity Building Activities (some items could be from CPAR recommendation) are listed with time schedule. Estimate S. Expected Outcome/Activity Cost, Estimated Start Location Comments No. Description Nu.in Duration Date million 1 Specialized training on Water Supply 3.00 02-weeks Jan 2016 Ex-country Staffs of PIU, TT & nd Sewerage System PMU, MoWHS 2 Construction and Project Management 1.00 02-weeks May 2016 Ex-country Staffs of PIU, TT & PMU, MoWHS 3 User Training on Accounting system 1.20 10 days May 2016 Ex-country Staffs of PIU, TT & (Tally ERP) PMU, MoWHS 4 Habits of highly effective people 0.70 3 days Feb 2016 In-country MoWHS Management skills development raining) 5 Construction & Contract Management 0.25 5 days Apr 2016 In-country Dzongkhags/Throm des/ MoWHS 6 Customer care and Public relations 0.35 5 days Apr 2016 In-country Dzongldiags/Throm des/ MoWHS 7 AutoCAD Training 0.35 12 days Oct 2015 In-country Dzongklags/Throm des/ MoWHS TOTAL 1.7 Note: The above activities' budget has been approved in this current FY 2015-16 by the MoF. Estimate S. Expected Outcome/Activity Cost, Estimated Start Location Comments No Description Nu.in Duration Date million 1 Construction and Project Management 1.50 02-weeks May 2016 Ex-country Staffs of PIU, TT & PMU, MoWHS (spill over from FY 2015/16) 2 Training on Accounting system 1.20 10 days May 2016 Ex-country Staffs of PIU, TT & PMU, MoWHS 3 Construction & Contract Management 0.25 5 days Apr 2016 In-country Dzongkhags/Throm des/ MoWHS 4 Customer care and Public relations 0.35 5 days Apr 2016 In-country Dzongkhags/Tirom des/ MoWHS TOTAL 1.8 Note: The final list shall be prepared in consultation with DPA. PROCUREMENT PLAN FOR WORKS 1 2 3 4 5 6 7 Estimated Procuren Review by Expected SI.no Contract (Description) Cost (Nu ent Bank Bid Opening Comments million) Method (Prior/Post) Date Work commenced from 12/09/2014 and Construction of Urban Infrastructure at 04/04/2014 target completion time is 11/03/2016 (18- Langjophakha LAP - Package III months contract duration). Time extended until June 2016 Work awarded for Nu. 23.6 m and 2 Package Sewerage Treatment Plant at 17.864 NCB Prior 17.08.2015 completion date is Dec 2016 (duration: 12 Langjophakha - Package IV months) Bid evaluation completed 3 Taba LAP Infrastructure Development Prior 22.01.2016 342.158 ICB Construction of Sewerage Treatment Plant at Taba (1.0 MLD) 23.586 NCB0 Construction of Intake, water main line 5 from Dotena to Taba and Distribution 244.513 ICB Prior 01.12.2016 reservoirs 6 Construction of Central Water Treatment Plant (WTP) of 10 MLD capacity at Taba 76.110 ICB 01.12,2016 PROCUREMENT PLAN FOR GOODS 1 2 3 4 5 6 7 Estimated Review by Expected SIProcuremeBiOpng no' Contract (Description) Cost (Nu M Bank Bid Opening Conunents nO, million) nt Method (Prior/Post) Date 1" HIardware and software for Strengthening Procurement may not happen at one time and 1 Municipal Finance & Management for 1.00 Shopping Post shall be need- based. Thimphu and Phuentsholing Thromdes Operational cost (office equipments, 2 laptops, printer, binding machine, 1.021 Shopping Post Procurement may not happen at one time. scanner, cameras, and other costs). Direct 3 Supply of Excavator 6.2 Contract Prior Sept. 2016 For PT Direct ForTT 3 Purchase of Road sweeping Machine 4.0 Cnrct Prior Sept. 2016 Contract 4 Printer (Heavy Duty A3) 0.05 Cnrct Post Sept. 2016 Contract 5 Printer - 2 nos. for TT 0.100 NCB Post Sept 2016 6 Furniture 0.020 NCB Post Sept 2016 PROCUREMENT PLAN FOR CONSULTANCY SERVICES 1 2 3 4 5 6 7 SIstmae Selection Rveby Services to I0 Description of Assignment Cost (Nu. Method Banl be completed Remarks million) (Prior/Post) This is to support any professional services required by TT and PT in . PS Municipal Finance and Management I Professional Services 2.50 NCB Prior 30.06.2016 and MoWHS and any other that may be required in the process. Covers both hardware and software support. Preparation of Human Settlement Strategy 5.0 Competitive 2 Methods Prior 15.06.16 (Firm) QCBS Preparation of Planning act and a sets of planning standards 5.0 Competitive Prior 25,08.2016 Methods (Firm) Local Consultant Engineer for Water Supply for 4 Design and Supervision Works 1.056 Post 3004.2018 IC Local Consultant Engineer for Sewerage Network for 5 Design and Supervision Works 0.84 Post 0.04.2018 IC Local Consultant Engineer for Road and Drain for 1.02 IC 6 Design and Supervision Works Post 30.04.2018 30.06.2016 7 Sociologist (Local) (extended for one year effective 0.48 (If IC Post from June 16, 2015) contract is extended) Three Technicians (Water, Sewerage & Road)) For 0.90 IC 31.01.2018 8 supervision (Local) Post Note: The consultants are recruited under the Additional Financing for BUDPZ under the sub-component 2.3 Project Management Consultancy (including PPA) PROCUREMENT PLAN (July 2010 - June 2015) Works 1 2 3 4 5 6 7 Estimated Review by Expected Bid SI.no Contract (Description) Cost (Nu it (r/st Bank Opening Date Comments million) (Prior/post) 1 Construction of Urban Infrastructure in 158.25 ICB Prior 22.07.201 1 Approvals: Bidding document:12.5.2011; Decliencholing Contract Award: 7.10.2011 2 Construction of Water Treatment Plant at 22.278 NCB Post 12.07.2012 Awarded Dechencholing 3 Construction of Sewerage Treatment Plant at 17.67m NCB Post 12.07.2012 Awarded Dechencholing 4 Civil works including Office cum Caretaker's 9.048m NCB Post 12.07.2012 Awarded quarter 5 Construction of Urban Infrastructure in 170.00 ICB Prior 01.10.2013 Bids opened April 4, 2014, Bid evaluation Langjophakha completed June 5. IDA no-objection sent June 25, 2014 6 Package Sewerage Treatment Plant 11.20 NCB Post 01.01.2014 7 External Power stipply to STP & WTP at 1.40 Direct Prior 30.07.2013 Dechencholing Contract Goods 1 2 3 4 5 6 7 Estimated Review by Expected Bid S.no0 Contract (Description) Cost (Nu Pc m Bank Comments million) Method (Prior/Post) Opening Date 1 Supply of laptops, Desktops and Printers 1.16 Shopping Post 06,12.2010 Completed 2 Supply of Photocopy Machines, Fax 0.34 Shopping Post 14.01.2011 Completed Machine, Scanner and Binding Machine 3 Supply of Digital Camera 0.06 Shopping Post 14.01.2011 Completed 4 Supply of laptops, Printers, Scanners, 0.685 Shopping Post 14.09.2011 Completed Wireless Access Points 5 Supply of Walkie Talkie 0.016 Shopping Post 05.04.2012 Completed 6 Supply of Total Station 1.027 Shopping Post 05.04.2012 Completed 7 Supply of Vehicle (Hilux) 1.200 Direct Prior NA Completed Contract 8 Supply of MxRoad Software 0.320 Direct Prior NA Approval: 26/07/2012 (Completed) Contract 9 Supply of laptops (2 nos.) 0.095 Shopping Post 15.09.2013 10 Supply of Servers 1.270 Shopping Prior 05.07.2013 Approval: 14/8/2013 (Completed) 11 Supply of Road Sweeping Machine (for 5.900 Direct Prior TT) Contract 12 Supply of Excavator (For PT) 6.200 Direct Prior Contract 13 SLIpply of Drain Cleaning Machine (For 2.900 Direct Prior Subject to fund balance PT) Contract Supply of vehicle 3.00 Direct Prior Subject to MoF's approval Contract 14 Supply of Air Conditioner 0.025 Shopping Post 20.06.2013 15 Supply of hardware and software for 12.00 Shopping Post From additional financing Thromdes and Ministry-Revenue System 16 Supply of hardware and software for 12.00 Shopping Post From additional financing Thromdes and Ministry-Accounting system, Re-engineering BPR, etc. Consultancy Services 1 2 3 4 5 6 Estimated Selection Review by Services to Sl.no Description of Assignment Cost (US$. Bank million) Method (Prior/Post) be completed 1 International Engineer for Design. Review and 0.210 Individual Prior 21.08.2012 construction supervision 2 Local Consultant (Water) Supply for Design and 0.048 Individual Post 28.02.2014 Supervision Works 3 Local Consultant (Sewerage) Supply for Design and 0.048 Individual Post 28.02.2014 Supervision Works 4 Local Consultant (Roads) Supply for Design and 0.048 Individual Post 15.02.2014 Supervision Works 5 Consultancy Services for Socio-Economic Impact 0.050 Direct Post 31.12.2014 Monitoring of Dechencholing and Langjophakha Contract Local Area Plans 6 Local Consultant-Sociologist-To assess and monitor 0.012 Individual Post 30.06.2014 social aspects of two LAPs 7 Consultant for Low Income Housing Analysis 0.050 Individual Post 8 Technical Assistance on Public Financial 0.200 Individual Prior 15.09.2013 Management for Thimphu and Phuentsholing Thromde (Municipal Finance Specialist) 9 Strengthening Local Revenue Administration System- 0.24 QCBS Prior 21.07.2013 Design and implementation of the system for computerization of tax and non-tax records and computerization of asset register 10 Strengthening Municipal Financial Management 0.274 QCBS Prior 11 Replication of asset register and revenue systems 0.20 QCBS Prior 12 Replication of Accounting System 0.20 QCBS Prior 13 Preparation of Planning Act & Standards 0.40 QCBS Prior 14 Preparation and implementation of Human Settlement 0.20 QCSB Prior 24 Zajhed H1. Klian NI: WBOD E&I ZKIAN BHUTAN, ete BUDP2-July2016-RevAideM-082516.docx 8 25 2016 3:20:00 PM 25 9