Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 36649-ID PROJECT APPRAISAL DOCUMENT FORA PROPOSEDMULTIDONORTRUST FUND (MDTF) FORACEH AND NORTH SUMATRA INTHEAMOUNT OFUS$42MILLION TO THE REPUBLIC OF INDONESIA THE AGENCY FORRECONSTRUCTIONAND REHABILITATION FORACEH AND NIAS (BU) FORTHE INFRASTRUCTURERECONSTRUCTIONENABLING PROGRAM June 19,2006 UrbanDevelopment SectorUnit EastAsia andthe Pacific Region Thls document has a restricted distribution andmaybe usedby recipients only inthe performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 27,2006) Currency Unit = IndonesianRupiah IDR1,000 = US$0.000114 US$ 1 = IDR8,748.17 FISCAL YEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS ADB AsianDevelopment Bank BRR Bureau for Rehabilitation and Reconstruction for Aceh andNias CQ Selectionbased on Consultants' Qualifications EA Environmental Assessment EIA Environment Impact Assessment EMP Environmental Management Plan FM Financial Management GAM Free Aceh Movement GO1 Government o f Indonesia IAP Immediate Action Program IBRD International Bankfor Reconstruction andDevelopment I C B International Competitive Bidding I C IndividualConsultants IDA International Development Association IFR InterimFinancial Report I P M Infrastructure Program Management IREP Infrastructure Reconstruction Enabling Program JICA JapanInternational Cooperation Agency LARAP LandAcquisition andResettlement Action Plan MDF Multi-Donor Trust Fundfor Aceh andNorth Sumatra MOF MinistryofFinance MOU Memorandumo f Understanding N C B National Competitive Bidding NGO Non-Government Organization N S National Shopping O&M Operations and Maintenance PIU Project Implementation Unit P M U Project Management Unit PSC Project Steering Committee PU Public Works Department QBS Quality-Based Selection QCBS Quality and Cost Based Selection RFP Request For Proposal SA Special Account SOE sss Statement o f Expenditure Single-Source Selection TA Technical Assistance FOROFFICIAL USE ONLY TNI IndonesianNational Army UN UnitedNations UNICEF UnitedNationsInternational Children's EmergencyFund Acting Vice President: Jeffrey Gutman Country Director: Andrew D.Steer Sector Director/Sector Manager: ChristianDelvoie/Keshav Varma Task Team Leader Aniruddha Dasgupta This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. INDONESIA Infrastructure Reconstruction EnablingProgram Table of Contents I. Background.......................................................................................................................................... 1 I1. Project Description............................................................................................................................... 4 I11 Project Costs......................................................................................................................................... . 8 IV . Implementation Arrangements and InstitutionalDesign..................................................................... 8 V. Local Government Capacity Building ............................................................................................... 10 VI. CoordinationwithotherReconstructionandRehabilitationActivities........................................... 10 VI1. ProcurementArrangements................................................................................................................ 11 VI11. Financial ManagementandDisbursementArrangements................................................................ 12 IX. SafeguardPolicies ....................................................................................................................... X . Monitoring andEvaluation.,............................................................................................................... 16 XI. QualityEnhancementStrategy........................................................................................................... 16 XI1. Sustainability andRisks..................................................................................................................... 17 XI11. Anti-corruptionAction Plan............................................................................................................... 22 XIV.Policy Exceptions andReadiness....................................................................................................... 23 Annex 1: ProjectsResultsSummary........................................................................................................... 24 Annex 2: Detailed Project Description....................................................................................................... 26 Annex 3: InstitutionalDesign and ImplementationArrangements............................................................ 33 Annex 4: Financing and Implementation of Infrastructure ReconstructionProjects................................ 37 Annex 5: LocalGovernment Capacity Building........................................................................................ 47 Annex 6: Coordination and Partnerships.................................................................................................... 57 Annex 7: ProcurementPlanand Assessment ............................................................................................. 58 Annex 8: FinancialManagement andDisbursementArrangements ......................................................... 65 Annex 9: Environmental and Social Safeguards Framework .................................................................... 70 Annex 9a: Indigenous PeoplesPlanningFramework for TreatmentofIndigenous or IsolatedVulnerable People.......................................................................................................................... 85 Annex 10:Anti-Corruption Action Plan.....................................................................................................87 Annex 11: Summaries of IREP Technical AssistanceTermso f Reference.............................................. 93 Annex 12: Quality EnhancementStrategy................................................................................................ 108 Annex 13: Project Preparationand Supervision....................................................................................... 110 MAP IBRD34927 INDONESIA INFRASTRUCTURE RECONSTRUCTIONENABLINGPROGRAM PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC REGION EASUR Country Director: Andrew Steer Sector DirectorISector Manager: Chstian ervices, Risk Management DelvoieIKeshav Varma [ ] Loan [ 3 Credit [ X I Grant [ ] Guarantee[ ] Other: Total Project Costs: US$42 million MDFGrantAmount: US$42million Government Contribution: N/A Borrower MDF X X 42 Total X X 42 GrantRecipient: BRR Responsible Agency: BRR Address: Jl. Muhammad Thaher no. 20, Luena Bata, Banda Aceh 23247 Contact Person: Eddy Purwanto, Chief.Operating Officer Estimated disbursements (CY/US$m) FY FY06 FY07 FY08 FY09 Annual 3.0 15.0 13.0 11.0 Cumulative 3.0 18.0 31.0 42.0 Project implementation period: June 2006 End: Oct 2009 Expected closing date 6/26/09 Does the project depart from the CAS incontent or other significant respects? [ ]Yes [ X ]No Does the project require any exceptions from Bankpolicies? [ ]Yes [XINO Have these been approvedby Bankmanagement? [ IN0 I s approval for any policy exception sought from the Board? [[ ]Yes ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? [ X I Y e s [ ] N o Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ] No: Project development objective: The objective o f the Infrastructure Reconstruction Enabling Programi s to support the BRR'sstrategy for infrastructure reconstruction byprovidinghighqualitytechnical assistance(TA) inorder to ensure that infrastructure program management, planning,design, andconstruction management follow adequate standards, andto support BRRinoverall coordination o fthe infrastructure reconstructionprogram. Project description [one-sentence summary o f each component] (i) Infrastructure Program Management. Identificationo f broad needs andinitialprogramming, capital works programming, program andbudget management, procurement procedures, safety quality and environmental management, financial systems, and coordination with stakeholders. (ii)WestCoastInfrastructurePlanning,DesignandConstructionSupervision.Identificationofcommunity level infrastructure needs, survey, planninganddesign, investment andcost planning, economic, social and institutional analyses, detailed engineering designs, bidprocedures, procurement and construction (iii)NiasInfrastructurePlanning,Design,andConstructionSupervision.Planningandprojectpreparationwork for the Nias logistical area, focusing on transport and city infrastructure planningandprogram management, institutional design and implementation methods o f essential services delivery, technical design andprocurement, construction planningand management, and supervision. (iv) Strategic Infrastructure Project Planning, Designand Supervision. Formulation, investmentplanning, design, andproject preparation work for the major Provincial-level infrastructure strategic infrastructure works which now require reconstruction. (v) Financial Management o fBRR-financed Projects. Development andimplementation o fanefficient financial management (FM) framework requiredto ensure that BRRmeets all its fiduciary responsibilities withrespect to the projects it finances. Which safeguard policies are triggered, ifany? The project will not have any large scale or irreversible adverse environmental impacts. The project triggers the World Bank Safeguards Policies on Environmental Assessment (OP/BP 4.01), Indigenous Peoples (OD 4.201, and Involuntary Resettlement (OP/BP 4.12). The project is classified as environment Catenorv "B". Significant, non-standard conditions, ifany: None TECHNICAL REPORT I. Background 1. More than a year has passed since the devastating tsunami and earthquake struck the Indian Ocean inDecember 2004. InIndonesia, the disaster lulled or left missingmorethan230,000 people, anddestroyed communities, infrastructure and livelihoods. The total reconstruction and development program for Aceh and Nias i s estimated to cost between US$6-9 billion' (2005-2009); making it the largest reconstruction program in the developing world. In addition to the physical damage, the disaster caused enormous destruction to the economy and loss o f institutional capacity. While it appears Aceh may finally have achieved peace between the government and GAM, the neglect to infrastructure and human development from thirty years o fconflict adds to the reconstruction challenges. 2. The people o f Indonesia and the international community have shifted from the initial emergency phase to the recovery phase. In April 2005, the Government o f Indonesia (GoI) created a dedicated Rehabilitation and Reconstruction Agency - Badan Rehabilitasi dan Rekonstruksi (BRR) - to provide leadership andmanagement across all aspects o frecovery. 3. Following the disaster, the immediate need was to put in place humanitarian and disaster relief programs; these were widely supported and successfully implemented by local, national and international governments, agencies, NGOs and individuals. The first reconstructionpriority was the provision o fhousing -thisprogramiswellunderway, with45 percentofthe overallrebuildingneedsinprogress.The second reconstruction priority - which has made less progress - i s to rebuild and restore essential infrastructure services, such as transport, roads, macro and local level drainage, water supply and sanitation, power distribution,' and solid waste. Overarching these demands are the BRR's policy goals o f rebuilding to improved standards (i.e,, building back better), strengthening local governments, and working with communities. 4. Sector overview. The estimate o f damage to the housing sector was US$1.4 billion, with the demand for new houses now ranging from 93,000 to 120,000.2The housing program i s moving rapidly (and generally in the absence o f supporting infrastructure) - by the end o f April 2006, an estimated 35,000 houses have been completed, with up to 20,000 under construction. Ensuring quality o f finished works and providing sufficient supporting infrastructure are the key sector priorities. 5. Damage to the water and sanitation infrastructure (water treatment installations, water tanker trucks, piping networks, wells, vacuum trucks, and sludge treatment plants, roads, drainage, power, sea defenses etc.) i s estimated at US$35 million. But both physical infrastructure and staffing were limited before the tsunami (no sewerage systems and less than 30 percent o f the population provided with piped water), so building back better will require substantially more investment than simply replacing what was lost. The basic needs are generally being met, but development o f sustainable networks and the institutional arrangements necessary to operate andmaintain sector investments are required. 6. The progress o f spatial and infrastructure development planning i s mixed. At the sub-district level, numerous donors, NGOs, and the government have produced community mapping and development plans but hardly any infrastructure planning. These efforts have succeeded in involving communities in the planning process, articulating community priorities and vision, and creating the foundations for the reestablishment o f land rights. However, the early approaches were not standardized and quality varies. * PermanentHousingBrief, ' Referto December 2005 report AcehandNias One Year After the Tsunami: The RecoveryEffort andWay Forward. February 16,2006, UN-HABITAT. 1 Many community mapshillage spatial plans were made before the release o f post-tsunami aerial photography, not developed on accurate base maps, and lack topographic details - thus limitingtheir utility for implementation. At the district level, the availability o f updated spatial and infrastructure development plansis limited. 7. Role o f the Aceh-Nias Reconstruction and Rehabilitation Agency (BRR). The Go1 established a ministerial-level Rehabilitation and Reconstruction Agency (BRR) to lead the recovery and emphasize a community-driven process. BRR's primary mission was to develop standard operating procedures and to provide coordination, leadership, and quality control o f the activities financed by BRR or underway by donor and NGOs. However, the BRR has undergone continuous organizational and managerial strengthening - and now has been given the additional power, under revised Kepress 80, to implement housing reconstruction projects through direct contracting. This will enable it to respond to gaps in poorly performing programs, by being able to assume responsibility for those programs, or to reassign them to another agency. BRR i s also strengthening its presence and coordination at the district and sub-district level through newly established regional offices. BRR has givenpriority to engaging district governments - the ultimate aim i s to increase capacity o f province and district authorities to allow a gradual shift of decision- making, management, and implementation responsibility from BRRto facilitate its exit in2009. 8. BRR's continued priorities are to: (i)strengthen coordination between donors and government agencies; (ii) ensure pledges for infrastructure are prioritized and matched with sector needs; (iii) improve the quality and pace o f infrastructure supporting housinghettlements; (iv) develop institutional and financial resources for sustainable infrastructure operations and services after BRR's operating period ends; (v) improve cost-effectiveness through competitive procurement; and (vi) increase the efficiency and flexibility o f the capital works planning and budgeting process. 9. Logistical areas and infrastructure initiatives. BRR has divided its overall infrastructure program framework - the Aceh-Nias Tsunami and Post-earthquake Reconstruction Program- into five logstic areas and five broadlydefined initiatives. BRR's logistical areas (and respective districts) inorder of severity of damage are asfollows: 1. North Coast (Banda Aceh, Aceh Besar and Sabang); 2. West Coast (Aceh Jaya, Aceh Barat, Nagan Raya, Aceh Barat Daya, Aceh Selatan, Aceh Singkil and Simeulue); 3. Nias (Nias andNias Selatan); 4. East Coast (Pidie, Bireuen, Aceh Utara, Aceh Timur, Aceh Tamiang and Lhokseumawe); and 5. MiddleAceh (Bener Meriah, Aceh Tengah, Gay0 Lues and Aceh Tenggara). BRR's mainInfrastructure Initiativesinclude: 1. Secondary District Level infrastructure supporting the housinglshelter programs, including water, sanitation, drainage, solid waste management, and transport infrastructure. 2. Sea defense, flood control, early warning andtsunami refuge initiative 3. Primary and Secondary Provincial Level infrastructure including intra settlementhillage roads, connector roads and ports, power, water resources, etc. 4. Economic infrastructure 5. A separateNiasprogram 2 10. BRR's Infrastructure Reconstruction Strategy. To determine the allocation of remaining MDF resources andto provide a strategic approach to infrastructure design andmanagement, BRRhas outlined an Infrastructure Reconstruction Strategy. This strategy serves as a framework for tailored to addressing infrastructure needs at the district and provincial levels - the infrastructure linking communities. The core approach i s to engage local governments, in collaboration with affected communities, to prioritize and manage their own infrastructure needs within a framework o f strong planning and oversight by BRR, with appropriate technical assistance (TA).3 11. Although sufficient funds have been pledged to support rehabilitation and reconstruction inAceh, the current allocation o f funds already programmed by the government and donors will not meet the minimumneeds incertain critical areas. BRR's strategy, therefore, is to focus on the remaining available funds to ensure that they are allocated to cover these gaps. Of the donor resources, the MDFi s the largest source o f programmable funds with approximately US$150 million available, with the potential for raising additional funds. BRR's medium-term strategy for the MDF comprises four mainpriorities: 12. Remaining MDF resources should be predominantly used for the reconstruction and development (i.e., building back better) o f infrastructure, broadly defined, at the housing plot, community, and district/provincial levels. The provision o f infrastructure should be closely matched with capacity building efforts for local and provincial governments through learning by doing approach and community participation for enhanced governance to prepare for the BRR's handover o f recovery activities to local and provincial governments in2009. 13. Though the initial focus will be on the areas most damaged by the tsunami and earthquake (with a particular focus on Nias), infrastructure support and related capacity buildingshould be gradually extended to districts o fAceh where years of conflict stunted economic and human development. The considerable financial needs and limited sources o f programmable finds necessitate closer integration andco-financing, where feasible, between the MDF,local and provincial governments, andBRR. 14. This strategy will also address potential problems in the sequencing o f the reconstruction program. Inparticular, one primary challenge is ensuring that infrastructure reconstruction adequately supports and keeps pace with the housing reconstruction program. The housing reconstruction program i s currently moving forward, largely in the absence o f supporting infrastructure. This gap affects the cost, quality o f delivery, and the final product, making it necessary to retrofit infrastructure services inthe immediate future. This issue could cause serious problems later in 2006, when it i s estimated that up to 72,000 houses will be constructed. 15. Phasing o f infrastructure support. The BRR Infrastructure Reconstruction Strategy encompasses three phases: (i) the execution o f the ongoing MDF-supported ImmediateAction Plan (IAP) agreed upon in November 2005 to meet urgent infrastructure needs; (ii)the proposed Infrastructure Reconstruction Enabling Program (REP), which would provide technical assistance for the mobilization o f human resources and technical support to BRR, provincial, and local governments; and (iii)investment in infrastructure works by BRR and other donors, including through a proposed Aceh Infrastructure Reconstruction Facility. 16. The first phase, the IAP, addresseskey infrastructurebottlenecks - existingand anticipated. BRRi s implementingthis program through four partner agencies, the World Food Program (WFP), United Nations InJuly 2005, the MultiDonor Fund(MDF)approveda technicalsupport projectto BRRfor US$14.7 million, which provides BRR with additional funding, to enable BRR to recruit consultants and advisors with the best skills and expertise available. The IREP TA is distinct fromthis program, and from other TA providedto BRR, as it is specific to the implementation and supervision o f infrastructure investments. 3 Development Program (UNDP), Catholic Relief Services (CRS), and MuslimAid. The projects covered by these agencies include sea delivery and logistics, ports, road and bridge repairs, and drainage and flood protection works, respectively. These projects lay some o f the groundwork for the implementation o f the second and thirdphases o f the Infrastructure Reconstruction Strategy. 17. The proposed MDF-funded Infrastructure Reconstruction Enabling Program (IREP) i s the second phase o f the Infrastructure Reconstruction Strategy. It will provide technical assistance and additional human resource capacity over a three-year period to assist the BRR in implementing the proposed third phase o fthe strategy, which provides fundingfor investment to targeted infrastructureprojects. This TA will provide direct support to BRR in the form o f an Infrastructure Program Management (IPM) team and financial management advisors; it will also mobilize technical teams to work closely with the local governments inthe West Coast andNias, andat the provincial level. IREP i s designed to work with the pre- existing infrastructure efforts and strategies o f the government and numerous agencies and donors. The local government and provincial level teams will buildproject management capacity, prepare infrastructure development plans, feasibility studies, detailed designs, comprehensive procurement planning and support, andwill provide construction supervision for infrastructure de~elopment.~ 18. The third phase o f the Infrastructure Reconstruction Strategy will initiate infrastructure investment and construction. BRR has proposed that an Aceh Infrastructure Reconstruction Facility, co-financed by BRR, MDF and local governments, be created to provide an annual allocation of funds for the reconstruction o f basic infrastructure to each o f the disaster affected districts, with additional oversight, monitoring, and quality control provisions. 19. Rationale for MDF involvement. The BRR's approach o f utilizing available resources from the MDF inthe context o f its overall rehabilitation and reconstruction strategy will allow the identification o f broad priorities, set out key projects that are intended to be submitted to the MDF and other sources o f funding for review over the coming year, andclarify how these priorities andprojects fit within the broader range o f activities financed from other sources. This project directly supports this strategy through its focus on improving infrastructure reconstruction support, management, and oversight to the BRR and local and provincial governments through the mobilization o f international and national consultant services. It also focuses on three logistical areas that sustained significant damage due to the tsunami and earthquake disasters. 11. ProjectDescription 20. Objectives. The objective o f the proposed Infrastructure Reconstruction Enabling Program (IREP) i s to support the BRR's strategy for infrastructure reconstruction by providing high quality technical assistance (TA) services in infrastructure program management, planning, design, construction management, quality management and program monitoring. The Project will support BRR in overall coordination o f the infrastructure reconstruction program. .Through IREPprograms, between US$330-400 million o finfrastructure projects will be developed and implemented (between 5-6% cost for design through construction supervision works), with the capability to provide overall management support to the BRR's larger infrastructure reconstruction program. To achieve this goal, the proposed TA will: (i) the BBR assist in the strategic planning, programming and implementation of infrastructure development and reconstruction through an Infrastructure Program Management (IPM) team; (ii) provide technical support and capacity building to local government on identification, design, (including preparation o f tender documents) construction supervision, and monitoring o f projects in the West Coast o f Aceh; (iii) provide technical support and capacity buildingto local government on identification, design, (including preparation 4 Localplanningfor the NorthCoast is being supportedby ongoing TA throughBRR's InfrastructureReconstruction Strategy. 4 o f tender documents) construction supervision, and monitoring o f projects inNias; (iv) give support at the provincialhational level for planning, design and implementation o f strategic infrastructure not under the purview o f local governments; and, (v) provide financial management advisory services to enable BRR to meet its fiduciary requirements. The higher level development objective to which this project contributes i s sustainable post-tsunami infrastructurereconstruction and development inAceh and Nias. 21. The key performance indicators for these development objectives are: (i) Development o f a sustainable and strategic long-term infrastructurereconstructionplanfor Aceh andNias; (ii) Donors and other stakeholders are consulted on the infrastructure reconstructionplananddesign projects that support implementation o f the strategy; (iii) Technical designs created duringproject appraisal ensure appropriate quality measures have been included; (iv) Consultant teams andlocal andprovincial governments prepare projects that incorporate - adequate procurement andfinancial management practices and safeguards measures; (v) The scale of funding committed to implement projects submitted by local and provincial governments to BRR as part o f their AIPs; (vi) Projects are o f higher quality standards than those prepared and implemented prior to the TA; (vii) Increased participationo flocal andprovincial government staffto incorporate appropriate safeguards measures and financial management and procurement practices duringproject design andimplementation. 22. Project components. The proposed US$42 million MDFprogram consists o f five focused, results- oriented consultancy TA components that will be implementedover a three year period. A detailed description o f the project components i s provided inannex 2. Summaries o f the terms o f reference for the first three components are provided in annex 11. a) Component 1 - Infrastructure Program Management (US$19.5 million) will support the mobilization o f a highly skilled Infrastructure Program Management (IPM) team deployed within the existing BRR structure to coordinate infrastructure programand its activities at the macro level. These experts would provide assistance to BRR in eight specific areas: (i)overall strategic infrastructure planning for Aceh and Nias, as per the BRR Infrastructure Reconstruction Strategy; (ii)management o f the infrastructure reconstructionprogram inAceh andNias; (iii) o f local review and provincial governments' plans for infrastructure investment as a basis for BRR funding; (iv) quality control, supervision, andmonitoring o f BRR-funded infrastructure projects; (v) procurement support; (vi) safeguard support for BRR-funded infrastructure projects; (vii)anti-corruption support for BRR-funded infrastructure projects; and (viii) management and coordination o f other IREP consultant teams. At all times, Consultants in Components 2, 3, 4, & 5 report directly to the BRR, not the IPM Consultants. The first two tasks o f this component refer to the entire infrastructure reconstruction program throughout Aceh and Nias, as these areas encompass the work o f both the government and other development partners. The remaining six activities focus on BRR funded activities. The IPMteam will take a proactive role inprogram management and be responsible for maintainingand demonstrating transparency and accountability across all processes. The IPMteam will be mobilized around October 2006. Hence, it may not be able to provide support to BRR for the 2007 budget cycle. To fill this gap, BRR i s planning to use existing TA to provide similar services. b) Component 2 - West Coast Infrastructure Planning, Design, and Construction Supervision (US$lO million) will finance a technical team to undertake the planning, project preparation, and 5 implementation work for the West Coast logistical area'. This team will provide assistance to the local governments in three main areas: (i)strategic planning; and (ii)project design and implementation; and (iii) institutional development support, including the development o f a long term maintenance strategy, and training. The assignment requires a project team with skills in infrastructure planning and program management, institutional development, implementation methods o f essential services delivery, technical design andprocurement, construction planningand management, and construction supervision. All work will be conducted in close collaboration with local governments andpublic works and in consultation with local communities. The Consultants will work with, and where feasible, integrate existing plans (spatial, community maps, etc) and coordinate with related planning and infrastructure on-going works inthe project area. Further, the Consultant will consult closely with community stakeholders at all stages o f the project cycle. Component 3 - Nias Infrastructure Planning, Design, and Construction Supervision (US$5 million) will support mobilization o f a technical team to undertake the planning, project preparation, and implementation work for the Nias logistical area. The work will focus on, but i s not limited to repairing the transport network. The consultant team will provide assistance to these local governments in three main areas: (i) strategic planning; (ii) design and implementation; and project (iii)institutional development support and training. All work will be conducted in close collaboration with local governments and public works and inconsultation with local communities. Further, the Consultant will consult closely with community stakeholders at all stages o f the project cycle. Component 4 - Strategic Infrastructure Project Planning, Design, and Construction Supervision (US$6 million) will finance a technical consulting team to undertake the formulation, investment planning, design, and project implementation work o f strategic infrastructure projects that are at the provincial and or national level, or with local governments not covered by components 2 and 3. This component i s designed to strengthen the ability o f BRR and that o fthe relevant governments to carry out project identification, appraisal, and implementation. The Provincial government will participate in selection and development o f the `strategic projects' and participate in the management o f the TA consultants. The types o f projects to be financed under this TA include infrastructure, such as ports, airports, and key roads managed by provincial, national or local government entities. Component 5 - Financial Management o f BRR-financed Projects (US$1.5 million) will strengthen BRR's capacity to putinplace the financialmanagement frameworkrequiredto ensure that itmeets all its fiduciary responsibilities with respect to this TA and other BRR investment projects. This assistance will be provided by experts located within BRR.Financialmanagement o f BRR-financed projects will include P M U and PIUs to establish and maintain financial accounting and statement arrangements for project activities undertaken and expenditures incurred at all project locations, including monitoring the operation o f internal controls over implementation o f the contracts. This component includes an external audit o f the project financial statements by the country's Supreme Audit Board (BPK). However, in view of capacity constraints at BPK, it is requested the audit be sub-contracted to reputable private sector firms acceptable to the Bank. The related external audit cost i s includedinthis component. Lessons learned and reflected in the project design. Numerous lessons have been learned from review o f reconstructionefforts to date.6The design o f the project takes into account the following: Aceh Jaya, Aceh Barat, Nagan Raya, Aceh BaratDaya, Aceh Selatan, Aceh Singkil and Simeulue 6Refer to December 2005 reportAceh andNias One Year After the Tsunami: The Recovery Effort and Way Forward. 6 The need for supplemental capacity in the BRR to implement and supervise infrastructure projects. BRR has developed quickly, but as a consequence it has not yet adapted to the demands o f project management. The BRR's Infrastructure Reconstruction Strategy and IREP are wide- ranging in scope and geographic coverage. The management and technical expertise required to develop and realize a strategic vision, will require staffing up and mobilizing experts with international experience. This additional support will also ensure that high-quality plans, designs and construction standards are integrated andimplemented duringreconstruction. Although the capacity o f local and provincial governments i s low, it i s imperative that they identify their priorities within a framework o f good practice. Infrastructure projects will be prioritized by local and provincial governments and subsequently reviewed by the BRR's IPM Consultants to ensure feasibility, quality, and consistency within the broader infrastructure reconstruction program. Projects will be based upon technical plans and designs developed by professional engineering design teams working closely with local planningauthorities. Local and provincial government staff will learn best practice management and oversight processes as they work with the consultant teams. This method will help localize the reconstruction strategy and create ownership o f the infrastructurereconstructionand development. Coordination across development partner and government reconstruction programs i s essential. T h i s lesson cannot be overstated; although the BRR i s tasked with coordination o f all recovery efforts in Aceh and Nias, many gaps remain. This proposed TA will address the issue by providing a strong management structure for the coordination o f the reconstruction o f medium- scale infrastructure projects across development partners, local and provincial governments, and the BRR with the goal o f expediting reconstruction activities and strengthening the quality o f the investments. Lessons learned from similar projects under implementation. The design of this proposedproject takes into account experiences gleaned from other infrastructure reconstruction projects being implemented in Aceh and Nias under the umbrella o f the MDF. Such lessons include (i) the need for, and returns from, allocating sufficient resources for close supervision o f works to ensure quality construction, and (ii)the importance o f engaging communities and other stakeholders throughout the project cycle. 24. Alternatives considered and reasons for rejection. Options for delivering the investments to the level o f quality as envisioned under IREP are limited in the context o f conditions in Aceh and Nias. However, the following approaches were considered: Use local governments or public works (PUS)as implementing agencies o f the TA. Inthis case, the wide geographical range o f the project would mean the involvement o f many implementing agencies, with the consequential difficulty in managing the service delivery to a common standard. Additionally, the institutionalcapacity o fthe local governments and PUSi s insufficient. Finance overall support to BRR without focusing solely on infrastructure. Key to recovery in Aceh and Nias i s the provision o f access, water and sanitation, transport and other essential infrastructure. Other donors are focusing on support to social and other areas o f BRR work, leaving infrastructure as a gap to be filled by other sources. In addition, the UNDP-led MDF project supporting the overall capacity o f the BRR has already been implemented to provide cross-sectoral specialists to the BRR for a fixed period o f time. Break the TA into smaller, separate packages. If the TA were divided into smaller units (for example, divide up the design and capacity buildingcomponents), it would be more complex to procure due to increased transaction costs and multiple contracts. This approach would not be feasible to deliver under the tight timeframe in the context o f the affected communities' emergency reconstruction needs. Further, there would be a loss in continuity between assignments that would lead to delays andreduced quality o fworks. 7 Bundle the TA and the investment phases together instead o f separating them. BRR does not have adequate staffing and financial management systems in place to manage a multi-million dollar reconstruction program for infrastructure. It i s justifiable to put in place systems for planning, design, supervision and quality assurance inadvance o f the investment phase to ensure smooth implementation and better adherence to safeguards policies. Suggest that the BRR use its own funds to procure consultants. BRR i s allowed to contract international expertise using its own funds. However, this procurement method limits the salary for which the consultant i s eligible, which hinders the hiringo f top international experts. As the infrastructure reconstruction i s occurring at such a massive scale, there i s insufficient local experience with this type o f program. Thus, it i s necessary BRR hire some international consultants with this specific experience to assist in the design and implementation of infrastructure duringthe reconstructionphase. Execution of the project by the Bank. The team considered Bank execution o f the project to facilitate faster implementation. However, this alternative was rejected since it would dilute the long tern development o f ownership and capacity buildingo f local government and institutions, which are amongthe core objectives o fthe TA. 111. ProjectCosts 25. The estimated cost o f the technical assistance required to undertake the above assignments i s displayed below inTable 1. Table 1:IREPCosts and ProposedSourcesof Funding IV. ImplementationArrangementsandInstitutionalDesign 26. BRR has established a Project Management Unit (PMU) to coordinate and oversee day-to-day implementation o f the TA at the macro level, which includes management o f the Infrastructure Program Management (IPM) team, donor coordination, procurement practices, safeguards policies, fiduciary management o f BRR investments, monitoring o f project progress, and the development o f a strategic infrastructure reconstruction plancovering Aceh andNias. BRR has appointed the Deputyo f Infrastructure as Chief o f the PMU, who will also serve as Task Leader o f the IPMteam. Sitting within the PMU will be an IREP Secretariat, responsible for daily work to support the functions o f the PMU. A full-time Chief o f PMU Secretariat will be appointed to administer the Secretariat work program and staff. BRR will be responsible for equipping the Secretariat with qualified staff. Inaddition, a full time contract officer for each contract will be part o f the Secretariat. 8 Successhl execution o f the IREP program requires that many BRR units work together in a coordinated fashion. The P M U will liaise closely with other BRR units to coordinate activities and maximize the use o f existing expertise within the organization. For example, the PMU Procurement Advisory team working under the umbrella o f the PMU will work with the central BRR procurement team to ensure consistency across all BRR programs. The IPM safeguards consultants will provide support to the land acquisition and environmental safeguards teams within BRR. In addition, the financial management team, and its supplemental consultants provided through the TA, i s responsible for coordinating with the Deputy o f Finance and Planning. 27. The three TA components focused on implementation at the local and provincial levels will be carried out in partnership with local public works (PU). For the West Coast and Nias TA, the consultant teams will be based in local government offices to build capacity o f local staff in areas o f strategic project identification, design, implementation and supervision, and maintenance. This mechanism would also consolidate asset ownership o f the new infrastructure services, enhancing sustainability prospects. As local governments are in the process o f identifjrlng critical infrastructure projects and completing their Annual Investment Plans, the PU staff will coordinate with and incorporate feedback from both Bappeda officials and the Bupati/Walikota. This process will integrate the views and inputs o f affected communitieshtakeholders. The Bupati/Walikota will coordinate directly with BRR's Executive Board throughout this process. The consultant team working with the local andprovincial governments will report directly to its r-n-five Task Leader within the PMU, which i s supportedby IPMconsultants. 28. The progress o f the project will be monitored by the BRR Infrastructure Board (IB),which i s comprised o f Deputy Directors o f Housing, Finance and Planning,Infrastructure, InstitutionalDevelopment. The Chief Operating Officer (COO) serves as board chair o f the program. The IBi s responsible for overall guidance related to donor coordination, monitoring progress o f the reconstruction program, and resolving multi-sectoral issues. The IB will meet every month during the first few months o f project implementation to provide additional oversight, and then will hold bimonthly meetings for the duration o f project implementation. Detailed implementation arrangements for the project are shown in annexes 3 (technical assistance) and4 (investment phase). 9 V. Local GovernmentCapacityBuilding 29. Both the post-disaster and post-conflict conditions have paralyzed local government activities in Aceh and Nias, leaving local governments no choice but to rely on the well intentioned, but often overwhelming supply of donor andNGO assistance. Inaddition, existinglocal governments are not properly equipped, many staff members are not adequately trained, further specialists may be required, and the organizations do not have the necessary routines, facilities, equipment and overall institutional competence for sustainable, economic development and operations and maintenance. 30. Complementary to consultations with local and provincial governments, a brief analysis was conducted to assess the gaps and overlaps o f donor capacity building programs over the past 6 months (10/05-3/06). Additional information on the analysis and recommendations i s given in annex 5. Analysis shows that donor programs focused on local government capacity building for infrastructure development fall under the following themes: housing, water supply and sanitation, hazard risk management, safeguards, environmental management, and community infrastructure planning. Inthe 11 kabupaten locations where the IREPplans to work, the highest concentration o f donor support i s inBanda Aceh, Aceh Besar andAceh Jaya. Almost all eleven donor infrastructure programs mapped incorporate hazard risk management andor environmental maintenance/management programs and trainings. Mapping o f capacity building programs also revealed donor programs' primary targets are communities at the sub-district and village level. There are not many activities directly targeting district governments. 31. A participatory program targeting local governments to build competence for identification, management and supervision o f infrastructure projects would be an appropriate approach for JREP. Recommendations for areas o f intervention include program planning, design, procurement, implementation, supervision, environment and social safeguards compliance, maintenance o f BRR-funded projects, and collaboration with other donors working on similar issues, such as USAID'S Local Governance Support Program (LGSP) and GoI's Support for Poor and DisadvantagedAreas (SPADA) program. The TA consultancies under REP will also work in cooperation with local institutions, such as universities and government training centers, which can benefit from this project and possibly continue to provide similar services to local governments inAceh and Nias. 32. BRRhas initiatedefforts to coordinate IREPwiththe activities oflocalandprovincial governments, and major donors through workshops and field visits. During project appraisal, local and provincial governments were consulted' on the concept o f IREP and its likely implementation arrangements. Local governments expressed their support, recognition o f the need for this technical assistance, and the importance o f close collaborative arrangements with the IREP consultant teams. Local governments are anticipated to provide co-financing for IEWP projects - it i s too early to obtain details and commitments from local governments now - but it may be through counterpart financing for identified projects, or fundingthroughthe local govemment budget. VI. Coordinationwith other ReconstructionandRehabilitationActivities 33. The IREP consultancies cover a broad scope o f works (technical assistance, capacity building, project design and implementation, program management, coordination, and monitoring) and operate with BRR, provincial government, local government, donors, and stakeholders. The success o f IREP greatly depends on coordination and partnershipswith the numerous parties involved inreconstruction activities. 'TheBRR IREP Government Workshop (March 26,2006, Banda Aceh) was attendedby 70 participants fiom affected local governments andprovincialagencies. 10 REP is designed to complement existing TA, studies, programs, consultancies, and facilitate local and provincial government involvement, The IREP consultancies will first utilize the existing plans and programs (when technically and economically feasible) o f local and provincial governments, NGOs, and donors for the basis o f all o f its work. 34. Coordination andpartnerships will be essential for the REP consultants to conduct work across the three primaryareasof support, which include: (1) Work Across Infrastructure Sectors - IREP will work through existing coordination channels, and use existing sector strategies (when feasible) and on-going TA as the basis o f its work. IREP will also seek to improve sector coordination and monitoring. Planned and on-going capital works programs will be integrated into the planning, design, phasing, and prioritization and implementation o f infi-astructure projects. IREP consultants at the local and provincial level will utilize and seek to implement existing development plans (where feasible). (ii) SumorttoBRR-TheIREPInfrastructureProgramManagement(IPM)teamwillbuildontheon- going work of the numerous TA programs currently mobilized to assist BRR.The I P M consultants will be expected to form partnerships and strengthen coordination and integration o f works within andacrossBRRdepartments. (iii) Sumort to Local Governments - Little overlap or duplicationis anticipatedbetweenexisting programs supporting local governments and the IREP consultants' work. Partnerships should be developed with other donors/NGOs to strengthen implementation of IREP capacity strengthening program fhctions. The consultant teams will closely liaise at all times with the district governments (Offices o f the Bupati, Bappeda, Public Works, and other relevant agencies) and will keep them hlly engaged as work proceeds. To assure buy-in and sustainability o f IREP investments, local governments need to act as partners in all decisions affecting their jurisdiction. All work will be integrated with current local government managed studies, designs, and planning initiatives. Further, IREP will build local government capacity and seek ways to transfer the consultant's expertise and experience to the local governments. 35. Inadditionto local governments, as mentioned inthe previous section, primarydonors involved in infrastructure and shelter reconstruction were consulted on the project concept and implementation arrangements. The groups then discussed how these would interface with current donor andNGO activities.' There was widespread support for the program's approach and objectives. BRR explained to participants how activities would be coordinated with ongoing work -no significant concerns were raised by donors. A chart highlightingother donor activities by sector i s presented inannex 6. VII. ProcurementArrangements 36. Procurement for IREP will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Grant Agreement. Given the emergency nature o f the project special procurement provisions have been agreed on an exceptional basis, which are outlined in annex 7. These are mainly to allow use o f selection based on Consultant's Qualifications for two of the large contracts. 8BRR IREP Donor Workshop (March 18, 2006, Banda Aceh) was attended by 50 participants representing primary donors, NGOs, and companies involved ininfrastructure and shelter reconstruction activities. 11 The procurement will be mainly the selection o f five large consultancy assignments to provide TA to BRR and the local governments on the planning, design and supervision o f infrastructure projects which will be financed under a separateproject. 37. A Procurement Capacity Assessment (PCA) of BRR was conducted in Aceh during February 22- 23, 2006. The assessment concluded that the procurement risk under the project i s rated as highdue to the following: (a) no track history for BRR in procurement and in particular selection o f consultants for high value contracts; (b) although the number o f the procurement packages i s limited, the high value o f the packages and the complexity o f the assignments are major factors inincreasing the difficulty o f the selection process; (c) the need to deliver the project on a fast-track basis; and, (d) general weakness o f the procurement environment and collusive practices under past World Bank projects in the country at large. Mitigation measures to address these findings o f the PCA have been agreed and are outlined in detail in annex 7 andinthe Anti-Corruption Action Plan (annex 10). 38. The main mitigation measure to address the capacity issue i s the recruitment o f procurement advisory team (PA) to assist BRR inthe procurement under this project. The PA will comprise experts who will work together with the BRR on the different tasks inthe procurement process for these contracts. This team will be financed by DFIDand i s expected to be mobilizedby grant effectiveness. VIII. Financia1Management andDisbursementArrangements 39. Overall, the project financial management risk i s assessed as being substantial. This financial management (FM) assessment has concluded that, with the implementation o f the FMaction plan, the risks will be substantially mitigatedand the proposed financial management arrangements will satisfy the Bank's minimumrequirementsunder OP/BP10.02 and are adequate to provide, withreasonable assurance, accurate and timely information on the status o f the grant requiredby the Bank.Additional information on financial management i s available inannex 8. 40. Risk assessment summary. The financial management assessment indicates significant capacity constraints within BRR. These constraints arise from factors such as a sharp increase in the volume o f financial transactions that are likely to take place inBRR, especially during the first year o f this operation, as BRR's responsibilities extend from a coordinating role to one o f actively managing development expenditure. Several important preparatory steps in the organization have been completed, such as the activation o f BRR internal audit activities based on a work program that has already been prepared and the finalization o f a financial management manual to guide accounting staff. The inexperience o f BRR's project management staff to manage relatively large and complex technical assistance contracts with diverse and not easily measurable outputs under this project could overwhelm internal financial controls and increase financial management risks. Based on these factors, financial management risks inherent in the project entity havebeenrated as substantial. 41. Budgeting. As with other government projects, h d s under this project need be placed in the government budget and follow existing government budgetingprocess. However, given the urgent nature o f this project, andsince it is funded from grant sources, the budget allotment document (RKA-KL)couldbe in a consolidatedsummarized format. In parallel, the budget authorization document PIPA) would also be made ina consolidated format andbe prepared inparallelwith budget realization, which will be under direct payment procedures. 42. Accounting and financial reporting. Accounting for grant transactions will be done using the government accounting software (SAT) that BRR currently uses. BRR uses SA1 for all sources o f funds, regardless o f whether they are on or off budget. These software applications have standard accounting controls inplace. However, the software does not have a feature on contract management. Therefore, there 12 i s a need to modify the software to include contract management functions. This application will inform BRR of the latest commitment o f the budget. Currently IBM provides technical assistance to develop software to enable BRR to present contracts that have been committed. Accounting standards to be adopted will be government accounting standards. The Chart o f Accounts o f the SAI is not flexible enough to allow reportingby components/categories to serve the reportingneeds o f the Bank. 43. To have better project information, grant expenditures and activities will be reported to the Bank under Interim Financial Reports (IFRs) on a quarterly basis. The IFRs may be prepared using a separate stand-alone spreadsheet. This would include information on procurement progress, physical progress o f budgeted activities, and financial sources and use o f funds. Formats for these reports would be agreed before negotiations. Quarterly IFRs should be received by the Bank no later than 30 days after the end o f each quarter. To ensure consistency o f the IFRswith Go1reporting, the aggregates inthe IFRs will be reconciled periodically with the aggregates in the S A I for grant transactions. All financial transactions should be recorded properly and supported with adequate evidence that the recipient i s as intended according to the grant objectives. The audited annual financial statements should be made publicly available to ensure transparency. 44. Internal controls and internal audit. The internal auditor will conduct a review o f the intemal control systems within BRR and implementingDinas. The terms o freference for this review should be expanded to include the procurement and expenditure under the project. Copies o f the audit reports will be made available to the Bank. Payment validation can present internal control risks, especially for payment o f reimbursable expenditures to the consultants. To mitigate these risks, details o f reimbursable expenditures will be clearly specified in the contract, and validation procedures will be agreed upon with BRR management. 45. External audit. BRR will prepare special purposes project financial statements annually inspecified formats. The report will be based on a summary o f financial transactions under this grant. The project financial report will be subject to a financial audit by Supreme Audit Institution (BPK), which will sub- contract this work to a reputable auditor acceptable to the Bank. A copy o f the project audited financial statements, along with the management letters issued by the auditors, if any, will be submitted to the Bank no later than six months after the end o f the government fiscal year. The terms o f reference for the project audit will be agreed upon by the Bank and BRR before negotiations. The audit report will include an opinion on the reliability o f the project financial statements. The audit reports will be made accessible to the public. 46. Disbursement arrangements. Eligible expenditures under this project are limited to payments against five consultancy firms' contracts, which will be under direct payment proceduresg. After review and verifications of consultants' invoices and their supporting documents, BRR will prepare the withdrawal application form. The withdrawal application, along with the invoices and supporting documents will be submitted to the Bank after having been signed by the authorized signatories. The Bank will then transfer the payments directly to the consultants' bank account. The appropriateBRR officials will review andverify the consultants' invoices following normal Go1procedures acceptable to the Bank. All origmal documents insupport ofsuchpaymentswill beretainedas accounting evidence for auditpurposes. 47. Remedies. If ineligible expenditures are found to have been made from the project activities, or if expenditures are made without adequate supporting documentation for validation, the recipient will be obligated to refund the same amount to the Bank. The Bank will have the right to suspend disbursement o f 9 Retroactive financing ofup to U S $4.2 millionwouldbe available for the eligible expenditures incurred since since March 25,2006 13 funds if significant terms o f the grant agreements, includingreporting requirements, are not compliedwith. This will be reflected inthe grant agreement. 48. Supervision plan. Supervision o f project financial management will be performed on a risk-based approach at least once a year. The supervision will review the project's financial management system, including but not limited to accounting, reporting, and internal controls. The financial management supervision will be conductedby financial management specialists andBank consultants. IX. Safeguard Policies 49. Safeguard policies triggered by this project include environmental assessment, involuntary resettlement, and indigenous peoples. These policies are triggered by virtue o f the fact that the project will deliver finishedprojects for financing, and will therefore have to consider a full range o f safeguards issues as part o f project preparation and detailed design. A safeguards framework for this project i s attached in annex 9. Key social and environmental impact areas to be considered during project preparation work will include: resource extraction impacts (primarily sourcing o f sand, gravel andother quarry material); 0 construction impacts (excavation, fuel spills, noise and dust management, obstruction to drainage, pollution and sedimentation o f water courses); migrantlabor relatedimpacts (increased social tension inthe community, spreadofHIV/AIDs); inclusiono f viewsheeds o f vulnerable groups inplanningandpreparation work; land acquisition and resettlement related impacts, with focus on compensation entitlements for widows andother marginal groups to ensure equitable treatment; special needs and concerns o f indigenous peoples living inNias. 50. The approach taken by the project in addressing impacts requires the development of a social and environmental framework that will provide: (i)strategic advice to BRR on the overall environmental sustainability o f the infrastructure development strategy; (ii) expertise built into the planning and design teams to assist BRR and local governments in screening proposed projects; (iii) establishment o f a facility to carry out all required environmental and social studies to be managed by the IPM team; (iv) a process framework for the monitoring and management o f environmental and social concerns during implementation o f sub-projects, including independent monitoring for social aspects; (v) provision of capacity buildingto BRR and local governments; and (vi) support to BRR inpreparation o f environmental guidelines and standards for infrastructure projects. BRR, supported by the IPMteam, will be responsible for the implementation o f the framework, including the development o f detailed operational procedures for integration into the project manual. These detailed procedures will be established withinthe first two months o f the project. SafeguardPoliciesTriggeredby the Project Yes No EnvironmentalAssessment(OP/BP/GP 4.01) [XI 11 Natural Habitats(OP/BP 4.04) [ I [XI PestManagement(OP 4.09) 11 [XI CulturalProperty(OPN 11.03, beingrevisedas OP 4.11) [ I [XI InvoluntaryResettlement(OPBP4.12) [XI 11 IndigenousPeoples(OD 4.20, beingrevisedas OP 4.10) [XI 11 Forests(OP/BP 4.36) [ I [XI Safety ofDams (OP/BP 4.37) [ I [XI ProjectsinDisputedAreas (OP/BP/GP 7.60)* [ I [XI ProjectsonInternationalWaterways (OP/BP/GP 7.50) [ I [XI * By supportingthe proposedproject,the Bankdoesnotintendto prejudicethe final determinationof the parties'claims on the disputedareas. 14 51. Social issues. In general, the infrastructure projects that will be designed and implemented with support from this TA will entail replacement o f pre-existing infrastructure. As a result, the level o f associated social risks i s likely to be limited. However, it i s important for planningprocesses, including prioritization o f infrastructure needs, to reflect community needs specifically those o f vulnerable groups, - such as women, children, and the poorest in society. Reports indicate that temporary settlements have not incorporated adequate facilities and safety measures for women and children. Thus, it i s essential that women have a voice during the planning and design o f infrastructure to ensure equitable service coverage and access. 52. In some cases, land acquisition and resettlement will be unavoidable, leading to a range of challenges associated with clarifying land titles and ensuring that adequate and timely compensation i s provided. Thousands o f people still remain missing after the tsunami while others still live in the campshamacks or have moved to other regions. Although most intendto return to their holdings, the timing varies. Therefore, in many cases landowners are not available to discuss land acquisition issues leading to project delays or later conflicts during project implementation relating to disputed land claims. A firther challenge is indealing with the tenure rights defined under the customary and traditional codes, particularly inNias which is dominated by traditional tenure systems. For example, traditional codes do not clearly define rights for women to inherit land, and a challenge may be how to ensure that female heads o f households retainrights to receive compensation. 53. Although the people o f Aceh are a broadly homogeneous group, there are indigenous people living inNias requiringthe project undertake specific measures to ensure that they are meaningfully engaged in consultation processes associated with the planning,design, and construction o fproposed infrastructure. 54. Environmental issues. Although the project entails the procurement o f services to support infrastructure reconstruction, it will have the effect o f programming very significant MDF and BRR resources for Aceh and Nias. Consequently, the consultant teams that will be engaged under the project will need to have a good understanding of related environmental and social impacts and how such impacts can be mitigatedvia appropriate planning, design, andimplementation measures. 55. Assessment o f the impacts o f infrastructure reconstruction first needs to be set within the context o f existing environmental conditions, particularly along the West Coast and inNias. Furthermore it should be recognized that existing conditions are being further impacted by the reconstruction process that has been underway since early 2005 - now increasing in scope and intensity. Many coastal areas have been severely damaged by the tsunami both in terms o f marine and terrestrial environments. In many places coastlines have been physically altered, particularly the inter-tidal zones. Shallow coral reefs have been affected resulting from the large amounts o f solid waste, silts and clays generated by the waves. InNias, large tracts o f coastal land have been lifted up and an estimated 250 ha o f coral reefs are reported to have been destroyed. With the loss o f sea defenses previously built up areas have been reclaimedby the tides leading to coastal inundation and the recreation o fmarshy areasjuxtaposed with humansettlement. 56. Safeguards approach. A range o f safeguards specialists will be hiredby the project both for the IPM team and geographically based teams situated on the West Coast and inNias. One o f the initial tasks o f the safeguards team will be to conduct an environmental orientation study based on a pressure/state/response methodology in order to determine how overall infrastructure planning can best take account o f environmental challenges. Other key tasks to be undertaken are further detailed in annex 9 and in the TORS for the consulting teams. These include development o f detailed and operational procedures for implementation o f the safeguards framework for agreement with local environmental authorities and integration into the project manual, as well as delivery o f a program o f training for BRR, local government, project staff, and contractors. Annex 9 A provides details o f a framework for treatment o f indigenous or isolatedvulnerable people. 15 X. Monitoring andEvaluation 57. BRR, with the assistance of the IPMteam, will be responsible for developing and implementing a monitoring and evaluation system for the project. Overall project implementationwill be tracked using the M I S and the project's key development indicators, which are elaborated in annex 1. In addition, physical implementation progress and financial performance will be measured and evaluated against set standards or targets using performance indicators and the MIS system created by the IPM. Regular reporting by IPM, West Coast, and Nias consultant teams will monitor the investments committed, quality o f designs and of investments duringimplementation, andthe levels o f involvement andresponsibility o f project management taken over time by local and provincial government staff. Consultant teams will also conduct spot checks o f design andconstruction quality. 58. Monitoring and evaluation o f safeguards issues will be done by the IPMsafeguards team to ensure that the social issues and impacts have been addressed properly and in a participatory, fair, and transparent manner, in particular where land acquisition and resettlement processes take place. Social and environmental aspects o f implemented projects will be tracked based on the findings of the social and environmental assessments. The Environmental Management Plan (Em) will include a key monitoring indicator, which will be followed during project implementation by the supervision team and reported on regularly as part o f project reporting systems. Project evaluation studies will also include monitoring and evaluation o f the impact of the project on indigenous communities and isolated vulnerable people. Complaints will be monitored through BRR's complaints handlingmechanism, as will the timely resolution o f the problems raised. 59. BRR's InfrastructureBoardwill beresponsiblefor monitoring overallproject implementation. Each month the PMU will prepare a summary report for BRR, MDF and the Bank, which briefly describes exceptional events and conditions identified during the monitoring process, as well as indications o f the actions to be taken in response to these events. The Bank, as partner agency under the MDF legal framework, will lie responsible for project supervision o f the project on behalf o f the MDF. XI. Quality EnhancementStrategy 60. An overarching objective o f the IREP is to improve the quality of all aspects o f BRR's infrastructure reconstruction program, including project selection, procurement engineering, construction management, and capacity building, and to ensure long term maintenance o f assets after hand-over to local governments. Details o f the IREP approach to quality improvement are provided in annex 12, and are summarizedbelow. 61. Project selection. The IPM, West Coast, and Nias consultants will assist BRR to ensure good practice i s applied in prioritization o f projects so that the sub-projects financed are both consistent and properly timed with BRR's strategic plan, local development needs, and the capacities o f local governments. An on-going consultative process will be established to support local governments to ensure close coordinationbetween local government and BRR and consistency among various plans. 62. Procurement. A central procurement team will be established within BRR to facilitate the process of procuring the various infrastructure projects identified and prepared under the IREP. The IPM consultants will be responsible for assisting this central procurement team to ensure Government and Bank standards as appropriate are followed. The IPMwill also support the PMU's contract management system. Anti-conuption support will be included to support BRR's already well-developed efforts in this regard. The IPMwill work with BRR to improve their standard biddingdocuments for works as needed to ensure proper incentives to the contractors and independent supervision o fworks takes place. 16 63. Design and engineering. The IPM, West Coast, and Nias consultants will assist BRR to ensure National and BRR quality standards for various sub-projects are applied. The quality o f individual project preparation - in particular the drafting o f detailed designs and tender documents, safeguards, will also be supported. The West Coast, Nias, and Strategc Projects consultants will help relevant government bodies with project preparation, while IPM consultants will assist BRR in spot checking the quality o f project documents and in acquiring the capacity that it needs to assist in the preparation o f the required safeguard assessmentsand studies. 64. Construction management. The quality o f project supervision (including construction quality) will be directly supported inNias and West Coast by this project. The IPMconsultant will further assist BRRto apply highstandards inconstruction supervision by, for example, assisting to set standards for qualifications for project managers, preparingdraft TORSfor supervising engineers, improving the BRRs standard bidding documents, etc. The IPM team will also assist BRR's quality control and undertake spot checks and technical audits duringproject implementation and hand-over. 65. Capacity building. A program to support hands-on training o f local government technical departments and BRR staff will be an integral part o f the IREP program. In addition, the IPMteam will review and prepare options for simplified asset management systems in Nias and West Coast to support management o f reconstruction assets after hand-over, including an assessment o f human and financial resources. The capacity buildingobjectives o fthe IREPprogram are further elaborated below. MI. SustainabilityandRisks 66. Inorder to ensurethe sustainability ofthe reconstructionprogramfor Aceh andNias, anumber of issues are being addressedby the IREPproject. The key issue for sustainability i s to ensure that highquality infrastructure i s built inthe first place and a robust regime for maintainingthis infrastructure i s implemented (discussed above). Additional issues are discussedbelow: 67. Strategic programming.\Infrastructure projects will not be sustainable inthe absence o f coordination between the major donors's active in the infrastructure field and in the absence o f integration with key reconstruction activities in other sectors (such as the ongoing housing programs). Under IREP, BRR will receive assistance to prepare strategic programs and sector plans based on a clear understanding o f (i) the overall infrastructure needs; (ii) the infrastructure activities o f all major donors, as well as those o f local and provincial governments; (iii)the priority projects best suited to fill these infrastructure gaps; and, (iv) adequate allocation o fresponsibilities among stakeholders. 68. The design o f the strategy and sector plans will be undertaken in close coordination with local and provincial governments. Such coordination i s important not only to ensure that BRR's plans reflect the information available to local and provincial governments, but also to maximize alignment between the strategic program prepared by BRR and plans prepared by local and provincial governments. Local governments of the West Coast andNias will also benefit from technical assistance, under IREP, to prepare their own infrastructure development plans inclose coordination with all development partners carrying out infrastructure activities intheir jurisdictions. 69. Capacity building. Some o f the main problems that hinder the sustainability o f infrastructure projects relate to capacity issues on the part o f local governments, as well as on the part o f BRR. IREP provides assistance, at each stage o f the project cycle, to address these capacity issues. Local and provincial governments will receive technical assistance to improve the quality o f individual project preparation, supervision, and maintenance, while BRR will receive technical assistance to help the agency monitor the quality o f project documents and o f project implementation. Safeguards, procurement and financial management processes inparticular will be strengthened. 17 70. Inaddition, some stepshavebeentaken to helpBRRmanage its consultantsinamore effective and pro-active manner than in the past. First, the IPMconsultants will assist BRR in managing the four other consultant teams (West Coast, Nias, Strategic Infrastructure, and Financial Management teams) to be established under REP. Second, BRR has established a strong secretariat within the project management unit, which is tasked with full time management o fthe five consultant teams (including IPM).Inaddition, BRR will draw on some of its international advisors - already mobilized - to help manage the IPM consultants. 71. Project financing. IREPwould not lead to sustainable infrastructure reconstruction ifadequate funds were not available to finance the projects that the program will help to identify and prepare. While total infrastructure reconstruction needs for Aceh and Nias have been estimated by BRR at US$1.2 billion over the 2007-2009 period, IREP will generate infrastructure projects for about US$400 million over the 2007- 2009 period, and BRR will have about US$470 million available for infrastructure over the same period. The gap between overall infrastructure needs (estimated as mentioned above at US$1.2 billion) and the US$470 million available to BRR can be partially bridged by MDF finds (US$lOO -150 million o f which ' remain uncommitted at present) and by local governments (who will have about US$250 million - from special development grants as well as their own finds - to spend on infrastructure projects over the 2007- 2009 period). 72. However, financial flexibility on the part o f BRR could be an issue. The issue i s that BRRneeds to submit its 2007 budget to Parliament before consultants to be hired under IREP have the time to comprehensively review existing project proposals and develop new ones to be submitted to BRR. BRR could therefore lack the financing flexibility to adapt its 2007 spending patterns to reflect consultants' inputs.Various steps can be taken to maintain financing flexibility however: (i) can proposerevisions BRR o f its 2007 budget to MOF at any point in time; (ii) BRR could allocate at least part o f its 2007 infrastructure budget to specific kabupatens without specifying, ex ante, how kabupaten allocations will be divided between different infrastructure sectors and/or projects; (iii)finally, MDF funds can be allocated to infrastructure investments in 2007, and as these funds do not need to be allocated ex-ante to specific projects, they can complement BRR's own funds and increase overall financing flexibility for infrastructure in2007. 73. BRR's exit strategy. BRR's mandate expires inmid-2009. Two main sustainability issues arise after that date: (i)local and provincial governments might not own the projects financed by BRR, which could result in inadequate maintenance in the post BRR period; and (ii) while local government revenues have substantially increased over the past few years, the revenues derived from natural resources will likely decline as Aceh's share o f oil and gas revenues decreases after 2009. The following steps can be taken to address these challenges: In order to foster local government ownership of BRR funded projects, local and provincial governments will have to sign o f f on the projects prepared under IREP and submitted to BRR. In addition, local governments will be asked to co-finance infrastructure projects with BRR (and MDF).Local andprovincial governmentscould infact be asked to cover an increasing share o fthe costs o f infrastructure projects over the course of the next three years. In addition, BRR plans to gradually shift key decision making functions to local and provincial governments over the next three years supportedby a comprehensive capacity assessmentto be conducted by the IPMteam. Mobilization o f local source revenues and revenue transfers from other levels o f government will need to be reviewed to ensure that local government revenues inAceh are sustained, beyond 2009, at sufficient levels to ensure continued development andmaintenance o f local infrastructure. Under IREP, local and provincial governments will receive technical assistance to devise appropriate maintenance strategies. The TORS for the West Coast, Nias, and Strategic Infrastructure TA include work to assess local government capacity to manage and operate infrastructure, in addition to the capacity training for budgeting and capital works programming. 18 T h i s will go some way toward ensuring that local and provincial governments adequately maintain the projects that will be financed over the next three years. The BRR has begun to provide operations and maintenance trainingto local governments. A detailed exit strategy is already part of the TOR for the IPMConsultants. However, there is a possibility that some REP projects may not be completed by the BRR's current mandate. Various options are under consideration to address this, andthe issue will be resolved duringappraisal o f the BRR'sproposed "Infrastructure Facility." Finally, under REP, IPM consultants will help BRR prepare a comprehensive exit strategy designed precisely to address the sustainability issues discussed in the present section. The exit strategy will include, inter alia: (i) assessmento f local and provincial government capacity based on assessments by the West Coast and Nias consultant teams; (ii) evaluation o f financial and human resources needs o f local governments; (iii) review o f TA capacity building programs; and, (iv) evaluation o f progress in transferring responsibility o f management o f infrastructure projects to local andprovincial government staff. Table 2 below outlines critical risks to the project, as well as proposed mitigation measures to be taken to minimize these risks. 19 Table2 -Criticalrisksand proposedmitigationmeasures RISK RATING MITIGATION RATING AFTER MITIGATION Misuse o f and failure to H Outsourcing o f accounting and reporting M account for project finds functions. Public disclosure o f audit report and anti-corruption initiatives as outlined in the Anti-corruption Action Plan. Ineffective audit functions H Inclusions o f an independent audit as part o f M the FM component. FM consultants apply professional bestpractices to implementation. Political involvement in funds S An independent financial management team M flow process will be supplied as part o f the IPM team to monitor fiduciary arrangements. Lack o f involvement and S The Infrastructure Board o f BRRwill be M support o f key government engaged to ensure the appropriate commitment agencies o fBRR andthe relevant LGs. Inadequate capacity o fthe S TA consultants willprovide the required M executing agency capacity. BRR will establish a P M U staffed by experienced technical staff, administrative staff, procurement and financial management stafflaccountants. Limitedavailability o f foreign M All consultants willbe procuredusing standard N and local TA consultants Bank procedures. Maximumcoverage will be givento advertisementsrequesting interest from consultants. Needto deliver the project on a M Modelbiddingdocuments have been M fast track basis developed and agreed with the Bank. Specific procurementprovisions elaborated to deliver the services quickly inresponse to the urgent nature o f the project. Use o fretroactive financing and advance procurement procedures. Consultant teams do not meet M Use o fprocurement advisors will ensure good S performance requirements quality consultants are selected. The Bank will support BRR inclosely monitoring performance o f consultants through intensive supervision. The TORSo f the consultants have clauses included that mandate replacement o f underperforming staff; also as part o fthe contract, consultants must sign an integrity clause. Financing Facility is not N Inthe event the FinancingFacility doesnot N implemented receive donor support, the BRR has sufficient findsto finance district-level projects. Localgovernments unable to H Iflocalgovernments areunable to mobilize S supplycofinancing for findingto cofinance landacquisition for compensationo f land infrastructure works, BRR will provide the acquisition additional financing. 20 Weak procurement H All packages funded ona retroactivebasis will M environment and collusive be subject to prior review. To ensure practices inpast projects transparency inthe procurement process, enhanced procurementprocedures are included inthe Anti-Comption ActionPlan. Procurement training activities and a capacity assessment will also be conducted with local and provincial governments with IPM assistance. L o w capacity o f local and H The project will create incentives for active S provincialgovernments to participation o f local andprovincial provide experienced, qualified government staffby increasingtheir ability to staff to work withconsultant manage projects through capacity building teams activities for project selection and management. L o w capacity o f the local S The project designincludes significant S governments to finance, institutional strengthening to promote operate, and maintain sustainable management, operations, and infrastructure maintenance by the P U staff, Infrastructure contracts will not S The project will ensure the use o f improvedbid M be executedto standards and documents and tightened control o f quantities ' costs as designed and quality by consultants. Transition o f responsibility to S IREP is designed to help buildcapacity o f local M local andprovincial and provincial government staff to bring about governments for maintenance improvements inthe planning and maintenance of infrastructure proves o f infrastructure. The consultants will gradually unsustainable after BRR's shift responsibility to local govemnient staff to mandate ends manage infrastructure projects during the course o f IREP. To foster local government ownership o f BRR fbnded projects, local and provincial governments will have to sign o f f on the projects prepared under IREP and co- finance infrastructure projects with BRR (and MDF). Mobilization o f local source revenues and revenue transfers fiom other levels of government will need to be reviewed to ensure that local and provincial government revenues in Aceh are sustained, beyond 2009, at sufficient levels to ensure continued development and maintenance o f local infrastructure. Finally, the IPMteam will work closely with BRR to develop an exit strategy that includes assessments o f local level capacity to ensure a smooth transition after BRR'smandate expires. OVERALLRISKLEVEL S M/S Risk Rating H(HighRisk), S (Substantial Risk),M(Modest Risk),N(Negligible or L o w Risk) - 21 XIII. Anti-corruptionActionPlan 74. This project provides TA to BRR to lay the groundwork for future infrastructure investments financed during the investment phase by BRR. Therefore, it i s important to buildinto this Anti-corruption Action Plan (ACAP) two forms o f anti-corruption measures: those which help to protect the crucial TAs launched under the first phase, and those aspects which must start to put inplace a system that will protect the second phase. More information on the action plan and its applicability to the investment phase i s available inAnnex 10. 75. The implementation o f this plan depends on strong support from the BRR through its PMU. It i s assumed that a small Ethics Team" will be established withinthe BRR, as advisors to the PMU.This Ethics Team would work closely with the IPMconsultants, providing timely advice to the P M U on issues such as: Adapting and adopting procedures acceptable to the MDF and the government for hiring and managing consultants and contractors; Ensuringthat parliament andcivil society groups are properly informedand engaged within an appropriate "third-party" monitoring system. 76. Disclosure o f information. To encourage healthy competition between bidders, the PMU must ensure that infomation i s widely circulated, particularly in relation to the procurement o f the initial contracts. This will be done using established procedures (e.g., advertisements in newspapers and on internet website), enhancing with additional measures when possible. To avoid misinformation circulating about the project, the P M U must ensure that groups interested in the project are kept up to date with progress during the procurement and implementation phases, inter alia by using an electronic mailing list and by sending informationdirectly to key distributionhubs, such as NGO fora. 77. Civil society oversight. To broaden informal oversight coverage and further reduce the problems relatedto misinformation, the PMUwill ensure that socialization o f civil society oversight begins as soon as possible, so that civil society becomes aware o f the forthcoming biddingprocess for the first phase contracts and so that local governments can see that BRR fosters coordination with key external groups, such as the local parliament and higher education institutions. Both o f these institutions should be encouraged to send representatives to witness the procurement process and comment on progress. 78. Collusion mitigation. The procurement team for the first technical assistance packages will be supported by professional procurement advisors. Strict procurement measures will be followed in order to minimize risks of collusion in the initial contracts. These measures include wide publication o f bidding announcements, and other mitigating internal control measures highlighted in the FM and Procurement Assessment annexes. As mentioned above, BRR will encourage representatives from civil society and, where possible, localparliament to act as observers o f the key stages inprocurement. 79. Mitigation o f forgery and fraud. Forgery and fraud risks will be minimized by adherence to fiduciary management practices (see also annex 8). These measures will include strict payment validation procedures that will be rigorously enforced. Project filinghookkeeping will be tightly controlled and subject to strict reviews. Intemal and external audits will be held to ensure that fiduciary management i s in accordance with the agreed procedures. Special attention will be given to aspects that have proven vulnerable in previous projects, such as "soft" categories like training, workshops and information loThis team would greatly benefit from havingaccess to a filltime Advisor on operational aspects, includingthe MDF and government disbursement, procurement and financial management guidelines. 22 dissemination. Internal audits will be carried out by BRR, whilst external audits will be outsourced to a professional audit company throughthe Supreme Audit Board (BPK). 80. Complaints handling. A sufficiently independent and credible system for handling complaints i s already available within the Anti-Corruption Unit o f BRR. The PMU should make full use o f this system throughout the life o f the program. 81. Sanctions and remedies. BRR may use its own sanctioning regime which includes blacklisting of companies. If necessary, the BRR Anti-comption Unit will activate and monitor the referral system to external authorities (e.g., the police/KPK) to gauge if legal and/or administrative sanctions are being effectively applied. 82. Effective involvement o f the Local Parliament. The PMU will ensure that the local parliament (DPRD) is actively involved from the beginningby insistingthat they are properly engaged inthe strategic planningstage. It will also invite representatives from the relevant commission to observe the procurement process on the condition that conflict o f interests i s avoided. Later on, the PMUwill ensure that DPRD are invited through relevant commission to all Accountability Meetings. All o f these activities will require inputsfrom the Ethics Team andthe IPM. XIV. Policy Exceptions andReadiness 83. Nopolicy exceptions are required. 84. Grantconditions and covenants. There areno project-specific effectiveness conditions. As requiredunder the general conditions applicable to the Grant, a satisfactory legal opinion mustbe delivered to the Association prior to effectiveness o f the Grant. 85. Inaddition to standardprojectimplementation covenantsrequiredto cany out the Project, the following actions will be taken duringimplementation: BRR will submit no later December 31, 2008 a letter outlining proposals for either (a) the orderly closing o f the Project; or (b) the extension o f the Project, including proposed institutional arrangements for further management o fthe Project. External auditor arrangement between BPK andthe acceptable auditor to be completed no later than 6 months after signing o f the Grant Agreement. The project audit should be submitted to the Bank not later than six months after the end o f each financial year. 23 ANNEX 1:PROJECTSRESULTSSUMMARY Project Intervention Verifiable Indicators o f Means o f Verification Assumptions Logic Achievement coordination o f the infrasi icture reconstructionpro{ .m. Result 1 A strategc plan for IPMteam andBRRwill Donors openly share Infrastructure infrastructure conduct bimonthly informationregarding investments made inthe reconstruction inAceh reports usingthe MIS their infrastructure Aceh and Nias post- andNias exists system to track progress reconstruction programs tsunami recovery o fthe overarching programreflectBRR's Donors andother reconstruction program BRRdatabasesare strategic infrastructure stakeholders are maintained and reconstruction plan consulted on the plan Project designs submitted improved upon during anddesignprojects that to BRR follow the project implementation support implementation strategic infrastructure ofthe strategy (i.e., the reconstruction plan proportion o f infrastructure Annual audit o f BRR's investments that reflects technical assistance BRR'sstrategic plan measures the proportion increases) o f infrastructure investments that reflect BRR's strategc plan Result 2 Technical designs are Regular reportingby Local andprovincial Infrastructure designs o f sound and appropriate IPM,West Coast, and governments actively BRR-financed projects Nias consultant teams to participate inproject are highquality Proper safeguards monitor quality o f design measures are integrated designs created at the into project preparation district and provincial Local andprovincial levels governments work closely with consultant Satisfactory spot checks teams to prepare their (i.e., un-announced Annual Investment Plans inspection o f works (AIp4 undertakeninthis project to monitor progress o f approximately 10-15% o f projects bynumber, and 20-40% by value being prepared) o ftechnical designs and safeguards documentation by IPM consultants duringproject amraisal 24 Result 3 The scale o f fbnding Regular reportingby BRRapprovesproposed ~ To ensure the committedto implement IPM,West Coast, and designs andprojects ina availability o f an the projects submitted Nias consultant teams to timely manner to avoid adequate number o f by local andprovincial monitor investments backlogs technical designs to governments to BRR as committed at the district support the highlevel of part o ftheir AIPs and provincial levels BRRprovides adequate BRRinvestment increases fimdingto support earmarked for project implementation reconstruction Result4 Regular reportingby Anti-Corruption Action To enhance the quality Projects meet the IPM,West Coast, and Planis followed during o f implementation o f specifications o f the Nias consultant teams to implementation BRR-financed technical designs monitor the quality o f infrastructure investments during Quality assurancetesting reconstruction projects implementation i s conducted Satisfactory spot checks (i.un-announced e., inspection o fworks undertaken inthis project to monitor progress o f approximately 10-15% o f projects being implemented for construction quality by IPMconsultants during implementation Result 5 Increasedproportion o f Reporting from IPM Local andprovincial Capacity o f local and projects managedby team, andfrom the West governments assign provincial level staffto local andprovincial Coast andNias consultant appropriate staffingas a assume increased government staff teams to track levels o f long-term commitment. responsibility for project involvement and management and Increased proportion o f responsibility o fproject Relevant government application o f projects managedby managementtaken over staffparticipate in safeguards policies, local andprovincial time by local and trainingprograms procurement, and government staff that provincial government offeredby BRR and financial management incorporate appropriate staff consultants safeguards measures, financial management andprocurement practices duringproject design and implementation 25 ANNEX2: DETAILED PROJECT DESCRIPTION A. Introduction On December 26, 2004, a major earthquake struck 150km off the coast of Indonesia. Forty-five minutes later, a devastatingtsunami wave hit Aceh. On March 28,2005, another devastating earthquake added to the toll on Nias Island, Simeulue and southern parts o f Aceh. These natural disasters caused massive humanand physical destruction: some 170,000 people were killed and 600,000 people displaced; 80,000 to 120,000 houses were destroyed or badly damaged; and all forms o f infrastructure - including roads, seaports, airports, water treatment and distribution systems, power supply networks and sea defenses - suffered enormous damage. A huge outpouring o f support followed and some 500 organizations are currently involvedinthe relief andreconstruction activities. In April 2005, the Government of Indonesia (GoI) announced the creation of the Rehabilitation and ReconstructionAgency (BRR), tasked with coordinating implementation o fpost-disaster recovery activities. InNovember 2005, BRRwas given additional powers to implement projects directly. This shift is meantto enable BRR to respond to gaps in implementation or non-responsive programs, by being able to assume responsibility for those programs itselfor to reassign them to other agencies. Given the magnitude o f the losses suffered and the number o f organizations currently involved in reconstruction efforts, demands on the technical and coordination capacities o f BRR as well as o f local and provincial governments are enormous. Under a bilateral aid agreement with France, two o f the local governments most affected by the disaster (Banda Aceh and Aceh Besar) are receiving technical assistance (TA) to strengthen their project preparation capacity across infrastructure sectors (including, in particular, water supply and sanitation, drainage, power, telecommunications, transport, and sea defenses). The proposedproject is designed to provide similar assistance across infrastructure sectors to the other nine local governments most severely affected (seven on the West Coast and two on Nias Island), to the provincial governments of Aceh andNias, and to supplement capacity within BRR. This proposed TA program i s to be complemented by a financing strategy based, inpart, on the establishment o f a financing facility co-funded byBRRandMDF.This financing strategy is described indetail inAnnex 5. The TA providedby the proposedproject includes the five main components describedbelow. B. Component 1:Infrastructure ProgramManagement (IPM)(US$19.5 million) T h i s component aims at strengthening BRR's ability to carry out program management functions by recruiting a core team o f highly qualified experts who will be deployed within the existing BRR structure for infrastructure working directly with existing staff. They will provide assistance to BRR in eight specific areas: overall strategic infrastructure programming for Aceh and Nias, as per the BRR Infrastructure Strategy (applies to all infrastructure projects, regardless o f source o f financing); program management o f the reconstruction process in Aceh and Nias (applies to all infrastructure projects, regardless o f source o f financing); review o f local and provincial governments' plans for infrastructure investment as a basis for BRR finding (applies only to infrastructure projects financed byBRR/MDF); quality control, supervision, and monitoring o f BRR-funded infrastructure projects (applies only to infrastructure projects financed by BRR/MDF); 0 procurement support for BRR-finded infrastructure projects (applies only to infrastructure projects financed by BRR/MDF); 26 0 safeguard support for BRR-funded infrastructure projects (applies only to infrastructure projects financed by BRWMDF); 0 anti-conuption support for BRR-funded infrastructure projects (applies only to infi-astructure projects financed by BRWMDF); and 0 support to BRR in managing the consultant teams that will assist with implementation o f the other components o fthe proposedproject. Strategic programming One o f BRR's mandates i s strategic programming o f infrastructure recovery activities, covering the following sectors: roads, ports, airports, telecommunications, water, sanitation, drainage, flood control, irrigation, power, and public buildings.This responsibility includes: (i) identifying the overall infrastructure needs; (ii)understanding the infrastructure activities o f all major donors, as well as those o f local and provincial governments; (iii) identifying the main gaps; (iv) developing a list o f priority projects across infrastructure sectors designed to fill these gaps; and, (v) allocating responsibilities between various stakeholders to ensure swift implementation o fpriority projects. To create the overall strategic program for infrastructure recovery, it will be necessary to prepare individual sectoral plans highlightingneeds and corresponding priority projects in affected areas. The IPMconsultants will help BRR prepare the strategic program and sector plans, which will outline activities over the next three to five years. Such plans should take advantage o f economies o f scale when possible. The planswill be reviewed every six months by, and will require the approval of, the Infrastructure Board o f the BRR. The design o f the strategy and sector plans will be undertaken in close coordination with local and provincial governments; in addition, the planning process will involve broad consultation with relevant stakeholders and communities living in areas covered by the strategic program. Such coordination i s important not only to ensure that BRR's plansreflect the information available to local and provincial governments, but also to maximize alignment between the strategic program prepared by BRR and plans prepared by local and provincial governments. Infrastructureprogrammanagement As there are a multitude o f donors, non-governmental agencies and other stakeholders working in infrastructure reconstruction throughout Aceh and Nias, it i s essential BRR has the ability to coordinate activities effectively to leverage resources and identify gaps in implementation that need to be addressed. The infrastructure program management function o f this TA will support BRR to review donor programs to track progress and results and ensure smooth implementation o f reconstruction processes. By having this information available, BRR will be able to suggest redirecting o f donor investments to meet m e t needs in affected communities. In addition, the IPMteam will support BRR's participation in infrastructure sectoral working groups to enhance coordination and communication links among stakeholders engaged in the recovery process. BRR is in charge o f collecting, preparing and disseminating information to stakeholders about implementation progress and milestones o f its overall strategic plan for infrastructure reconstruction in Aceh. IPM consultants will help BRR develop an adequate monitoring framework in the form of a management information system (MIS) to track progress toward achieving the objectives o f BRR's overall strategic infrastructure program. The IPM team will also, in collaboration with BRR's communications office, assist BRR in communicating information regarding program progress to the public in an effective manner, through the Internet, newspapers, and other appropriate forms o f media. Review o f local and provincial governments' reconstructionplans and priority projects BRRreviews the infrastructureplans andpriority projects preparedbythe local and provincialgovernments to ensure that they match BRR's overall strategic program mentioned above. The remaining local 27 governments inAceh andNias will also submit development plans, which will be evaluated on the basis o f the investments' strategic value to the overarching reconstruction program. Upon review o f these local and provincial plans, BRR will determine whether or not to approve these individual infrastructure projects plans and whether to allocate some o f its own funds to implement these projects. It is possible that local and provincial governments may submit specific projects for approval by BRR before having completed their strategic plans, especially in the first year o f this IPM TA project implementation. In this case, BRR will review the merits o f those projects, determine whether to approve them, and whether to allocate some o f its own funds to their implementation. IPMconsultants will help BRRdevelop templates and guidelines on how localandprovincial governments must present their infrastructure reconstruction plans (including the level o f details requested on each individual project included inthe plans). Such templates and guidelines will build, to the possible extent, on the existing processes o f BRR. IPMwill assist BRR with the development o f a detailed project manual to explain the project cycle o f infrastructure investment, which includes the process o f drafting plans and proposals, requesting funds from BRR, and the monitoring and evaluation o f these projects. The IPM consultants will also support BRR inpreparing the infrastructure budget for submission to Parliament. This activity i s particularly crucial for inclusion in the 2007 budget cycle, as all o f the higher quality plans and projects may not be ready before this mustbe completed. Quality assuranceo f BRR-financedprojects Once individual local and provincial projects are approved by BRR, local or provincial governments will prepare corresponding detailed designs and tender documents. For the projects it finances, BRR will check the quality o f project design and implementation arrangements. IPM consultants will help BRR develop minimumquality standards and standardized biddingdocuments pertaining to specific projects; it will also help BRR carry out its checking function. To ensure sustainability o f its infrastructure investments, BRR will develop management, maintenance and operations guidelines including future recurrent budget needs, to assure adequate future maintenance o f the projects it finances. IPM consultants will assist BRR in the development o f these plans. Any processes designed by IPMconsultants will build, to the extent possible, on existing processes o f BRR. Procurement support and capacity building BRR is responsible for setting up adequate procurement capacity to ensure the effective implementation of the projects that it finances. I P Mconsultants will provide advice and support to BRR inthis area. One o f the components o f the assignment o f the IPM will be to provide procurement services during the implementation o f the infrastructure projects. The main task is to assist in meeting the urgent needs by conducting procurement in the short term; while developing the capacity o f local governments to carry out procurement inthe long term. The procurement services will directly support the actual procurement for up to 18 months o f the implementation o f infrastructure projects designed under this grant and which will be financed under a following project. During the first 18 months of the project, the consultant procurement team will assess the current procurement procedures o f BRR,propose improvements ifnecessary, conduct training workshops for BRR, provincial and local government representatives in the procurement process, prepare the procurement plan(s), assist BRR inconducting the procurement process, prepare evaluation reports, andnegotiate (where applicable) andprepare contracts. Inparallel, the consultant team will assess the capacities to conduct procurement at the local government level, propose capacity development plans for BRR approval, implement these capacity development plans through workshops and on-the-job training, and benchmark the performance o f the different local governments. Depending on the stage o f preparedness o f the different local governments, a gradual shift in 28 responsibilities will occur whereby procurement will be conducted by these governments under the monitoring o f BRR.This phase is expected to occur during the last 12-18 months o f the project. Safeguard support and capacity building BRR requires that its projects meet all social and environmental safeguards requirements. BRR is responsible, inparticular, for: (i)developing overall processes to ensure that all safeguards requirements are met; (ii) screening o f projects to determine whether they trigger the implementation o f specific safeguards requirements; (iii)ensuring that any safeguards-related studies or assessments are performed by an independent consultant; and, (iv) supervising implementation o f such assessments and studies on a spot- check basis. BRR will also provide hnding to contract consultants to execute safeguards studies as necessary. IPMconsultants will provide advice to BRR on all safeguards-related issues and will be responsible for assisting BRR in acquiring the expertise required to draft any safeguards-related actionplans andprepare all required social andenvironmental studies (AMDAL,UKL/UPL,and LARAP).The IPMteam will carry out these tasks at it deems appropriate. Anti-conuption support andcapacity building Inaddition, BRR will be tasked with enforcement of the project's anti-corruption action plan to reduce leakages o f resources and assure transparency. The IPM team will assist BRR in enhancing its existing complaints handling mechanism for BRR-financed projects to track and resolve grievances reported by communities affected by the infrastructure works duringthe investment phase. Project management support BRR is tasked with managing the work programs, performance, and outputs o f the consultants that will assist with implementation o f the other components o f the IREP project, namely: West Coast Infrastructure Planning, Design and Construction Supervision; Nias Infrastructure Planning, Design and Construction Supervision; Strategic Infrastructure Planning, Design and Construction Supervision; and, Financial Management o f BRR-financed projects. IPMconsultants will assist BRR in carrylng out this management function and will conduct any assessments or audits necessary to ensure the quality o f the performance o f the other TA components. C. Component 2: West Coast Infrastructure Planning, Design and Construction Supervision (US$lO million) The seven local governments located on the West Coast" have beenparticularly affected by the tsunami and earthquake disasters. This component o f the IREP project aims at strengthening the ability o f those seven local governments to improve the provision o f infrastructure in their respective jurisdictions by providing technical experts to assist them in this area. These experts are expected to work closely with the planning and public works departments o f the local governments. They will provide assistance to these local governments in three main areas: (i) planning; (ii)project design, tender documents, implementation and supervision, including compliance with environmental and social safeguards policies; and (iii) institutional development support and training. Strategic planning Under the IREP, the local governments must identify their present and hture development needs related to physical planning and infrastructure development and services, and against this background, review the activities o f all major donors active within their jurisdictions, identify the main gaps, and prepare development plans (including spatial and infrastructure master plans, if needed) focusing on their priority IIAceh Jaya, Aceh Barat, Nagan Raya, Aceh Barat Daya, Aceh Selatan, Aceh Singkil and Simeulue. 29 infrastructure investment needs, specified on a yearly basis over the next three to five years. On the basis of such overall plans, the local governments should prepare Annual Investment Plans(ATP) with the assistance o f the IREP consultants, which include new projects and priority maintenance works and indicate tentative source of funding for proposed activities (local government funds, BRR funds, or contributions from donors). These AIPs must be submitted to BRR for approval. AIPs will be prepared annually on a rolling basis, with a revised version submitted to BRR every six months. Local governments will coordinate the plans with other development partners to avoid overlaps. The consultants will help the local governments preparethe development and ATP plans mentioned above. The local governments may submit specific projects for approval by BRR before having completed their strategic plans. During the first year o f implementation, before assisting local governments with the preparation o f strategic plans, the consultants are likely to be asked first to review and vet the priority projects already identifiedby the local governments andready to be sent to BRRfor approval. Project design, implementation and supervision Once the local governments' ATPs are approved by BRR, local governments need to produce detailed designs and tender documents, as discussed above, and then proceed with the tendering o f these projects. Local governments are responsible for approving any required safeguard-related action plan and for managing/monitoring the implementation o f the projects. Consultant teams will work alongside local government staff to assist in the implementation and supervision o f infrastructure reconstruction. These IREP consultants will be responsible for utilizing the IPM team's contract designs to ensure high quality standards are applied. To ensure sustainability o f its infrastructure investments, consultant teams and local governments will develop management and maintenance strateges andtrainingprograms to assure adequate hture maintenance andoperations o f the projects. Of the US$10 million available to finance this component o f the proposed project, it is expected that about 20% will be spent planningactivities, about 50% on designing and tendering projects, and about 30% on supervising projects. On average, design and tendering costs tend to represent about 5% o f total project costs. Since a relatively high proportion o f the projects to be undertaken by local governments are rather simple projects requiring minimal design work, design and tendering costs may represent between 2.5 and 5% o f total project costs. Therefore, the US$5 million (i.e., 50% o fUS$lO million) spent on project design and tendering by the seven local governments might be expected to generate infrastructure projects worth betweenUS$lOO and US$200 million. Institutionaldevelopment and capacity building The consultants will strengthen the technical capacity o f local governments by providing local government staff with hands-on experience and tailored training in management, planning, project design, financial management, construction, supervision maintenance, and operation. Local consultants, contractors, and local government staff will be trained by BRR (in part through IPM consultants) on effective implementation o f social and environmental safeguards to ensure projects comply with these policies and do not negatively impact vulnerable social groups or the environment. Local government staff will also be trained on procurement procedures by the BRR Procurement Advisory team and IPM consultants. In addition, the consultants will prepare a longer term maintenance and asset management strategy for local governments that include staffingand humanresource needs. D. Component 3: Nias InfrastructurePlanning, Design, and Construction Supervision (US$6 million) Nias Island, which lies in North Sumatra province and comprises two local governments, Nias and Nias Selatan, was most negatively affected by the earthquake that occurred on March 28, 2005. Nias' infrastructure needs are particularly acute inthe transport sector; roads, bridges, ports andairports need to be rehabilitated and improved due to both the damage from the disaster and from long term lack of 30 maintenance. By investing in this sector inNias, it i s expected to instigate renewed economic activity and help restore livelihoodso f affected communities. Strategic planning The local governments need to identify their present and future development needs related to physical planning and infrastructure development and services with regard to this IREP project. Against this background, they must review the activities o f all major donors active within their jurisdictions, identify the main gaps, and prepare development plans (including spatial and infrastructure master plans, if needed) focusing on their priority infrastructure investment needs, specified on a yearly basis over the next three to five years. On the basis o f such overall plans the local governments, assisted by the IREP consultants, will prepare Annual Investment Plans (AIP)that include new projects as well as priority maintenance works, indicate tentative source o f funding for proposed activities (either the local government's own funds, or BRR funds, or contributions from donors), and submit them to BRR for approval. A P s will bepreparedfor periods o f one year on a rolling basis, with a revised version submitted to BRR every six months. Local governments will coordinate the plans with other development partners to avoid overlaps. The consultants will helpthe local governments prepare the development andAIP plans mentioned above. The local governments may submit specific projects for approval by BRR before having completed their strategic plans. During the first year o f implementation, before assisting local governments with the preparation o f strategic plans, the consultants are likely to be asked first to review and vet the priority projects already identifiedby the local governments and ready to be sent to BRRfor approval. Project design, implementation and supervision Once the AIPs are approved by BRR, local governments need to produce detailed designs and tender documents for the relevant projects, as discussed above, and then proceed with the tendering o f these projects. Local governments are responsible for approving any required safeguard-related action plan and for managing/monitoring the implementation o f the projects. Consultant teams will work alongside local government staff to assist in the implementation and supervision o f infrastructure reconstruction. These IREP consultants will be responsible for utilizing the IPM team's contract designs to ensure high quality standards are applied. To ensure sustainability o f its infrastructure investments, consultant teams and local governments will develop management andmaintenance strategies and training programs to assure adequate future maintenance andoperations o fthe projects. As mentioned incomponent 2, the 50% o fthe TA budget allocated to project design and tendering are likely to represent between 2.5 to 5% o f total project costs - which means that the US$3 million (i.e., 50% o f US$6 million) spent on project design and tendering in Nias might be expected to generate infrastructure projects worth between U S 6 0 and US$120 million. Capacity building The consultants will strengthen the technical capacity o f local governments by providing local government staff with hands-on experience and tailored training in management, planning, project design, financial management, construction, supervision maintenance and operation. Local consultants, contractors (when applicable) and local government staff will be trained by BRR (in part through IPM consultants) on effective implementation o f social and environmental safeguards to ensure projects comply with these policies and do not negatively impact vulnerable social groups or the environment. Local government staff will also be trained on procurement procedures by the BRR Procurement Advisory team and IPM consultants. 31 E. Component 4: Strategic Infrastructure Project Planning, Design and Supervision (US$S million) Several larger priority infrastructure projects that fall under the responsibility o f local or provincial governments, or possibly o f the national government, constitute this fourth component o f IREP. It i s designed to strengthen the ability o f BRR and the relevant governments to carry out the identification, appraisal, detailed design and supervision o f these larger, strategic infrastructure projects. This assistance will beprovidedby experts who will work closely with therelevant governments. Project identification The types o f projects to be financed under this TA include large infrastructure projects such as: ports, airports, andkey roads managedby provincial, national or even local government entities. A number o f such projects have been identified in particular in the airport and road sectors. The IPM consultants will assist BRR and the relevant governments in preparing projects already identified and help identifying further priority infrastructure projects. Relevant governments will coordinate the plans with other development partners to avoid overlaps. Project design, implementation and supervision Once strategic projects have been identified, the relevant government (at the local, provincial or possibly national level) will produce detailed designs and tender documents and proceed with the tendering o f these projects. The relevant governments are responsible for approving any required safeguard-related action plan and for supervising the implementation o f the projects. An additional team o f consultants, distinct from the IPMconsultants, will provide support on all aspects of design, financial management, implementation and supervision o f the projects. These IREP consultants will be responsible for utilizing the IPMteam's contract designs to ensure high quality standards are applied. To ensure sustainability o f these infrastructure investments, consultant teams and local governments will develop asset management and maintenance strateges and relevant training programs to assure adequate future maintenance o f the investments. These strategies will include an assessment o f local and provincial government human and financial resource needs for assuming full responsibility for all aspects o f infrastructure works. This assistance will focus on strategic projects financed by BRR. Although the exact number o f priority projects to be implemented over the next 3 to 5 years remains uncertain at this stage, the consultants will likely be recruited under a time based contract that describes the nature o f the tasks to be performed and the qualifications required, but maintains a degree o f flexibility regarding the quantity o f support to be provided. F. Component 5: FinancialManagement o fBRR-financed Projects (US$1.5 million) BRRneeds to put inplace a sound financial management (FM) framework. This component is designed to strengthen BRR's capacity to put in place the financial management framework required to ensure that it meets all its fiduciary responsibilities with respect to the projects. This assistance will be provided by experts located within BRR. The financial management consultant team will include assistance to the PMU and PIUs to establish and maintain financial accounting and monitoring arrangements for project activities undertaken and expenditures incurred at all project locations, including monitoring the operation o f internal controls over implementation o f the contracts. This component will also include an external audit o f the project financial statements by the country's Supreme Audit Board (BPK). However, in view o f capacity constraints at BPK, it will sub-contract the audit to reputable private sector firms acceptable to the Bank. The related cost for an external audit i s includedinthis component. 32 ANNEX 3: INSTITUTIONAL DESIGNAND IMPLEMENTATIONARRANGEMENTS A. Introduction To ensure smooth execution o f project components, it i s important to devise a clear, transparent structure for reporting on progress, outcomes, and challenges to the program. This annex explains how the proposed o f the BRR structure - through management o f the BRR Infrastructure Board and the establishment of a Infrastructure Reconstruction Enabling Program (IREP) technical assistance (TA) will work in the context Project Management Unit(PMU) - as well as how it will support provincial and local governments covered by the IREP TA inthe West Coast andNias logistical areas. It also elaborates the reporting structures and oversight functions to be put inplace duringimplementation. B. Project ManagementUnit BRR has established a Project Management Unit (PMU) to coordinate and oversee day-to-day implementation o f the TA at the macro level, which includes management o f the Infrastructure Program Management (IPM) team, donor coordination, procurement practices, safeguards policies, fiduciary management o f BRR investments, monitoring o f project progress, and the development of a strategc infrastructure reconstruction plan covering Aceh and Nias. BRR has proposed to appoint the Deputy of Infrastructure as Chief o fthe PMU, who will also serve as Task Leader o fthe IPMteam. The P M U will consist o f Directors o f relevant BRR programs in the following thematic areas: the Chief o f the P M U Secretariat, Finance and Planning, Communication, .the Public Facilities, Quality Assurance, Water Resources and Energy, Water and Sanitation, Nias Representative, and Roads and Bridges. The four TA packages addressing the West Coast, Nias, strategic infrastructure projects, and financial management will each be managedby one sector Director sittingwithin the PMU. These Directors will continue to serve not only as Task Leaders to the individual TA components, but also as Directors o f their BRRprograms: The BRRNias Representative will administer the Nias TA; the Director ofPublic Facilities will managethe strategc infrastructureTA, the Director o f Water Resources andEnergy will be Team Leader o f the West Coast TA; and, the Chief o f Finance and Planningwill be responsible for the financial management TA. Sitting within the PMUwill be an IREP Secretariat, responsible for daily work to support the functions o f the PMU. A full-time Chief of PMU Secretariat will be appointed to administer the Secretariat work program and staff, BRR will be responsible for equipping the Secretariat with qualified personnel and support staff. The IPMteam will support the Secretariat, as outlined in the IPM terms o f reference. Also working within the P M U will be an IREP procurement team that will assist in the contract management of the three main TA consultants by the time the teams have been mobilized. A Procurement Advisory team will be mobilized for the investment phase. This team will be staffed by BRR and supplemented by procurement staff from the IPM team. As part o f its work program, the Procurement Advisory team will manage procurement o f works during the investment phase and will train local and provincial government staff on procurement practices and policies under the project. The chart below highlights the KEP PMU structure. 33 The PMUwill liaise closely with other BRR units to coordinate activities and maximize the use o f existing expertise within the organization. With the help o f the IPMconsultants, the PMU will work with the BRR Internal Supervisory Unit that addresses complaints handling and anti-corruption measures to monitor and resolve issues that arise during implementation. It will also feed information and data collected on implementation progress and results o f infrastructure projects to the Communications Office for dissemination. The PMU Procurement Advisory team working under the umbrella o f the P M U will work with the central BRR procurement team to ensure consistency across all BRR programs. The IPM safeguards consultants will provide support to the land acquisition and environmental safeguards teams withinBRR.Inaddition, the financial managementteam, andits supplemental consultants providedthrough the TA, will be responsible for coordinating with the Deputy o f FinancialManagement. These relationships are illustrated inthe chart below. Relationshipwith Other Units in BRR Deputyof Operations Housing support I Anti- Land Environmental corruption Acquisition Safeguards I Complaints Handling Coordination II I PMU I I i Procurement BRR Central IPM Team support Consultants I I , I BRR I c I Communications Office C. InstitutionalArrangements at the Local and ProvincialLevels ' I f Infrastructure Chief of PMU IREP Secretariat Program 9 Deputy Infrastructure Director PMU Secretariat Management(IPM) Project Manager for 9Project staff from all Consultants IPM consultants infrastructuredirectors \ J (appointed) 1 r-l I I Director of Water ERR Nias Director of Public Resources & Energy Representative Facilities Planning Advisory Team Task Leader for Task Leader 0Task Leader West Coast for Nias for Strategic Infra phase (appointed) (appointed) Consultants (to be appointed) (appointed) [-I [-I [-I [-I I I 34 The three TA components focused on implementation at the local andprovincial levels will be carried out in partnership with local public works staff (PU).The consultant teams will be based in local government offices to buildcapacity o f local staff inareas o f strategic project identification, design, implementation and supervision, and maintenance. As local governments are in the process o f identifying critical infrastructure projects and completing their annual strategic infrastructure plans, the PU staff will coordinate with and incorporate feedback from both Bappeda officials and the Bupatimalikota. This process will integrate donor consultations as well as the views and inputs o f affected communities. The Bupatimalikota will coordinate directly with BRR's Executive Board throughout this process. The consultant team working with the local andprovincial governments will report directly to its respective Task Leader within the PMU, which i s supported by IPM consultants. Feedback will also be provided through a Project Coordinating Team (PCT) formed o f the heads o f Bappeda, BRR Regional Representatives, and the Task Leader for the TA. This PCT will meet monthly to discuss implementation progress and consultant performance, and resolve any outstanding issues. The example provided below shows the institutional arrangements for the West Coast TA. The entire project cycle i s shown for the West Coast TA inthe last chart inthe annex. Local Government Level Reporting Arrangements IREP TA Consultants (PDCS-WC) Bupatil Board - - Walikota (Mayor) PMU IREP Local I IREP TA + Directorof/ Government Public Works Task Leaders based in Local Gov 4 Consultants \ Supported by At the provincial and local government levels, the consultant teams will work closely with PU and other local or provincial government staff, but will report directly to their respective Task Leader sittingwithinthe PMU. The PMU Secretariat staff will support the Task Leaders in this fimction. The IPMconsultant team will be responsible for assisting the Secretariat and Task Leaders in the oversight and management o f the other TA teams. Feedback will also be providedthrough the Project Coordinating Teams (PCT) for each o f the four TA components. Withinthe PMU, the IPMteam will report to the Head o f the PMU. The Head of the P M U will then consolidate all o f the information from the teams andreports to the Infrastructure Board. Reporting arrangements are shown inthe chart below. 35 J- Reporting Arrangements for Five Consulting Teams Q Task Leader Service Delivery 7 Local 2 Local Provincial Dept Government Government Local Gov I 1 Feedbackthrough Proje D. Project Oversight The progress o f the project will be monitoredby the BRR Infrastructure Board (IB), which i s comprised o f Deputy Directors o f Housing, Finance, and Planning, Institutional Development, and Infrastructure. The Deputy o f Infrastructure serves as both board chair and as Chief Operating Officer (COO) o f the program. The IB will discuss issues related to donor coordination, monitor progress o f the reconstruction program, and resolve multisectoral issues. The Board will meet every month during the first few months o f project implementation to provide additional oversight, and then will hold bimonthly meetings for the duration o f project implementation. The PMU Secretariat team will prepare agendas for these meetings and highlight issues to be discussed. The IB will receive monthly reports from the Project Management Unit (PMU) on progress, challenges to implementation, and budgeting issues. Inaddition, the BRR complaints handlingunit will provide monthly updates o f complaints received regarding the infrastructure program to both the PMU and to the IB.The P M U will be responsible for recommending courses o f action for resolution, which could escalate to the IB, if the problem is complex and warrants special attention. The IB will also give regular updates and fill briefs every three months to the BRR Executive Board, which comprises all BRR Deputy Directors and is headed by an Executive Director. The Bupati/Walikota will also communicate feedback on progress of the infrastructure program in their jurisdictions to the Executive Board on a regular basis. The structure o f the IBandreportingstructure isshowninthechart below. 36 ProjectCycle (WestCoastlNias) I h I I I I PDCS Local 1.Consultants, BRR, and Local Government identify immediate Consultant Government priorities& projects. Develop Immediate Infra Project Plan (IIPP) and Annual Investment Plan (AIP) 2. Local Governmentsubmits Annual Investment Plan (also, llPP for the first year) to BRR, updated biannually. 3. IREP PMU reviews projects from list, with IPM consultants conducting technical review. Approved projects are returnedto LocalGovernment and preparedby Consultants. The BRR then initiates procurement steps in parallel. 4. Consultantteam preparesDED & TD, and all requiredtechnical documents. Localgovernment PublicWorks may assist in design work. 5 Localgovernmentsubmits requestto BRR Fund Managerfor authorizationto procure. investmentphase of the project - 6. Fund Manager initiates m checks that conditions are metfor start of procurement (e g. contractual documentations adequate,local governmentPIU is rocuremen mobilized, etc). 7. After cleared by Fund Manager, the BRWIPM Procurement Support Team works with local government PIUto procurecontractor. 8. Contractor is mobilized. First direct payment from the Fund manager. Supervisionby Consultantand local government PU, subsequentpaymentsto contractorbased on supervision CzZIl evaluation. 9. BRR & IPM consultants develop Maintenance asset management and maintenance strategiesfor local gov. PDCS-WChelps implement 37 ANNEX 4: FINANCING IMPLEMENTATIONOFINFRASTRUCTURERECONSTRUCTIONPROJECTS AND This annex focuses on how projects prepared by the IREP program will be financed and highlights that spending large sums o f money effectively and efficiently has been difficult for BRR. BRR now has over a year's experience implementing infrastructure projects upon which it can draw; indeed, important lessons can be learned from BRR's activities and from its key development partners, local and provincial government. The annex also explains how the main capacity issues affecting infrastructure development are being addressed through the proposed TA program. Finally, it reviews BRR's exit strategy and, in particular, the issue of financinghighquality projects after BRR concludes operations. A. Available Fundsto FinanceInfrastructure Projects Table 1below estimates funds available to finance infrastructure projects to be designed and supervised by REP consultants. The table provides estimates for: (a) remaining committed but unallocated funds (to projects or sectors) for budget years 2007, 2008, and 2009; and (b) the estimated funds available for infrastructure projects for the same three years. There are three sources o f funding: (a) BRR; (b) Decon or special development grants to local government; and (c) local government funds. Table 1- Estimate of available funds for reconstruction and for infrastructure 2005 to 2009 - Item BRR Decon Local Total ($mill.) ($mill.) ($mill.) ($mill.) Total funds for reconstruction Total commitment- 2005 to 2009 2,100 300 350 2,750 Already allocated- 05 & 06 budgets 980 83 72 1,135 Remaining for 07,08, & 09 1,120 217 278 1,615 Fundsavailable for infrastructure07 to 09 Estimated YOallocation to infrastructure 60 65 40 Total available for infrastructure 07 to 09 670 140 110 920 Less housing & housing infrastructure 200 Available for infrastructure excluding housing 470 140 110 720 Estimate available for 2007 300 55 45 400 Estimate available for 2008 100 55 45 200 Estimate available for 2009 70 30 20 120 Total available 2007 to 2009 470 140 110 720 Estimates indicate that about US$700 million will be available in total for the three years from the three sources. This i s more than enough to fund the projects to be designed and supervised by the IREP; the expected level o f required funding will be o f the order o f US$400 to US$500 million. However, there are three crucial points to be noted: (i) BRR will be under considerable pressure to disburse quickly and, as noted above, it is likely than the bulk o f remaining funds will be allocated in 2007. A significant tranche from the BRR allocation (of the US$300 million estimate) will need to be reserved for projects designed by the IREP consultants (see below). (ii) Fundingfrom Decon andlocal government sources may not be available for IREPprojects because o f decisions by local governments to spend the money according to their perceived needs. It i s anticipated though that BRR funds and technical assistance can be usedto effectively leveragethese two sources o f funding. 38 (iii)Developmentfunds currently controlledbylocal governmentswillbespent onprojectsin21 kabupatens and kota. As a result, all these finds may not be available to high priority projects which have been identifiedby IREP. B. Current Experience and LessonsLearned Fiscal decentralization (in2001) along with the granting o f special autonomy status (in2005) has provided Aceh with considerable and newfound financial resources. This, along with the massive financial inflow of resources for relief and rehabilitation, has provided Aceh with the opportunity reshape its hture direction and level o f prosperity. Unfortunately the province i s yet to capitalize on these opportunities to the full extent possible. The development experience o f GoI's reconstruction agency- BRR andlocal government in Aceh i s reviewedhere, BRR's budget preparationprocess BRR's budget process has four significant milestones: (i) establishment o f budget ceiling; (ii)development o fannual work plans; (iii) budget preparation and DIPA; and, (iv) project implementation. Procedures for establishing BRR's budget ceiling by parliament are rigorous and follow standard procedures; but the process after this i s less clear. The current process o f translating the budget ceiling into sector and sub-sector ceilings by BRR and fixed program budgets was somewhat ad hoc for the 2005 and 2006 budgets. It involvednegotiations by senior BRR personnel, andthe final arbiter, BRR's Director, who eventually releasesbudget resources. BRR's budget i s framed (usually inthe October o f the year preceding the budget year) so that it can readily receive parliamentary approval; this means it attempts to take into account the expectations o f parliament's constituents. Current practice (for the 2005 and 2006 budget) was for all budget resources to be allocated to satkers (single or relatively simple groups o f projects allocated to a single implementing unit). In 2005 and 2006, no provision was included in the budget for block expenditures by sector or sub-sector or geographic location that would leave some flexibility for specifylng allocations at a later time inthe budget year. BRR's mandate for budgetary procedures gives it some flexibility after the ceiling has been set. The post tsunami and earthquake emergency o f 2005 meant that BRR's budgetary process followed few formalities and regulations. This approach was modified for the 2006 budget when an attempt was made to jointly leverage local government budgets with the BRR budget; a procedure which will be important in future years. BRR reviews and revises its budget twice during the calendar year; the first time i s in June when consideration i s given to budget additions and reallocations for the current year's budget and the second time in Februarymarch o f the following when consideration i s given to which projects should be carried over and what remaining or undisbursed funds should be reallocated. It i s evident that budget allocations may be readily transferred between sub-sectors (energy, transport, and housing are all within the infrastructure sector for example) but that transfers between sectors (infrastructure and economic development for example) are more difficult; normally this can only be done at the June and February reviews. BRRproposes to reform its budget process with three main aims: (i) the effective and fair allocation ensure o f resources; (ii) develop BRR's key position as a role model for other government institutions; and (iii) promote good governance. 39 Disbursementof BRRfunds and project performance Two tables are presented below. The first shows the level o f disbursements by satker as o f March 31,2006 for the 2005 program and budget, and the second shows the 2005 and 2006 budget by sector and sub-sector (for infrastructure) andprovides an estimate o f the likely available carry over o f 2005 funds to 2006. Table 2- Level of disbursementsofthe 2005 budgetby satker as ofMarch31,2006 Total 2005 Level of Disbursement No. of Satkers budget (Rp % of2005 budget billion) ~ Satkers with zero disbursements 3 26 4 % Less than 5 % of 2005 budget 15 364 9% Less than 10%of 2005 budget 26 856 22% Less than 20% of 2005 budget 46 1,643 41% Less than 30% of 2005 budget 63 2,261 57% Less than 50% of2005 budget 86 3,515 89% More than 50% of 2005 budget 15 452 11% Total satkers 101 3,967 Table 2 aboveshowsthat: (i) The average size o f the satker budget i s not large: Rp 39 billion (about US$4.2 million). (ii) As o f March 31, 2006, 26 (of 101) satkers from the 2005 budget round have disbursed less than 10 percent o f their 2005 budget. The total budget for these 26 satkers is about Rp 856 billion or 22 percent o f the total BRR2005 budget. (iii)Sixtythree satkershavedisbursedlessthan30percentoftheir budgetandthebudgets ofthese satkers makes up about 57 percent o fthe total BRR2005 budget. (iv) Only fifteen satkers have disbursed more than 50 percent o f their budget and the budget o f these satkers makes up 11percent o f the BRRbudget (an average budget o f Rp 30 billion each). 40 Table3 BRR's 2005 and 2006 budgetand carryoverby sector and sub-sector (for infrastructure) - Likely Tot. 2005 Spent to Disburs. % from Available 2006 available Sectorlsub-sector budget March 31, 2005 carryover budget funds for (Rpbill.) 2006 (Rp to 2006 bill.) budget (Rpbill.) 2006 (Rp (%I (Rpbill.) bill.) Planning /programming 91 11 12 80 112 192 Institutional 770 122 16 648 774 1422 Infrastructure -- Telecommunication 1619 450 28 1169 3454 4623 Energy 100 10 10 90 170 260 13 1 8 12 62 74 -- Transportation 285 31 11 254 290 544 --- Housing Roads 356 62 17 294 429 723 Water & natural 417 184 44 233 390 623 Humansettlement 65 18 28 47 120 167 350 120 34 230 1895 2125 -- Infrastructure Land 25 23 92 2 98 100 oversight 8 1 13 7 7 Economic development 546 167 31 379 490 869 Social & culture 270 64 24 206 353 559 Education and health 480 154 32 326 454 780 Secretariat & Nias rep. 191 126 66 65 196 261 Total 3967 1094 27.6 2873 5833 8706 Table3 above shows that: (i) AsofMarch31,2006, theaveragedisbursementrateforBRR's101satkersis27.6percent. (ii)Thehealthsectorhasthehighestlevelofdisbursementsintermsofpercentofbudgetspentat41 percent followed by economic development at 31percent. (iii)Theinfrastructuresectorhasanaveragedisbursementrateof28percent(theportfolioaverage).The best performing sub-sector i s land cadastre and the worst three disbursing sub-sectors are telecommunication, energy, andtransportation. (iv) No funds from the 2006 budget havebeen spent as o fMarch31,2006. (v) BRR's likely budget carry-over from 2005 to 2006 will be about Rp 2800 billion (about US300 million). (vi) The available BRR funds for 2006 will likely be about Rp 8700 billion or some 2.2 times the amount which was available in2005. (vii) BRR funds available for infrastructure in2006 are about Rp4600 billion(about US$500 million) or 2.9 times the amount available in2005. BRRissues Even though BRR has only been operational for about twelve months, some key issues and lessons have become clear: (i) Disbursements have not met expectations. Possible reasons for this include: (a) unrealistic and unreasonable expectations; (b) satkers were formed late andbecame functional even later; (c) some satkers were relocated as late as December causing further disruption; (d) satker activities are often complex, poorly prepared, not adequately screened, and not ready for immediate implementation; (e) satker supervision i s often inadequate because o f location, workload on BRR deputies and their staff, inadequate capacity, and an inadequate centralized structure; (f) the program monitoring 41 system i s passive as opposed to one which is timely and active (g) capacity inmany satkers is weak and satker managers often lack specific project-related training, operations manuals andprocedures, adequately trained personnel, and technical support; and (h) satker managers have been attempting to serve two or three key stakeholders or masters- BRR, their line ministry, and local government; thisoften frustrates efforts to expedite implementation andresults inoverlap and confusion. So far BRR's apuroach to reconstruction has been relatively ad hoc and i s often driven by factors other than a systematic and programmed approach to development. The problem i s exacerbated by annual (as opposed to multi-year) budget procedures and the perceived need to be disbursing regardless o f work quality. Some satkers hold the view that BRR lacks technical suuuort and exuertise to assist with project implementation and supervision. BRR's current centralized structure exacerbates the problem. Procurement procedures can be cumbersome and difficult to manage; this often slows project implementation. Rising living and operational costs were not captured in the 2005 DIPA; in some cases, finds allocated to specific projects were inadequate to cover all costs, especially operational costs. BRR's strategy o f designing small Projects to be implemented by individual satkers and small contractors tends to limit economies o f scale, complicate coordination and hinder sector or geographic wide approaches to development. Many satkers lack physical capacity to carry out their assigned tasks. Staff numbers are minimal and many employees work excessive hours. Incentives provided to key implementation personnel often do not matchthe tasks at hand. (viii) Suecific lessons from Nias include the following: (a) many implementation delays are the result o f holdups inprogram approval, unrealistic expectations, and the time taken to establish and move the control o f key satkers from Medan to Nias; and (b) BRR's decision to decentralize key decision making, move satker management to the kabupaten, appoint a skilled and appropriate management team that involves itself actively inkey satker management, and expedite contractor payments, will have significant benefits for Nias. (ix) On-going manapement and maintenanceo fprogram assets will likely be problematic. (x) BRRhashad some difficulty managing itsconsultants effectivelv. Local GovernmentRevenueandExpenditure Funding for local government in Aceh is derived from; (i) sources (PAD), (ii) local intergovernmental transfers based onrevenue sharing arrangements; and (iii) other sources from central government. Indonesia's decentralization laws have provided local government with the opportunity to expand local source revenue (PAD). This revenue comes from local taxes, local levies, revenues o f local state-owned enterprises, and other eligible local revenues. Intergovernmental transfers based on revenue sharing arrangements have become the major source of revenue for regional government in Aceh. Revenue sharing applies to income from tax and income from natural resources- mainly oil and gas; rates are set between central, regonal, and provincial governments. Non tax revenue sharing i s weighted towards producingkabupatenkota. Provisions relating to the Special Autonomy Fund (Otsus Fund) prescribe that Aceh will receive an additional share o f oil and gas revenue which will decline in the ninthyear o f the arrangement. Other tax revenue sharing arrangements apply to the disbursement ofincome to kabupatenkotafromincomederived fromprovincial taxation. Other sources o f revenue from central government include revenue from the DAU or General Allocation Fundandthe DAK or Specific Allocation Fund. The DAUis allocated inthe form o fblock grants andthe DAKare conditional grants covering specific sectors. 42 Table 4 below summarizes local government revenue and expenditure for the years 1999, 2002, and 2005. Table 4 Provincial and Kabupatedkota (Rp billion) excludingBRR's budget - - Item x d q d 5 x 2005 Kab Prov Total Revenue 1165 3408 1497 4905 5184 1915 7099 Expenditure Routine -- Personnel 473 110 583 1690 293 1983 3415 1119 4534 314 34 348 1212 122 1334 2137 181 2318 Other 159 76 235 478 171 649 1278 938 2216 Development 370 170 540 1668 1060 2728 2795 942 3737 Total expenditure 843 280 1123 3358 1353 4711 6210 2061 8271 Development percent 44% 61% 48% 50% 78% 58% 45% 46% 45% As a result of Aceh's revenue sharing arrangements provincial revenue has increased dramatically. The table above notes that provincial income (kabupaten and provincial) increased by a factor o f 4.2 between 1999 and 2002. It increased again significantly between 2002 and 2004 before dropping back slightly to about Rp 7100 billion (about US$750 million) in2005 as a result of reduced income from oil and gas from which Aceh receives a major portion o f its income. The highlevels o f income produced from these assets i s expected to last only till 2009 after which sharing arrangements reduce Aceh's share and production declines as reserves deplete. While regional spendinghas increased sharply between 1999 and 2005, the percentage o f total routine costs spent on salaries has remained relatively consistent at between 60 and 70 percent for kabupatenkota and between 20 and 30 percent for the provincial government. After decentralization, responsibility for the delivery o f most public services was transferred to local government; probably the main reason for the major increase inexpenditure on salaries. Development expenditure has increased in-line with increases in provincial revenue taking about the same percentage o f total expenditure. Kabupatenkota governments spend more on development thanthe provincial government inabsolute terms but the provincial government spends a greater percentage o f income on development. Local GovernmentIssues The major issues facing local government and organizationsworking with local governments are: (i) Capacitv varies between local government units but a recent review'* o f local government capacity noted that: (a) staff numbers were mostly adequate but there were major problems relating to the skills and motivationo f personnel; (b) some local governments lack funds for development and this i s thought to be largely the result o f increased expenditure on salaries; (c) managerial capacity and leadership skills are weak; and (d) communities perceive local governments as lacking responsiveness. Overall, local governments lack the capacity to adequately perform project planning, implementation, supervision andmaintenance. (ii) Local government revenue increased significantly as did their responsibility to provide ongoing services. But, it i s clear though that revenue from oil and eras will decline this decade because o f declining productionandbecause o f the sharingprovisions inthe decentralization agreement. Local I 2District Governments' Capacity Assessment: Service Delivery and Implementing ReconstructioninAceh- Tunas Aceh Research Institute- December 2005 43 governments will need to find alternative revenue sources if they are to provide ongoing services, undertake further development andmaintain their assets. (iii)Generally,lessthanhalfoflocalgovernmentrevenueisspentondevelopment; itappearsthatlocal government expects the BRR budget to cover most development needs. When BRR's mandate expires in 2009, there will however still be significant development and maintenance needs at the kabupaten level. C. The Way Fonvard Addressing themain capacityissues The experience discussed inthe preceding section shows that some o f the main problems that have hindered implementation o f infrastructure projects in the past relate to capacity issues on the part o f local governments, as well as on the part o f BRR.IREPwill help implement a series o fmeasures, at each stage of the project cycle (from broad strategic planningto individualproject), to address these capacity issues. The quality o f infrastructure planning at the kabupaten as well as at the strategic level will be strengthened through the assistance o f the West Coast, Nias, Strategic, and IPM consultants. As mentioned in annex 2, the West Coast and Nias consultants will help local governments identify immediate priority projects and develop longer term plans for infrastructure deployment. I P M consultants, for their part, will assist BRRinreviewingthe planspreparedby local governments and inplanningstrategic investments that lay beyond the responsibility of West Coast and Nias local governments. The quality o f individual project preparation - in particular the drafting o f detailed designs and tender documents, o f any required safeguard measures, and o f contractual clauses that enhance performance incentives - will be strengthened. The West Coast, Nias and Strategic Projects consultants will help relevant government bodies with project preparation, while IPM consultants will assist BRRinspot checking the quality o fproject documents (and inacquiring the capacity that itneedsto assist inthe preparationofthe required safeguard assessmentsandstudies). The quality o f individual project supervision will be strengthened through the same assistance package as that applicable to project preparation: West Coast, Nias and Strategc Projects consultants will help relevant government bodies with day to day project supervision, while IPM consultants will assist BRR inspot checking the quality o fproject implementation. Procurement processes - one o f the key weaknesses so far - will also be strengthened. A central procurement team will be establish within BRR to facilitate the process o f procuring the various infrastructure projects identified and prepared through the project cycle supported by the proposed TA program. IPMconsultants will beresponsible for assisting this centralprocurement team. BRRwill benefit from the assistanceof an additional team o fconsultants tasked withhelpingBRR design strengthened financial management processes and safeguards applicable to all BRR-financed projects. Finally, some steps have been taken to help BRR manage its consultants in a more effective and pro-active manner than inthe past. First, the IPMconsultants will assist BRR inmanaging the four other consultant teams (West Coast, Nias, Strategc, and Financial Management teams) to be established under the proposed TA program. Second, BRR has established a strong secretariat within the project management unit, which is tasked with full time management of the five consultant teams (including IPM).In addition, BRR will draw on some o f its international advisors -alreadymobilized-tohelpmanagetheIPMconsultants. 44 Ensuringsuacientfinancingflexibility BRR will submit its 2007 budget proposal to Parliament in October 2006. However, the proposed TA program may not be in place in time to generate project proposals to BRR before October 2006. If the TA program i s to impact BRR's 2007 investments (as it clearly should), ways have to be found to maintain financing flexibility for 2007 beyond October 2006 (this issue does not arise for 2008 and 2009 as consultant inputs to the 2008 and 2009 investment programs can be received well before BRR's 2008 and 2009 budget proposals are finalized). Some stem needto be taken inthat resuect: (0 BRRcan proposerevisions ofits 2007 budget to MOF at any point intime. BRRcan therefore take into account consultants' recommendations regarding the 2007 infrastructure program after October 2006. (ii)BRRneedstomaintainacertaindegreeofflexibility inits2007budgetproposal.Apromising solution would be to allocate at least part o f BRR's 2007 infrastructure budget to specific kabupatens without specifying, ex ante, how kabupaten allocations will be divided between different infrastructure sectors and/or projects. (iii)FundsfromtheMDTFcanbeallocatedtoinfrastructureinvestmentsin2007.Asthesefundsdonot need to be allocated ex-ante to specific projects, they would complement BRR's own hnds and help increase overall financing flexibility for infrastructure in 2007. In the context of this type of financing facility, BRR management has indicated that it i s interested inusing a larger amount o f MDFfunds in2007 than in2008 and 2009 inorder to maximize financing flexibility in2007. Financinglarger contracts In2005 and2006,oneofBRR'smainobjectiveshasbeento ensurethat localcontractorscarriedoutmuch o f the reconstructionwork inAceh. Inorder to achieve this objective, BRRhas tended to design a very large number o f small contracts: 101 satkers (or project managers) managed very many more (than 101) distinct contracts in 2005. This policy promotes the resurgence o f economic activity in Aceh and responds to clear political imperatives. This policy has serious drawbacks however: (i)it complicates the management and coordination o f the overall infrastructure reconstruction program; (ii) multiplies the number of satkers and it therefore imposes high demand on limited human resources; and (iii) fails to take advantage o f possible it economies o f scale. The TORSo f the various consultant teams to be hired under IREP emphasize the need to design contracts in ways that reap the benefits o f economies o f scale whenever possible. Some additional measures need to be adopted to strike abetter balancebetween local preference andefficiency imperatives: (i) More o f BRR's own finds couldbe allocated to larger contracts. (ii) MDF finds, which are not subject to the same political imperatives as BRR's own finds, could be allocated to large contracts. Inthe context o f the envisaged BRR/MDF financing facility, this could call for allocating MDF finds to different projects from BRR's own h d s (rather than having BRR andMDFsystematically co-finance each investment). (iii)Tenderdocumentsforlargercontractscouldbedesignedinsuchawayastoencouragesomesub- contracting to local entrepreneurs. D. FinancingHigh Quality ProjectsAfter BRR's MandateExpires BRR's ExitStrategy - Local governments will face three main challenges as they seek to maintain the quality o f infrastructure investment programs beyond 2009. First, the proposed TA program will help local government prepare and implement highquality projects, but ensuring that local governments maintain this capacity beyond the end 45 of the TA program will be a challenge. Second, capacity issues might be compounded by lack o f local government ownership o f projects financed by BRR (even though local governments will sign off on projects prepared by IREP) which might result in inadequate maintenance in the post BRR period. Third, while local government revenues have substantially increased over the past few years, the revenues derived from natural resources will likely decline after 2009 as Aceh's share o f oil and gas revenues decreases after 2009. A numberof measuresneedto betakento addressthese challenges: The TORSo f the REP consultant teams include not only helping local government with the identification and implementation o f high quality infrastructure projects but also assisting them to build their long term capacity in this area. The consultants will aim at transferring knowledge by guiding the local governments as they prepare their own investments proposals; in other words, emphasis will be on learning by doing (in addition to targeted training), which i s likely to be the most effective form o f capacity building. In the area of procurement, a gradual transfer of responsibilities to local governments will also contribute to capacity building. During the first year o f implementation o f the proposed TA program, procurement h c t i o n s are likely to beperformed, at least for the most important contracts, directly by the centralized procurement team. IPMwill, inparallel, carry out procurement capacity assessments at the local government level in order to determine training needs, with a view to transferring increased responsibility for procurement to the local governments capable o f handling these tasks effectively. Inthe area o f financial management, a gradual transfer o f responsibilities will take place as well. The present system, whereby KPPN pays contractors directly (in a way that bypasses local governments' budget) has worked quite well. In order to build local government's financial management capacity, however, there should be a progressive transition to a system whereby KPPN transfers funds to local government budgets (so that contractors are paid by local governments). T h i s transition should only take place though if it i s possible to replicate at the local government level, the KPPNprocesses that are currently working well. In order to increase local government ownership, local government will be asked to co-finance infrastructure projects with BRR (and MDF). Local government could in fact be asked to cover an increasing share o f the costs o f infrastructure projects over the course o f the next three years. Such measures combined with consultants' assistance to BRR and to local government in devising appropriate asset management and maintenance strategies, would go some way toward reducing the risk that local government might fail to maintain the projects that will be financed over the next three years. Mobilization o f local source revenues and revenue transfers from other levels o f government will need to be reviewed to ensure that local government revenues inAceh are sustained, beyond 2009, at sufficient levels to ensure continued development and maintenance o f local infrastructure. 46 ANNEX5: LOCAL GOVERNMENT CAPACITYBUILDING A. Background Both the post-disaster and post-conflict conditions have paralyzed local government activities, which has left local governments no other choice but to deal with the generous yet overwhelming supply o f donor and NGO activity. The following is a brief analysis that assesses the gaps and overlaps o f donor capacity buildingprograms that have beenimplementedover the past 6 months (10/05 -3/06). B. Donor-supportedCapacityBuildingPrograms The following informationderives from a mapping exercise with the following objectives: 1. Collect information pertaining to donor capacity buildingprograms across all sectors in Aceh and organize according to which donors are providing capacity buildingprograms on the provincial and district levels specifically to local governments; 2. Analysis of overlaps and gaps o f capacity building programs supplied to local government by donors related to infrastructure development with focus on: program planning, design, procurement, implementation, supervision, safeguards compliance, and maintenance o fBRR-funded projects. 3. Provide a broad picture o f current donor capacity building programs focused on infrastructure development in Aceh in order for I P M consultants to strengthen BRR and local governments to develop strategic plans resultingfrom identificationo f donor programs. The following donors have been considered inthis analysis: Asian Development Bank: Earthquake andTsunami Emergency Support Project (ETESP) UnitedNations Development Programme: Aceh Emergency Response and Transitional Recove Programme German Development Ministry: GTZ - Support to Local Governments and Community Planning (Component 1o f GTZ ProGReS) Canadian International Development Agency: Governance Reform Support Program United States Agency for InternationalDevelopment: (LGSP, A-TARP) JICA: Community Empowerment Programfor RehabilitatiodReconstruction o fAceh and North Sumatra BritishRedCross, Canadian RedCross, AmericanRedCross andAustralian RedCross EC/GTZ:Aceh Local GovernanceAction Program(ALGAP) Summary o f analysis. Inorder for local governments to establish comprehensive strategic.plans, it i s critical for them to achieve synergies with donor programs and compliment such programs based on community needs. Currently, what i s needed from the donor community i s a series o f local government capacity buildingprograms that are demand driven, focused on long term sustainable investments, and improve the quality o f local government capacity. Also, it i s critical that donors' work to strengthen the relationships between executive and legislative both on the provincial and local levels based on lessons learned and best practices. Overall, donor programs should seek to introduce a new range o f services and concepts to advance local government capacity beyond pre-tsunami levels. 47 C. Donor-supportedCapacityBuildingProgramsinInfrastructure Donor programs focused on infrastructure development fall under the following 6 themes: Housing, Water and Sanitation, Hazard Risk Management and Disaster Mitigation, Safeguards, Environmental Management, and Community InfrastructurePlanning. Inthe 11Kabupaten locations where the IREP plans to work, the highest concentration o f donor support i s in Banda Aceh, Aceh Besar and Aceh Jaya. Specifically, in Banda Aceh and Aceh Jaya, ADBETESP and GTZ Support to Local Government and Community Action Planning Program are heavily focused on program planning and design. Also, both donors have a similar framework andplanning process inworking with communities to develop action plans for housing. Both donors provide support to provincial and local governments to integrate them in the facilitationprocess and establish database management systems which would allow for local governments to manage infrastructure programs and establish requirements for other donors wanting to support implementation inthe future. Donor programs under UNDPERTRP, British, Canadian and American Red Cross have a similar participatory, community based approach mostly targeting sub-district and village level communities through training and facilitation. Almost all donor programs focused on infrastructure programs mapped incorporate hazardrisk management and/or environmental maintenance/management programs andtraining. Donors focused on community and village level infrastructure development planning also have a similar approach in scheme, design and methodology. For example, program facilitators/technical assistants are hired to facilitate a process that engages communities in an action planning process based on either lessons learned or mapping out site plans which incorporate training on maintenance o f facilities and assessment o f implementation procedures. Mapping also revealed that donor programs primarily target communities at the sub-district and village level. Donor programs targeting community levels do realize that inorder to have effective and sustainable infiastructure programs it is critical to incorporate local governments from the provincial down to the village level. The weakness o f implementingthis strategic approach i s that donors either do not currently have the funding to engage within all levels o f local government institutions and/or are only designed to meet the short term immediate needs o f communities affected by the tsunami and earthquake. Donors that do focus on strengthening local governments at the provincial and/or district level are USAID-LGSP and A-TARP, CIDA, SPADA and GTZ. However, with the exception o f GTZ and USAID-LGSP, programs are process- and planning-oriented to provide technical assistance and guidelines for procedures on environmental and construction issues. D. PerceivedGaps The information collected in this mapping did not reveal any overlaps in the two major types of infrastructure capacity building programs: Housing Reconstruction and Water/Sanitati~n'~.However, the data did reveal serious gaps both in infrastructure planning and implementation and quality control which could eventually result in bottlenecks. Gaps in infrastructure capacity building programs are correlated within the following three categories: teams, geographic, and basic needs vs. beyond local economic development. 13These data do not include NGOinfrastructure capacity buildingprograms inthe region and should not be considered the overall picture of all infrastructure activity inAceh. For more accurate informationregarding all infiastructure programs across sectors refer to the RANDDatabase: www-e-aceh-nias.org 48 Teams Housing construction and water and sanitation programs lack monitoring and evaluation o f environmental inspection and trainings to communities on how to assess environmental hazards for disaster preparedness, such as flood controls. While donor programs do incorporate disaster risk management into their programs, they tend to be weak incapacity. Donors implementing infrastructure programs, while strong in technical expertise, lack capacity buildingprograms that strengthen provincial and local governments on procurement issues andor engaging inthe right type o f investmentsto meet the needs o f communities. The design o f donor infrastructure programs lack anti-corruption components, which would help local governments fight against collusion and corruption when making investment decisions. Programs also lack components such as a complaint handling mechanism that would assist local governments and communities on how to formulate a committee/advisory board that would facilitate and mediate any complaints made by communities on quality andprocess o f donor-funded infrastructure programs. Geography e Currently, infrastructure planning inthe province o f Aceh resides with donors and BRR, andnot in the hands of local governments. Mapping revealed there are currently no donor programs focused on teaching local governments technical skills on how to identify and prioritize appropriate donor- funded programs and then direct them to locations inneed o finfrastructure development. e Donor infrastructure capacity buildingprograms are geographically targeted to the west coast of the province, mostly to the areas affected by the tsunami and earthquake. Locations such as central and east Aceh, which were damaged by the conflict, lack donor infrastructure programs. These locations are in immediate need of not only housing reconstruction, but also infrastructure programs, including training in institutional design and essential service delivery to provincial and local governments andreintegrating displaced people back into their villages. E. Recommendations In light of this assessment, it appears that a participatory program targeting local governments to build competence for identification, management and supervision o f infrastructure projects would be an appropriate approach for the proposed IREP project. The recommendations below focus on the following areas: program planning, design, procurement, implementation, supervision, safeguards compliance, maintenance o f BRR-funded projects, and collaboration with other donors working on similar issues. Program planning and design. The IREP project i s unique in its focus on action learning - local government staff, especially P U employees, will learn best practices through hands on experience and guidance from technical experts working as a team (i.e., training and strategizing on architectural plans, assessing the visual quality o f constructions/engineering designs and skills on studying and writing o f tender documents). By pairing the TA consultant teams with local government staff, it i s anticipated that this hands-on learning will be the most effective learning mechanism since workshops and other classroom-based trainings tend to be less sustainable over time. Oftensuch activities are heldwithout adequate follow up andknowledge gained i s forgotten. Program design. While the design o f the IREPproject takes into account that the current capacity of local governments i s weak, it i s also critical to assess the capacity o f DPRD and Bapedalda- which 49 also need skills such as on the job training, staff management, financial management and form synergies based on a collective approachbetween municipalitieson the planningprocess. Implementation quality and supervision. The timeframe o f the proposed KEP i s another asset - m the program i s three years long, which should give sufficient time for the local government staff to absorb and systematize knowledge and experience gained for improved quality and supervision of infrastructure reconstructionand development. 0 Procurement. Training for local government authorities under the project will help ensure transparency o f fund flows andprevent corruption. Strengtheningthe procurement system through a combination o f training programs, on the job training and gradual transfer o f procurement responsibilities will help local governments make more informedinvestments. Maintenance. To ensure sustainability o f the investments, training and awareness-raising programs will be offered to local government staff on strategies for maintenance o f works. Furthermore, as the project progresses towards the third year, the consultant team will h c t i o n as advisers to local government officials more so than executors o fproject design andimplementation. Safeguards compliance. Social and environmental safeguards compliance training will be another key area for human resource development, which will enhance community-driven processes and reinforce the voice o f affected communities in the identification and design o f projects. Safeguards will also ensure environmental quality is maintained and enhance the service delivery beyond pre- tsunami procedures to those affected by the disasters (for more information regarding environmental and social safeguards framework, refer to annex 9). Collaboration with other donors. One o f the main objectives o f the R E P program is to complement rather than duplicate existing donor programs already providing support to local governments. As a result o f this mapping, the following i s a brief description o f two existing donor programs (USAID- LGSP and SPADA) working with local governments, specifically on procurement, asset management, budgeting/financial management andtraining to strengthen DPRD.It i s recommended the IREP program work with these donor programs and utilize this opportunity to coordinate and possibly expandtheir scope into proposed KEP locations. o USAID-LGSP (Local Governance Support Program) has three components that could be linked into the REP program: (i) procurement; (ii) management and (iii) asset training to DPRD. LGSP works with local governments to streamline procurement issues by developing "live programs," which review already existing past and present local government procurement procedures to further develop future procurement program guidelines. Training also provides tools such as accounting, law, and computer data based programs. LGSP assists local governments on how to assess inventory o f assets, identify value and appraisal, and how to make idle assets productive, LGSP also works to strengthen DPRD (district only) through workshops focused on: a,) sensitivity to citizen participation, b.) budget cycles and financial management through performance based budgeting systems, c.) how to make laws transparent and provide accountability, and d.) capacity buildinginlegal drafting and local law writing. o Support for Poor and Disadvantaged Areas (SPADA) is a Government o f Indonesia effort to help local governments o f disadvantaged areas to solve their underlying problems by giving local governments a basic framework and support for implementing socioeconomic development strategies. The project will deliver significant quantities o f small-medium 50 scale economic infrastructure and improved social services in health, education and economic development inrecovering areas, across 17 districts inAceh and will allow for an extended long term recovery planning across Aceh. To strengthen local governments, SPADA will implementthree main capacity buildingcomponents: (i) strengthening district, sub district and village administrative capacities to prepare social and infrastructure projects; (ii)anchoring bottom up planning in local government institutions and civil society organizations; and (iii) working to improve local government capacity to deliver critical development programs. To strengthen local government procedures at the district level, SPADA intends to partner with USAID-LGSP in 5 districts: Banda Aceh, Aceh Besar, Aceh Barat, Aceh Jaya and Nagan Raya, which already have a strong program and experience intraining and buildingthe capacity o f local governments inIndonesia. USAID aims to support the national planning process through a service improvement mechanism, which SPADA i s currently considering using as a tool to drive community development planning. 51 -- 5 . I I_ I 0 9 - I ' ANNEX 6: COORDINATIONAND PARTNEBHIPS The success o f the Infrastructure Reconstruction EnablingProgram (IREP) greatly depends on coordination and partnerships with the numerous parties involved in reconstruction activities; REP consultancies will first utilize existing plans and programs (when feasible) o f local and provincial governments, NGOs, and donors for the basis o f its work. Below i s a table outlining activities currently being undertaken by other donors across infrastructure sectors. Sector Work Integration with IREP Water and UNICEF:Overallsector donor coordination,monitoring,data IREP will work through established coordination Sanitation collection andqualitycontrol. channels, and use existing sector strategies (when USAID-ESP: Institutionalstrengtheningof LGs and PDAMs applicable) as basis for future work. The inAcehBesarandAcehJaya. Infrastructure Program Management (IPM) will Swiss SDC: Development and operational support to seek to improve donor coordination and Lambarowater treatment plant inBanda Aceh, and twinning formulation of long-term sector strategies and agreementwith its PDAM. priorities (developing cost recovery schemes and Dutch SAD-SAS: Assistance to PDAM in O&M and OBA programs to phase out O&M donor managementimprovement. subsidies, for example). It will also improvedata ADB: Support for rural watsan reconstruction planning, sharing and sector monitoring. The IREP capacitybuildingandtrainings providedat provincial, district programs assistinglocal & provincial government andvillage level. will assist in coordinationof these programs with IRD: Rural water supply and sanitation assistance to 200 respective governments, as well as facilitate villages inthe West Coast. implementation andqualitycontrolofworks. Roads,Transport, USAID:ReconstructionofB.Aceh to MeulabohRd IREP will coordinate closely with the major & other JICS:Repair ofMeulabohto CalangRd infrastructure programs. On-going and planned Infrastructure ADB: Repair & reconstructionofportionsof Sigli to B. Aceh works will be integrated into planningand design Rd. considerations of provincial & district projects. CRS: Rd& bridge works on West Coast These initiativeswill be factored into IREPproject UNDP:Design& rehab ofkey ports phasing and prioritization. When possible, IREP WFP: Restorationand operationofportfacilities will considering utilizing the planddesigns France: Support through Sogreah consultants for planning, prepared under these consultancies for IREP engineering,anddesign investments. Dutch: Planning,design, andengineeringof seadefenses Land RALAS: Community-led land titling & rehab of land IREP consultants will utilize existing plans that Administration& administrationprogram have been agreed on by communities and local Community JICA: MasterPlanfor B.Aceh governments (that are technically feasible). Mapping ADB: Village Planning Consultants will upgrade, when necessary to USAID: YIPD programon landmaps & standards implement, existing plans. Village plans will GTZ: Village-leveldevelopmentplans& mapping serve as the base for identificationof community priorities. Mapping Norway: 1:2000 scale photos of urban areas and partial Mapswill be distributedto IREP consultants,and sections ofcoast will be used for improvedquality ofplanning, site preparatioddesign, and monitoring. Mapswill be sharedwith district andprovincialgovernment. Support to BRR Integrationwith IREP UNDP: Operational advisors to the BRR, sector experts, Substantial numbers of sector advisors have been fundingfor ASCIL on quality assurance & monitoring mobilized under various TA programs to support USAID: ATARP, 3~yearprogram of TA to BRR, project the BRR. IREP is not to replace these programs managementadvisory services, andstudies or consultants, but will build from their existing UNICEF: Technical advisorsto the BRRregionaloffices. work. Partnerships, integration & sharing of works, and coordination across BRR divisions will bekey for carryingout IREPtasks. Support to Local ndProvincial Government Integration with IREP SPADA:Capacitybuilding for localgovernments Several donors and NGOs are working directly ADBETESP: Environmental management and spatial with local and provincial governments on planningTA to LGs capacity building, and training for planning and USAIDIA-TARP: Training for LGs on housing, support on implementation support. Little overlap or planning. duplication is anticipated between existing GTZ: Support to LGs and Community Action Planning & programsandIREPConsultant'swork. Programming 57 ANNEX 7: PROCUREMENTPLANAND ASSESSMENT A. Introduction Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Grant Agreement. The general description o f the various components and the proposed selection procedures are detailed below. For each contract to be financed by the Grant from the MDTFANS, the consultant selection method, estimated costs, prior review requirements, and time frame are agreed between the Grant Recipient (BRR) and the Bankproject team inthe Procurement Plan. This plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. There will be no procurement o f works or goods under the Grant. B. Selectionof Consultants The projectwill finance TA assignments. The five maincomponents are as follows: Component 1: Infrastructure ProgramManagement (IPM) (estimated at US$19.5 million): This component aims at strengtheningBRR's ability to carry out programmanagement functions by recruiting a core team of highly qualified experts who will be deployed within the existing BRR structure for infrastructure working directly with existing staff. They will provide assistanceto BRR ineight specific areas: overall strategic infrastructure programming for Aceh and Nias, as per the BRR Infrastructure Strategy (applies to all infrastructure projects, regardless o f source o f financing); program management o f the reconstruction process in Aceh and Nias (applies to all infrastructure projects, regardless o f source o f financing); review o f local and provincial governments' plans for infrastructure investment as a basis for BRR funding (applies only to infrastructure projects financedbyBRR/MDF); quality control, supervision, and monitoring o f BRR-funded infrastructure projects (applies only to infrastructure projects financed byBRR/MDF); procurement support for BRR-funded infrastructure projects (applies only to infrastructure projects financed by BRR/MDF); safeguard support for BRR-funded infrastructure projects (applies only to infrastructure projects financed by B W F ) ; anti-cormption support for BRR-funded infrastructure projects (applies only to infrastructure projects financed by B W D F ) ; and support to BRR in managing the consultant teams that will assist with implementation o f the other components o fthe proposedproject. The procurement services will include carrying the actual procurement for the first 24 months o f the implementation o f the investment phase (i.e., implementation o f infrastructure projects designed under this grant) while in parallel assessing the procurement capacity at the local government level, developing this capacity through a combination o f training programs, on the job training, and gradual transfer o f procurement responsibilities to the local governments in the last 12-18 months o f the investment phase of the project and which will be financed under following project(s). 58 The services for this component will fall under one contract selected usingQuality and Cost Based Selection (QCBS). Component 2: West Coast Infrastructure Planning, Design and Construction Supervision (estimated at US$10 million): This component o f the IREP project aims at strengthening the ability o f those seven local governments to improve the provision of infrastructure in their respective jurisdictions by providing technical experts to assist them in this area. These experts are expected to work closely with the planning and public works departments o f the local governments. They will provide assistance to these local governments in three main areas: (i)planning; (ii)project design preparation o f tender documents, implementation and supervision, including compliance with environmental and social safeguards policies; and(iii) institutional development support and training. The services for this component will be under one contract selected usingQuality and Cost Based Selection (QCBS). Component 3: Nias Infrastructure Planning, Design, and Construction Supervision (estimated at US$6 million): Nias' infrastructure needs are particularly large inthe transport sector: district roads, bridges, ports andairports needto berehabilitated andexpanded. This component ofthe project is structuredvery muchin the same way as component 2, with the aim o f assisting the two local governments in Nias Island with "strategic planning" and "project design and implementation" capacities. The same activities required under component 2 will be requiredhere. Because Nias is an island separated from the mainland, and because its infrastructure needs are somewhat more exclusively centered on transport than those o f the seven local governments o f the West Coast, a specific component o fthe proposedproject focus on the specific needs o f Nias. Accordingly, this component has been launched separately from component 2. The services for this component will be under one contract using selection based on Consultant's Qualifications (CQ). This has been agreed to by the Bank on an exceptional basis due to the urgency o f the needs inNias. Component 4: Strategic Infrastructure Project Planning, Design and Supervision (estimated at US5 million): Inadditionto the infrastructure projects under the direct responsibility o f the local governments on the West Coast andNias, there are additional strategic infrastructure projectsthat needto be implemented as a matter o f priority and that fall under the responsibility o f other local governments, the provincial government, or possibly the national government. This fourth component o f the proposed project i s designed to strengthen the ability o f BRR and that o f the relevant governments to cany out such strategic infrastructure projects. This assistance will be providedby experts who will be located within BRR and who will work closely with the relevant governments and will provide services for project identification, design and implementation in strategic priority infrastructure projects such as the airport, road, power and port sectors; and for supervising the implementation o f the projects. The services for this component will be under one contract selected usingQuality and Cost Based Selection (QCBS). Component 5: Financial Management o f BRR-Financed Projects (US$1.5 million). BRR needs to put in place the financial management framework required to ensure that it meets all its fiduciary responsibilities with respect to the projects that it finances. This component o fthe proposedproject is designed to strengthen BRR's capacity inthis respect. This assistance will be provided by experts located within BRR. Financial management o f BRR-financed projects will include assistance to PMU and PIUs to establish and maintain financial accounting and monitoring arrangements for project activities undertaken and expenditures incurred at all project locations, includingmonitoringthe operation o f internal controls over implementation o f the contracts. This service i s not required for the financial management o f the contracts under this grant 59 but for the contracts resultingfrom the investmentphase (i.e., implementation), which is estimated to start in the last quarter o f 2006.The services for this sub-component will be under one contract selected using Quality andCost Based Selection (QCBS). The value o f this contract is estimatedat US$1.3 million. Another sub-component i s also proposed to include an external audit o f the project financial statements which i s usually carried by the country's Supreme Audit Board (BPK). However, in view of capacity constraints at BPK, it i s requested the audit be contracted to reputable private sector firm acceptable to the Bank. The related external audit cost will be includedinthis component and i s estimated at US$0.2 million. This contract will be estimated to start in the first quarter o f 2007 and will be selected using least cost selectionmethod. Other activities: IPM will assist BRR in the supervision and contract management o f contracts under components 2, 3 and 4. However, there may be a need to recruit some individual consultants to support BRR in the management o f the IPM and Financial Management Contract. Selection of individual consultants will follow Section V o fthe Consultant Guidelines. An audit firm will also be recruited as an external auditor. Selection o f this auditor will follow least cost selection method. Ifthere isneedforanyfurtherassignmentsforfirmsatalaterphaseoftheproject,thenCQselectioncanbe used for assignments estimated to cost less then US$200,000 while QCBS will be used for values above us$200,000. Special procurement provisions. Considering the urgent nature o f the project and in order to accelerate the procurement process, the following special procurement provisions will be made: (1) The assignments for Nias Infrastructure and Services Planning and Design and Construction Supervision which i s vital to commence the design and procurement o f themain reconstruction program will be selected through Selection Based on Consultant's Qualification (CQ) method on an exceptional basis. N o extension o f these contracts will be financed from the grant. (ii) Theperiodfor submissions ofexpressions ofinterest shallbe at least 14days fromdateof publication. The period for submission o f proposals by firms will be three weeks for the assignment selected under CQ, four weeks for assignment for West Coast Infrastructure and Services PlanningandDesign and six weeks for the other assignments. (iii) Selectionprocessforthefourmainassignmentswillbelaunchedpriortogranteffectivenessto expedite the process. The General Procurement Notice for the project and the Specific Procurement Notices for the assignments under components 1,2 & 3 was issued inthe first week o f April 2006. The assessment o f the firms who expressed interest and proposed short lists for assignments 1 and 2 has been submitted by BRR to the Bank for review and clearance. Any contract that may be signed prior to grant effectiveness will be financed from the grant on a retroactive basis subject to the following: (a) the payments are for items procured in accordance with applicable Bank procurement procedures; (b) such payments do not exceed 20 percent o f the grant amount; and (c) the payments were made by BRR not more than 12 months before the expected date o f grant agreement signing. Short lists o f consultants for services estimated to cost less than U S D 400,000 equivalent per contract may be composed entirely o f qualified national consultants inaccordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines. Assessment o f the agency's capacity to implement procurement. The BRR was established in May 2005, and staffed with specialized and experienced personnel drawn from throughout Indonesia. The BRR has ministerial status in Indonesia, and has undertaken a wide variety o f aspects inthe reconstruction program, 60 working closely with and coordinating the activities o f provincial and local governments, NGOs, bilaterals and multilaterals. A special regulation o f the President (Kepress 70 o f year 2005) was issued on November 2005 amending the presidential decree (Kepress) 80/2003 on public procurement. This special regulation is specific for procurement for funds managed by BRR. It allows for some flexibility, particularly in the housing sector. BRR has carried out some procurement activities so far and mainly in the housing sector usingdirect award. It provides the funds to local governments who cany out procurement. However, final award o f contracts i s still subject to BRRapproval. BRRhas expressed its concern on the timeliness andquality ofprocurement at the local government level, particularly in certain cases where there has been suspicion o f collusion. BRR has indicated its decision to centralize procurement where it will be conducted by BRR with the participation o f the concerned local governments. BRR i s currently developing a structure for a new procurement unit and plans to staff it with qualified personnel to carry' the procurement for funds provided by BRR. This plan can be supported through a component o f the services that PM will provide to BRR. Although some BRR staff members have some experience in World Bank procurement, the organization does not have a proven track record. Consequently, carrying out the selection process for the four large contracts under this assignment, with the complexities o f the tasks involved, and in particular technical evaluations and contract negotiations, may prove challenging within the proposed expedited,schedule. Beloware some key issues facing the project and mitigating measuresto addressthese risks: IssueiRisk Mitigating measure L o w Capacity o f the procuring unit in the selection A consulting fmwill be recruited as a procurement process o fthese large contracts: advisor (PA) to BRR and to be fimded by DFID.The The selection process for these contracts will require P A will provide support to BRR in carrying out all solid experience in Bank selection procedures, activities required for the selection process o f the four technical know how and a dedicated team to main contracts. This will be an intensified effort o f a successfully complete the required tasks within the team o f three qualified experts to be carried over the proposed time schedule. The size o f the contracts and first six months o f the project. This will address the the different expertise required from the consultants required capacity and expedite the selection process. will require focused work on all phases of the A scope o fthis work has already been developed and selection process Le., Short listing, preparation o f provided to DFID by BRR. DFID is expected to TORS& RFPs, evaluation andcontract negotiations. process the award o f contract shortly. The qualifications o f the team o f experts should be acceptable to the Bank and meet minimum requirements in terms o f knowledge o f Bank selectionprocedures and subject matter. Procurement Delays: Selection process o f consultants 1. The enhancing o f capacity by the P A will i s usually lengthy in several projects in Indonesia due help inexpediting the process. to low capacity and required approvals o f the results 2. The approval by the relevant authority will o f the evaluation by the relative authority (ies). This be expedited due to the fact that the usually leads to problems in validity o f proposals, structure in BRR i s not complex, the availability o f staff, proposed prices, delay in the evaluation committee(s) will be reporting investment phase and more importantly opening the directly to the deputy director who is process for potential intervention and manipulation. managing this project. 3. There is urgent need for these services and the leadership o f BRR i s highly committed to this project and the investment phase which is dependent on this. Management o f large contracts also proposes a major The I P M will act as technical advisor to the BRR in challenge to BRR. It will require a skilled and managing the three contracts for components 2, 3, dedicated team to approve workplans, schedules, and 4. BRR will appoint a small dedicated team to deliverables, and invoices o f consultants. Delays or manage contacts for the IPMand comonent 5. 61 ?roblems at this level will pose a critical threat to the ?reject. Relationships between multiple entities: Consultants Clear working and reporting relationsbps should be will work with local governments but at the same provided to the consultants inthe TOR; BRR should time will be reporting to BRR. There may be a be solely responsible for accepting deliverables o f all janger o f conflicting instructions to consultants and consultants. ?ot&tial delay o f accepting consultants' deliverables. Corruption and Collusive Practices: This i s a nation (i) Duetothe sizeofthe contracts, there wide issue, which normally involves both will be full disclosure o f advertisement bidders/consultants and the government officials. The opportunities and contract awards. Upon general procurement environment i s weak, and the completion o f a procurement process, the BRR is practice o f offering and accepting bribes and required to publicize in public domain kickbacks i s widespread. The low salary structure of information related to the summary of evaluation government employees is also a contributing factor. report, the name o f contractor/consultant (long BRR is unique inthat it is an entity that is entrusted list, shortlist, and the awardees whichever with carrying a very important humanitarian task. applicable), the description o f services, and the There is the expectation that its staff act with the amount o f contract. highest integrity. BRR actions are under the scrutiny (ii) BRR will publicize the complaint of the national government, local provinces, handling database for the project and the result communities and donors. o f the performance o f consultants, as well as sanctions on poor performance/corrupt/fiaudulentpractices. The salaries o f BRR staff are also higher then the (iii) All consultants who intend to average government staff. Finally, BRR has set its participate in any o f the procurement packages own anticorruption team. Therefore, due to the nature under this project are required to disclose o f BRR and the added scrutiny that the size o f these information upfiont if any o f their members o f contracts will attract, corruption risks are assessed to board o f directors/commissionaires andor their be lower then average projects. immediate family members are members o f the respective procurement committee andor directors inBRR. (iv) All evaluation committee members will sign an integrity pact and will disclose any information if any o f their immediate family members have any working relationship with the firmssubmittingproposals. (v) At the very least, a sworn public notary will be invited to officially witness the opening o f technical and fmancial proposals, and certify the Minutes o f Opening o f technicallfinancial proposals. The public notary will also keep in a safe place one copy o f the technical proposals submitted by each consultant (once they are opened), the whole copy o f the financial proposals (before they are opened), and one copy of the financial proposals submitted by each consultant (once they are opened). Although there is a limited number o f contracts under this project, andthat there will be enhanced measures by BRR, including recruiting procurement advisors, the overall project risk for procurement is High.This categorization i s mainly due to the size of these contracts, the fact that two large contracts are being selected under CQS and due to the low capacity of the BRR as an organization in procurement according to Bank procedures. 62 Procurement plan. A Procurement Plan for project implementation has been prepared which provides the basis for the procurement methods and prior review requirements. This plan was agreed between the BRR as the Executing Agency and the Bank at appraisal in June 2006, and will be available in the project file. The plan will also be available in the Project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the project team on an annual basis, or as required to reflectthe actual project implementation needs and improvements ininstitutionalcapacity. Frequency o f procurement supervision. Inaddition to the regular prior review supervision to be carried out from Bank offices, annual supervision missions will visit the field to carry out post review of procurement actions ifany further activities are added. At the time o f appraisal, the procurement plandidnot indicate any contracts that are subject to post review. 63 C. ProcurementArrangementDetails The followingtable setsoutthe proposedprocurementarrangementsunder this project: Listof ConsultingAssignments Prior Description Procurement I I Estimated Review Advertisement Method Amount (USD million) byBank Date awarddate Infrastructure Project Management QcBs 19.5 Yes 4-Apr-06 -r West Coast Infrastructure Planning, Design, and QCBS 10.0 Yes 4-Apr-06 29-Jul-06 Construction Supervision Nias Infrastructure Planning, Design, and 1 1 Construction CQS 6.0 Yes 4-Apr-06 3- J ~ - 0 6 Supervision Strategic I Infrastructure Project Planning, Design, and QcBs 5.o Yes 15-Ju-06 11-Sep-06 Supervision Financial Management of I --t 1 BRR-Financed QCBS 1.2 Yes 15-Ju-06 15-Nov-06 Projects ExternalAuditor LCS 0.3 Yes 15-July-06 15-Dec -06 Total 42 Consultancy services for firms estimated to cost above US$200,000 per contract and those which may be selected on a single source basis will be subject to prior review by the Bank. Selection based on Consultant's Qualifications will be used for assignments estimated to cost less then US$200,000, while Quality and Cost Based Selection will be used for assignments estimated to cost more then US$200,000. As an exception to the above, selection of consultants for the Nias Infrastructure Planning, Design, and Construction Supervision and the Strategic Infrastructure Project Planning, Design, and Supervision contracts may be through CQ. 0 Short lists composed entirely o f national consultants: Short lists of consultants for services estimated to cost less than US$400,000 equivalent per contract may be composed entirely o f qualified national consultants in accordance with the provisions o f paragraph 2.7 of the Consultant Guidelines. 64 ANNEX8: FINANCIAL MANAGEMENTAND DISBURSEMENT ARRANGEMENTS Overall, the project financial management risk i s assessed as being substantial. This assessment has concluded that with the implementation of the action plan, the risks will b e substantially mitigated, and the proposed financial management arrangements will satisfy the Bank's minimum requirements under OP/BP10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status of the grant required by the Bank. M o r e details of the financial management assessment are given below. A RiskAssessment Summary 1. A detailed analysis of financial management risks arising from the country situation, the proposed project entities and specific project features and related internal controls has been completed during the assessment, and i s summarized below. These risks have been rated on a scale from High, Substantial, Moderate, and Low. R i S k S Assessment tigation Measures [High/Substant@ / . Mbderate/Low] .. @ " > The government has a new budgetary systemthat has been implemented since FY05. Implementation o f a new system created delay onbudget execution. MOF and executing agency need to speed upthe processto issue alldetailbudget documents andrelatedcircular letters. Public sector follows single entry and cash basis with a partially reporting computerizedsystem. An Accounting Standards Boardhas issued accounting standards on a modified accrualbasis; these have been adopted by Presidentialdecree. Implementation o f standards remains a challenge. 3. Audit arrangements BPKhas a legalmandate as externalauditor o fthe government budget. Overlapping assignment with internal auditor agencies exists. BRRis a special agency establishedbyPEWU212005. A new M structure was established inOctober 2005, but the decision to appoint director level and other staff has not been decided yet. Project management capacity needs to be strengthened. 2. Accounting capacity, BRRfollowsthe governmentaccountingsystem. Accounting capacity staffing is adequate. Currently they have three staff inthe SPM unit and four staffinthe Accounting Unit.All staff members have S1bachelor's degrees inaccounting, and four o fthem are accountants. Due to the sharplyincreasing transaction volume inFY06, BRR's FMcapacity will be constrained, and itneeds to hire additional qualified staffinthe SPM unit. 3. Internal controls H The consultant outputs are diverse and not easily measurable. The contracts are complex and large. Therefore, the risk of weak internal control over payment may arise, unless the contracts are clearly I worded and BRRhas strong project management. 4. Flow o f funds M The flow o f funds will follow budget documents decision. Ituses the 65 Go1Treasury system for on-budget and uses RANTFsystem for off- budget. Based on Go1regulation, except UP (petty cash) and small payments, payments above IDR5 millionuse bank transfers. B ahas two bank accounts for UP,andhas spent IDR600 millionthrough bothaccounts (less than 3% o f the total budget realization). 5. Internalaudit S BRRestablishedaninternal audit department inearly 2006. Currently the internal audit department has 7 staff, includingthe Department Director. An internal audit manual and department working planhave beenprepared. 6. External audit BPKis externalauditor for BRRbudget. Currently BPK is conducting the first audit for BRR financial statement (FY05).Risksarise from integrity andlimited capacity o f the auditors. 7. Informationsystems; BRR uses a government system (SAI) to prepare the financial report. Reporting and monitoring The first BRR report for FY05 was submitted to MOF on time. SA1 raw data basically i s a payment order (SP2D) as budget realization. A chart o f account i s established during budget preparation. However, S A I i s not an integrated system and does not have a feature on contractkommitted budget. IBMhas provided technical assistance to develop additional features on contract commitments. As o f June 14, 2006 the software has been completed and BRR started to trainproject - - staffonhow to use the software. The flow o f funds system will follow the normal government mechanism for on-budget expenditures, and all payments will be made through GO1treasury. The project contracts will be on-budget. BRR needs to prepare the budget document and discuss it with MOFprior to negotiations. SA1 does not have a feature to report expenditures from foreign donors. BRR will prepare a separate project financial report and submit it to the Bank on quarterly basis. Project financial reports may be developed through excel sheets. T o find and select quality consulting firms will be a challenge. High quality consultants will assist BRR to monitor the consultants' performance. The Internal Audit department is new and untested, though a work plan i s ready and pending approval. The internal auditor will review and verify payment validation, especially for payments o f reimbursable expenditures. 6. External audit S BPK will assign an acceptable auditor to the Bank to audit the project I financial statement. Overall project specific rjiskI S 1 * . / . * B. Budgeting As a government agency, BRRfollows the normal annual government budget mechanism. The BRRBudget Unitprepares and submits aproposedbudgetto MOFprior to DPR(Parliament) approval. The FY05budget amounted to IDR 4.2 trillion, o f which IDR 185.5 billion was executed by BRR.Most o f the FY05 budget has been channeled directly to line ministries and local government agencies (Dinas). BRR budget realization for FY05 amounted to IDR 47.7 billion. To respond to the delay of budget documents and low disbursement inFY05, the government has approved a carry over o funspent budget to April 2006. 66 BRRhas received budgetdocuments for FY06 amounting to IDR 13.2 trillion, o f which IDR 232.8 billion has been executed by BRR. Budget amounting to IDR 12.9 trillion will be transferred to the budget authority in implementing Dinas, which will work under BRR supervision and oversight. A Project Management Unit (Satker) inDinas will be appointedby BRRthrough fit and proper test procedures. As with other government projects, funds under this project need be put in the government budget and follow existing government budgeting processes. However, given the urgent nature o f this project, and since it is funded from grant sources, the budget allotment document (RKA-KL) could be in a consolidatedsummarized format. Following this, the budget authorization document (DIPA) would also be made ina consolidated format andbe prepared inparallel with budget realization, which will be under direct payments procedures. C. Accounting andFinancialReporting Accounting for grant transactions will be done using the government accounting software (SAI) that BRR currently uses. BRR uses S A I for all sources o f funding, regardless if it i s on or off budget. These software applications have standard accounting controls in place. However, the software does not have a feature on contract management. Therefore, there i s a need to modify the software with the contract management and inform the latest commitment o f the budget. IBMhas providedtechnical assistance to develop additional features on contract commitments. As o f June 14,2006 the software has been completed and BRR started to train project staff on how to use the software. Accounting standards to be adopted will be according to government accounting standards. The Chart o f Accounts o fthe S A I i s not flexible to allow reportingby components / categories to serve the reportingneeds o f the Bank. S A I does not have a feature to present foreign financed expenditures. The system does not separately track the use of fund from donors. Expenditures from all sources are treated and accounted for as government- owned budget. To have better project information, grant expenditures and activities will be reported to the Bankunder InterimUnauditedFinancial statements on a quarterly basis. The Financial Statements may be prepared usingseparate stand-alone spreadsheets. This would include informationonprocurement progress, physical progress o f budgeted activities and financial source and use of funds. Formats for these would be agreed before negotiations. Quarterly Financial Statements should be received by the Bankno later than 30 days after each quarter ends. To ensure consistency o f the Interim Financial Statenients with Go1reporting, the aggregates in the Financial Statements will be reconciled periodicallywith the aggregates in the S A I for Grant transactions. All financial transactions should berecordedandproperly supported by adequate evidence that the recipient i s as intended according to the Grant objectives; the audited annual financial statements should also be made publicly available to ensure transparency. D. Internal Controls andInternalAudit BRR established an internal audit department in early 2006. Currently the internal audit department has 7 staff including the Department Director. An internal audit manual and department working planhave been prepared. The internal audit department will be responsible to supervise all satker (Dinas) that implement BRRbudget. The internal audit unitplans to recruitmore staffinthe near future. The internal auditor should conduct a review on internal control systems within BRR and implementing Dinas. The terms o f reference for this review should be expanded to include the procurement and expenditure under the project. Copies o f the audit reports will be made available to the Bank. 67 Payment validation can present internal control risks, especially for payment for reimbursable expenditures to the consultants. To mitigate these risks, the detail o f expenditures that are reimbursable shall be clearly specified inthe contract andvalidation procedures will be agreed with BRRmanagement. E. ExternalAudit BRRwill prepare special purposes projectfinancial statements annually inspecified formats. Thereport will be based on a summary o f financial transactions under this grant. The project financial statements will be subject to a financial audit by Supreme Audit Institution (BPK), which will sub-contract this work to a reputable auditor acceptable to the Bank.A copy o f the project audited financial statements, along with the management letters issued by the auditors, if any, will be submitted to the Bank no later than six months after the end o f fiscal year. The Terms o f Reference (TOR) for the project audit will be agreed by the Bank with the Recipient before negotiations. The audit report will include an opinion on the reliability o f the project financial statements. The audit reports will be made accessible to the public. F. DisbursementArrangements Eligible expenditures under this project are limited to payments against five consultancy firms' contracts, which will be under direct payment procedures. After review and verifications o f consultants' invoices and their supporting documents, BRR will prepare a withdrawal application form. The withdrawal application, along with the invoices and supporting documents, will be submitted to the Bank after having been signed by the authorized signatory(-ies). The Bank will then transfer the payments directly to the consultants' bank account. The appropriate BRR officials will review and verify the consultants' invoices following the normal Go1 procedures acceptable to the Bank. All original documents in support o f such payments will be retained as accounting evidence for audit purposes. As requiredunder government procedures to have expenditures under the Grant be recorded inthe APBN, based on payment advise from the Bank, BRR will issues payment-orders (SPM ex-post) and the MOF treasury office (KPPN) will issue payment vouchers (SP2D ex-post) which consolidate all payments made inthe year. G. Remedies If ineligible expenditures are found to have been made Erom the project activities, or if expenditures are made without adequate supporting documentation to validate these, the Recipient will be obligated to rehnd the same amount to the Bank. The Bank will have the right to suspend disbursement o f the funds if significant terms o f the Grant agreements, including reporting requirements, are not complied with. This will be reflectedinthe Grantagreement. H. SupervisionPlan Supervision o f project financial management will be performed on a risk-based approach at least once a year. The supervision will review the project's financial management system, including but not limited to accounting, reporting, and internal controls. The financial management supervision will be conducted by a financial management specialist andBank consultants. 68 I. ActionPlanandConditionalities Actions to be followed up on during implementation (to be reflected as Other Covenants inthe Grant Agreement): External auditor arrangement between BPK and the acceptable auditor to be completedno later than 6 months after signing o f the Grant Agreement. The project audit should be submitted to the Bank not later than six months after end o f each financial year. 69 ANNEX9:ENVIRONMENTAL SOCIAL SAFEGUARDSFRAMEWORK AND A. Introduction T h i s project supports the Aceh and Nias Reconstruction and Rehabilitation Agency's (BRR) strategy for district and province infrastructure reconstruction by providing world class consulting services in infrastructure programmanagement, planning, design, and construction management. Although traditionally TA projects have been regarded by the World Bank as low impact, this particular project will involve detailed engineering design and construction supervision for approximately US$300-400 million inproject financing to be provided through an Infrastructure Funding Facility (to be established). On this basis, a more robust approach to social and environmental safeguards than would normally be expected for pure TA i sjustified. B. Objectives o f the Framework The environmental and social safeguards framework provides general policies and guidelines to serve the following objectives: Protect humanhealth; Prevent environmental degradation as a result o f either individual investments or their cumulative effects; Enhance positive environmental outcomes; 0 Avoid or minimize land acquisition and involuntary resettlement, and where this can not be avoided, provide compensation at replacement value and assistance to rehabilitate livelihoodsbased on consultation with those affected; Avoid conflict among community members and strengthen the community's social cohesiveness; Mechanisms for implementation o f the framework are built into the project oversight structures, guidelines and tools, as well as the terms o freference for the proposed InfrastructureProgamManagement (IPM)team, and associated geographically focused teams (West Coast, Nias and Province level). It will be the responsibility o f the IPM team to support the BRR in developing detailed social and environmental management procedures for this framework, to be integrated into the Project Manual. The safeguard policies triggered include OP 4.01 on Environmental Assessment, OP 4.12 on Involuntary Resettlement and OP 4.10 on Indigenous Peoples. Safeguard Policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [XI [I NaturalHabitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevised as OP 4.11) [I [XI InvoluntaryResettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OP 4.10) [XI [I Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP/GP 7.60) [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI 70 C. Environmentaland Social Issues Environmental Issues. Although the project entails the procurement o f `services' to support infrastructure reconstruction, it will have the effect o f programming very significant levels o f financing both from the BRR's own budget and additional financing made available through the Multi Donor Fund for Aceh and Nias. Consequently, the consultant teams that will be engaged under the project will need to have a good understanding o f related environmental and social impacts and how such impacts can mitigated via appropriate planning, design, and implementation measures. Assessment o f the impacts o f infrastructure reconstruction first needs to be set within the context o f existing environmental conditions, particularly along the West Coast and in Nias. It i s important to understand, for example, that reconstruction will be impacting on already stressed environmental conditions. Many coastal areas have been severely damaged by the tsunami both interms o f marine and terrestrial environments. In manyplaces coastlines have been physically altered, particularly the inter-tidal zones. Shallow coral reefs have been affected resulting from the large amounts o f solid waste, silts and clays generated by the waves. Mudladen residues have infiltrated both man made andnatural water sources, and blocked drainage lines. Many o f the heavy clay soils that predominate inthe coastal region have been inundated with salt water. In Nias large tracts o f coastal land have been lifted up and an estimated 250 ha o f coral reefs are reported to have been destroyed. With the loss of sea defenses, previously built up areas have been reclaimed by the tides leading to coastal inundation and the recreation o fmarshy areasjuxtaposed with human settlement. Furthermore it should be recognized that existing conditions are being further impacted by the reconstruction process that has been underway since early 2005 - now increasing in scope and intensity.As indicated in the initial drafts o f on-going SEA work carried out by Bappenas, existing critical pressure points include: impacts o f housing construction through extraction o f raw materials including wood, sand, coral and clay, leading to multiple effects on surface water features, coastal geomorphology, protected areas and watershed protectionareas; impacts of housingconstruction overwhelmingthe capacity o f water and sanitation services to keep upwith demand; spill over waste fiom existing dump sites and establishment o fnew sites without due consideration o f externalities; relaxation o f environmental controls and building standards associated with road construction, leadingto ponding, landslides and other localized construction type impacts; urgent needs o f livelihoodrecovery leading to overexploitation for sea and pond-based aquaculture; illegal logging achieving social legitimacy in the interests o f rapid reconstruction, while actually targeting markets outside o fAceh; social conflict over land expropriation (housing, road reconstruction, mangrove reforestation) with insufficientcompensation and due process. Consequently this TA, along with the impacts resulting from reconstruction that will ensue, takes its place among many other efforts underway all o f which will leave their mark on the natural systems that must also sustain the future economic growth o fthe region. Social Issues. Ingeneral the infrastructure projects that will be designed andimplemented with support from thisTA will entail replacemento fpre-existing infrastructure. As a result, the levelo fassociated social risks i s likely to be limited. However, it is important for planning processes, including prioritization of 71 infrastructure needs, to reflect community needs and specifically those o f vulnerable groups (such as women and the poorest insociety). In some cases land acquisition and resettlement will be unavoidable leading to a range of challenges associated with clarifying land titles and ensuring that adequate and timely compensation i s provided. Thousands o f people still remain missing after the tsunami while others still live in the campsibarracks or have moved to other regions. Although most intend to return to their holdings, the timing varies. Therefore inmany cases landowners are not available to discuss land acquisition issues leading to project delays or later conflicts duringproject implementation relatingto disputed landclaims. A further challenge is in dealing with the tenure rights defined under the customary and traditional codes, particularly inNias which i s dominated by traditional tenure systems. For example traditional codes do not clearly define rights for women to inherit land, and a challenge may be how to ensure that female heads of households retainrights to receive compensation that i s due. Ensuringthat infrastructure reconstruction addresses the particular needs o f women remains a critical issue for consideration under this TA. Women were the most directly affected group by the tsunami and earthquake, while at the same time having critical roles to play both inthe immediate challenges o fphysical reconstruction and in ensuring sustainable and equitable social and economic recovery in the longer term. Strategic planning work undertaken under this TA will need to ensure that the specific concerns o f women inrelationto infrastructure reconstructionare taken account of, while at the sub-project level relatedpublic consultation will need to ensure that women are given a strong voice in choices to be made over siting and design, as well as the relative prioritization o f sub-projects to be funded under each district management plan. For example, under certain circumstances, water supply and sanitation may be considered to be a greater priority thanroadrehabilitation. Although the people o f Aceh are a broadly homogeneous group, there are indigenous people living inNias requiring specific measures to be undertaken by the project to ensure that they are meaningfully engaged in consultation processes associated with the planning, design and construction o fproposed infrastructure. D. Environmental and SocialManagement Framework Screening. The Government o f Indonesia's environmental review procedures, which include specific procedures for Aceh and Nias16, are broadly consistent with those o f the World Bank, and will form the framework for the project's approach to environmental screening and mitigation. The project i s considered to be equivalent to World Bank "Category B", recognizing that it i s providing consulting services only and the funding for implementation work will be provided from a separate source - the Local Infrastructure ReconstructionFa~ility'~. Subprojects being prepared, designed and implemented with consulting services under this TA will be screened on an individual basis and classified as follows: -- - fullenvironmental assessment (AMDAL)required; environmental management and monitoringplan(UKL/UPL)required; LandAcquisition and ResettlementAction Plan(LARAP)required; l6 Ministryo fEnvironment DecreeNo. 308/2005 onImplementationofEnvironmentalImpactAssessment, Environmental Management Measures and Environmental Controlling Measures for Rehabilitation and Reconstruction Activities o fNanggroe Aceh DarussalamandNias Islands o fNorth Sumatra. 17This facility is likely to be supported with MDF fimding and will likely be World Bank "Category A," requiring full environmental assessment. 72 - standard operating procedures (SOP) only. All new projects (being either partly or wholly fundedby MDF)will be requiredto complete a standardized screening form providing basic information, according to infrastructure sub-sector (roads, irrigation, drainage, coastal defenses, etc.)''. Table 1 provides screening criteria for infrastructure projects (generally for new alignmentsfland take) that will require fill environmental assessment, drawn from Decree 30812005. The table provides a selection o f criteria only. Inapplying the framework the relevant annex to the Decree should be referred to directly. The criteria represent 'maximum' thresholds only (for example 2000 ha for a new irrigated area). Full AMDALEAScan be required for sub-projects even if they are within the maximum thresholds based on a technical discussion between the PM team and local environmental authorities (for example a new irrigated area o f 500 ha). The WBOJ safeguards staff will review screening decisions for all projects and may require additional fill AMDALsEAs to be carried out as appropriate. Harbor construction with one o f the following facility a. -- Massive constructionjetty Length 2200 m Or area sooo m2 b. Harbor Infrastructure support (terminal, storage, container, etc.) - area I 25 ha Dredging : Capital dredging - Volume 2250.000 m3 Reclamation -- Area 225 ha Orvolume ~ ~ O O . O Om3 O I Infiastructure inthe Region Irrigation area a. New construction area 22.000 ha b.Intensifylngbyadding area 21.OOO ha Swampy area development, marsh landreclamation for irrigation needs 21.OOO ha a. Highway construction All units b.Flyover and subway roadconstruction Xlan Road construction andor improvementby widening out side of a. Big city/metropolis b. Length c. Or area 2 5 h 25 ha b. Middle city d. Length 18GTZis inprocessofpreparing standardscreeningformats for discussion withProvince Bapedalda. The project will review these formats as abasis for preparing appropriate internal screeningprocedures. 73 e. Or area 210 km -c. Length Village 210 ha - 215 km Trash handling a. Trash handlingby control sanitary landfill systems f. Area 210 ha g. Or total capacity 210.000 ton b. Last trash Discarding Location (TPA) at tide area h. landfillarea 2 5 ha i. Ortotalcapacity 25.000 ton c. Transfer station construction j. Capacity 21000tonlday d. Opendumping Last Trash Discarding systems - Area or total capacity All units Requirement for an AMDAWfull EA may also be triggered if a project i s likely to impact on sensitive sites either by being located in close proximity to a sensitive site, or if the nature o f the project activity could directly impact on a sensitive site, Key sites or areas that will be considered `sensitive' under this framework include: 1. Nationalpark 2. Forestpark 3. Wildlife reserve 4. Protectedflora area 5, Conservation forest 6. Watershed protection forest 7. National cultural preserve 8. Traditionalh-eligious buildings 9. Marine reserves 10. Coastline and dune systems 11. Mangrove and wetland areas 12. IsolatedVulnerable People (IVP) 13. Steep slopes (>40%) 14. Commercialhesidential areas 15. Productive land 16. Other areas as identifiedbyBRRduringthe course o f implementation. Under Decree 308/2005 there are no criteria inplace for determining whether a UKL/UPLinrequired. The general approach i s that for all but very low impact projects a UKL/UPLi s required. A clear procedure for determining the need for UKLruPLwill be negotiated with Provincial Bapedalda duringthe early stages o f the project. All projects, irrespective o f whether an EA i s required or not, will apply standard operating procedures for environmental management covering basic (commonly occurring) construction and operation type impacts. Screening process. The project will provide consulting services to seven districts along the West Coast of Aceh, two districts in Nias and to the Province o f Aceh. Consulting support teams located in these areas 74 will help local governments prepare annual infrastructure investment plans (APs) containing lists of sub- projects, each having completed technical and economic feasibility studies. AIPs will be submitted to the BRR/IPMteam for review/`best fit' inrelationto the BRRoverall strategy for infrastructurereconshction. Sub-projects which are considered to fit with the objectives o f the overall strategy will be identified by the PMteam and communicated to the respective local government. Environmental and social screening of `approved' sub-projects will be carried out at this point in order to determine if a LARAP, or EA/AMDAL i s required. Screening will be based on completion inadvance by local governments o f a standard screening format for each sub-project, to be developed by the IPMteam based on KepMen 308/2005. The BRR will be responsible for developing templates and guidelines on how local and provincial governments must present their Annual InvestmentPlans (including sub-project details), to include safeguards information. Based on this information, the BWPMteam will screen each sub-project to be partly or wholly funded by MDF, involving: (i) comparison o fproject information against Annex 1o f Decree 308/2005, (ii) assessment of likelihood o f impact on sensitive sites, (iii) comparison against World Bank criteria for LARAP. Further information will be requested o f the respective local government, as necessary, in order to complete screening. A representative from the relevant local environmental authority will be invited participate inthe screening process. Screening results will be formally communicated to the respective local governments, to relevant local environmental authority and to WBOJ safeguards staff. Environmental and social studies. The IPM will be responsible for engaging additional and specialist consulting support to prepare all required social and environmental studies (AMDAL, UKL/UPL, and LARAP). The IPMteam will award an annualrenewable contract to a firm(s) with aproventrack recordin carrying environmental and social assessments to GO1 and World Bank standards. While such firms are most likely to be found in Java, they will be encouraged to establish partnerships with local organizations (NGOs andacademic institutions) to carry out field research functions. Itis expected that approximately 10-15%o fa total o fapproximately 80 sub-projects preparedunder thisTA will require AMDAL and/or LARAP,and that a further 40-50% will require UKL/UPL and/or abbreviated LARAP. The resultingcost estimation is presented inTable 2, requiring approximately US$1.O million to cover costs o fthe studies (not including costs o f compensation). Should this figure prove to be insufficient, additional resources for studies will be made available as part o f the financing to be provided under the proposed Local InfrastructureReconstruction Facility. The procedures for preparation and completion o f AMDALs and UKL/UPLs are set out under Ministerial Decree 308/2005. For AMDALs, a Province or local government `Tim Teknis' prepares and approves the AMDAL TORS,consultants carry out the studies and final review and approval is carried out by a Province Level AMDAL Commission. Given acknowledged lack o f capacity within local environmental authorities to undertake this workload, the IPM will submit draft TORSto the Tim Teknis for approval. This arrangement will be negotiated and agreed with local environmental authorities inadvance. A basic format for completion of UKL/UPLs is provided in Annex 2 to Decree 308/2005. Completed UKL/UPLforms are submitted to the local environmental authority for review andapproval. Where land 75 acquisition andcompensation i s required, the World Bank's standard approachto the preparation of LARAP will be applied, as further detailed inSectionDbelow. Review and approval of studies. Completed environmental and social studies will be reviewed by safeguards specialists within the geographically located consultant teams (West Coast, Nias, Provincial) prior to submission to the B W M team for secondary review and comments. The BRR/IPMteam will provide consolidatedcomments to the consultant for revisions to be made as necessary. Environmental studies (AMDALLJKL) will be submitted for formal approval to the relevant local environmental authority. During the first year o f implementation o f this TA, this is likely to be the Provincial Bapedalda. With time, the review and approval function will be transferred to local governments in line with existing practices elsewhere in Indonesia, with the exception of province level infrastructure which will continue to be reviewed and approved at the provincial level. The standard practice at present i s for local environmental authorities to provide approval/and or comments within 14 days. However, this remains an informal arrangement which will be negotiated between Province Bapedalda and the IPMteam duringthe initial stages o f the project. A sample o f AMDAL and UKLwill be submitted to the WBOJ for review and approval, at least one for each participating local government. Procedures for the review o f LARAPs and other related social studies are set out in Section D. The Bank applies a standard five working-day turn around time for review o fLARAPS. Review and final approval o f all required environmental and social studies will be a precondition for completion o f detailed design, which will have to demonstrate how social and environmental mitigation has been handled, and when required, integrated into detailed project designs. The B W Mteam will review and sign off on all completed Detailed Designs and Tender Documents, including further safeguards review to ensure key impacts identified have been adequately addressed. This could include one or a mix o f the following: structural measures to be incorporated into detailed engineering design; non-structural measures to be listed in specific conditions o f contract; and Standard Operating Procedures for social and impact management integrated into biddocuments andcontracts. LandAcquisitionandResettlementandIndigenousPeoplePolicyFramework (a) Principles Although the project i s not directly involved in physical reconstruction, activities associated with project preparation and design will trigger OP/BP 4.12 on involuntary resettlement. Furthermore the existence of indigenous minorities in Nias will trigger OP 4.10 for this area. This Framework provides general guidelines inrelation to application o f these policies. The following provides overriding principles o f how land issues will be dealt with: 0 Maximizing community consultation as a mechanism to clarify land tenure, resolve conflicts and minimize resettlement. The process o f reconstruction will apply transparent and participatory procedures to ensure that all eligible and affected persons agree on any option that involves land acquisition and resettlement. Inmost areas covered by this TA, there are community-driven development mechanisms (for example KDP, UPP structures) inplace which will provide valuable inputs into project planning, design and consultation. Specifically public consultation will be carried out at the following three points during the preparation andimplementationo f infrastructure sub-projects: o during the planningphase of the proposed investments, as a means of minimizing impacts andinformingpeople o ftheir compensationentitlements and options, as well as a grievance redressal mechanism; o following the census o f affectedpeople and inventory o fassets lost inorder to get feedback on preferences regarding compensationoptions; 76 o during implementation o f the sub-project to assess whether adequate compensation has beenprovided. Consultation will be carried out within the context o f applicable Bank and Go1standards, such as the Basic Agrarian Law which provides for equal rights between men and women inrelation to landtenure. Sensitivity to the local culture and the traditional regulations where appropriate. Land acquisition and resettlement will take into account relevant local or traditional regulationdlaws where appropriate, and this will be reflected during the community consultation processes associated with development of LG annual plans. Where traditional laws and the Bank's policies or Go1laws conflict (for example on the rights o f women inrelation to land tenure), these will be highlighted during consultations and every effort made to resolve such conflicts through traditional decision making structures. Minimizing adverse impacts on assets. The BRR will ensure that no real decline in income will take place because o f displacement and that all project affected persons will be compensated for their loses at market value or replacement cost, as well as provided with rehabilitation measures to assist them to improve, or at least maintaintheir pre-disaster living standards andincome earning capacity. @) LandAcquisitionandResettlement At the appraisal stage of the Infrastructure Reconstruction Enabling Program, it is not possible to identify the intensity o f the potential social issues and impacts that may arise as a result o f the TA provided. Nor can the project assess the land acquisition and resettlementneeded until specific sub-projects are put forward for financing. However, in case the need for land acquisition or for involuntary resettlement does occur, the following provisions will apply: The local government that needs to acquire land for public good purposes will negotiate with the private landowners, as well as other categories o f project affected people (renters, share croppers, squatters). The agreement on the type and level o f compensation i s made through a participatory and transparent process to be further detailed inthe Project Manual, based on existing practices under other World Bank projects. Agreement between the local government and project affected people will be set out in the LARAP, with clear land plots demarcation, an inventory o f the type/quantity o f assets to be acquired and the corresponding type and amount o f compensation (both ifit i s incash or kind, e.g. replacement land), the timingo fpayment, andthe fundingsources for the compensation. Compensation will be paid by local government for land acquired and assetdincome lost as a direct result o freconstruction activities. Compensation for land and assetdincome will be provided at their replacement or market cost. Existing World Bank practice in Indonesia is to refer to databases held by local commercial banks in assessing replacement and market costs, rather than to use independent assessors. The process o f consultation associated with land acquisition and compensation will ensure that widows and other marginalizedvulnerablegroups receive equal treatment, and it will be the responsibilityo f the geographically located social safeguards staff to ensure that this i s the case. The IPM and WBOJ safeguards staffwill also review all LARAPswith this issue inmind. Where voluntary contributiono f land or other assets is indicated, either inthe new site or inthe existing site where the reconstruction works will be located, there will be documentation o f proof o f ownership and a clear agreement between the contributors andthe recipients, includingthe names, landplots with clear demarcation, and the details o f the terns o f the contributions. The usage o f the contributed land will be definedthroughcommunity consultation andbe made transparent to the community. 77 If the local government acquires land from private landowners through cash compensation or other compensation scheme, it will be paidprovided prior to the implementationo fworks. Local Governments are requiredto demonstrate that sufficient finds have been allocated intheir DIPAs to cover costs o f compensation before any proposed investments can be considered for funding. The effect o fthis requirement may be that sub-projects for which financial compensation i s necessary cannot be preparedand financed withinthe samebudget year. Other means o f obtaining land, which would not trigger OP 4.12 but for which documentation would still be required to be reviewed by the project, include willing-seller-willing-buyer situations, donation of community land and use o f vacant government land. Any reconstruction activities involving involuntary resettlement or land acquisition o f more than 25 households or 200 persons (or about 40 private landowners) will only be approved after preparation by the IPMteamofafullLandAcquisition andResettlement Action Plan(LARAP)acceptable to the WorldBank. Several issues are likely to increase the complexity o f land acquisition - the availability o f reliable land records, the inability o f people to document ownership, the demise o f occupants and subsequent uncertainty about transfers o f title. LARAPSwill spell out measures to implement the principles o f compensation and livelihoodrestoration for any Project Affected Person (PAP). This includes any person who, on account o f the execution o f a sub- project, has experienced or would experience direct economic and social impacts caused by the involuntary taking o f land resulting in: (i) relocationor loss o f shelter; (ii) o f assets or access to assets; or (iii) loss loss o f income sources or means o f livelihood, whether or not such person must move to another location, resulting inadverse impacts on the livelihood o f such person. The format o f the fillLARAPwill contain: description o f proposed sub-project activities that require land (together will alternative means used to acquire this land); a census o fpersons affecteddisplaced by involuntary land acquisition including an inventory o f lost assets; valuation o f landto be acquired and lost assets detailed description o fthe compensation andother resettlement assistance to be provided; description o f consultations held with persons affected about alternatives for compensation and other related assistance; institutional responsibilities for implementation andprocedures for grievanceredressal; arrangements for monitoring and implementation; time schedule for the implementation andbudget; clear written agreement between the government and project affected people on extent, type and timingo fcompensationto beprovided. Any reconstruction activities involving involuntary resettlement or land acquisition o f less than 25 households/200 people (or about 40 private landowners) will only be approved after preparation by the IPM team o f an abbreviated LARAP acceptable to the World Banklg. The abbreviated LARAP contains the same essential informationas a fillLARAPbutrequires a less detailed survey o fproject affected people. Consultants engaged by the IPMteam will carry out the LARAPs on behalfo frespective local governments who will be responsible for mediating consultations on land acquisition and compensation, supported by safeguards specialists located within the geographically located consultant teams. The conclusions and 19Based on an initial review o f 3-5 abbreviated L A W S ,the WBOJ may decide to transfer authority for review and approval to the IPMteam. 78 implications o f LARAPs must be agreed with respective LGs in advance o f submission to the IPM and World Bank Office (Jakarta) for review and approval. (c) IndigenousPeoples'Framework Inview of the existence of distinct indigenous communities in Nias, an Indigenous Peoples' Planning framework i s required, based on World Bank Operational Policy 4.10 - as further elaborated in h e x 9a. The basic approach to be taken will entail ensuring that the views o f Nias based indigenous people are meaningfilly reflected in the preparation and implementation o f reconstruction projects in their areas. This will require consultation measures to be tailored to their specific socio-cultural setting, involving identification and use o f appropriate means o f communication and use o f vernacular language. Complaints and grievance procedures will need to be adapted to ensure that affected people are able to effectively exercise their rights. During the initial stages o f TA implementation, a workshop will be held in Gunung Sitoli to discuss infrastructure reconstruction needs and implicationsfor localNGOs, indigenous leaders and representatives from the local museum o f ethnography. A repeated annual workshop will be held thereafter as a basis for identifying andresponding to concerns. Environmental orientation study and overall strategic infrastructure planning.One o f the main objectives o f the TA i s to provide strategic level advice to the BRR on infrastructure planning, focused on immediate reconstruction needs but set within the context o f a 5-10 year development horizon. Inproviding strategic planningadvice, the IPMteam will be structured according to the existing BRRdivisions of: transportation, water and waste, sea defenses and drainage, and spatial planning. The IPM team will review and consolidate existing plans, identify gaps and introduce additional variables as necessary to ensure that infrastructure planning in Aceh and Nias i s founded on principles o f sustainable development and social inclusion. This will require a significant input from social and environmental advisers to be includedinthe IPMteam. Accordingly, one o f the initial tasks o f the IPMteam will be to cany out an environmental orientation study based on a pressure/state/response methodology, to determine how infrastructure planning can best take account o f key environmental challenges. The paper will identify and characterize key environmental impacts o freconstruction along the West Coast and inNias, provide generic guidance on suitable mitigation measures and identify how existing environmental guidelines and standards should be revised or added to under IREP. The paper will draw on existing Strategic Environmental Assessment work that has been underway in Aceh and Nias since mid 2005. It will be drafted in a `policy brief' style o f no more than 12 pages andwill be translated into Bahasa Indonesian. The paper will be used as a basis for consultations both within BRR and participating LGs in order to identify key implications for infrastructure planningin terms of: general direction, prioritization, suitability o f different types o f investments, institutional organization for environmental management, capacity buildingneeds, and resourcing. This process will be completed withinthe first 6 months o fthe TA feeding into the broader work o f the IPMteam on strategic infrastructureplanning. Standards, guidelines and codes of practice. Implementation o f this framework is dependent upon the establishment not only o f clear procedures o f social and environmental review, but also clear guidance and standards o f performance. Some o f this material i s already available from Go1 sources and can be readily adapted, while inother areas there are gaps. Table 3 summarizes the existing status o f some o f the guidance and standards o f environmental and social review that will be required. The IPM team i s responsible for establishing systems and procedures for effective implementation o f this framework, to be integrated into the project operational manual. 79 Table3: Requiredproject )cumentationprovidingguidelinesand standards 1 Guidancelstandards needed status Required actions Standardised screening formats (for 3- Currently being IPMteamto immediately review status 4 key infrastructure sub-sectors) preparedby GTZ on o f the preparationo f these screening behalfo fProvince formats and incorporate as appropriate Bapedalda into the Project ImplementationManual Screening criteria for sub-projects Available (KepMen None requiring AMDAL 30812005) Screening criteria for sub-projects Not available, but IPMto maintainclose contact with requiring LJKLIUPL maybe developed ProvincialBapedaldato monitor during course o fthe progress TA Standard format for completion o f Available (KepMen INone uKL/uPLs 308/2005) SOPs for environmental management Available for road I IPMteamto compile additionalSOPs o f infrastructure sub-projects projects only covering other infrastructure sub- sectors. Standardtender documents for Available IPMteamto integrate SOPsfor infrastructure sub-projects environmental management into standard tender documents Field-based environmental monitoring Not available IPMteamto develop, tailoredto protocols for infrastructure sub- infrastructure sub-sectors. More detail projects required for monitoring o f AMDALs andUKLIUPL,as opposed to SOPs. Format for 3 and 6 month reporting on Not available IPMteamto developtabular format environmental monitoring results indicating frequency o f monitoring events, problems identifiedand corrective actions taken Other To be defined as necessary by the IPM team, inconsultation with WBOJ. E. ConsultationandDisclosure This environmental and safeguards framework has been discussed with BRR, MPW and other relevant authorities at the provincial and local government levels. The Go1will disclose this framework inAceh and Nias. The IDA will ensure that the framework i s published inInfoshop and the IDA IndonesiaPublic InformationCenter. The framework will be available also on the E-Aceh website (http://m,e-aceh.orq). All LARAPSand full environmental assessments(AMDAL)will be made available inIndonesianlanguage on the e-aceh website, with Englishlanguage versions published inInfoshop. The preparation o f Local government Annual Investment Plans for infrastructure will be carried out in a participatory and transparent manner. All projects involving significant levels o f re-design above and beyond simple replacement o f infrastructure will be supportedby community consultations to take account o f project-affected people. The principles mechanisms for ensuring an appropriate level o f community consultation are embedded inGo1procedures for AMDAL and World Bankrequirements for LARAP. For example, the processes o f acquiring land by the local government will involve consultation with all landowners (private and public), facilitated by the geographically based consultant support teams. The resulting agreements including maps o f the land plots and owners will be disclosed to the public by local Dinas PU. The consultation process and the results agreed by the community members will be made available to the public throughwebsites, meetings, newsletter, public postings, and other means. 80 In relation to AMDAL, local environmental organizations and representatives of community groups participate in the formal process of AMDAL review through locally established AMDAL Commissions. Formal review is carried out at the TORstage and at Draft Final report stage. The Project will ensure that AMDAL commission meetings have the required local community representation and will provide facilitatiodcoordination to this effect, including necessary briefings in advance so that local community representation at such meetings i s meaningful. F. Mechanisms for Complaints and Grievance Redressal Each member o f the community has the right to file complaints should there be any concerns that remain unsolved during community consultations. Complaints can be conveyed inthe form o f written documents, inperson, through e-mail, media, etc. Complaints can be addressed to the office of the Bupatiand/or Dinas PU. In consultation with Dinas PU, the geographically based consultant teams will respond to the complaints within a specific period o f time. Unresolved complaints at the city/district level will be brought to the existing Complaints HandlingUnit at the BRR. All complaints and responses will be documented at the respective LG and/or province level specifying: (i)type o f grievance; (ii) o f complaint; (iii) of date status complaint (pending or resolved); and (iv) level at which the complaint was resolvedby whom. Operational elements o f the complaints handlingmechanism are further elaborated inAnnex 11 (Anti-corruption Action Plan) andinthe Project Operational Manual. G. Monitoring and Evaluation Environmental monitoring. Implementation o f EMPs and SOPs i s the responsibility o f contractors, as set out in bid and contract documents. Field-based environmental monitoring of SOPs to ensure contractor compliance i s the primary responsibility o f the supervising engineer assigned for each sub-project by the relevant Dinas PU. Additional support and spot-checking will be carried by the safeguards specialists assigned to the geographically based consultant teams funded under this TA, in coordination with local environmental authorities. Field based environmental monitoring o f EMPs associated with UISLAJPL and AMDALs i s the primary responsibility o f local environmental authorities. As current capacity to fulfill these tasks i s extremely low, monitoring will be carried out by safeguards staff assigned to the geographically based supervision teams. However special attention will be givento ensuring that local environmental authorities are able participate. For example, the geographically based safeguards specialists will coordinate their monitoring missions closely with local environmental authorities ensuring that adequate transportation i s available. The IPMteam will develop a monitoring andreporting system, to be further detailed inthe Project Manual. This will include field based environmental monitoring protocols tailored to project type, a budget for the purchase of monitoring equipment and usables, and clear procedures for dealing with non-compliances. One o f the initial tasks to be carried out by the IPMenvironmental specialist will be to develop the monitoring protocols, and provide related training to Dinas PU supervising engineers, local environmental authorities andthe geographically based consultants. The results o f environmental monitoring will be collated on a three monthly basis by geographically based safeguards staff and submitted to the IPMteam on a biannual basis, Significant non-compliances will be noted inthese reports, whether issues raisedhave been resolved and what corrective actions were taken. Six monthly monitoringreports will be submittedby the BRRto the WBOJ as an inputto supervision missions. Routine IDA supervision missions will assess the overall implementation o f the framework and, ifrequired, recommend additional support. 81 Social monitoring. Monitoring and evaluation will be done to ensure that the social issues and impacts have been addressed properly and in a participatory, fair, and transparent manner, in particular where land acquisition and resettlement processes take place. The geographically based social safeguards staff will carry out datdinformation collection to monitor the progress and impacts, consolidate this information, advise on necessary follow up actions, and provide 6 monthly status reports to the BRR/IPM team. Additional independent social monitoring focusing on implementation o f LARAPswill be carried out by the BWPMon a spot checking basis. A suitable local academic institutionor NGOswill be engaged for this work, based on TORS be drafted by the IPMteam. to H. Responsibilities,CapacityBuildingandIndicativeBudget Underthe overall coordination bythe BRR,eachprojectimplementingentity at the province andlocal government level i s expected to take responsibility inensuring that this framework i s supported. The key tasks, responsibilities, and relatedmanagement actions required insupporting the framework are listedinthe following table. Tasks Responsibility Required actions Detailed social and IPMsafeguards specialists A detailedset o fprocedures for screening, review, environmental management approval, monitoring and reporting will be procedures for integration into developed withinthe first three months o fthe the project manual project, for discussion with local governments, and BRRapproval. The procedures will bebasedon this safeguards annex. Development o ftraining I P M safeguards specialists Training materialsprepared inIndonesianfor joint modules andmaterials, required social and environmental training inthree modules standards and guidelines including: General introduction to the safeguards framework (3 days) Specialist training for project staff(2 days) Specialist training for contractors (2 days) Guidelines and formats for screening (including basic informationrequired when local governments submittheir Annual Investment Plans), review, monitoring and reporting. General environmental and IPMsafeguardsspecialists Delivery o f 3x3-day training events to be held in social safeguards orientation and geographically based Banda Aceh, Meulabohand Nias. Approximately training for Project staff, and key safeguards specialists 50people attending each event. local government counterparts (Bappeda, P U and Bapedalda) Specialist environmental and Geographically based Year 1delivery o f3x2-day training events to be social training inscreening, safeguards specialists heldinBanda Aceh, Meulaboh andNias. review and supervision Approximately 100people attending each event procedures, for project staff and Year 2 delivery 1or 2 training events for newly field suDervision eneineers recruiting staff. Specialist environmental and Geographically based Rolling training program to be provided for all social training for contractors safeguards specialists contractors. Contractors to be issued a certificate focusing o n implementation o f for renewal every 3 years, EMPs, LARAPSand SOPS Specialist training for IPMsocial safeguards All localconsultants carrying out LARAPSwill consultants engaged incarrying specialist with support require 3 day training inWorld Bankprocedures for out LARAPs fiom WBOJ landacquisition andresettlement. Orientation paper on IPMenvironmental Study will be completed within the f i s t 6 months o f 82 Ienvironmental issues and safeguards specialist effectiveness o f this TA. IPMsafeguards specialists, 3 step screening process applied to all sub-projects inconsultationwithlocal approved for findingbyBRFUIPMteam environmental authorities Commission environmental and PMsafeguardsspecialists The LocalInfrastructure ReconstructionFacility is social studies (AMDAL, expected to find approximately US$350-400 UKLAJF'L,L A W )as millionfor a total o f 60-80 individualprojects. 10- necessary 15% are o f these projects are expected to require fullEA and/or full LARAP. 40-50% o fprojects are expected to require UKLAJF'Lor abbreviated LARAP. Localenvironmental TORSfor AMDAL studies to be draftedby PM authority (Province level environmental specialist. duringYear 1) Formal review and approval o f TORSand draft AMDALbyProvincialAMDAL Commission Formal review and approval o fUKLAJPL by local environmental authority Review andapproval o f WBOJ, withprior review Geographically based social safeguards consultants LARAPs and acceptance by ' to ensure study conclusions are agreed with LGs, respective LGs prior to submission o f draft reports to WBOJ for approval, via IPMteam. Provide compensation for land LocalGovernments Formandrate o f compensationto be negotiated acquisition and lost withProject AffectedPeoplebyLocalGovernment assets/livelihoods with assistance from geographically based social safeguards staff. Compensationdelivered infillby LG, prior to award o f contract. Monitoring and reporting For SOPS, field based Supervising engineers complete field protocols supervisingengineers Monitoring data compiledby local safeguards supported by specialists into 3 monthly reports for PM geographically based t e a N B O J safeguard specialists For AMDAL and Geographically based safeguards consultants will UKLAJPL, local carry out routine inspections with a focus on sub- environmental authorities projects requiring AMDAL incoordination with supported by local environmental authorities. geographically based safeguard specialists For LARAPs, Individualreports submitted to PMteam and geographically based WBOJ, as necessary, for each sub-project safeguard specialists, and via independent organizations For IsolatedVulnerable For Nias only. Individual reports submitted to IPM people, geographically team and WBOJ as necessary. based safeguards specialists 83 The main capacity needs and related budget items required to support implementation of this framework areprovidedinthe followingtable. Item Needs Indicative budget Environmental and social 1Senior (international) 18 months, including 12months safeguards support to the Environmental Specialist continuous duringyear 1. I P M(also covering province 1Senior Social Specialist 24 months, including 12months level infrastructure continuous during year 1. investments) Facility to hire consultants for Initial US$lmillion inh d s to cover social and environmental costs o f environmental and social studies. studies Additional resources to be made available as necessary via the Local Infrastructure Reconstruction Facility. Environmental and social 1safeguards specialist (social 36 man-months safeguards support to the andenvironmental) Nias TA Team Environmental and social 2 environmental specialists 50 man-months (total) safeguards support to the 2 social specialists 50 man-months (total) West Coast TA Team Environmental and social Development and delivery o f N o additional cost safeguards training modules to be preparedby IPM safeguards specialists Training budget required for an US$7,000 per training event to cover estimated 15 training events costs o ftravel, accommodation for over the course o f the TA participations, roomhire, consumables Capacity buildingfor local 1environmental specialist to be Fulltime (36 months) at localgovernment environmental offices providedto Provincial fee rates for a midto senior level official Bapedalda to assist with routine project screening and review functions. Monitoring and reporting Travel costs US$25,000 to be allocated to each o fthe following contracts -IPM, West Coast, Nias (Province levelto be coveredunder IPMcontract) 84 ANNEX 9A: INDIGENOUSPEOPLESPLANNINGFRAMEWORK TREATMENT INDIGENOUSOR FOR OF ISOLATEDVULNERABLEPEOPLE Objectives The design o fthis project i s structuredto ensure the participation andinclusiono f various groups within communities inlocal level decision making over resource allocation. However, the projectrecognizesthat IndigenousPeoples from a particular group that merit a differentapproach and specific support. Therefore, inaccordance withOP4.10, the following framework for addressing indigenous peoplewill be adopted for the project. The Objectivesofthis framework areto: (i) Ensure that indigenous peoples are involved infree and informed consultation on planned project activities; (ii) Ensure that indigenous peoplesparticipate inand benefit from the project; (iii) Avoid or minimize potentially adverse effects o f the project on indigenous people Definition "Isolated vulnerable peoples" (IVP) i s the term usedofficially by the Indonesian Government to describe groups that have the characteristics o f "indigenous peoples'' as used inOP 4.10. This document will hereafter use the term "isolated vulnerable people". For the purposes o fthis project, isolatedvulnerable peoples are defined as those that present varying degrees o fthe following characteristics: (iv) a close attachment to ancestral territories andto the natural resources inthese areas; (v) self-identification andidentificationby others as members o f a distinct cultural group; (vi) an indigenous language different from the common regionallanguage (e.g. Javanese); (vii) the presence o f customary social andpolitical institutions; and (viii) primarilysubsistence-oriented production. Framework The IVPwill be the beneficiaries o f the projecthub project and no projects/subprojectswith adverse impact to the IVPwill be approved, includinginvoluntary land acquisition affecting 200 or more people. Isolated vulnerable peoples are not prevalent inall the project sites -they are only found inthe islands o f Nias and not inthe Province o fAceh. The following steps will be taken to ensure that, where isolated vulnerable groups do exist, the project caters to their specific needs. (1) For the areas where isolated vulnerable groups are identified (parts o fNias), social safeguards specialists will organize orientation training for relevant staffwithin the local administration (Bappeda, Dinas PUandBapedalda) inhow to work with isolated vulnerable groups ina usefulway to identifymechanisms for effective participation, and address specific challenges inworking with such groups, for example, how to deal with groups that may be inconflict with the larger community, etc. (ii) Opportunities will be provided for I V P s to be consulted independently, out o fthe non-IW group ina language/dialect familiar to them 85 (iii) Appropriate media and means o f communication will be identified and applied, potentially different from consultationsprocesses applied innon-IVP areas (iv) Where the isolated vulnerable group speaks a language different from Bahasa Indonesia, relevant brochures and documents will be translated inthe appropriate language. These stepswill be aimed at ensuring that isolated vulnerable peoples participate fully inthe project, are aware o f their rightsandresponsibilities, and are able to voice their needs duringthe participatory planning process. Monitoring and Grievance Procedures Where isolated vulnerable peoples are identified, the safeguards specialists within the geographically located TA teams will berequiredto report on their participation inthe project, both to the IPMandto the World Bank. The project has a complaint system that allows community members to raise issues or complaints at various levels- at the community level (through community leaders), at the district level (through the respective Dinas PU), and at the BRRlevel (through the Complaints HandlingUnit).Where isolatedvulnerable people are concerned, the relevant safeguard specialists will ensure that grievance redressal mechanisms are developed inculturally appropriate ways inclose collaboration with the relevant group. Project evaluation studies will include monitoring and evaluation o f the impact o fthe project on isolated vulnerable people. The IVP-NGOwill be part o f the monitoringteam andinvolved infacilitatingthe participatory planning process inthe program. 86 ANNEX10:ANTI-CORRUPTION ACTION PLAN A. Background This Anti-corruption Action Plan (ACAP) concerns the crucial Technical Assistance packages that will be mobilized in the first phase o f the infrastructure reconstruction enabling program. These consultants will help BRR to prepare and later supervise the second phase o f the program, when hundreds o f millions o f dollars will eventually be invested inthe repair and construction o f vital infrastructures. Since the first phase sets the groundwork for the second, it is important to build into this ACAP two forms o f anti-corruption measures: those which help to protect the crucial TAs launched under the first phase, and those aspects which must start to put inplace a system that will protect the second phase. T h i s ACAP should be understood within the overall post-disaster context o f the Aceh-Nias reconstruction effort. In particular, it needs to be understood in relation to the BRR itself and the agency's mandate, strengths and weaknesses. The existence o f a specific Anti-Corruption Unit within BRR i s o f particular significance to the ACAP. This unit o f BRR has confirmedthat, whilst needing to remain independent from the project management structure in order to ensure objectivity, it will be able to provide advice to the project in terms o f preventative measures such as disclosure o f information and civil society oversight. It will also be able to provide direct support for activities such as corruption-related complaints handlingreferral and case tracking, which are functions that the BRR Anti-Corruption Unit i s mandated to perform for all BRR activities. The unit understands fully that this program brings the BRR's involvement inproject implementation to anewlevelofengagement, andthat this will require their special attention. The structure o f this ACAP follows guidance from the World Bank's Anti-Corruption Committee for Indonesia. Inparticular, it outlines risks and mitigation measures inrelation to six key elements, namely: (i) disclosure; (ii)civil society oversight; (iii) collusion mitigation; (iv) mitigation o f forgery and fraud; (v) complaints handling; (vi) sanctions and remedies. Each o f these elements i s further discussed in the Action Plan section o f the annex. Because o f the special nature o f the assignment, based as it i s within the context o f the Aceh-Nias reconstruction effort, BRR's Anti-Corruption Unithas requested a seventh element to be added: that o f effective involvement o f the localparliament (DPRD) inthe oversight o fthe program. The proposed project i s the first phase o f an important infrastructure reconstruction program. The significance o f this phasing and some o f its key aspects are discussed below. FirstPhase(technical assistancemobilizatiodpreparation) Inthis phase six very important TA packages will be mobilized. It is envisaged that each of these will be continued, possibly through to the end o f the second phase depending on the needs o f the BRR for TA support. One main consultancy contract, the Infrastructure Program Management consultants (IPM), will provide contract management and oversight assistance to the BRR. The IPMwill primarily be focusing on strategic planning, consolidating inputs from and monitoring the three subproject preparatiodsupervision consultancies, each o fwhich will further assist the BRR and local governments to create local infrastructure plans. The current design calls for different teams to assist with (a) Strategic Infrastructure; (b) West Coast Infrastructure Development; (c) Infrastructure on Nias Island.Parallel to the IPM, a financial management consultancy will strengthen the necessary fiduciary processes and a separate audit facility will provide additional support for external financial audits. The Annex dealing with financial management issues provides more detailed informationonthe work o fthe financial management consultants and auditors. 87 The IPM team will design a system to check implementation progress on the ground either internally, through the consultant teams, or through an external technical auditor. The sample size, methodology, etc. will be developed by the I P Mteam. The most important anti-corruption measures needed to protect the first phase o f the program will focus on preventing collusion inprocurement and other forms o f misprocurement in relation to the abovementioned TA contracts. The effective management o f the contracts, based on the clearly defined deliverables, is another serious concern which ifnot properly addressed could lead to corruption andor serious loses due to delays and inefficiencies. Second Phase (Subproject Implementation) It is envisaged that the contracts started under the first phase will continue with supervisory functions as well as refining local infrastructure plans during the lifespan o f the program. Based on the plans from the first phase, many sub-projects will be launched early in the second phase, with an initial emphasis on '"repairing what i s broken" rather than on new infrastructures driven by longer term economic development plans. More strategic infrastructures are likely tojoin the list o f subprojects as the projectprogresses. At the beginning, most ifnot all o fthe realresponsibility for works will be borne by the BRR, even though local government may be involved inthe process. The intentioni s to hand over this responsibility duringthe life o f the project to the local governments as their capacity to procure and manage contracts increases. This presents an important challenge as the project transitions from a centralized to decentralized mode o f working - with very different anti-corruption challenges when the project is fully centralized, partially decentralized and fully decentralized. This transitional challenge must be reflected in the TORSfor all key design consultants as well as inthe strategic plans. BRR will assign *'"Satker" (ineffect, subproject management teams consisting of four key personnel for the daily management o f subprojects), with members proposed by local governments. The Satker will be responsible for managing the implementation o f civil works at the local level. It i s envisaged that the Satker would be involved inthe procurement process. Procurement activities for the first year o f the second stage will happen physically in Banda Aceh. The Satkers will need to travel to attend. At the end o f that year, the IPM consultants will produce a "procurement capacity assessmentreport for local governments and provincial Dinases." This report will set thebenchmark for procurement capacity at the local government level, determine progress after the capacity building takes place and will assist in determining which entities will be ready to carry out their own procurement under the monitoring o f BRR. Duringthe second phase o fthe programaround one-third o fthe funds will be usedfor small (less thanUS$2 million) civil works subprojects, whilst roughly two-thirds will be used for larger subprojects. It can be assumed that the smaller projects will present a special set o f challenges in terms of reducing corruption risks, as there will tend to be a plethora o f widely-distributed small infrastructure repairs/constructions that will be difficult for BRR and their consultants to keep track of. There will doubtless be a need to promote extensive information dissemination and engage effective third-party oversight through both formal and informal linkages with external groups such as religious and mass organizations, NGOs and universities. It will be important to ensure that such groups properly understand the local plans o f the project andthe basic 2o One option is to select the Satker fromunder the District Head (Bupati) rather than under the individual Dinas so that there would (a) only be one per district instead o f one per sector and (b) so that the loyalty of the Satker would not be split so muchbetweenthe project and the Dinas as tends to happennow. This mighthelp to reduce complexity of supervisionand some of the possible corruption risks. 88 processes that should be followed, so that complaints born out o f misinformation or misunderstandings can beminimized. Though not very expensive inrelation to the overall project costs, it will still be important to ensure sufficient, timely availability o fbudget. B. Action Plan Description This action plan follows the six key elements that have been identified by the World Bank's Anti- Corruption Committee for Indonesia. Each o f these i s described below, along with a seventh element suggested by the BRR's own Anti-Corruption Unit: effective involvement o f the local parliament (DPRD), particularly inrelation to the oversight o fthe second phase o fthe program. The plan focuses on preventingcorruptioninthe key TA contracts and on preparing the groundwork for the future implementation phase. It does not provide a comprehensive set o f tools to fully protect the forthcoming investments. The implementation of this plan depends on strong support from the BRR through its PMU. It i s assumed that a small Ethics Team2' will be established within the BRR, as advisors to the PMU. This Ethics Team would work closely with the IPMconsultants, providing timely advice to the PMUon issues such as: Adapting and adopting procedures acceptable to the MDF and the government for hiring andmanaging consultants and contractors; 0 Ensuringthat parliament andcivil society groups are properly informedandengaged within an appropriate "third-party" monitoring system. It is important that the plan is operationalized, andtherefore all Manuals and training materials relatedto the project shouldreflect the aspects o f the ACAP that are relevant to their subjects. To ensure success, it is vital that sufficient funds be made available for the activities outlined inthis plan. Most o f these activities are already mainstreamed as procedures under financial management, procurement and monitoring, but some aspects such as information dissemination and complaint handlingmay require a small additional budget. This will not be a significant restraint for the initial phase, but it i s very important that budgets are carefully prepared duringthe first phase for the broader investment phase. The following pages elaborate the six key elements o f the plan, beginning with recommendations for each to protect the first phase, which are essentially aspects related to the procurement and management o f the crucial TA contracts. These sections are then followed by recommendations for preparation for the second phase, which discuss aspects that needto be addressedinorder to safeguard the future investment phase. Disclosure o f Information To encourage healthy competition between bidders, the P M U must ensure that information i s widely circulated, particularly in relation to the procurement o f the initial contracts. This will be done using established procedures (e.g., advertisements in newspapers and on internet website), enhancing with additional measures whenpossible. To avoid misinformation circulating about the project, the P M U must ensure that groups interested in the project are kept up to date with progress duringprocurement and implementation phases, inter alia through *'T h i s team would greatly benefit from having access to a fulltime Advisor on operational aspects, includingthe MDF and government disbursement, procurement and financial management guidelines. 89 the use o f an electronic mailing list and by sending information directly to key distribution hubs such as NGO fora. Preparation for the second phase (investment in civil works). With advice from the Anti-corruption Unit of BRR and from the project-related EthicsTeam, the IPMmust design a simple but effective system that uses different mechanisms for sharing public information (e:g., posting hll audit and progress reports on the project internet websites; sending summary reports on a monthly basis to the press and civil society forums; having contractors read progress reports at district level Accountability Meetings at least twice per annurdcontract period; having full documents available inpublic informationcenters, etc). The PMU must ensure that all consultant and contractor packages promote effective transparency. For example, all subproject sites must have information boards, the standards for which must be established by the BRR with advice from the IPMand the BRR's Ethics Team. The PMUmust also ensure that sufficient resources are available for disclosure measures and that these are reflected in the TORs/contracts for the subprojects. Civil Society Oversight To broaden informal oversight coverage and further reduce the problems related to misinformation, the P M U will ensure that "socialization" o f civil society oversight begins as soon as possible, so that civil society becomes aware of the forthcoming biddingprocess for the first phase contracts and so that local governments can see that BRR fosters coordination with key external groups, such as the local parliament and higher education institutions, both o f which should be encouraged to send representatives to witness the procurement process and comment on progress. The core consultants (IPMand other design consultants) must hold Accountability Meetings at least every six months in both Aceh and Nias, where civil society groups can hear about the contracts, progress and pose questions. The IPMshould help BRR to organize these meetings and ensure that a wide range o f actors are invited. Preparation for the second phase. Methods for ensuring the effective inclusion o f members from civil society and parliament inthe bidding committees and monitoring o f implementation must be discussed and agreed. This becomes increasingly difficult as the contracts themselves are to be implemented in several districts over Aceh and Nias, therefore "local" groups need to be involved appropriately without this becoming an undue burden on the project. Plans for achieving effective third-party monitoring o f procurement and implementation must therefore be defined by the BRR with assistance from the IPMand the Ethics Team. Some flexibility to these plans will be needed in order for them to be appropriate in the various locations. All contracts must include clauses that ensure the inclusion o f the firm concerned in Accountability Meetings at the appropriate level. Recent experience inprevious projects indicates that selection and preparation o f thirdparty partners should not be delegated to local government. CollusionMitigation The procurement team for the first technical assistance packages will be supported by professional procurement advisors. Strict procurement measures will be followed inorder to minimize risks o f collusion in the initial contracts. These measures include wide publication of biddingannouncements, etc. (please refer to the specific risks and mitigating internal control measures highlighted in the annexes 7 and 8). As mentioned above, the BRR will encourage representatives from civil society and, where possible, local parliament to act as observers o fthe key stages inprocurement. 90 Preparation for the second phase. Special attention must be given to the planning and preparation o f procurement processes for the second phase, as this may entail very different package types and sizes, different levels o f responsibility (e.g. shared between BRR and local governments), and different local capacities in terms o f process management and oversight (internal and external). The preparation o f materials and schedules for the investment phase must reflect the reality o f each situation, including special measures to protect against collusion as necessary for each subproject type and area. For example, it could be that some areas or subproject types may just require some basic briefing materials for third-party observers to procurement whilst for others special observers may have to be brought from Banda Aceh or from elsewhere. Sensitive but practical systems need to be designed and put in place to allow appropriate collusionmitigation for each contract type. MitigationofForgery andFraud Forgery and fraud risks will be minimized by adherence to fiduciary management practices (see also annex 8). These measures will include strict payment validation procedures that will be rigorously enforced. Project filinghookkeeping will be tightly controlled and subject to strict reviews. Internal and external audits will be held to ensure that fiduciary management i s inaccordance with the agreed procedures. Special attention will be given to aspects that have proven vulnerable inprevious projects, such as "soft" categories like training, workshops and information dissemination. Internal audits will be carried out by the BRR, while external audits will be outsourced to a professional audit company through the Supreme Audit Board (BPK). Preparation for the second phase. In addition to the aspects outlined above, the consultants hired under the first phase o f the program will eventually be tasked with assisting the BRR in supervisory work, including routine and ad hoc reviews o f other contracts, etc. Inpreparation for this it will be necessary during the first phase to design and adopt supervision methodologies that can effectively mitigaterisks. ComplaintsHandling A sufficiently independent and credible system is already available within the Anti-Corruption Unit of the BRR.The PMUshouldmake full use o fthis system throughout the life ofthe program. Preparation for the second phase. The current system under the Anti-Corruption Unit o f the BRR will form the backbone o f the complaint handling system for the program. If the number and severity o f the complaints becomes too extreme for the unit to handle then this may require strengthening, but at the present time this i s thought to be unlikely. An assessment will be made by the IPMduring the first phase o f theprogramto ensurethat there areno immediate needs for strengtheningthe complainthandlingsystem. SanctionsandRemedies BRR may use its own sanctioning regime which includes blacklisting of companies. Ifnecessary, the BRR Anti-corruption Unit will activate and monitor the referral system to external authorities (e.g., the police/KPK) to gauge iflegal and/or administrative sanctions are being effectively applied. Preparation for the second phase. The project design should build in some awareness-raising functions targeted at the contractors (especially for small contracts) so that they hlly understand the rules and the sanctions that will be applied in relation to these specific works - e.g., ensure that they know that this will not be "business as usual" and that automatic investigations will be launched whenever serious suspicions o f corruptionarise. The I P M and the Ethics Team will prepare materials for this on behalfo fthe BRR. This i s a highrisk project in a highrisk environment, so there are likely to be several cases o f abuse found duringthe implementation phase. Even ifthe project only follows up on a small number o f `winnable' cases, it will senda good message. The P M Uwill ensure that provencases o f corruptionget highpublicity so that they will act as a social deterrent. Depending on the case, sanctions may be imposed by on individual 91 offenders, companies or other entities. A step-by-step process for this will be devised by the IPM with advice from the EthicsTeam. The BRR needs to ensure that there will be a mechanism whereby disbursements will cease to flow to offending units or subprojects until corruption cases are appropriately dealt with. Depending on the case, this mightbe at the levelo findividualcontracts, or entire administrative units (e.g., districts). Again, a clear, step-by-stepprocess mustbepreparedfor these activities duringthe first phase. Effective Involvemento f the Local Parliament The PMU will ensure that the local parliament (DPRD) i s actively engaged from the beginningby insisting that they are properly involved in the strategic planning stage. It will also invite representatives from the relevant commission to observe the procurement process on the condition that conflict o f interests i s avoided. Later on, the PMU will ensure that DPRD are invited through relevant commission to all Accountability Meetings. All o f these activities will require inputsfrom the Ethics Team and the IPM. Preparation for the second phase. Because the DPRD have a mandate to monitor development, and to allocate local development funds, they need to be aware o f all significant infrastructure works in their area. However, they may need some briefing or very basic training to fulfill their related functions in an optimal way. Under the guidance o f the PMU, the TA packages must identify training needs ineach area and design the packages needed for the second phase. A design i s needed to minimize the risk of conflict of interest (particularly when involving DPRD in observing procurement processes) and undue politicizing o f the development agenda. One option that should be considered i s to ask SPADA to help identify specific local training needs and ask a local universityto provide the training personnel, perhaps after some TOT from the IPMworking alongsidethe EthicsTeam. 92 ANNEX 11:SUMMARIESOFm pTECHNICALASSISTANCETERMSOFREFERENCE This annex provides the detailed scope o f work and key tasks from the draft terms o f reference (TOR) prepared for the IPM and the West Coast TA packages. The IPM TOR provides an overview o f how the PM consultant will assist BRR as it develops and supports strategic programs across the five logistical areas o f Aceh and Nias to plan, identify, quantify, prepare and deliver the optimal reconstruction programs, support direct execution by BRR and coordinate programs funded by other sources. The West Coast TOR illustrates tasks necessary to undertake the planning, project preparation, and implementation work for the West Coast logistical area22. This team will provide assistance to the local governments in strategic planning, project design and implementation, and institutional development support and training. Tasks in the Nias TOR are similar to those o f the West Coast; thus, only the West Coast TOR i s presented here. The draft TORSfor all five project components are inthe project file. A. InfrastructureProgramManagement(US$19.5 million) Detailed scope o f work. The IPM consultants will assist BRR to ensure that the proposed infrastructure investmentswill be economically, financially, and institutionally sustainable and will have positive health, environmental and social impacts. The Consultant will be based in BRR headquarters in Banda Aceh; the Consultant will also give consideration to the appropriateness and timing of, at some stage, operating through additional sub teams, located in and working with the seven BRR Regional Offices recently established in sub-regions o fAceh. The IPMConsultant will institute and maintain close liaison with all providers o f reconstruction assistance and services, technical assistance (TA) management service providers working under BRR on this overall program, and will design, implement, and manage cost and time-effective processes to appropriately monitor andcoordinate all activities inthe infrastructure reconstruction program. Management systems and skills .would ensure that investments are rationally prioritized, quality and standards are consistent, program management information i s reliable, consistent and timely, processes to ensure donor funds are matched with demand, and that the less "high-profile" andor more scattered projects are not ignored. This coordination strategy for infrastructure would rationalize fund utilization and reduce competing interests between levels o f government andduplication between donors, while achieving results on the ground. Phasing o f services and deliverables. This consultancy assignment is both complex and cyclical due to the nature o f the services described in this TOR. The IPM consultant tasks and responsibilities focus on assisting BRR to devise and implement a sustainable, well-designed and managed infrastructure plan for Aceh andNias that fits with the government's yearly budget cycle. In this regard, the first three months of this consultancy are unique, and require an initial period of assessment and planning to ensure optimal use o f the skilled resources comprising the IPMteam. During this initial period, the consultant will update and refine the Work Plan as submitted in the consultant's proposal and develop Key Performance Indicators (KPI) to track and monitor progress of the TA. This process will help rationalize and clarify the specific deliverables, delivery o f initial outputs, and the incorporation o f adjustments, if any, (such as timing or content) to inputs. This would be in detailed consultation with BRR, and building on the Work Plan in the proposal submitted by the consultant for this assignment. 22 Aceh Jaya, Aceh Barat, Nagan Raya, Aceh Barat Daya, Aceh Selatan, Aceh Singkil and Simeulue 93 The remainingtasks discussed inthe following eight sections outline the specific responsibilities o f the IPM consultant, including the corresponding deliverables and skills necessary to complete these outputs. Many of these activities (once initiated) are ongoing and will require successive updating and monitoring. Inaddition, as the Go1 envisions that BRR will disband in 2009, it i s essential that the IPM consultants help BRR prepare a viable exit strategy to facilitate this exit ina well-managed way. Task 1 StrategicDlanning - One o f BRR's mandates i s strategic planning for all infrastructure recovery activities, covering the following sectors: roads, ports, airports, telecommunications, water, sanitation, drainage, flood control, irrigation, power, and public buildings.This responsibility includes: (i) understanding and progressing the infrastructure activities o f all major donors as well as those o f local and provincial governments; (ii) identifyingthe main gaps; (iii) developing a list o f priority projects across infrastructure sectors designed to fill these gaps; and, (iv) allocating responsibilities between various stakeholders to ensure swift implementation o fpriority projects. StrategicInfrastructureReconstructionPlan The IPM team, together with BRR, will undertake the following activities to prepare an updated master strategic infrastructure reconstruction plan, incorporating individual sectoral plans highlighting correspondingneeds andpriority projects inaffected areas: (a) review existing donor program and local government reconstruction and medium to long term development; (b) assess and review the full range o f existing and proposed community based village and environmental plans, and planningactivity identifying strengths, gaps, and issues arising; (c) identify gaps in existing plans, policies, strategies for reconstruction and long term service delivery, andresource allocations; (d) develop list o f priority project so fill gaps, and set out alternative policies and allocations o f responsibilities across stakeholders; (e) review alternative mechanisms and construction cost implications for the reconstruction o fAceh and Nias; (f) prepare strategic and sectoral plans, which will outline activities over the next three to five years; (g) combine these into Strategic Infrastructure Reconstruction Plan for the reconstruction o fAceh and Nias The plans should promote projects large enough to take full advantage o f economies o f scales wherever possible; (h) review and update the Strategic Infrastructure Reconstruction Plan and subsets every six months with the Infrastructure Board of the BRR; and (i)prepare a Comprehensive Exit Strategy, setting out options, possible outcomes and implicationso f alternatives for Aceh and BRR,paying special attention to long term sustainability and management o f investments and social development assets reconstructed and instigatedduringBRRsreconstructionassignment. The design o f the strategy and sectoral plans will be undertaken in close coordination with local and provincial governments, to ensure that BRR's plans reflect the information available to local and provincial governments, and to maximize alignment between the strategic plans prepared by BRR and those prepared by local and provincial governments. The consultants will be responsible to organize and facilitate as needed the interaction with local governments to ensure BRR's Strategic Plan i s well-integrated with local government plans. 94 InvestmentPlanning Inparallel, and as part of the above Strategic Infrastructure Plan, inorder to optimize resource utilization and to meet the budgeting timetable, the IPMconsultant will provide specific investment planninginputs to theBRRannualbudget cycle process, includingthe following: Budget year 2007 (January - December) (a) collect and review existing budgetedproject lists; (b) prepare, in consultation with BRR and proposed project ownersheneficiaries, prioritized project listings, and assessment o f implementation arrangements between different stakeholders; (c) review these priorities against strategic priorities and concerns; and (d) prepare an optimal investment programandproject listing for submission. Budgetyear 2008onwards(January December) - (a) verify readiness o f project, costs estimates, and feasibility, and prepare updated rolling investment plans; (b) each Oct & May for period o f assignment (connected with the budget cycle), prepare updated strategic plan (see above) and updated investment plan in line with BRR budget cycle and expected infrastructure allocations; (c) collect andreview existing budgeted project lists; (d) prepare, in consultation with BRR and proposed project ownersheneficiaries, prioritized project listings, and assessment o f implementation arrangements between different stakeholders; (e) review these priorities against strategic priorities, plans and concerns; (e) prepare optimal rolling investment program andproject listingfor submission; and ( f ) support BRR inthe preparation o f a proposed MDTF infrastructure financing facility. Deliverables and timing 0 Outline o f Strategic InfrastructureReconstructionPlan end month2 0 FirstStrategic InfrastructureReconstruction Plan end month 3, updated every 6 months 0 2007 Investment Plan end month 3 0 2008 onwards Investment Plans Updated 6 monthly Draft BRR Exit Strategy Years 1-3 Skills anticbated Program Management; Strategic and Investment Planning; Urban and Regional Planning; Finance and Financial management; Community and Social Development; Engineering andprocurement skills Task 2 ProgramManagement - The participation of many local government agencies, donors, non-governmental agencies and other stakeholders working in infrastructure reconstruction throughout Aceh and Nias, necessitates that BRR has the ability to coordinate activities, leverage resources and identify gaps in implementation that need to be addressed. This would enable BRR to redirect possible alternate sources o f finance, accelerate reconstruction and enhance longtern sustainability. 95 The programmanagement function o f this TA will support BRRto review, report on, assess the adequacy o f and identify optimal next steps o f all reconstruction programs, tracking progress and results. By having this information available, BRR will be able to identify possible redirecting o f donor and other investments to realizeunmetneeds inaffected communities. To achieve this, the IPMteam will be responsibleto: (a) review and assess the adequacy o f existing database and related information systems, and recommend any adjustments needed to enable effective programmanagement; (b) supplement andor design, provide and get operational, program tracking, management information system (MIS) and financial reporting systems, build on and ensure avoiding duplication o f the existing BRRbusiness andinformationmanagement systems; (c) advise and assist BRR in reviewing and tracking donor-supported programs, and explore optimal ways o fredirecting resources where found appropriate; (d) actively strengthen BRR participation in infrastructure sectoral working groups seeking to enhance coordination and communication links among stakeholders engaged in the recovery process; (e) prepare and assist BRR to implement an external communications program-reporting progress and disseminating information to the public and stakeholders regarding implementation; progress. This function will be carried out in collaboration with BRR's communications office; (f) report through a monthly Reconstruction Program Progress Report based on the updatedredesigned monitoring and evaluation framework and MIS, trackmg progress toward achieving the objectives o fBRR's overall strategic plan for infrastructure. Deliverablesand Timing MIS draft Proposals (end month 3) then updated as needed Monthly Reconstruction Program Progress Report, containing program tracking, management information and financial reporting system, including procedures for tracking the following: Financial andbudget management for BRR; 0 Program management, including tracking timing, costs and outputs o f BRR, and all NGO, multilateral and bilateralprograms; Standards and Quality Control Management; Materials Requirements and logistics Management; RiskManagement; 0 Electronic Data Management systems consistency; Document Production, Review and Approval; Non-conformance and ImprovementManagement; External Communications Program. BRR already has extensive management, financial control systems and other systems. Inpreparation of the financial reporting activities, the IPM Consultant will make maximum use o f these systems by avoiding duplication, buildingon them, and where necessary, improving them. These systems will bepractical, robust enough to be transferable to and used by local government, and made substantially operational within 3 months o f mobilization. See reporting schedule for details. Draft MIS proposals will be prepared and submitted for BRRreview after 3 months, and subsequently implemented and updated, as needed. Skills anticipated Program Management; Strategic and Investment Planning; Urban and Regional Planning; Finance and Financial management; Community and Social Development; Engineering and procurement skills; Information and systems specialist; ProgrammingandProject Planning; Communications specialist. 96 Task 3 Review of local and provincialgovernments' reconstruction ulans and priority uroiects - BRRreviewsthe strategic infrastructureplans and priority projects prepared by the 14local andprovincial governments covered by this TA project to ensure that they match BRR's overall strategic plan mentioned above. The remaining local governments in Aceh and Nias will also submit development plans, which will only be evaluated on the basis o f the investments' strategic value to the overarching reconstruction program. Uponreview o f these local andprovincial plans, BRRwill determine whether or not to approve any o f these individual infrastructure projects plans and whether to allocate some o f its own funds to implement these projects. It i s possible that local and provincial governments may submit specific projects for approval by BRR before having completed their strategic plans, especially in the first year of TA project implementation. In this case, BRR will review the merits o f those projects, determine whether to approve them, and whether to allocate some o f its own funds to their implementation. IPMconsultantswillundertakethefollowingactivities: assist BRR develop manuals, guidelines and procedures for supporting local andprovincial governments present their strategic plans (including the level o f details requested on each individual project included in the plans). Such templates and guidelines will build, to the maximum possible extent, on the existing processes o f BRR, reflected through Project Delivery Plans for major investments (over US$s.Om); assist BRR develop and implement a detailed Project Manual for local and provincial governments, setting out the project cycle for infrastructure investments, including the process o f drafting strategic plans and proposals, requesting finds from BRR, and the monitoring and evaluation o f these projects; provide a framework andprocedures for enabling local and provincial government to assess economic andfinancial priorities; support BRR in preparing the infrastructure budget for submission to Parliament, initially for 2007, and then for each subsequent year; establish and assist BRR and project owners implement in the review process value management, value engineering and risk management studies and procedures for complex projects. Particular attention would be given to reviewing existing hazard assessments and data, determining vulnerability, assessing the need for firther assessments, and developing appropriate mitigationmeasures; and arrange through BRR to convene regular outreach meetings with BRR, TA providers, local govemments, community committees and other stakeholders to review issues andprogress, and to agree corrective measures as necessary, aimed at seeking to broaden stakeholder support for the BRRreconstructionprogram. Deliverables and Timing Project Manual by end month 3; Project Delivery Plans (end month 3 with quarterly updates); Outreach meetings (quarterly). Skills anticiuated Program Management; Urban and RegionalPlanning; Finance and Financial management; Community and Social Development; Engineering and procurement skills; Programming andProject Planning Task 4 Qualitv Assurance of BRR-financed Proiects - 97 Once individual local and provincial projects are approved by BRR, local or provincial governments will prepare corresponding detailed designs and tender documents. For the projects it finances, BRR will undertake spot checks on the quality o f project design and implementation. Any processes designed by IPM consultants will build, to the maximum possible extent, on existingprocesses o f BRR. IPMconsultantswill assist BRRto: (a) develop minimum quality standards and standardized bidding documents pertaining to specific projects; (b) design and implementa spot checking quality function; (c) prepare a Quality Management strategy for approval o f BRR, and (d) develop and implement asset management and maintenance guidelines to ensure sustainability and adequate future maintenanceo fthe projects BRR finances. Deliverables and Timinq Agreed quality standards and spot checking methodologies documented by endmonth 4, as part of Reconstruction ProgramProgress Report; Quality Management strategy developed by end o f month 4; Asset Management Guidelines agreed (end month 3) and implemented (end month 6). Skills anticipated Program Management; Finance and Financial management; Community and Social Development; Engmeering andprocurement skills; ProgrammingandProject Planning. Task 5 Procurement support and capacitybuilding - BRR is responsible for setting up adequate procurement to ensure the effective implementation o f the projects that it finances. IPMconsultants will provide advice and support to BRR inthis area, both for BRR- financed investments/projects, and to the extent possible for infrastructure investments funded and implemented by others. The main objective o f the support i s to assist in delivering the urgent needs by assisting to implement procurement in BRR and local government in the short term, while developing the capacity o f local governments to carry procurement inthe long term. A central procurement advisory team will be located within BRR, supported by the IPM, responsible for undertaking the bulk o f procurement activities during the first 1.5 years o f implementation o f the IPM assignment; procurement responsibility will then be passedto local governments ina phased manner. Tasks of the IPMteamwill include the following: (a) conduct procurement capacity assessments o f the local and provincial governments and, based on these assessments, develop and execute procurement training programs to build capability duringthe first 1.5 years; (b) provide direct support to BRRandlocal government procurement activities duringthe first 1.5 to 2 years; (c) assist BRR transfer procurement activities-to the local and provincial governments in stages, and then take on a monitoringrole, accordingto predeterminedbenchmarks; (d) develop andimplement Action plansto enable local governments to take ownership by the end o f the IPM assignment, o f most procurement activities for BRR investments with minimalintervention by the IPMprocurement team; (e) identify and agree with BRR, alternate and appropriate procurement procedures and regulations for each set o f investments; 98 (f) prepare standard documentation for international and national procurement o f goods and services based, depending on sources o f funding, on BRR/National/World Bank guidelines for procurement contracts and assist BRR to carry out the prequalification award process includingassist BRRwithnegotiation ofthe contracts; (8) provide coordination and guidance on procurement, contract packaging and bid documentation for other funding agencies; (h) recommend the contract packaging anddetailed strategy of the work to be carried out for BRR for the optimum delivery o fthe program. The contract packaging will consider to the extent possible the use and development o f the local consultant and construction industry. Procurement strategies will seek to achieve economies o f scale, and build in incentives for early completionwhile achieving quality goals; and (i)designimplementationfordifferentsourcesoffimdingandimplementationmechanisms. Deliverablesand Timing Training program delivered to BRR & all local governmentsby end month 6; Standard documentation and procurement methods for BRR funded and all government funded investments agreed anddistributedby end month 4; Standard documentation and procurement methods for NGO funded infrastructure related investments agreed anddistributed by end month 4; Infrastructure ProgramContract packaging agreed and discussed by end month 6; The above items updated on a 6 monthly basis; Reporting on the above deliverables incorporated into monthly Reconstruction Program Progress Report. Skills anticipated Program Management; Finance and Financial management; Community and Social Development; Engineering and procurement skills; Programmingand Project Planning. Task 6 Safeguard support and capacitvbuilding - BRR requires that its projects meet all social and environmental safeguards requirements. BRR is responsible, inparticular, for: (i) developing overall processes to ensure that all safeguards requirements are met; (ii)screening o f projects to determine whether they trigger the implementation o f specific safeguards requirements; (iii)ensuring that any safeguards-related studies or assessments are performed by an independent consultant; (iv) supervising implementation o f such assessments and studies on a spot-check basis. BRR will also provide fundingto contract consultants to execute safeguards studies as necessary. The IPMsafeguards team will be responsible for undertaking the following activities: (a) provide advice to BRR on all safeguards-related issues and will be responsible for assisting BRRinacquiring the expertise requiredto draft any safeguards-related actionplans. (b) prepare an Environmental Management strategy for approval o fBRR; (c) engage additional and specialist consulting support to prepare all required social and environmental studies (AMDAL, UKL/UPL,and LARAF'); (d) arrange for all projectshnvestments to put acceptable safeguard policies in place, with respect to nationalpoliciesand source o f funding; (e) award and manage an annual renewable contract to a firm(s) with a proven track record in carrying environmental and social assessments to GO1 and World Bank standards, for 99 investment and projects which will be finded through the MDF ( these would require processinginaccordance withWorld Bank Safeguardpolicies and procedures); (f) encourage the establishment o f partnerships with local organizations (NGOs and academic institutions) to carry out field research functions; and (g) ensure that systems are incorporated into all contracts and contract documentation within the scope o f work o f this program to ensure that Consultants, Contractors and Suppliers operate in accordance with international and local regulations and accepted quality management and safeguard requirements intheir contracts. Deliverablesand timing Draft an Environmental Management strategy for approval o fBRR; Prepare andprocess Environmental and Social SafeguardAssessment Reports as required. Skills anticipated ProgramManagement; Environment Safeguards; Social Safeguards; Community and Social Development; Engineering andprocurement skills; Programmingand Project Planning Task 7 Anti-corruptionsupport and capacitybuilding - BRR will be tasked with enforcement of the project's anti-corruption action plan to reduce leakages of resources and assure transparency. Systems should allow for both upfront and stage payments to ensure Contractor liquidity.In general, and where possible, priority will be given to local Acehenese Contractors. Programs for the planning, design and construction o f infrastructure, which involve the creation o f assets should be undertakenwith full local government involvement at all stages. To support thisBRRmandate, the IPMconsultant will be responsiblefor the following activities: (a) establish procedures and systems to ensure national and international standards o f accountability and transparency; (b) assist BRR in enhancing its existing complaints handling mechanism for BRR-financed projects to track and resolve gnevances reported by communities affected by the infrastructure works duringthe investment phase; and (c) review programs funded by BRR and all other infrastructure providers, assessing plans made and proposals for creating capacity as part o f the program. Identify gaps, and development and arrange implementation by the respective funding agency o f appropriate integral capacity buildingprograms for long term infrastructure management. Deliverablesand Timing 0 National and international standards o f accountability andtransparency drafts by end month 3; 0 Dissemination strategy for the above by end month 4; Follow up on the above: ongoing; 0 Capacity BuildingGap identification, andremedial planend month4; Ongoing implementation o f Capacity Remedial Plan. 100 Skills anticipated Program Management; Finance and Financial management; Community and Social Development; Engineering andprocurement skills; ProgrammingandProject Planning. Task 8 Managementof other componentsof the proDosedproiect - BRR is tasked with managing the work programs, performance, and outputs of the consultants that will assist with implementation o f the other components o f the proposed project, namely: West Coast Infrastructure and Services Planning and Design; Nias Infrastructure and Services Planning and Design; Strategic InfrastructurePlanning and Design; and FinancialManagement o fBRR-financedprojects. To executethistask,the IPMconsultantwill beresponsibleto: (a) prepare a consolidated program for the implementation of the REP, and other major technical assistance programs; and (b) assist BRR incarryingout management o fthe IREPand conduct any assessmentsor audits necessary to ensure the quality of the performance o f the other TA components. DeliverablesandTiming Regular monthly updates incorporated as part o f ReconstructionProgramProgress Report Skills anticipated Program Management; Financial Management; Community and Social Development; Transportation and Highways; Municipal Engineering; Procurement. B. West CoastInfrastructurePlanning,Design, and ConstructionSupervision(US$lO million) Detailed scope o f work. Implementation o f priority works should start as soon as feasible upon the Consultant's mobilization. The Consultant's first 6 months may not rigidly mirror the proposedproject cycle (see Annex 1) as Consultants will utilize preexisting resources (plans, studies, project documents, etc) to deliver investments that are recognized as strategic priorities. The consultants will need to adopt flexible, creative, and pragmatic approaches. To the extent possible, specific responsibilities o f the consultant are described below. The programis dividedintopreparation(TasksI,II, m)andinvestmenttasks (Tasks I V & V). & 101 Task I-FieldAssessments Data Collection The Consultant shall immediately collect and vet data that are relevant to the assignment. The BRR will provide the Consultant with copies o f progress/stocktaking reports, all available base maps and aerial photography (digital form). Some topographic mapping may be available. The consultant should identify all communities that already have spatial and infrastructure plans, and examine their status and quality of the materials. The Consultant team should also examine existing natural hazard maps to determine whether the project will be implemented inan area vulnerable to natural hazards, such as floods, earthquakes, landslides, etc. The Consultants will coordinate with and obtain information on the relevant programs o f the key NGO/donors already working in the project area, especially those involved in housing settlements and infrastructure. All o fthis data shouldbe cataloged, and findings shared with the BRR and IPMconsultants. The Consultant will need to assess the availability, obtain copies of, and review key district government planning documents, where feasible and when available. Results will be cataloged and shared with the BRR. Important documents the Consultant should target include; Renstra Strategis (Five-year Strategic Plan), PPJM-Perencanca Pembangunan Jangka Menengah (Medium-term Development Plan), Pola Dasar Pengbangunan (Twenty-Development Framework), and Rencana Pembangunan Satahun (Annual Development Plan). Many o f these documents were made before the tsunami. Although most o f the materials will be outdated and with varying quality and utility-the Consultant will determine which aspects (district vision for development, priority investments, etc) o f these documents are still applicable in the current context. The local government counterparts will assist the Consultant to verify that existing plans still have `buy-in' from community stakeholders. By the time o f consultant mobilization, some district level project prioritization work may be advanced. The Consultant should draw on existingwork and established systems when still applicable, but will realistically have to fill in gaps to implement the program. The Consultant should provide professional advice to local governments on areas such as the overall feasibility andpriorities o fprojects based on technical, economic, and sustainability criteria. InstitutionalAssessment The consultant will undertake a preliminary institutional analysis o f each o f the local governments in the project area. The assessment will evaluate current capacity for infrastructure delivery, on-going activities, and obvious areas requiring further support. This assessment will be at outline level, only in order to (i) provide a first view o f the scale o f capacity building needs o f individual districts and as a group, (ii) determine strategies and approaches for best interacting with each local government, and (iii) theidentify relative strengths o f local governments and how they can be integrated with implementation o f the TA program. After the consultants first 6 months, the institutionalassessment should be updated and prepared inmore detail to formthebasis for preparationofPhaseV -CapacityBuildingworks. Task I1 Planning,Prioritization,and Selection - Upon mobilization the Consultant will work on two initiatives in parallel, the (i) Immediate Infrastructure Project Plan (IPP) and the (ii) Annual Investment Plan(AIP).The Consultant will use findings from Task I (Field Assessments) and work closely with local governments and the BRR to develop criteria, prioritize, and select projects. Both the local government and the BRR must approve all projects within the IIPP and AIP before they can be implemented. IPPs and AIPs will be made for each district government in the project area - both may be submitted to the BRR on a rolling basis upon completion (as opposed to bundlingall districtplans together) to expeditethe process. 102 ImmediateInfrastructureProjectPlan (IIPP) The Consultant will use its field assessments and selection criteria to quickly identify projects that are priorities o f local governments, and BRR, and local stakeholders for inclusion into an Immediate InfrastructureProjectPlan(IIPP). The intention o f the IIPP i s that the Consultant will immediately start preparation o f select strategic projects for construction start with the first 6 months o f mobilization. Both the local governments andthe BRR must agree on the projects. The Consultant shall provide professional guidance and review existing planning, project selection, and preparation works o f the local governments, the BRR, or other organization. Selected projects should be non-contentious (low safeguards risks, widespread acceptance by local stakeholders, etc), ideally be priority investments supporting the housingand shelter programs, and/or provide immediate relief to communities still suffering from damages from the disaster. The IIPP shall be developed in close coordination with the local governments. The Consultant should balance the investments in the IIPP equitably within the West Coast program area. IIPP projects will be implemented inparallel with preparation o f the Annual Investments Plans (AIPs) that willbepreparedmore closely following the PDCS-West Coast Project Cycle (Annex 1). The IlpP will contain an initial estimate o f the cost o f the works, project descriptions, rational for inclusion in the IIPP, schedule of works, and expected impactshenefits. The consultant will submit the IIPP to the local government for approval, then to the BRR. Once cleared by the BRR, procurement o f contractors for IIPP projects can begin. The first IIPP should be submitted to the BRR for review 2 months after mobilization. AnnualInvestmentPlan (MP) The consultants will work closely with the district governments (Office of the Bupati, Bappeda, Public Works, and other relevant agencies) and BRR to analyze alternatives, prepare feasibility studies, and identify priority investments for each o f the district governments inthe AIP. The A I P s identify and evaluate the districts' priority infrastructure investments to support Initiative 1 infrastructure. Infrastructure under Initiatives 2, 3, 4, & 5 are under the scope o f other consultancies under the I M P framework.23 The AIP will recommend the investments best suited for funding support from the BRR, and those, which should be developed and financed by the local government, province, or other sources o f support such as NGOs or donors. AIP projects supported by the BRR must be coordinated with, and fit within the BRR's REP framework. AIP projects should be at the kabupaten level, but in some cases it may be sensible and cost effective to include some sub-district investments. Inthese cases, sub-district investments will need to be coordinated closely withinthe BRR with the Office o f the Deputy o f Housing and Settlements. The BRR (through the Chief o f the IREPPMU) and IPMconsultants will develop the format and guidelines o f the AIP, as well as the general criteria for AIP projects to be funded by the BRR. In general, the expected content o f the AIP will be to provide all agreed infrastructure locations, key levels, proposed layout o f services (roads, water distribution system, drainage system, IT and electricity distribution system etc.) as well as (i) design parameters to be used in the DED, (ii) o f any recommended phasing, details showing clearly the first phase works, (iii) recommended procurement and implementation proposals and schedules, (iv) initial capacity buildingneeds for sustainable operation and maintenance o f the systems (v) 23The Infrastructure Rehabilitation Enabling Program( I M P ) consists of the InfrastructureProgram Management, PDCS-Nias, and Strategic Infrastructure consultants. 103 an updated capital cost estimate o f the recommended works and an estimate o f the recurrent annual operation and maintenance costs, and (v) a feasibility study when required. The AIP i s submitted to the district government for approval, and then to the IREP PMU. Environmental and social screening o f `approved' AIP (and IIPP) sub-projects will be carried out by the IREP P M U in order to determine what technical documents are required. The BRR will be responsible for screening supported by IPMteam safeguards specialists reviewing all projects submitted. Screening results will be formally communicated to the respective local governments and to relevant local environmental authority. The Consultant (supported by the local governments) will be responsible for preparingrequired technical documents (LARAP, AMDAL, DED, etc). It is expected that approximately 10-15% o f the projects prepared under this TA will require AMDAL and/or LARAP, and that a further 40-50% will require UKLKJPLand/or abbreviated LARAP. The BRR's Infrastructure Board within the IREP PMU will review the AIPs (with support from the IPM consultants). The first round o f AIPs (already approved by local governments) should be submitted on a rolling, `as ready,' basis within 3 months o f mobilization. AIPs will be updated every six months to adjust for changes inthe implementation schedule, or to initiate new programs. The Deputy o f Infrastructure/Chief Operating Officer o f the BRR will approve the individual projects to be supported. Once projects are approved, the BRR Infrastructure Procurement Committee will initiateprocurement (expressions o f interest, etc) in a parallel process, while the consultant prepares the detailed engineering designs and tender documents (DED&TD), Task I11 ProiectPreparation - DetailedEngineering Designs and Tender Documents (DED& TD) The Consultant will be responsible to prepare detailed engineering designs and tender documents (DED & TD) for all o f the approved works inthe IIPPs and AIPs supported under IREP. This includes, preparation o f detailed specifications, bill o f quantities for civil works, schedule o f requirements for goods, tender drawings and contract documentation inaccordance with Indonesian National, Provincial and other relevant standards guidelines and instructions. The IPMconsultant will support coordination and harmonization o f standards and technical solutions to facilitate operations and maintenance, considering the tradition o f poor maintenance. Review and final approval o f all required environmental and social studies will be a precondition for completion o f detailed design, which will have to demonstrate how social and environmental mitigation has beenhandled, and possibly integrated into detailed project designs. The BRRwill review and sign off on all completed DED & TDs, including further safeguards review to ensure key impacts identified have been adequately addressed. Duringdetailed engineering design, the consultant will undertakethe necessary field studies and document preparation activities, including refinement as needed to the proposed list o f IIPP & AIP approved projects, required environmental and social work, and preparation o f detailed engmeering and bidding documents. These activities should be carried out by field supervision teams in the most cost-effective manner. The activities to be covered duringthe detailed engineering phase o f the assignment include: (a) review and finalization o f IIPP and AIP works plans, including review and updating o f preliminary engineering reports, economic evaluation, and social and environmental screening o f approved projects; (b) preparationofenvironmental/safeguardsdocuments, includingLARAPsandAMDALs; (c) social assessment and preparation o f resettlement action plans (RAPS)and ethnic minority development plans (EMDP/IPDP), as determined are needed; 104 (d) topographic surveys; (e) for roads, material source surveys locating sites o f borrow pits and aggregate quarries, identification o f sufficient quantity and quality o f each fill and aggregate materials at economic haul distance, and carrying out laboratory testing as required to ensure that identifiedmaterials meet design specifications; (0 geological andsoil investigations; includingfoundation investigation asrequiredfor design for bridges and culverts, soil sampling and testing for roads and and other tests as needed for professional detailed engineering design o f works; (8) hydrological investigations and calculations as required for bridge, culvert and drainage design includingreview o f existing hydrological data, meteorological data, and carryingout additional hydrological survey ifnecessary; (h) detailed, safe, economic, complete engineering design for IREP supportedroads and short bridges (<25 meters), including detailed design o f vertical and horizontal alignments, cross sections, , pavement structures; drainage, culverts and other structures such as retailing walls, causeways, river training and river bank protection and approaches; andpreparation o f all related detailed engineering drawings and setting out data; (i)preliminarypreparationofconstructionmethodsandschedulesasbasesforcostestimates, and identification o f critical equipment/personnel needs for quality works, packaging o f works, and schedules; (i) preparation ofdetailed cost estimates, includingpreparationof detailed analysis of inputs and prices for items such as labor, materials, equipment, tax, overhead, profit, etc, breakdown o f the foreign currency and local currency requirements, and preparation o f the relateddisbursement schedules; (k) preparation o f complete biddingdocuments following applicable World Bank or National Standard Bidding Document specifically detailing how design standards will be met and quality assured by the contractor; (1) preparation o f updated capital cost estimates o f the DED works and an estimate o f the recurrent annual operation and maintenance costs; (m)preparation o f a DEDReport (i) summarizing the main points o f the DED, including any variation(s) from the AIP recommendations with justification for the variation(s) (ii) recommendations for the provision o f local technical support for supervision o f construction o f the works giving details o f staff time inputs, level o f experience required andterms o freference; (n) coordination withthe IREPPMUfor tendering ofworks asrequired. Task IV -- ConstructionSupervision The Consultant will be responsible for construction supervision o f the civil works under IREP, and specifically to act as the "EngineerKontracts Manager" as defined in the construction contract documents. The Consultantsbroadresponsibilities include: (a) provision o f documents and support as required for the efficient competitive procurement by BRR / IPMconsultant o f studies, equipment and construction works following World BankProcurement Guidelines or BRR'sProcurement Guidelines, whichever is applicable; (b) ensuring contractual establishment o f contractors and supervision consultants on sites including appropriate staff, equipment, laboratories and other facilities for contractual work capacity and quality. Projects will be supervised directly by the Consultant; (c) development o f a format for a Monthly Construction Progress Report (MCPR) to monitor the physical and financial progress o f the works. The BRR and IPM consultants shall approve the MCPR format, and the Consultant shall train appropriate personnel how to prepare and submit the report; 105 (d) participation inmonthly meetings arranged and attended bythe BRR,the local government, and the construction contractor(s) to discuss progress o f each contract package and other issues to be addressed. The Consultant shall prepare and submit meetingminutes for each monthly meeting; (e) establishment o f appropriate quality monitoring and reporting procedures and develop contractors' quality assurance/ quality control systems; ( f ) review o f each contractor's MCPR and prepare a summary for all contracts; and (g) preparation o f Final Engineering Reports, including review for accuracy the 'As Built' drawings prepared by the Contractor, and for all the works prepare progress reports for each contract in a form acceptable to the BRR. These reports will include, at a minimum, details o f the physical and financial status o f each contract, details o f delays and the budgetary effect o fparticular problems with suggested solutions. During construction supervision the Consultant will supervise a team consisting o f the appropriate professional skills as mentioned inthejob descriptions. Their scope o f activities generally follows: (a) provision o f such information as i s necessary for the Contractor to set out the works and check that the setting out is correct; (b) review and approval o fthe Contractor's work proposals, working drawing etc. to the extent, required by the contract, advise modifications where necessary and approve these proposals; (c) review and approval o f the Contractor's work program and, where necessary, request revisions o f these to account for the current status o f the works, ensure adherence to the construction schedule; (d) agreement with the Contractor on systems o f measurement for interimpayment certificates and verify the quantities for such certificates; (e) recommendations to the BRR on the Contractor's claims for additional payment, extension o f time and other matters, based on the Consultant's interpretation o f the Contract documents, the relevant site conditions and the Contractor's detailed submissions; ( f ) in the event o f variations to the works being required, preparation o f the necessary documents, negotiate these with the Contractor and submit these to the BRR for approval; (g) through inspectors o f works and other site staff as may be required, supervision o f the day- to-day operations o f the contractor to ensure quality o f workmanship and compliance with the contract, including day-to-day monitoring o f environmental compliance; (h) maintenance of detailed daily diaries, photographs and documents concerning relevant events and activities, call and keep minutes o f routine site meetings between the parties to the Contract; (i)carrying out final inspections of the works and recommend the issue of completion u) certificate; checking the Contractor's final accounts and certify them correct for payment; (k) preparationofcompletionreports inaformacceptableto BRR,and (1) provisiono f any other specialized services as may be necessary and agreed upon. Quality management i s requiredto ensure that the proposed investments are economically, financially, and institutionally sustainable and have positive health and social impacts. The overall BRR (and specifically IREP) program execution shall be monitored with the support o f a Management Information System (MIS) administered by the IREP IPM consultant. The Consultants will work closely with the BRR and IPM consultant on all aspects o f quality control, including: ensuring infrastructure components included in the Annual Investment Plan follow the BRR and IPM consultants guidelines on meeting economic, social, and environmental criteria, and also equitable 106 distribution between districts, connectivity, and integration with the housing program, peach process, andeconomic development; ensuring that appropriate bidding documents for civil works and goods, and TORSfor consultant services are used; introducing quality assurance systems, incentives, penalties, technical audit, extended guarantee and maintenance periods, andperformance based maintenancecontracts; and establishing appropriate quality monitoring andreportingprocedures. Task V Capacitv Building - The current capacities o f the district governments inthe project area are low, and vary between districts. It i s anticipated that at the beginning o f this project, the consultant and BRR will play a greater role in provision o fthe district level infrastructure. Local governments have expressed the importance and need for increasing capacity. It is a goal o f the BRR and the IREP program to incrementally transfer greater responsibilities (in planning, budgeting, procurement, construction management, and operations and maintenance) from the BRR to the local governments over the three-year period o f this program in preparation o f the BRR's departure. The capacity building program will be divided into three tasks, (i) `teaming-up' transfer o f knowledge, (ii) capacity buildingpreparation, and(iii)implementation. Due to the urgency of expediting projects (to support the escalating housingprogram), the consultant will adopt a pragmatic `learning by doing' approach for increasing the capacity o f local governments. The Consultant will use the Outline InstitutionalAssessment (prepared inTask I) find opportunities to `team- to &withlocalgovernment staff, utilizingtheir existingskillsto engagethem(however feasible) intothe project. For example, staff from the district public works office could work with the consultant's design team to prepare projects and while transferring skills and knowledge from the Consultant on current best practices. The Consultant should highlight in its Monthly, and Annual Status Reports collaborative `teaming-up' arrangements it has developed. The Consultant should seek ways o f engaging local government at the start, and increasing activities throughout the project. The Consultant will use the Final InstitutionalAssessment to identify the relative strengths and weakness o f district governments to'prepare a program for cauacitv building;training and organizational strengthening. Based on the expected IREP works program, and anticipated needs after the BRR's departure - the consultant will recommend areas for targeted training. These recommendations will be submitted (as an annex to the Final Institutional Assessment) to the BRR and IPM consultants. The Consultants will coordinate with the BRIUIREPconsultants to develop local government capacity buildingprograms. Where key gaps exist, The Consultant will recommend specific programs in the areas o f planning, budgeting, revenue improvement, procurement, safeguards preparation, operations and maintenance, for example. The Consultant will coordinate and implement the capacity buildingtraining programs. Programs should start within 9 months o f the Consultants mobilization. Local governments will be expected to contribute budget for trainings, with other sources o f fundingfrom provincial and central government. The Consultant should develop partnershipswithNGOs and donors already involved inlocal government capacity building. Programs should be conducted locally to maximize IREPprogram funds. 107 ANNEX12: QUALITY ENHANCEMENT STRATEGY An overarching objective o f the REP is to improve the quality o f all aspects of BRR's infrastructure reconstruction program, including project selection, procurement engineering, construction management, and capacity building, and to ensure long term maintenance o f assets after hand-over o f infrastructure project management to local governments. To ensure that this quality enhancement strategy i s followed throughout the project cycle, the IPMteam will monitor progress, including the quality, quantity, andtiming of investments, against set targets and standards established as part o f its management information system (MIS). This reporting will cover the procurement and execution o f studies, technical designs, implementation o f infrastructure works, and the official procedures for handing over constructed infrastructure to local governments. Details o f the IREP approach to quality enhancement are summarized below. Project selection. The IPM, West Coast, and Nias consultants will assist BRR to assure good practice i s applied in prioritization o f projects so that the sub-projects financed both consist o f and are properly timed with BRR's strategic plan, local development needs, and the capacities o f local governments. An ongoing consultative process will be established to support local governments to ensure close coordination between local government and BRR staff and consistency among various plans. The selection process will be enhanced through the refinement o f established BRR procedures and evaluation criteria. Selection may be based on multiple criteria, such as economic (e.g., SK77 for roads), social and environmental, distribution between districts, connectivity and integration with the housing reconstruction program, and economic development objectives. Procurement and contract awarding. To address the issue o f transparent and efficient procurement, a central procurement team will be established within BRR to facilitate the process o f procuring the various infrastructure projects identifiedandpreparedunder the IREP. The IPMconsultant team will be responsible for assisting this central procurement team to ensure Go1and World Bank standards are followed. The IPM team will also support the PMU's contract management system. Cost-effectiveness will be ensured through competitive bidding for services, works and goods using standard bidding documents that clearly specify standards and quantities, as well as consultants' and contractors' competencies and critical resources required for delivering the services, works and goods to meet contractual quality standards in a timely manner. Anti-corruption support will be included to enhance BRR's already well-developed efforts in this regard. The IPMwill also work with BRR as needed to improve their standard biddingdocuments for works to ensure proper incentives for contractors and independent supervision o f works exist. Design and engineering. Under the IREP, the design o f infrastructure shall meet national and international standards, be cost-effective, and ensure safe, economic, user friendly operations and maintenance. With regardto roads, specific attention is required to road safety and road pavement design to ensure that total transport costs are minimized during the lifespan o f the road. The quality o f design and works has been neglected in some cases, and this topic may require special efforts by the consultants to reach full understanding with and support from government institutions and the construction industry. Introduction o f quality assurance measures, such as incentives, tough penalties, technical audits, extended guarantee and maintenance periods, will be encouraged when suitable. The IMP, West Coast, and Nias consultants will assist BRR to assure national and BRR quality standards for various sub-projects are applied. The quality o f individualprojectpreparation- inparticular the drafting of detailed designs andtender documents, and safeguards, will also be supported. The West Coast, Nias, and Strategic Projects consultants will help relevant government bodies with project preparation, while IPM 108 consultants will assist BRR inspot checking the quality o f project documents and inacquiring the capacity that it needs to assist inthe preparation o f the required safeguard assessments and shdies. Construction management. The quality o f project supervision (including construction quality) will be directly supported inNias and West Coast by this project. The West Coast and Nias consultants will carry out construction management and supervision to ensure the contractual establishment o f contractors on sites with appropriate staffing, equipment, laboratories, quality assurance systems and facilities for contractual capacity and quality implementation o f works. The IPM consultant will further assist BRR to apply high standards in construction supervision by, for example, assisting to set standards for qualifications o f project managers, prepare draft TORS for supervising engmeers, improve upon BRR's standard bidding documents, etc. The IPM team will also assist BRR's quality control and inspectorate to spot check and undertake technical audits during project implementation and hand-over to local governments. The IPMconsultant team will monitor, and perform technical audits to ensure compliance with agreed policies, contracts and standards. It will also verify that foreign and local consultants have appropriate organizational set ups, qualified manpower with sufficient resources and technical skills, and assume contractual liability for the quality and quantity control o f works produced. Capacity building.The REP will support capacity building activities for local and provincial government staff to ensure adequate future operations and maintenance for infrastructure by improving capacity of technical personnel within local governments, as well as their appointed procurement committees and site supervision consultants. Capacity buildingactivities under IREP include the development o f technical skills and professionalism necessary to monitor and control projects effectively. A program to support hands-on, "leaming by doing" training o f local government technical departments and BRR staff will be an integral part o f the REP program. In addition, the PM team will review and prepare options for simplified asset management systems in Nias and the West Coast, which includes an assessment o f financial and human resources needed to support management o f reconstruction assets after hand-over of infrastructure projects from the consultant teams to the local and provincial government staff, The capacity buildingobjectives of the IREPprogram are further elaborated inannex 5. 109 ANNEX 13: PROJECTPREPARATIONAND SUPERVISION Planned Actual Project Concept Review by MDF 2117/06 2117/06 Initial PIDto PIC 5/2/06 5/2/06 Initial ISDS to PIC 5/2/06 5/2/06 Appraisal 3/27/06 3/27/06 BoardlRVP approval 5/26/06 6/30/06 Planned date o f effectiveness 6/26/06 7/15/06 Planned closing date 6/26/09 6/26/09 Key institutions responsible for preparation o f the project: 1. Agency for the Reconstruction o f Aceh and Nias (BRR) 2. World Bank Bank staff and consultantswho worked on the project included: Name Title Unit Aniruddha Dasgupta LeadUrbanPlanner, (Task Team Leader) EASUR MichelKerf Infrastructure Policy Advisor EASIN Jerry Lebo Sr. Transport Specialist EASTR Zoe Elena Trohanis HazardRiskManagement Specialist TUDUR IndiraDharmapatni Sr. Operations Officer (resettlementlsocial) EASUR Yogana Prasta Sr. Disbursement Officer EACIF ImadSaleh LeadProcurement Specialist EAPCO UnggulSuprayitno FinancialManagement Specialist EAPCO Steven Burgess Senior Social Development Specialist EASSD Melinda Good Counsel LEGEA Andre Bald Infrastructure Specialist (consultant) EASUR Angus Mackay EnvironmentAdvisor (consultant) EASEN Lauren Serota Local Government Specialist (consultant) EASSD Patrisia Mulita Governance Specialist EASSD Geoffrey Read Municipal Infrastructure Spec. (consultant) ' EASUR Anders Bonde Transport Adviser (consultant) EASTR John Cameron FinancialManagement Specialist (consultant) EASUR AlunPhillips Infrastructure Specialist (consultant) EASTR John Smithson UrbanDrainage Specialist (consultant) EASUR Kalpana Seethepalli Infrastructure Economist (consultant) EASIN Bank funds expended to date on project preparation: 1. Bank resources: US%85,000 2. Trust funds: US%45,000 3. Total: US%130,000 Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$50,000 2. Estimated annual supervision cost: US$125,000 110 95°E 96°E INDONESIA INFRASTRUCTURE RECONSTRUCTION AND REHABILITATION PROGRAM FOR ACEH AND NIAS PROJECT AREAS SELECTED CITIES AND TOWNS NATIONAL ROADS KABUPATEN CAPITALS PROVINCIAL ROADS PROVINCE CAPITAL 6°N 6°N RAILROADS KABUPATEN BOUNDARIES We Sabang PROVINCE BOUNDARY 97°E This map was produced by the Map Design Unit of The World Bank. Breueh The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Banda Aceh S t r a i t endorsement or acceptance of such boundaries. Lhoknga Sigli o f Seulimeum Taupingraya Bireun Lhokseumawe Jantho Meureudu Lhok Sukon Lamno Keumala M a l a c c a 5°N Lutung Cot Girek Peureulak 5°N Geumpang Calang Takengon Peunaron Langsa Ceulala Uwak Karang Baru Jeuram Meulaboh Pangkalan- Kutanibong Blangkejeren brandan 4°N Lamie Blang Pidie Kutacane Tapaktuan Kandang 3°N Pulau-pulau Kokos Lewak Bakungan Sibigo Simeulue Nasreheu Rundeng Inor Sinabang P. Balee Lasikin Ti. Nibong Singkil Lasia Tuangku Babi Bangkaru 2°N I N D I A N O C E A N 95°E 96°E MYANMAR Northern VIETNAM Mariana INDIA THAILAND Islands (U.S.) CAMBODIA MARSHALL PHILIPPINES Guam (U.S.) ISLANDS SRI LANKA Nias BRUNEI PALAU Area of MALDIVES M A L A Y S I A Map FEDERATED STATES OF MICRONESIA 1°N 1°N 0° SINGAPORE NAURU I N D O N E S I A PAPUA NEW GUINEA SOLOMON TIMOR-LESTE ISLANDS I N D I A N O C E A N 0 10 20 30 40 50 Kilometers 15°S VANUATU IBRD JUL New Caledonia 0 10 20 30 40 50 Miles 34927 Y A U S T R A L I A (France) 2006 97°E 98°E 75°E 90°E 105°E 165°E