Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES10401 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE KAKHETI REGIONAL ROADS IMPROVEMENT PROJECT IBRD LOAN: 7802-GE, US$30.00 MILLION (NOVEMBER 10, 2009) TO GEORGIA November 20, 2013 Transport Sector Unit Sustainable Development Department Europe and Central Asia 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. ABBREVIATIONS AND ACRONYMS EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan FPU Foreign Project Unit GDP Growth Domestic Product GOG Government of Georgia HDM-4 Highway Development and Management Model IBRD International Bank for Reconstruction and Development KRRIP Kakheti Regional Roads Improvement Project KRSMP Kakheti Road Safety Management Plan NPV Net Present Value PDO Project Development Objective PMR Project Monitoring Report RAP Resettlement Action Plan RD Roads Department RPF Resettlement Policy Framework TEWHIP Third East West Highway Improvement Project TRRC The Transport Reform and Rehabilitation Center USD United States Dollars VGT Vaziani, Gombori, and Telavi (Road Circuit) Regional Vice President: Laura Tuck Country Director: Henry G. R. Kerali Sector Manager: Juan Gaviria Task Team Leader: Jean-Francois Marteau Co-Task Team Leader Natalya Stankevich II GEORGIA Kakheti Regional Roads Improvement Project CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS ............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 5 D. APPRAISAL SUMMARY ................................................................................................... 7 ANNEX 1: RESULTS FRAMEWORK AND MONITORING............................................... 10 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK ................................... 10 III DATA SHEET Georgia Kakheti Regional Roads Improvement Project (P117152) EUROPE AND CENTRAL ASIA ECSTR Report No: RES10401 Basic Information Project ID: P117152 Lending Instrument: Specific Investment Loan Regional Vice President: Laura Tuck Original EA Category: Partial Assessment (B) Country Director: Henry G. R. Kerali Current EA Category: Partial Assessment (B) Sector Director: Laszlo Lovei Original Approval Date: 10-Nov-2009 Sector Manager: Juan Gaviria Current Closing Date: 30-Nov-2013 Team Leader: Jean-Francois Marteau Borrower: Georgia Responsible Roads Department of the Ministry of Regional Development and Infrastructure Agency: Restructuring Type Form Type: Short Form Decision Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 20-Aug-2013 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P117152 IBRD-78020 Effective 10-Nov-2009 12-Nov-2009 08-Dec-2009 30-Nov-2013 30-Nov-2013 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P117152 IBRD-78020 Effective USD 30.00 30.00 0.00 27.10 2.90 90 Policy Waivers Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] 1 A. Summary of Proposed Changes The proposed restructuring will accommodate the following changes: (i) a 21 month extension of the project closing date from November 30, 2013 to August 30, 2015; (ii) inclusion of the Sasadilo-Sioni road (17 km) and 5 bridges in Component 1 for rehabilitation using the savings of the project; (iii) modification of capacity strengthening activities under Component 2 to reflect organizational changes in the Roads Department (RD) in 2010 and support capacity building of the RD and construction industry in the design-build contracting modality which will be piloted under this project after restructuring, and additional studies to improve the major road safety blackspot in the area; and (iv) updating of the Results Frameworks to accommodate the above changes in the project activities and reflect more realistic targets. B. Project Status The progress towards achieving the Project Development Objective (PDO), which is to reduce transport costs and improve access and traffic safety for the Kakheti regional roads, is rated moderately satisfactory. It is mainly because the achievement of the traffic safety benefits as part of the PDO is affected by the delayed implementation of the traffic safety improvement activities under Component 2. Otherwise, targets for reduction in transport costs and improved accessibility (travel time) have either been achieved or on track to be achieved. The overall implementation progress remains moderately satisfactory, which is mainly due to the delays in the implementation of the traffic safety improvement works under Component 2. The status of each component is described below. C. Proposed Changes Financing Change in Loan Closing Date(s): Explanation The Restructuring proposes a 21-month extension of the project closing date from November 30, 2013 to August 30, 2015 to allow the time needed to complete the remaining small-scale traffic safety improvement measures under Component 2, the works on the proposed Sasadilo-Sioni road under Component 1, new capacity building activity for RD and local construction industry, and feasibility study and EIA for Bakurtsikhe by-pass. Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Status Date Date Date Date(s) IBRD- Effective 30-Nov-2013 30-Nov-2013 30-Aug-2015 78020 Reallocations Explanation The inclusion of another road section as part of the proposed Restructuring will involve the use of savings as a result of the lower than estimated contract values under Component 1. It will not result in reallocation of funds between the categories. Ln/Cr/TF Currency Current Category of Allocation Disbursement % (Type 2 Expenditure Total) Current Proposed Current Proposed 29,925,000. 29,925,000. IBRD-78020 USD GO,CW,CS,TR,IOC 80.00 80.00 00 00 PREMIUM FOR 0.00 0.00 0.00 0.00 CAPS/COLLARS FRONT END FEE 75,000.00 75,000.00 0.00 0.00 30,000,000. 30,000,000. Total: 00 00 3 A. SUMMARY 1. The proposed Level-II project restructuring of the Kakheti Regional Roads Improvement Project (KRRIP), Loan IBRD-78020, is prepared in response to the Government of Georgia’s (GOG) requests of December 15, 2012 and February 26, 2013 to extend the closing date for the Project by 18 months and introduce changes in some of the project activities. Based on the assessment of the on-going and new project activities, the Bank project team believes that 21 months extension from November 30, 2013 to August 30, 2015 is more feasible to allow completion of all activities. If approved, it will be the first extension of the project closing date. The project was approved on November 10, 2009 and became effective on December 8, 2009. US$ 29.3 (or 78 percent) out of US$ 37.5 million, total project cost (IBRD loan of US$30 million and Borrower’s contribution of US$7.5 million), has been spent or committed under this project. There is no pending audit report related to this project. 2. The proposed restructuring will accommodate the following changes: (i) a 21-month extension of the project closing date from November 30, 2013 to August 30, 2015; (ii) inclusion of the Sasadilo-Sioni road and 5 bridges in Component 1 for rehabilitation using the savings of the project; (iii) modification of capacity strengthening activities under Component 2 to reflect organizational changes in the Roads Department (RD) in 2010 and support capacity building of the RD and construction industry in the design-build contracting modality which will be piloted under this project after restructuring, and additional studies to improve the major road safety blackspot in the area; and (iv) revising the Results Framework to accommodate the above changes in the project activities and reflect more realistic targets. B. PROJECT STATUS 3. The progress towards achieving the Project Development Objective (PDO), which is to reduce transport costs and improve access and traffic safety for the Kakheti regional roads , is rated moderately satisfactory. It is mainly because the achievement of the traffic safety benefits as part of the PDO is affected by the delayed implementation of the traffic safety improvement activities under Component 2. Otherwise, targets for reduction in transport costs and improved accessibility have either been achieved or on track to be achieved. 4. The overall implementation progress remains moderately satisfactory, which is mainly due to the delays in the implementation of the traffic safety improvement works under Component 2. The status of each component is described below. Component 1: Improvement of the Road Linking Vaziani, Gombori, and Telavi (US$26.12 million in Bank financing) 5. The implementation progress of this component is satisfactory. The component supported two major civil works contracts to rehabilitate 55 km of the Vaziani, Gombori, and Telavi (VGT) road (which is the most direct route to Telavi from Tbilisi) along the existing alignment (except for about 3.8 km of realignment to straighten curves) and repairs to the bridge deck over the Iori River. The contracts were completed in September 2011 and August 2012, respectively. The last 4 11 km section of the same road (with a finishing point in Telavi) was completed before the start of the other two contracts. It was financed from the Government budget outside the scope of this project. This 11 km section was initially in much better condition than the rest of this road and the civil works involved only surface dressing. The RD continuously monitors landslide-prone areas and has a standing maintenance contract to cover incidents, because landslides had been considered as the biggest technical risk of this project, which has materialized on several occasions. 6. Land acquisition and resettlement were completed and compensations were fully paid in accordance with the RAP. No complaints were received from the project affected people. Component 2: Road Safety Improvement and Institutional Strengthening (US$1.60 million in Bank financing) 7. The implementation progress of this component is rated moderately satisfactory. The implementation of the road safety improvement activities are behind schedule due to more than a two-year delays with preparation and low quality delivery of the Kakheti Road Safety Management Plan (KRSMP) by the Consultant. However, the implementation of Phase 1 of the road safety improvement works started on April 29, 2013 and is to be completed by November 30, 2013. A second phase of road safety improvement works will be tendered in the coming months once their design is finalized. Supervision of identified traffic safety works is carried out jointly by the Maintenance Division and Road Safety Unit of the Roads Department, not supervision consultants, because of the availability of the needed capacity and expertise in the RD. To achieve a level of improvement consistent with the initial objectives of the project requires an extension of over a year. 8. No institutional strengthening activities were carried out due the organizational changes in the Roads Department. At the time of project preparation, there were six regional offices, including the Sagarejo office which was included for financial support in this project. However, in 2010, the Government made a decision to maintain only two regional offices, i.e., Kutaisi and Batumi, and convert all others into small branches of the RD with only one-two technical specialists. The recommendations of the study on the functional analysis of the RD being carried out under TEWHIP which were related to the Regional Offices of the RD and the Sagarejo Office in particular could therefore not be implemented. Component 3 - Project Implementation (US$0.17 million in Bank financing) 9. The implementation progress of this component is satisfactory. The Transport Reform and Rehabilitation Center (TRRC) continues to perform satisfactorily for financial auditing, monitoring and evaluation, and the Foreign Projects Unit (FPU) has been implementing procurement activities adequately. C. PROPOSED CHANGES 10. The proposed Level II restructuring of the KRRIP will accommodate a number of changes related to the components/activities, results framework, and project closing date. PROJECT COMPONENTS 9. Component 1: This restructuring proposes to include the 17 km Sasadilo-Sioni road section and 5 bridges on this road for rehabilitation. It will be financed through the savings of around US$7 million from the project as a result of the lower than estimated contract values of the 5 completed works. This is the main feeder road to the recently rehabilitated VGT road and it is in a very poor condition, and would improve linkage of part of the North West of Kakheti region to Tbilisi. Its rehabilitation is consistent with the project PDO and targets the same area covered by the project. The original design and cost estimates for the road which had been originally done in 2011 were updated in May 2013. The tender package was finalized in October 2013 and is ready for tendering. This and would be the first road design-build contract carried out in Georgia. 10. Component 2: In order to reflect organizational changes in the RD, the restructuring involves cancelation of the strengthening of the capacity of the RD Regional Office in Sagarejo. Instead, it is proposed to support (i) capacity building of the RD and local construction industry in Design-Build contracts, which will be piloted under the support of this project, and (ii) preparation of a feasibility study and carrying out of an EIA for Bakhurtsikhe-Gurjani by- pass to re-direct heavy traffic from the densely populated Bakhurtsikhe village, with the aim to improve road safety. RESULTS/INDICATORS 11. The results framework will be modified to reflect the proposed changes to the Components/Activities and set more realistic targets. The revised table is attached as Annex 1 and the main modifications are as follows:  Cancelation of an intermediate outcome indicator “Action plan for strengthening the Regional Office of the RD in Sagarejo approved” due to the cancelation of the respective activity;  Inclusion of an intermediate outcome indicator “Workshop on Capacity Building in Design- Build Contracting Modality for the RD and construction industry held” which is linked to piloting of the design-build contract for Sasadilo-Sioni road;  Revision of the target value of an intermediate outcome indicator “number of kilometers rehabilitated” for Component 1 from 65 to 82. It includes additional 17 km of Sasadilo-Sioni road which is to be rehabilitated under this project after restructuring;  Revision of the targets for 2013, 2014 and 2015 for a project outcome indicator “Traffic Volume between Vaziani and Gombori (with baseline of 372 cars) to reflect more realistic targets which were over-forecast at project appraisal and to ensure consistency with the Supplemental Letter;  Revision of the targets for 2013, 2014 and 2015 for a project outcome indicator “Traffic Volume between Vaziani and Gombori (with baseline of 496 trucks) to reflect more realistic targets which were over-forecast at project appraisal;  Revision of the targets for 2012, 2013, 2014 and 2015 for an intermediate outcome indicator “Number of person-months of jobs created”;  Revision of the targets for 2012, 2013, 2014 and 2015 for an intermediate outcome indicator “Number of person-months of jobs created”; and  Revision of the targets for 2012, 2013, 2014 and 2015 for an intermediate outcome indicator “Percentage of planned engineering related road safety interventions completed on the Vaziani-Sagarejo-Bakurtsikhe-Gurjaani-Telavi road”. PROJECT CLOSING DATE 12. The Restructuring proposes a 21 month extension of the project closing date from November 30, 2013 to August 30, 2015 to allow the time needed to complete the remaining 6 small-scale traffic safety improvement measures under Component 2 and the works on the proposed Sasadilo-Sioni road under Component 1. FINANCING 13. The inclusion of another road section as part of the proposed Restructuring will involve the use of savings as a result of the lower than estimated contract values under Component 1. It will not result in reallocation of funds between the categories. The cost estimate for rehabilitation of 17 km of the "Sasadilo-Sioni" road section, rehabilitation of four bridges and a complete replacement of the fifth bridge on this road section is estimated to be US$ 6.5 million. The costs of civil works (including project contingencies) are adequately covered by the savings under Category 1. PROCUREMENT AND IMPLEMENTATION SCHEDULE 14. The procurement plan has been updated to allow full utilization of project funds, for both the completion of current project activities, as well as the completion of the additional civil works for the new road section under Component 1 and the additional institutional activities under Component 2. It will also include the cancelation of institutional strengthening activities to the Sagarejo Regional Office. The updated implementation plan reflecting extension of the project by 21 months has been discussed and agreed with the Government. D. APPRAISAL SUMMARY ECONOMIC ANALYSIS Contribution to shared prosperity in the Kakheti Region. 15. The project in general and the additional activities proposed in particular will not only contribute to the full achievement of the PDO, but also to the contribution of the World Bank twin goals of ending extreme poverty and promoting shared prosperity by improving road access for residents in rural areas, which are much poorer than urban areas, to markets, new job opportunities, social and economic services and by reducing road accidents which currently cost around 1-1.5 percent of GDP in Georgia. 16. Improvement of the secondary road networks is important for regional integration, improved accessibility and poverty reduction in Georgia. Roads are the lifeline of the economic activities of most Georgians and a reliable transport network is needed to stimulate both the wine industry and tourism, and to reduce poverty in rural areas. Kakheti region where the newly-proposed road is located is neither the poorest nor the wealthiest, because in a country where 39.4 percent of households fall below the poverty line, all regions require development support. 17. Rehabilitation of Sasadilo-Sioni Road will directly benefit about 1,500 residents of 9 villages1 living along this road. The road is the main link with Tianeti, the administrative and economic center of Tianeti Municipality, and Sioni, a tourist resort, with several century-old churches and sites of medieval historical importance (castles and fortress ruins). At present, the residents of Sioni and nearby villages have to use another road which takes them twice longer to reach Tbilisi than the rehabilitated road would do. 1 The villages are Sioni – 610, Orkhevi – 277, Badaani - 37, Sajinibo – 51, Kudro - 112, Pichviani – 27, Omaraulebi – 124, Bochorma – 172, Grdzelvelebi – 32, thus the municipality’s total population being 1442. 7 18. This road provides an important link between Tbilisi and the Kakheti Region, shortening travel time and reducing the cost of doing business along this local trade route. The improved connection with Tbilisi will also provide increased job opportunities, which will directly and indirectly contribute to the wellbeing of those living in the rural communities along the road. This road will stimulate small business investments as a result of increased inflow of visitors and demand for local products and services. It will provide improved and faster access to bigger markets to sell their agricultural products in Tbilisi or other cities outside Kakheti region, and markets of goods and construction materials in the capital to improve their living standards. Equally important, it will provide faster access to health services and culturally enriching activities in Sioni and economic and public services in the administrative center of Tianeti Municipality. Cost Benefit Analysis of the Roads Investments 19. The Restructuring which will lead to extension of the project and inclusion of an additional secondary road for rehabilitation. As the roads initially planned for rehabilitation (VGT) were completed ahead of schedule and their traffic is similar or above appraisal estimate there is no need to re-appraise the initial roads component. 20. The economic analysis done for the proposed rehabilitation of Sasadilo – Sioni road yielded an economic internal rate of return (EIRR) of 12.4 percent and a net present value (NPV) of US$ 0.129 million with a 12 percent discount rate. The analysis was carried out using the Highway Development and Management Model-4 (HDM-4). The proposed road is a paved road in very poor condition with too many potholes. The 2013 daily traffic is 145 vehicles per day of which 15 percent are trucks. The evaluation considered: (i) annual traffic growth rate of 6 percent from 2013 to 2015, 4.8 percent from 2015 to 2020, 4.2 percent from 2021 to 2025 and 3.3 percent onwards; (ii) generated traffic corresponding to 40 percent of normal traffic2; (iii) 20 year evaluation period; and (iv) construction occurs over one year. The sensitivity analysis has a marginal impact on the project. If costs increase by 20 percent the EIRR is 10.2 percent; if traffic growth rates decrease by 20 percent the EIRR is 11.5 percent. TECHNICAL 21. The proposed road commences at the village of Sasadilo in a junction at km 27 of the Vaziani – Gombori – Telavi (VGT) road. It is a secondary road which links to the regional road of Vaziani – Gombori – Telavi, itself connecting to the main highway between Tbilisi and the border with Azerbaijan. It provides access to the villages of Kochbaani, Bochorma, Kudro and Orkhevi before ending at km 17. The road is currently in very poor condition with a majority of sections reverted back to unpaved surfacing and the remaining asphalt pavement is substantially damaged with many large potholes. In addition, the road has five bridges, four in need of repair, including two bridges in excess of 80 m length, both over the River Iori, and one in need of replacement. 22. The proposed rehabilitation works for the 17.3 km Sasadilo-Sioni road section will follow the existing alignment of the road with only minor alignment improvements within the existing right-of-way. The pavement design will include a new asphalt surfacing layer with bitumen/cement stabilized cold recycled granular base course for the first 5.5 km and 2 Based on the Vaziani-Gombori-Telavi road example, induced traffic of 40 percent is conservative compared to potential actual impact. 8 bitumen/cement stabilized granular base course for the remaining 11.5 km. The project will also rehabilitate four bridges and replace the superstructure of the fifth one. 23. The works on this road will be implemented under a Design-Build Contract which will involve: (i) preparation and finalization of engineering designs and drawings; (ii) embankment construction; (iii) repair and rehabilitation of four bridges and all culverts; (iv) replacement of one bridge; (v) provision of new culverts; (vi) re-establishment unlined side drains; (vii) pavement construction; (viii) provision of road marking, guardrails and road signage installation; and (ix) other minor rehabilitation and repair works. The contract includes Levels of Service for rehabilitation of the road pavement and structures. Payment will be made on a lump sum basis and will be linked to meeting specified Levels of Service. This will be the first contract of this type carried out by the RD. SAFEGUARDS 24. The first Environmental Impact Assessment (EIA) was carried out and Environmental Management Plans (EMPs) were prepared for the rehabilitation of VGT road as part of the KRRIP preparation in 2009. The EIA report was later updated in August 2011, which included the rehabilitation of the Sasadilo-Sioni road section as part of the assessment. The EIA report was again updated in August 2013 based on the current day conditions surrounding the Sasadilo- Sioni road section proposed for support as part of this restructuring of KRRIP. The RD did not find any tangible changes in the natural and social environment, which would necessitate changes to the existing EIA report. Therefore, the updated EIA report carries only minor editorial changes as compared to the initial report dated August 2011, and reflects recent institutional changes within the State agencies regulating environmental aspects of the project-supported activities. The updated EIA was disclosed on August 6, 2013 in Georgia and on August 9, 2013 in Infoshop. 25. The project maintains its Environmental Category B status and no additional safeguard policy is triggered. The same environmental safeguard arrangements will apply. There is no land acquisition envisaged for the proposed additional rehabilitation works, as these will follow the existing road alignment with some minor alignment improvements within the existing right-of- way. Thus, no Resettlement Action Plan (RAP) is needed and the same Resettlement Policy Framework (RPF) will apply. 26. There are two main risks associated with the proposed activities to be supported as part of the restructuring of this project. There is a risk associated with inadequate and poor implementation and supervision of the Design-Build Contract for Sasadilo-Sioni road due to lack of experience by the RD. A workshop on design and build contracting will be held by the supervision consultant to build the capacity of RD in contract management of and capacity of the local construction industry in execution of a design-build contract. 27. There is a landslide and slope failures risk which was identified in the original EIA and is still prevalent along the Sasadilo-Sioni road section. Landslides and slope failures is a common problem across the Kakheti Region. The detailed design of the proposed section will include site- specific engineering solutions for the landslide prone areas and their adequate application will be closely monitored by the supervision consultant and RD’s Social-Environmental Division. 9 10 ANNEX 1: RESULTS FRAMEWORK AND MONITORING Project Development Objective (PDO): To reduce transport costs and improve access and traffic safety for the Kakheti regional roads Revised Project Development Objective (PDO): No change D=Dropped C=Continue Cumulative Target Values Frequency Core PDO Level Results N= New Unit of Data Source/ Data Baseline and Indicators* R=Revised Measure Methodology Collection Target Reports 2010 2011 2012 2013 2014 (2015) Travel time between C Minutes 120 120 90 55 55 55 55 Travel time Vaziani and Telavi via survey Gombori Vehicle operating cost C US $ 0.36 0.32 0.26 0.25 0.25 0.25 0.25 Road Data between Vaziani and /vehicle- Bank Telavi via Gombori – km Cars Vehicle operating cost C US $ 1.05 0.93 0.75 0.72 0.72 0.72 0.72 Road Data between Vaziani and /vehicle- Bank Telavi via Gombori – km Trucks Annual RD Traffic volume between R 372 375 870 1,880 1,950 2,100 2,100 report Vaziani and Gombori - Cars Traffic volume between R 496 500 1,155 2,510 2,720 2,800 2,800 Road Data Vaziani and Gombori - Bank Trucks Percentage annual C Percentage 0% 0% 10% 20% 30% 30% 30% Project reduction in fatalities Monitoring along the Vaziani- Reports Sagarejo-Bakurtskhe- (PMR) Gurjaani-Telavi road Intermediate Outcome Indicators Number of kilometers R Kilometers 0 18 55 65 65 65 82 Annual PMR improved report Number of person- R No. 0 4,100 8,300 8,300 8,300 9,800 9,800 Q1 of each Supervision months of jobs created person- year consultants months report Action plan for D Text No 0 0 0 0 0 0 Annual PMR strengthening the report Regional Office of the RD in Sagarejo approved RD Percentage of planned R Percentage 0% 30% 60% 75% 75% 100% 100% Semi- PMR engineering related road annual safety interventions report completed on the Vaziani-Sagarejo- Bakurtsikhe-Gurjaani- Telavi road Workshop on Design- N Yes/No No - - - Yes - - Semi- Supervision Build Contracting annual consultant’s Modality held report report ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK Risks 1. Project Stakeholder Risks 1.1 Stakeholder Risk Rating Low Description: Risk Management: Road improvements in Georgia generally benefit from a strong There are no particular risk-mitigation measures envisaged, besides monitoring any possible (but unlikely) support from the various stakeholders and the particular Project change in the Government’s road investment program. The Projec t has a high economic justification. has high Government support. Resp: Bank Stage: Recurrent: Due Date: 30- Frequency: Status: In Implementation Aug-2015 Progress 2.2 Sector and Multi-Sector Rating Moderate Description: Risk Management: The Government has a sector investment plan which is being Bank will continue to have a dialog on sustainability of routine and periodic maintenance funding, which successfully implemented. Ownership of the road network is fairly will be supported through Technical Assistances aimed at promoting innovative maintenance contracting strong. However, practices in the other Bank-funded road project. there is a risk in relation to the limited funding allocated to annual Resp: Bank Stage: Recurrent: Due Date: 30- Frequency: Status: In road routine and periodic maintenance. The deterioration of road Implementation Aug-2015 Progress assets is a major concern because it weakens the sustainability of road investments. 2. Implementing Agency (IA) Risks (including Fiduciary Risks) 2.1 Capacity Rating Moderate Description: Risk Management: The RD may not be able to retain acquired capacity in Project The TEWHIP Additional Financing finances the salaries of three FPU/RD consultants (Project Manager, management and environmental management. The FPU has Environmental Specialist Monitoring and Reporting Specialist), which also continues providing support to recently been strengthened with an additional staff member and KRRIP, and the operating costs and salaries of the TRRC which also continues providing support to this consultant. A stand-alone Social and Environmental Division has project. been recently established at the RDMRDI. The procurement track Resp: Client Stage: Recurrent: Due Date: 30- Frequency: Status: In records of the RDMRDI on the portfolio has been satisfactory. In Implementation Aug-2015 Progress addition, the procurement unit of the RDMRDI has experience with World Bank-financed procurement. 2.2 Governance Rating Low Description: Risk Management: The MRDI has proven to have institutional standing to effectively No mitigation measure has been proposed. shield the Projects from outside interference. A recent change in Resp: Bank Stage: Recurrent: Due Date: 30- Frequency: Status: In the top management of the MRDI as a result of the recent Implementation Aug-2015 Progress Parliamentary elections on October 1st did not affect the governance structure of the project. The risk remains low as the governance structure of the Project is well-defined and has proven to be well-functioning. 2.3 Fraud and Corruption Rating Moderate Description: Risk Management: Georgia has been very proactive in eliminating fraud and Reinforcement of the contract management function, and existing strong financial management team. corruption in its public sector – improving transparency in the Resp: Client Stage: Recurrent: Due Date: Frequency: Status: Not Yet transport sector. However, previous projects have had substantial Implementation Due contract management issues which the government, with support from the Bank,managed to solve. 3. Project Risks 3.1 Design Rating Low Description: Risk Management: The Project road design is simple and straightforward, and not overburdened by many components or The Project design risk is low. There are three components, which complexity of components or innovations. include (i) civil works, (ii) capacity strengthening of the RD’s Road Safety Unit and implementation of road safety measures on Resp: Bank Stage: Due Date: 30- Frequency: Status: In Recurrent: the Kakheti circuit road, (iii) Project Implementation Support. Implementation Aug-2015 Progress Risk Management: There is a risk associated with inadequate and poor implementation and supervision of the Design-Build Contract for Sasadilo-Sioni A workshop on design and build contracting will be held by the supervision consultant to build the capacity road due to lack of experience by the RD in Design-Build of RD in contract management of and capacity of the local construction industry in execution of a design- Contract. build contract Resp: Client Stage: Due Date: 30- Frequency: Status: Not Yet Recurrent: Implementation Aug-2015 Due 3.2 Social and Environmental Rating Moderate Description: Risk Management: The Resettlement Policy Framework for the entire project and the RAPs for the first 27 km section and There is a risk of delays in and inappropriate implementation of the then for 28 km section were developed and disclosed. The capacity of the Resettlement Unit was EMP and RAP due to the weak institutional capacity. strengthened. There is a landslide and slope failures risk which was identified in Resp: Client Stage: Due Date: 30- Frequency: Status: Recurrent: Implementation Jun-2010 Completed the original EIA and is still prevalent along the Sasadilo-Sioni road Risk Management: section. Landslides and slope failures is a common problem across The designs were revised to minimize land acquisition needs. the Kakheti Region. Resp: Stage: Due Date: 30- Frequency: Status: Recurrent: Implementation Jun-2010 Completed Risk Management: The EIA was also developed and disclosed. The updated EIA to reflect the newly-prosed road was disclosed in August 2013. The capacity of the Environmental Unit was strengthened through recruitment of new social and environmental specialists and establishment of a stand-alone Social and Environmental Division at RDMRDI. Resp: Stage: Due Date: 30- Frequency: Status: In Recurrent: Implementation Aug-2015 Progress Risk Management: The detailed design of the proposed section will include site-specific engineering solutions for the landslide prone areas and their adequate application will be closely monitored by the supervision consultant and RD’s Social-Environmental Division. Resp: Stage: Due Date: 30- Frequency: Status: Not Yet Recurrent: Implementation Aug-2015 Due 3.3 Program and Donor Rating Low Description: Risk Management: There is a low risk regarding Program and donor coordination. Continue close cooperation with other donors. There is an active coordination between donors through regular Resp: Bank Stage: Recurrent: Due Date: 30- Frequency: Status: In donor-Government conferences. Donors active in the road sector Implementation Aug-2015 Progress include: the ADB, the JICA, and the EIB. In addition, the RD supports information exchange between donors that further supports effective donor coordination. The execution of the Project is not dependent on any other project or donor. 3.4 Delivery Monitoring and Sustainability Rating Moderate Description: Risk Management: The Bank supports the strengthening of the current RMS under a technical assistance component of SLRP- The RD is undertaking an ambitious road rehabilitation and II - and through on-going policy dialogue, that will be enhanced under EWHIP-4 improvement program; there is a risk that the RD’s capacity will be over-stretched and the M&E Unit has experienced some Resp: Bank Stage: Due Date: 30- Frequency: Status: In Recurrent: turnover. Implementation Aug-2015 Progress Risk Management: Sustainability of the benefits of the newly rehabilitated road is Regular and proper maintenance system has been put in place to prevent slides on the landslide-prone area achieved through proper maintenance. There is a risk that without on Gombori-Telavi section. a proper road management system, maintenance of the road will Resp: Client Stage: Due Date: Frequency: Status: In not be managed properly by the RD. Recurrent: Implementation Progress 4. Overall Risk 4.1 Overall Implementation Risk Rating Moderate Description: The overall project risk is assessed as moderate