BANGLADESH Enhancement and Strengthening of Power Transmission Network in Eastern Region Project Implementation Support Mission (October 20-27, 2019) Aide Memoire (AM) 1. During October 20-27, 2019, a Bank Team1 carried out an Implementation Support Mission of the Enhancement and Strengthening of Power Transmission Network in Eastern Region Project (ESPTNER). This Aide Memoire (AM) summarizes the findings of the project implementation, and agreements reached with the Power Grid Company of Bangladesh (PGCB), the implementing agency, on measures/actions to expedite implementation. This AM has been discussed at the wrap-up meeting on Oct 27, 2019 with Mr. Mamunul Alam, Joint Chief, Power Division as the Chair. OVERALL STATUS AND KEY PROJECT DATA 2. After a late start due to delayed appointment of the Project Director and revision in multiple project sites, the implementation of the project has moved well in the last 6-7 months. The project has 7 works packages and 4 consulting packages. Out of the 7 works packages, bidding documents of four packages (P1, P2, P3, P5), with a total package value of about US$248 million, have been issued. Three of these packages (P1, P3 and P5) are currently under evaluation. The mission expects that the contracts for these four issued packages can be awarded in Q3, FY20. Another bidding package (P6) with a value of about US$72 million has been cleared by the Bank and is expected to be issued soon. The other two packages (P4 and P7) are dependent on the outputs of the consultants’ works under the two consulting packages yet to be awarded. 3. On the consultancy packages, the international individual procurement consultant for bid evaluation under S4 was hired in January 2019 and has since been involved in the evaluation of bids. The consultancy package S1 to hire Owner’s Engineer for construction supervision and preparation of bidding documents for 400kV substation package is expected to be engaged by December 30, 2019. The Expression of Interest (EOI) of the package S2 for developing maintenance roadmap for PGCB is currently being evaluated, while the Terms of Reference (ToR) for the package S3 is being finalized. 4. The project involves land acquisition (LA) for 12 new substation locations. The process of LA has started for some of the sites for these substations. However, some of the other substation sites needed to be relocated due to various reasons and LA process for those sites would start soon. 5. Considering the overall progress of the project so far, implementation performance has been rated at “Moderately Satisfactory (MS)". The key project and performance data are shown in Table 1: Table 1: Project Data & Performance Ratings (as of Oct 20, 2019) Board Approval March 29, 2018 Summary Ratings Current Effectiveness Date July 04, 2018 Project Development Objective (PDO) S Closing Date of IDA Credit December 31, 2022 Implementation Progress MS IDA Credit Amount US$ 450.6 mil eqvlt Procurement S Amount Disbursed US$1.1 mil Financial Management S Safeguard S Ratings: HS=Highly Satisfactory; S=Satisfactory; MS=Moderately Satisfactory; MU=Moderately Unsatisfactory; U=Unsatisfactory; HU=Highly Unsatisfactory 1 Mohammad Anis (Senior Energy Specialist and Task Team Leader), Anthony Granville (Senior Power Engineer), Iqbal Ahmed (Senior Environmental Specialist), Premendra Roy (Technical Consultant), Shariful Islam (Consultant, Social Development), Mohammed Atikuzzaman (Senior Financial Management Specialist), Mohammad Sayeed (Consultant, Disbursement) and Md. Tafazzal Hussein (Program Associate). Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 1|Page KEY POINTS DISCUSSED AND AGREED ACTIONS 6. Revisiting the Provision of Advance Payment: The mission discussed the possibility of increasing the advance payment of each contract from 10% to 15%2 to incentivize contractors for timely delivery of their works and help the initial disbursements from the project. The mission informed PGCB that Bank guideline would allow such increase up to 20% of the contract value as the advance payment are secured through submission of guarantees. PGCB agreed to this suggestion and informed the mission that they would submit the proposal to their Board for approval. 7. Further discussion took place whether such increase would be applied to all the works packages including those for which bids have already been received. After a thorough discussion, it was agreed that such revision would only be applied to those packages that are in the process of bidding. The revision would not be applied to the packages whose submissions of bids have been closed to avoid any unpleasant response from any bidder. Subject to the approval from their Board, PGCB would issue an immediate addendum for works package 2 (P2) whose submission deadline is November 13, 2019. 8. Complete Land Acquisition before Contract Effectiveness: The mission was informed that, the expected approval from the District Commissioner (DC) office is still underway to complete the land lease agreement for Chandina and Choumohni 132/33 kV substations. The LA process for the Korerhat 400/230/132 kV Substation is expected to be completed by the first week of November 2019 PGCB is waiting for the estimated cost of land acquisition from DC’s office for Dagonbhuiyan 132 kV site. The mission visited these four sites during the mission and highlighted the risk whether the LAs and the associated Resettlement Action Plan (RAP) can be completed to allow the relevant contracts to be effective as per the timeline. PGCB gave assurance that all sites will be acquired and handed over to the contractors by the date of contract effectiveness. 9. The issue of possible delays arising from slow payment or non-payment of compensation by the DC was also discussed. This delay may lead to contractors requesting for extension of project closing date due to non-availability of site by the time the contract has been made effective. Therefore, a possible solution was opined that the PGCB could explore the opportunity to include a clause in the contract or bidding document that could envisage a scenario where there is delay in handing over the site, by instructing contractors to concentrate on design and procurement portion of the contract for the first six months after contract effectiveness, until the site may be ready for handover. This does not preclude the condition of handing over the site if it is ready at contract effectiveness. Such clauses may prevent contractors from seeking claims related to non-availability of site at the time of effectiveness at a later stage in contract implementation. 10. Reducing the scope of consultancy for Fixed Asset Register & Inventory and Financial Automation: This consultancy (package S3) support to be funded by PGCB was a subject of discussion due to the gap between the scope and the available funds in the Development Project Proforma (DPP) for this work. DPP estimate was revised down as per the recommendation from the Project Evaluation Committee (PEC) meeting (before Negotiations) to avoid overlapping of these activities with the broader sectoral Enterprise Resource Planning (ERP) implementation project that is being managed by Power Cell with GOB’s fund. Accordingly, the mission explored the possibility of reviewing the scope downwards with the PGCB Finance team to capture the essential components that will meet the project expectations and fund availability as well. The other part of the consultancy was to automate PGCB’s financial reporting system. For the same reason and the possibility that this activity may be included in another PGCB project, this was suggested to be removed. Accordingly, the ToR for this S3 consultancy is being reviewed. 2 PGCB wants to apply this to the foreign part of the contract only, although the mission suggested to apply to both local and foreign parts. The mission agreed to PGCB’s proposal but would be keen to know PGCB Board’s decision on this. Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 2|Page 11. Hiring of RAP implementation Consultant: As agreed during project preparation, PGCB will hire a safeguard implementation firm to support the implementation of RAP, EMP and ESIA. It was agreed then that such consultant would be hired through Power Cell’s Technical Assistance (TA) fund under another ongoing Bank financed project and therefore, this activity was not included in the current DPP of this project. The mission came to know that Power Cell has closed DPP of the other project recently and therefore financing to appoint this consulting firm became uncertain. The mission discussed the possible alternatives and it was agreed that the Project Implementation Unit (PIU) will place a proposal to its Board to hire the firm from its own source. FIDUCIARY MANAGEMENT 12. Procurement Performance: Procurement Performance rating is satisfactory. Procurement activities are moving at full-swing. International individual procurement consultant for bid evaluation is on board. PGCB has issued notification of intention to award to hire the consulting firm for bidding document preparation for 400kV substations and construction supervision of the project. The contract is expected to be signed by November 10, 2019. PGCB has received bids for the major procurement packages. On October 27, 2019, Bank provided its clearance to the final bidding documents for Package -P6 (Design, Supply, Installation, Testing and Commissioning of 230/132 kV GIS SS at Chowmuhoni, 132/33 kV GIS SS at Maijdee, Patiya, Anandabazar, Daganbhuiyan, and Halishahar - US$72 million estimated cost). The bids will be invited (after PGCB Board approval) by November 05, 2019. Detailed agreed timeline and actual status for these turnkey procurement packages and consultancy packages are given in the Annex 2 and 3. 13. Financial Management (FM) Performance: The FM performance rating is satisfactory. The Finance department of PGCB has appointed the vacant General Manager Finance position with a proper accounting background. The Deputy General Manager, Finance position also has similar accounting background and has been assigned for the FM operation of the project on accounting, financial reporting, audit and client connection as per the Bank’s requirement. PGCB is already registered in the World Bank Client Connection and completed the other pre- requisites for client connection including creating user profile for signatories. However, the mission noted that two signatories to the client connection left the organization. Hence, the mission recommends sending the revised Authorized Signatory Letter (ASL) to the Bank through the Ministry and ERD by November 20, 2019. 14. The mission is pleased to note that PGCB has finalized the ToR for consultancy service of fixed asset and inventory identification, verification, impairment test and updating fixed asset register. The TOR now needs to be sent to the Bank for concurrence. As the task requires incessant coordination among different management and operational teams of PGCB in dispersed locations across the country, the mission recommended that PGCB assigns a dedicated person to lead the coordination for this task by December 30, 2019. 15. The mission also noted that PGCB is yet to confirm on how to oversee and settle the project related audit issues during the implementation of the project. Currently, PGCB maintains a Board Audit Committee (BAC) for its corporate level audit matters. As per Financing Agreement (FA), Schedule 2 Section 1A2, PGCB requires to maintain the audit committee under the terms and reference acceptable to the Association to oversee and settle project-related audit issues. Hence, the mission recommended that PGCB decide on whether to form an audit committee for the project or agree to place the project audit matters to the BAC and share the terms of reference with the Bank by 31 December 2019. 16. Disbursements: Only disbursements from the project so far is the front end-fee of US$ 1.10 million deducted on July 10, 2018. Based on the substantial progress of several Turnkey and Services contracts, the project has made the disbursements projections of US$ 22.06 million in FY20. However, the estimated disbursements will increase further if the points mentioned in para 7 can be applied to the remaining packages, subject to approval of the PGCB Board. Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 3|Page SAFEGUARD MANAGEMENT 17. During the preparatory stage, PGCB had prepared ESIA, EMP and RAP for 14 substations and relevant transmission lines networks under the project. Among 14 substations, Mirarsharai and Halishahar substations do not require LA as these are owned by PGCB and Export Processing Zone (EPZ) respectively. For the remaining 12 substations, LA process has already been started. DC office served section 4 notice for 4 proposed substations land under ARIPA3 2017. The team also visited proposed substation locations of Chandina, Dagonbhuiyan, Chowmuhony and Korerhat on October 21, 2019 and all lands were observed to be agricultural. It was informed that proposed substation locations at Laksham, Chandina and Koshba were changed, hence PGCB is required to update the relevant safeguard documents. It was decided that PGCB safeguard unit would update the safeguard documents by themselves based on the training provided and further guidance from the Bank. The Bank safeguard team provided environmental and social safeguard training to the project team on October 14, 2019. 18. The mission emphasized that PGCB safeguard unit shall conduct consultation meetings with affected households and they must inform the grievance procedures to affected people as land acquisition process through relevant DCs for most of the proposed substation sites is in process. It was agreed that PGCB would form the Grievance Redress Committee (GRC) by November 15, 2019. Till then, PGCB project team must resolve the grievance, if received. Once the construction contractors are hired, PGCB safeguard unit will provide training to the contractors on environmental and social safeguards, labor management and Grievance Redress Mechanism (GRM). NEXT MISSION: April 2020. Annex I: Summary of Agreed Actions SL Actions Responsibility Agreed Timeline 1 Issue immediate addendum for P2 to increase Advance PGCB November 07, 2019 Payment provision from 10% to 15% 2 Sign Owner’s Engineer Contract PGCB December 30, 2019 3 Get PGCB Board approval to hire RAP PGCB December 15, 2019 implementation consultant 4 Review and clear the TOR of fixed asset register WB November 10, 2019 5 Decide on action for covenant compliance on audit PGCB December 31, 2019 committee 6 Revised Authorized Signatory Letter (ASL) PGCB November 20, 2019 7 Update Client Connection with revised ASL WB November 30, 2019 8 Formation of Grievance Redressal Committee PGCB November 15, 2019 9 Update RAP and ESIA PGCB December 15, 2019 3 Acquisition and Requisition of Immovable Property Act Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 4|Page Annex II: List of Officials Met Power Division, Ministry of Power, Energy and Mineral Resources (MPEMR) 1. Mr. Rahmat Ullah Mohd. Dastgir, Additional Secretary, Power Division 2. Mr. Sayed Mamunul Alam, Joint Chief (Planning) 3. Dr. Shah Md. Helal Uddin, Deputy Chief, Power Division 4. Tania Khan, Deputy Chief, Power Division 5. Mr. Mostafa Kamal, Sr. Assistant Chief, Power Division Power Grid Company of Bangladesh Ltd. (PGCB) 6. Mohammad Shafayet Hossain, Executive Director (HRM) and then Acting Managing Director 7. Mr. A.K.M. Gause Mohiuddin Ahmed, Chief Engineer & Project Director, ESPNER 8. Mr. Tanver Ahmed, Deputy General manager (Project Finance) 9. Mr. Nasim Zafar, Assistant Engineer Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 5|Page Annex III: Turnkey Packages Date/ Expecting Estimate Date/ Expecting Date/ Date/ DPP Value Date Package in US Date of Bid Expecting Expecting Date Package Name (Taka In International No. Dollar Submission Date of of Contract Lac) Bid/ Tender (million) Deadline Evaluation Singing Invitation Design, Supply, Installation, Testing & 1 30,562 35.96 30-Jul-2019 22-Oct-2019 19-Jan-2020 19-Mar-2020 Commissioning of 400 kV and 132 kV Lines Design, Supply, Installation, Testing and 2 115,462 135.84 6-Aug-2019 6-Nov-2019 30-Jan-2020 9-Apr-2020 Commissioning of 230 kV Lines Design, Supply, Installation, Testing & 3 12,262 14.43 28-May-2019 3-Sep-2019 24-Nov-2019 26-Jan-2020 Commissioning of 400 kV and 132 kV Lines Design, Supply, Installation, Testing and Commissioning of new 400/230/132 kV GIS SS at 4 65,756 77.36 2-Jan-2019 12-Mar-2020 14-Jun-2020 16-Aug-2020 Korerhat and Upgradation of 230/33 kV substation to 400/230/33 kV GIS at Mirsharai Design, Supply, Installation, Testing and Commissioning of 230/132 kV GIS SS at Kachua, 5 52,341 61.58 2-May-2019 5-Sep-2019 12-Dec-2019 13-Feb-2020 132/33 kV GIS SS at Muradnagar, Lakhsam, Chandina, Koshba, Laxmipur Design, Supply, Installation, Testing and Commissioning of 230/132 kV GIS SS at 6 Chowmuhoni, 132/33 kV GIS SS at Maijdee, 61,051 71.82 14-Nov-2019 22-Jan-2020 31-Mar-2020 14-Jun-2020 Patiya, Anandabazar, Daganbhuiyan, and Halishahar Design, Supply, Installation, Testing and 7 Commissioning of Computerized maintenance 16,577 19.50 5-Mar-2020 5-May-2020 16-Jul-2020 24-Sep-2020 management system Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 6|Page Annex IV: Consultancy Packages DPP Total Date/ Date/ Estimate Date/ Date/Expected Date/Expected Estimate Expecting Expecting US Dollar Expecting Date of Date/Expected Date of SL No. Package Name & No. Value Date of Date of EoI according Date of Proposal Date of Contract Including EoI Submission to STEP RFP issue Opening Date Evaluation Singing 15% VAT Invitation Deadline S-1 Consultancy service for the EMTP study, bid document 19-Aug- 31-Jan- 1 preparation& clarification, design 3014.40 3,300,000.00 4-Oct-2018 2-Apr-2019 22-Aug-2019 31-Dec-2019 2018 2019 checking, supervision for 400kV substation S-2 Consultancy service for 4-Aug- 22-Sep- 10-Nov- 2 computerized maintenance 932.06 1,000,000.00 30-Dec-2019 25-Feb-2020 25-Apr-2020 2019 2019 2019 management system S-3 Consultancy service for fixed 15-Nov- 15-Jan- 15-Apr- 3 assets & inventory and computerized 503.63 550,000.00 15-Jun-2020 30-Jun-2020 31-Jul-2020 2019 2020 2020 financial management system S-4 Independent procurement 4 164.99 200,000.00 Direct Procurement (Single Source Selection) 21-Jan-2019 consultant Enhancement and Strengthening of Power Transmission Network in Eastern Region Project 7|Page