The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) REPORT NO.: RES38057 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CHITTAGONG WATER SUPPLY IMPROVEMENT AND SANITATION PROJECT APPROVED ON JUNE 23, 2010 TO PEOPLE'S REPUBLIC OF BANGLADESH WATER SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Mercy Miyang Tembon Regional Director: John A. Roome Practice Manager/Manager: Takuya Kamata Task Team Leader: Arif Ahamed The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) ABBREVIATIONS AND ACRONYMS CWASA Chittagong Water Supply and Sewerage Authority EA Environmental Assessment FA Financing Agreement GOB Government of Bangladesh IDA International Development Association PA Project Agreement PMU Project Management Unit SDR Special Drawing Rights The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) BASIC DATA Product Information Project ID Financing Instrument P103999 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 23-Jun-2010 31-Mar-2020 Organizations Borrower Responsible Agency Chittagong Water Supply and Sewerage Authority PEOPLE'S REPUBLIC OF BANGLADESH (CWASA) Project Development Objective (PDO) Original PDO The objective of the Project is to increase the sustainable access to safe water and improved sanitation, as well as support theestablishment of a long term water supply, sanitation and drainage infrastructure development and operational management program inChittagong. Current PDO The revised PDO is to increase access to safe water and improve CWASA’s institutional capacity and investment planning for sanitation and drainage in Chittagong City. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-60930 23-Jun-2017 06-Aug-2017 09-Oct-2017 31-Mar-2020 47.49 8.74 39.15 IDA-47340 23-Jun-2010 26-Jul-2010 27-Oct-2010 31-Mar-2020 155.52 118.26 26.00 TF-58153 02-Sep-2007 02-Sep-2007 02-Sep-2007 18-Nov-2009 0 0 0 The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING The team recommends cancelling SDR 7,193,620 from the Additional Financing Credit (Cr. 60930-BD). This recommendation follows a request from the Government of Bangladesh (GOB) through a letter dated June 26, 2019, to address the Project’s savings, which it estimated to be approximately US$10 million equivalent on account of highly competitive bids price received for the major works contract package under the Additional Financing. Based on a joint assessment of project savings and financing requirements for the remaining IDA-financed components of the project, the total amount of IDA Credit proposed to be cancelled is SDR 7,193,620. The GOB has clarified through discussions with the Bank team that such steps mean cancellation of funds not needed for project completion. Consequent to the savings in the cost of water supply improvement, the project cost will change by the extent of the savings and result in revision in the allocation made in category 1 and also the disbursement estimate. It was also clarified by GOB that some more project savings are expected due to lower utilization of contingency amounts, but this will be better known when the contracts are finalized around September/October 2019. The GoB may request for cancellation of more project savings in due course. The project had made satisfactory progress with the execution of works packages of the original project. As of end of June 2019, all construction works which were taken under original project have been fully completed. But, some minor post completion activities regarding the pipelines are ongoing. Customer connections are being provided from the new distribution pipelines. The works contract (Package W-5), which is financed out of Additional Financing (IDA-60930), is making slow progress due to contractor’s performance issue. It registered only 35% progress (against a target of 67.20%) as of the end of June 2019 and it places completion within the stipulated period at high risk. Nevertheless, the work plan has been revamped with greater coordination of all inputs and is expected to be completed before the current credit closing date (March 31, 2020). The technical assistance for improving institutional capacity of the utility (Package S-31) has delivered a number of reports identifying interventions and is expected to be completed by the end of July 2019. As of the last implementation review mission in July 2019, the project is rated moderately satisfactory in progress toward achievement of the Development Objective and Overall Implementation Progress. Fiduciary ratings are moderately satisfactory for procurement and financial management, and Safeguards ratings are satisfactory for environmental safeguards and social safeguards. There are no outstanding audits. Performance of the implementing agency (CWASA, Chittagong Water Supply and Sewerage Authority) is rated as moderately satisfactory mainly due to the delays in contract completion, which in fact is contributed by the below performance of the supervision consultants. The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) II. DESCRIPTION OF PROPOSED CHANGES The following changes are proposed: (i) To cancel SDR 7,193,620 (USD10 million equivalent) from the Additional Financing Credit (Cr. 60930-BD). (ii) To revise the cost of Component 1 (Water Supply Improvement) to USD 167.75 million. Cost of other components remains unchanged. Project cost will revise to USD 180.53 million. (iii) To revise the allocation for Category 1 from SDR 34,700,000 to SDR 27,506,380. Allocation for other disbursement categories remain unchanged. (iv) To revise the disbursement table taking actual disbursements during FY 2010 to FY 2019 and provide estimates for disbursement during the balance project period and the disbursement grace period. (v) To delete the legal covenant requiring CWASA to prepare a quarterly report on procurement activities undertaken in previous quarter, including procurement processes followed and quality of goods, works and services procured. This covenant has been proposed for deletion given that all major procurements have been completed under this project including Additional Financing. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Legal Covenants ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Water Supply Improvement 177.75 Revised Water Supply Improvement 167.75 Investment Planning for Investment Planning for 4.22 No Change 4.22 Sanitation and Drainage Sanitation and Drainage Institutional Capacity Institutional Capacity Development and Project 8.56 No Change Development and Project 8.56 Management Support Management Support TOTAL 190.53 180.53 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN IDA-47340- Disburs 103,050,000.0 103,050,000.0 RESTRUCTUR XDR 0.00 27-Jun-2019 001 ing 0 0 ING, COST SAVINGS LOAN IDA-60930- Disburs RESTRUCTUR XDR 34,700,000.00 7,193,620.00 27-Jun-2019 27,506,380.00 001 ing ING, COST SAVINGS The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) LOAN Fully TF-58153- RESTRUCTUR Cancell USD 0.00 0.00 27-Jun-2019 0.00 001 ING, COST ed SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-60930-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: Works and CS - Parts A &B 34,700,000.00 3,697,942.60 27,506,380.00 100.00 100.00 Total 34,700,000.00 3,697,942.60 27,506,380.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2010 0.00 0.00 2011 0.00 448,513.00 2012 509,253.00 0.00 2013 0.00 18,919,533.00 2014 6,475,057.00 15,344,838.00 2015 30,660,985.62 35,924,699.00 2016 37,250,000.00 33,191,369.00 2017 55,000,000.00 13,804,656.00 2018 15,164,066.00 20,709,641.00 2019 0.00 42,222,856.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement :FA, Schedule 2, Section V (1) | Description: The Recipient shall enter into a IDA-47340 Performance Contract with CWASA detailing the Complied with No Change respective parties' obligations and responsibilities under the project | Due Date: 27-Apr-2011 Finance Agreement :PA, Schedule, Section I (A) (1) | Description: CWASA shall establish a PMU, led by a Project Director, to IDA-47340 Complied with No Change be responsible for the coordination and the overall management, implementation and supervision of the Project | Due Date: 27-Jan-2011 Finance Agreement :PA, Schedule, Section I (A) (1) | Description: CWASA shall constitute a Project Audit IDA-47340 Complied with No Change Committee to meet at least twice a year to review CWASA's audit reports | Due Date: 30-Jun-2011 Finance Agreement :PA, Schedule, Section IV (1) | Description: CWASA shall report not later than 6 IDA-47340 months after end of each of its fiscal years on progress Complied with No Change toward achieving the targets stipulated in the Performance Contract | Frequency: Yearly Finance Agreement :PA, Schedule, Section IV (2) Marked for IDA-47340 Unknown Dropped at Restructuring Deletion Finance Agreement :PA, Schedule, Section IV (3) Marked for IDA-47340 Unknown Dropped at Restructuring Deletion IDA-47340 Finance Agreement :PA, Schedule, Section IV (4) | Complied with Marked for Description: CWASA shall prepare a quarterly report on Deletion procurement activities undertaken in previous quarter, including procurement processes followed and quality The World Bank BD Chittagong Water Supply Improvement and Sanitation Project (P103999) of goods, works and services procured | Frequency: Quarterly Finance Agreement :FA, Schedule, Section II (B)(3) | Description: CWASA shall have its financial statements audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association. Each IDA-47340 Complied with No Change Audit of these financial statements shall cover the period of one fiscal year. The audited financial statements for each period shall be furnished to the Association not later than six (6) months afte | Frequency: Yearly Finance Agreement :PA, Schedule, Section II (A)(1)(a) | Description: CWASA shall monitor and evaluate the progress of the project and prepare project reports for the project. Each such Project Report shall cover the Partially complied IDA-47340 No Change period of one calendar semester, and shall be furnished with to the Bank not later than forty-five (45) days after the end of the period covered by such report. | Frequency: . Yearly