Issyk-Kul Wastewater Management Project (RRP KGZ 50176)

Project Number: 50176-002 Loan and Grant Numbers: {LXXXX; GXXXX} October 2018

Kyrgyz Republic: Issyk-Kul Wastewater Management

Project

Project Administration Manual

http://www.adb.org/Documents/RRPs/?id=50176-002-3

ABBREVIATIONS

ADB – Asian Development Bank DDWSSD – Department of Drinking Water Supply and Sewerage

Development Gosstroy – State Agency for Architecture, Construction, Housing and

Public Utilities under the Government of the Kyrgyz Republic

IWMP – Issyk-Kul Wastewater Management Project PIO – Project Implementation Office PMC – Project Management Consultants PMO – Project Management Office PRGIKO – Office of Plenipotentiary Representative of the

Government in Issyk-Kul Oblast PSC – Project Steering Committee

CONTENTS

I. PROJECT DESCRIPTION 3

II. IMPLEMENTATION PLAN 3

A. Project Readiness Activities 3 B. Overall Project Implementation Plan 2

III. PROJECT MANAGEMENT ARRANGEMENTS 3

A. Project Implementation Organizations: Roles and Responsibilities 3 B. Key Persons Involved in Implementation 5 C. Project Organization Structure 6

IV. COSTS AND FINANCING 9

V. FINANCIAL MANAGEMENT 19

VI. PROCUREMENT AND CONSULTING SERVICES 25

VII. SAFEGUARDS 26

VIII. GENDER AND SOCIAL DIMENSIONS 28

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 32

X. ANTICORRUPTION POLICY 43

XI. ACCOUNTABILITY MECHANISM 43

XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 43

PROCUREMENT PLAN (DRAFT) 44

BASIC DATA 44

A. Background 50 B. Objectives of the Assignment 50 C. Scope of Services 50

II. DESIGN & SUPERVISION CONSULTANTS (DSC) 72

A. Introduction 72 B. General Tasks 73 C. Sector Specific Scopes of Work 74 D. Surveys and Investigations 75 E. Deliverables 76 F. Client Support 76 G. Staffing and Facilities 76

III. INSTITUTIONAL DEVELOPMENT CONSULTANTS (IDC) 80

I. MANAGEMENT RESPONSIBILITY FOR PREPARING PROJECT FINANCIAL STATEMENTS 86

II. OBJECTIVES 86

III. AUDITING STANDARDS 86

IV. PROJECT FINANCIAL REPORTING FRAMEWORK 87

V. AUDIT DELIVERABLES 87

A. Audited Project Financial Statements 87 B. Reasonable Assurance Opinion Over the Use of Loan Proceeds And Compliance

With Financial Covenants 88 C. Management Letter 88 D. Specific Considerations 88

VI. OTHER MATTERS 89

A. Statement of Access 89 B. Independence 90 C. Auditor Experience 90

Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with the policies and procedures of the government and Asian Development Bank (ADB). The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Department of Drinking Water Supply and Sewerage Development (DDWSSD) under the State Agency for Architecture, Construction, Housing and Public Utilities under the Government of the Kyrgyz Republic (Gosstroy) (executing agency) and Office of the Plenipotentiary Representative of the Government in Issyk-Kul Oblast (PRGIKO) (implementing agency) are wholly responsible for the implementation of ADB-financed projects, as agreed jointly between the borrower and ADB, and in accordance with the policies and procedures of the government and ADB. ADB staff is responsible for supporting implementation including compliance by DDWSSD and PRGIKO of their obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures. At loan negotiations, the borrower and ADB shall agree to the PAM and ensure consistency with the loan and grant agreements. Such agreements shall be reflected in the minutes of the loan negotiations. In the event of any discrepancy or contradiction between the PAM and the loan and grant agreements, the provisions of the loan and grant agreements shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP), changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval, they will be subsequently incorporated in the PAM.

I. PROJECT DESCRIPTION

1. The project will improve wastewater services in two lakeshore cities of Issyk-Kul Lake, located in the eastern region of the Kyrgyz Republic. It will upgrade and expand existing wastewater systems, build institutional capacity, and strengthen the sustainability of the water supply and sanitation (WSS) utilities in Balykchy and Karakol.1 2. The project is aligned with the following impact: improved living standards, health, and economy in the Issyk-Kul Region improved.2 The project outcome is an improved and expanded access to reliable, sustainable, and affordable wastewater services in Balykchy and Karakol. 3. The project outputs are (i) improved wastewater systems in Balykchy and Karakol, (ii) strengthened institutional capacity, and (iii) improved septage management services and sanitation and increased hygiene awareness.

II. IMPLEMENTATION PLAN A. Project Readiness Activities

Table 1: Project Readiness Timeline

Indicative Activities 2018-2019 Responsible Unit

Jun Jul Aug Sep Oct Nov Dec Jan Feb

Advance contracting actions

∆ ∆ ∆ ∆ ADB, DDWSSD

Establish project implementation arrangements

∆ ∆ ADB, DDWSSD

ADB Board approval ∆ ADB

Loan signing

∆ ADB, DDWSSD, MOF

Government budget inclusion

∆ MOF

Government legal opinion provided

∆ MOJ

Loan effectiveness ∆ ADB

ADB = Asian Development Bank; DDWSSD = Department of Drinking Water Supply and Sewerage Development; MOF = Ministry of Finance; MOJ = Ministry of Justice Source: Asian Development Bank.

1 ADB 2016. Project Preparatory Technical Assistance to Second Issyk-Kul Sustainable Development Project. Manila. 2 Government of the Kyrgyz Republic. 2016. Strategy for the Development of Drinking Water Supply and Sanitation

Systems for Human Settlements in the Kyrgyz Republic up to 2026’. Bishkek

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B. Overall Project Implementation Plan

Table 2: Project Implementation Plan

DMF = design and monitoring framework Source: ADB estimates

O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

A. DMF

Output 1: Balykchy and Karakol wastewater systems improved

1.1 Issuance of request for proposal for Project Management Consultants

through advance contracting

1.2 Mobilize Project Management Consultants

1.3 Mobilize Project Design and Superv ision Consultants

1.4 Commence design-build contract procurement (CW#1)

1.5 Award design-build contract

1.6 Commence civ il works contract procurement (CW#2)

1.7 Award civ il works contract(s)

1.8 Complete equipment procurement

1.9 Complete civ il works contracts

Output 2: Institutional capacity strengthened

2.1 Mobilize consultants

2.2 Formulate corporate business plans

2.3 Design and prepare training modules

2.4 Organize international twinning arrangement

2.5 Deliver trainings

2.6 Submit final reports

Output 3: Septage management improved and hyiene awareness

increased

3.1 Conduct first sanitation and hygiene awareness campaign

3.2 Septage management programs developed

B. Management Activities

Implementation of environment management plan and gender action plan

PMO lead implementation of communication strategy

Inception, annual and mid-term rev iew of the project

Project completion report

Indicative Activities Q2 Q3 Q4

2024

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2019 2020

Q4Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3Q4

2018 2021 2022 2023

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III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations: Roles and Responsibilities 4. The Issyk-Kul Wastewater Management Project (IWMP) will have a Project Steering Committee (PSC) to oversee and provide overall guidance on the implementation of the project. The Director of the State Agency for Architecture, Construction, Housing and Public Utilities under the Government of the Kyrgyz Republic (Gosstroy) will be the Chairperson of the PSC. The representatives from the Ministry of Finance, the Prime Minister’s Office, the Ministry of Health, the State Agency for Environmental Protection and Forestry, relevant Ministries, other state entities and Issyk-Kul Oblast will serve as members of the PSC. The Project Director of the Project Management Office (PMO) will be the PSC Secretary. The PSC will provide policy direction and strategic oversight and serve as a focal point for interagency coordination on project-related matters. The chairperson may invite other persons, as necessary, to attend PSC meetings. The PSC will meet at least quarterly. The PSC will, among other responsibilities (i) advise on key sector reform milestones, (ii) review annual and quarterly performance reports on the sector roadmap reform and implementation progress of the project, and (iii) advise on or make policy-level decisions required to facilitate timely project execution. The Department of Drinking Water Supply and Sewerage Development (DDWSSD) under the State Agency for Architecture, Construction, Housing and Public Utilities under the Government of the Kyrgyz Republic (Gosstroy) will be the executing agency (EA) of the project and the Office of Plenipotentiary Representative of the Government in Issyk-Kul Oblast (PRGIKO) will be the implementing agency (IA). A Tender Committee will be established in accordance with the Law of KGZ on Public Procurement (2015), to review and approve selection of consultants and procurement of goods and civil works, it shall consist of representatives from EA, IA and relevant government ministries. 5. The DDWSSD will establish a PMO and a team of Project Management Consultants (PMC) that will support the EA. Reporting directly to the DDWSSD, the PMO’s responsibilities include procurement, contract and financial management, project administration, and safeguards compliance and reporting. The PMO will be headed by a PMO Director who will be recruited by the EA through competitive selection process acceptable by ADB. The PMC will comprise of specialists in contract management, procurement, safeguards, gender, accounting, monitoring and evaluation. Where necessary, ADB will support the government to facilitate the recruitment of PMC staff. ADB will support the government to place an international technical advisor to provide technical support on project implementation. The PMO Director will ensure that the implementation of the project is consistent with the environmental and social safeguards frameworks and plans of ADB as stipulated in the loan agreement. PMO Director will also ensure that implementation of the project is consistent with ADB’s Procurement Guidelines, Disbursement Handbook, and ADB’s Anticorruption Policy. 6. PRGIKO, as IA, will be responsible for oblast-level project and safeguard compliance coordination. Two project implementation offices (PIOs) will be established by the IA in each vodokanal to manage day-to-day project implementation. The IA will coordinate with the EA and relevant government agencies on the project’s compliance with the safeguard requirements (environment, land acquisition and resettlement) of the government and ADB. The IA will have one representative in the Tender Committee to review and approve the consultant selection and procurement of works and goods. The PIOs will support the cities of Balykchy and Karakol in the implementation of the civil works components of the project. They will dually report to the PRGIKO and the PMO. The PIOs will each be led by a manager to oversee the day-to-day project implementation. The PIO Manager will report to the PMO Director and city mayors and will be

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assisted by a supervision engineer. The PIOs will be responsible, among others, for (i) managing the detailed surveys, investigations and engineering designs of the civil works; (ii) providing updates on Environment Initial Assessment and Environmental Management Plan; (iii) administering civil works contract and ensure the quality execution of the contract; (iv) certifying the civil works interim progress certificate and transmit to PMO for preparation of withdrawal applications to ADB; and (v) serving as the focal for the Grievance Redress Systems in vodokanals, and resolve any potential complaints in the field. The PIOs will be supported by the PMC hired by the PMO.

Table 3: Key Roles and Responsibilities

Project Implementation Organizations

Management Roles and Responsibilities

Ministry of Finance ➢ Representative of Borrower

• Facilitate negotiation, signing and execution of the financing agreement.

• Expedite project implementation and minimize cost by timely allocating and making available counterpart funds, approving payment to contractors, goods and service providers.

Department of Drinking Water Supply and Sewerage Development under the State Agency for Architecture, Construction and Public Utilities under the Government of the Kyrgyz Republic

➢ Executing Agency

• Responsible for overall coordination and implementation of the project.

• Serve as secretariat for the project Steering Committee. Prepare progress and other reports to the Steering Committee for decision making and ensure the decisions are fully complied with.

• Establish PMO and a team of PMC for project coordination, account maintenance, loan disbursement, safeguards implementation, audit and reporting to ADB. A PMO Director will be appointed and will manage the PMC inputs.

• Oversee procurement of civil works and consultant recruitment activities.

• Implement the project land acquisition and resettlement plan, including environmental safeguards due diligence, in accordance with ADB’s Safeguard Policy Statement (2009) and local requirements. PMO will submit to ADB required safeguards monitoring reports during project implementation.

• Prepare and submit withdrawal applications to ADB. PMO Director will be responsible in managing the Advance Fund.

• Submit annual audited project financial statements to ADB.

• Prepare and submit consolidated quarterly monitoring report to ADB.

• Coordinate availability and timely release of government counterpart funds.

Office of Plenipotentiary Representative of the Government in Issyk-Kul Oblast

➢ Implementing Agency

• Establish PIOs at the two vodokanals in Balykchy and Karakol. The vodokanals, through the PIO, will be responsible for the day-to-day operations of the project, specifically, for monitoring of construction, including monitoring and updating of compliance with safeguards requirements.

• PIOs will report to PMO and coordinate with IA on safeguard related activities, establish the Grievance Redress Systems in vodokanals, and resolve any potential complaints in the field.

• Will manage, through the PIOs, the detailed surveys, investigations and engineering design, administer the civil works contracts and ensure the quality control of contract execution.

• PIOs will certify the civil works interim progress certificate and transmit to PMO for preparation of withdrawal applications to ADB. Act as focal for reviewing changes to the contract in coordination with the construction supervision consultants.

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• As owners of completed facilities under the project, the vodokanals will be responsible for operations and maintenance functions upon transfer of these facilities.

Project Steering Committee

➢ Act as oversight body for the project.

• Provide advice, as necessary, on resolution of issues at national or policy level.

• Meets at least once every three months to review the project progress and decide matters on relevant policies on water supply and sanitation, and institutional effectiveness in the Kyrgyz Republic.

• Facilitate coordination with other government agencies, if necessary.

Tender Committee ➢ Review and approval body for selection of consultants and procurement of goods and civil works.

• Consists of representatives from EA, IA and relevant government ministries.

Asian Development Bank ➢ Provide financing

• Guide the executing agency, implementing agency, PMO, PMC and PIOs during project implementation.

• Review and approve all procurement and consultant recruitment actions.

• Conduct regular loan review missions, including midterm and project completion missions.

• Monitor compliance with all loan covenants, including safeguards.

• Review annual audit reports and follow-up on audit recommendations. ADB = Asian Development Bank; EA = executing agency; IA = implementing agency; PIO = project implementation office; PMC = project management consultants; PMO = project management office Source: Asian Development Bank

B. Key Persons Involved in Implementation Executing Agency

Department of Drinking Water Supply and Sewerage Development under the State Agency for Architecture, Construction and Public Utilities under the Government of the Kyrgyz Republic

Officer's Name: Askarbek Suleimanovich Toktoshev Position: Director Telephone: +996-312-610318 Email address: toktoshev53@mail.ru Office Address: 28 Manas Avenue, Bishkek

Implementing Agency Office of Plenipotentiary Representative of the Government in Issyk-Kul Oblast

Officer's Name: Damir Cherikovich Monoldorov Position: First Deputy of the Plenipotentiary of the Government of the KR in Issyk-Kul Oblast Telephone: +996-392-250001 Email address: polpred.ik9@mail.ru Office Address: Karakol City, Yusup Abdrakhmanov Street, 105

ADB Urban Development and Water Division

Staff Name: Yong Ye Position: Director Telephone: +632 632 4444 Email address: yyong@adb.org

Team Leader Staff Name: Ruoyu Hu Position: Urban Development Specialist Telephone: +632 632 4444 Email address: rhu@adb.org

mailto:toktoshev53@mail.rumailto:polpred.ik9@mail.rumailto:yyong@adb.orgmailto:rhu@adb.org

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C. Project Organization Structure

Asian Development Bank

Ministry of Finance (Borrower),

(on behalf of the Government)

Balykchy Vodokanal

Karakol Vodokanal

Construction Supervision Consultants

Loan Agreement

Project Management Office supported by Project

Management Consultants

Consultants

Department of Drinking Water Supply and Sewerage Development

under the State Agency for Architecture,

Construction and Public Utilities (Executing Agency)

Contractors

Project Implementation

Office

Project Implementation

Office

Plenipotentiary Representative of the Govt

in Issyk-Kul Oblast (Implementing Agency)

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Organogram of PMO

Office administrative support staff will be engaged to support the PMO.

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PMO, PMC and PIO Functions and Responsibilities

ADB = Asian Development Bank, DDWSSD = Department of Drinking Water Supply and Sewerage Development; LARP = land acquisition and resettlement plan; PIO = project implementation office; PMC = project management consultants; PMO = project management office. Source: Asian Development Bank.

PMO under DDWSSD supported by PMC PMO Director Project Management Consultants:

Chief Technical Advisor (International) Procurement Specialists (International & National) Design-Build Contracts Specialist (International) Environment Specialists (International and National) Social Safeguards Specialist (Resettlement and Gender) (National) Lawyer (National) Financial Manager (National) Disbursement Specialists (National) Monitoring and Evaluation Specialist (National) Translator (National) Secretarial Support (National)

PIO under Balykchy PIO Director/Chief Engineer Office Manager/Translator

Procurement - Submit bidding documents and bid evaluation report to ADB for civil works and goods (equipment) procurement - Submit consultant recruitment form requests to ADB

PIO under Karakol PIO Director/Chief Engineer Office Manager/Translator

Finance and Audit - Maintain financial records and documents relating to the Project, including PMO and PIO operations - Submit withdrawal applications to ADB - Submit annual audited project financial statements to ADB

Reporting - Prepare and submit quarterly project progress reports to ADB - Submit safeguards monitoring reports (Environment and LARP) to ADB

Contracts Management - Monitor implementation of contracts of contractors and consultants - Coordinate requests for contract variation with PMO - Oversee overall construction progress and consultants’ inputs - Oversee delivery and acceptance of goods (equipment) - Verify and confirm the civil works’ interim progress certificates and submit to PMO for preparation of withdrawal applications to ADB

Safeguards - Implement and monitor Environment Management Plan during construction - Implement and monitor Land Acquisition and Resettlement Plan and Gender Action Plan

Plenipotentiary Representative of the

Govt in Issyk-Kul Oblast

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IV. COSTS AND FINANCING 7. The total cost of the project is $41.82 million, inclusive of price and physical contingencies, taxes and duties, and financial charges. The government has requested (i) a concessional loan of $23.68 million from ADB’s ordinary capital resources and (ii) a grant not exceeding $12.84 million from ADB’s Special Funds resources (Asian Development Fund) to help finance the project. The loan will have a 32-year term, including a grace period of 8 years; an interest rate of 1.0% per annum during the grace period and 1.5% per annum thereafter; and such other terms and conditions set forth in the financing agreements. The government will provide counterpart financing of about $5.30 million including taxes and duties. 8. The summary financing plan is in Table 6. The ADF (grant) will finance civil works, detailed design and supervision, consulting services, public awareness, land acquisition and resettlement. It will also finance project implementation support, specifically (i) costs of the project management office (PMO) in the executing agency and project implementation offices (PIOs) in the implementing agency, including staff salaries and operating costs; and (ii) social charges on staff salaries. The COL (loan) will finance civil works, equipment and machinery, and interest during implementation. The government will finance 100% of taxes and duties, and 8.4% of project implementation support through in-kind contributions. Detailed cost estimates by expenditure category and financier are in Sections C and D.

Cost Estimates Preparation and Revisions

9. The cost estimates were prepared based on the preliminary design and technical analysis by the project preparatory technical assistance consultants and were refined by ADB project team and DDWSSD during fact-finding. The cost estimates were based on current market prices. The final estimates were reviewed by ADB and endorsed by DDWSSD.

Key Assumptions

10. The following key assumptions underpin the cost estimates and financing plan:

(i) Price contingencies used an average of 1.6% on foreign exchange costs and 4.9% on local currency costs and includes provisions for potential exchange rate fluctuations under the assumption of a purchasing power parity exchange rate. The exchange rate used as of 10 June 2018 is KGS 68.3 = $1.00.

(ii) Price contingencies and exchange rates based on expected cumulative inflation

over the implementation period are as follows:

Table 4: Escalation and Exchange Rates for Price Contingency Calculation Item 2019 2020 2021 2022 2023 2024 Average

Escalation Rates (%) Foreign rate of price inflation 1.5% 1.5% 1.6% 1.6% 1.6% 1.6% 1.6% Domestic rate of price inflation 4.5% 5.0% 5.0% 5.0% 5.0% 5.0% 4.9% Exchange Rates (KGS) Rates actually used 69.3 71.5 74.0 76.4 79.0 81.6 75.3

Source: Asian Development Bank.

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Summary Cost Estimates and Financing Plan

Table 5: Summary Cost Estimates ($ million)

Item Amounta

A. Base Costb

1. Wastewater collection and treatment systems rehabilitated and operational 30.41

2. WSS institutional capacity enhanced and project implementation capacity improved 5.76

3. Septage management and public awareness improved 0.91

Subtotal (A) 37.08

B. Contingenciesc 4.09

C. Interest During Construction:d 0.65

Total (A+B+C) 41.82 a Includes taxes and duties of $4.80 million. Such amount does not represent an excessive share of the project cost.

The government will finance taxes and duties by contribution. b In mid-2018 prices as of May 2018. c Physical contingencies computed at 10% of base cost estimates for civil works and equipment. Price contingencies

used an average of 1.6% on foreign exchange costs and 4.9% on local currency costs and includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.

d Includes interest for the Asian Development Bank loan at 1% per year. Source: Asian Development Bank estimates.

Table 6: Summary Financing Plan

Source Amount

($ million) Share of Total

(%)

Asian Development Bank Concessionary Ordinary Capital Resources Lending (COL)

23.68 56.6 Asian Development Fund Grant (ADF) 12.84 30.7

Government 5.30 12.7 Total 41.82 100.0

Source: Asian Development Bank estimates.

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Detailed Cost Estimates by Expenditure Category

Table 7: Detailed Cost Estimates by Expenditure Category

Item

(KG SOM million) ($ million) % of Total Base Cost Foreign

Exchange Local Currency Total Cost

Foreign Exchange

Local

Currency Total Cost

I. Investment costs A. Civil Works, Equipment and machinery 777.55

1,088.52 1,866.07 11.38 15.94 27.32 65.33

B. Detailed design and supervision 110.99 142.06 253.05 1.63 2.08 3.71 8.86

C. Project implementation support/a 28.51 134.00 162.52 0.42 1.96 2.38 5.69

D. Consulting services 60.79 44.33 105.11 0.89 0.65 1.54 3.68

E. Public awareness campaign 4.10 5.25 9.34 0.06 0.08 0.14 0.33

F. Resettlement and land acquisition 0.00 136.60 136.60 0.00 2.00 2.00 4.78

Total BASELINE COSTS 981.93 1,550.76 2,532.69 14.38 22.71 37.08 88.67

II. Contingencies

A. Physical 76.53 109.36 185.89 1.12 1.60 2.72 6.51

B. Price 39.92 53.54 93.45 0.58 0.78 1.37 3.27

Total contingencies (II) 116.44 162.90 279.34 1.70 2.38 4.09 9.78

III. Financial charges during implementation

Interest during construction 44.22 0.00 44.22 0.65 0.00 0.65 1.55

Total Project Cost (I+II+III) 1,142.60 1,713.66 2,856.26 16.73 25.09 41.82 100.00

Notes: Numbers may not sum precisely because of rounding. a/ Includes staff salary, cost of office operations, land travel, per diem, vehicle, office equipment and furniture. Sources: Asian Development Bank and Department of Drinking Water Supply and Sewerage Development estimates.

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Allocation and Withdrawal of ADB Loan and Grant Proceeds

Table 8: Allocation and Withdrawal of ADB Grant Proceeds

Number Item

Total Amount Allocated for

ADB Financing

Basis for Withdrawal from the Grant Account

($ equivalent)

1 Civil works, equipment and machinery 3,830,000 14.02% of total expenditure claimed

2 Design and Supervision and Consulting Services (including public awareness campaign)

4,720,000 100.00 of total expenditure claimed*

3 Project Implementation Support 2,000,000 100.00% of total expenditure claimed*

4 Resettlement and land acquisition 1,610,000 100% of total expenditure claimed*

5 Unallocated* 680,000

Total 12,840,000

* Exclusive of taxes and duties imposed within the territory of the Recipient.

Table 9: Allocation and Withdrawal of ADB Loan Proceeds

Number Item

Total Amount Allocated for

ADB Financing ($)

Basis for Withdrawal from the Loan Account

1 Civil works, equipment and machinery (including equipment for PIMS)

20,130,000 73.68% of total expenditure claimed

2 Interest Charge 650,000 100% of total amount due

3 Unallocated 2,900,000

Total 23,680,000

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Detailed Cost Estimates by Financier

Table 10: Detailed Cost Estimates by Financier

Item

ADB Grant ADB Loan GOV Total Cost

Amount % of Cost

Category Amount

% of Cost

Category Amount

% of Cost

Category Amount

Duties and

Taxes

I. Investment costs

A. Civil works, equipment and machinery

3.83

14.02

20.13

73.68

3.36

12.30

27.32

3.36

B. Detailed design and supervision

3.25

87.70

0.00

-

0.46

12.30

3.71

0.46

C. Project implementation support

2.00/a

84.04

0.00

-

0.11/b

4.62

2.38

11.34

D. Consulting services 1.35

87.70

0.00

-

0.19

12.30

1.54

0.19

E. Public awareness campaign

0.12

87.70

0.00

-

0.02

12.30

0.14

0.02

F. Resettlement and land acquisition

1.61

100.00

0.00

-

0.00

-

1.61

0.00

Total BASELINE COSTS (I) 12.16

33.10

20.13

54.29

4.47

12.16

36.70

4.29 II. Contingencies 0.68

15.42

2.90

70.83

0.83

18.93

4.47

0.51

III. Financial charges during implementation -

-

0.65

100.00

-

-

0.65

-

Total Project Cost (I+II+III) 12.84 30.70 23.68 56.62 5.30 12.69 41.82 4.80

ADB = Asian Development Bank, ADF = Asian Development Fund, COL = concessional ordinary capital resources lending, GOV = Government Note: Numbers may not sum precisely because of rounding. a/ Includes salary for PMO and PIO staff, consultants recruited for PMO and PIO support. b/ Includes cost of office operations, public utilities, office equipment and furniture.

Sources: Asian Development Bank and Department of Drinking Water Supply and Sewerage Development estimates.

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Detailed Cost Estimates by Outputs

Table 11: Detailed Cost Estimates by Outputs ($ million)

Item

Total Cost

Output 1 Output 2 Output 3

Amount % of Cost

Category Amount

% of Cost

Category Amount

% of Cost

Category

I. Investment costs A. Civil works, equipment and machinery 27.32 26.71 97.76 0.13 0.47 0.48 0.77

B. Detailed design and supervision 3.71 3.71 100.00 - - - -

C. Project implementation supporta/ 2.38 - - 2.38 100.00 - -

D. Consulting services 1.54 - - 1.25 81.48 0.29 18.52

E. Public awareness campaign 0.14 - - - - 0.14 100.00

F. Resettlement and land acquisition 1.61 - - 1.61 100.00 - -

Total BASELINE COSTS (I) 36.70 30.42 82.02 5.37 15.54 0.91 2.44 II. Contingencies

Physical 3.10 3.05 98.39 - - 0.05 1.61

Price 1.37 1.37 100.00 - - - -

Total Contingencies (II) 4.47 4.42 98.93 - - 0.05 1.07

III. Financial charges during implementation

Interest During Construction 0.65 0.65 100.00 - - - -

Commitment Charges - - - - - - -

Total Financial Charges (III) 0.65 0.65 100.00 - - - -

Total Project Cost (I+II+III) 41.82 35.49 84.69 5.37 12.84 0.96 2.27

Sources: Asian Development Bank and Department of Drinking Water Supply and Sewerage Development estimates. a/ Includes staff salary, cost of office operations, land travel, per diem, vehicle, office equipment and furniture.

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Detailed Cost Estimates by Year

Table 12: Detailed Cost Estimates by Year ($ million)

Item Total Cost Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

I. Investment costs

A. Civil works, equipment and machinery 27.32 0.00 1.41 3.27 7.53 12.48 2.63

B. Detailed design and supervision 3.71 0.00 0.74 0.74 0.74 0.74 0.74

C. Project implementation supporta/ 2.38 0.15 0.48 0.48 0.48 0.48 0.33

D. Consulting services 1.54 0.00 0.42 0.28 0.28 0.28 0.28

E. Public awareness campaign 0.14 0.00 0.01 0.07 0.05 0.00 0.00

F. Resettlement and land acquisition 1.61 0.00 0.81 0.81 0.00 0.00 0.00

Total BASELINE COSTS (I) 36.70 0.15 3.87 5.64 9.08 13.97 3.98

II. Contingencies 4.47 0.00 0.23 0.54 1.23 2.04 0.43

III. Financial charges during implementation 0.65 0.00 0.01 0.03 0.08 0.19 0.34

Total Project Cost (I+II+III) 41.82 0.15 4.11 6.20 10.39 16.21 4.75

Total Project Cost % 100.00 0.36% 9.83% 14.83% 24.85% 38.75% 11.36%

Sources: Asian Development Bank and Department of Drinking Water Supply and Sewerage Development estimates. a/ Includes staff salary, cost of office operations, land travel, per diem, vehicle, office equipment and furniture.

16

Contract and Disbursement S-Curve

Table 13: Contract Awards and Disbursements for Grant

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2019 0.3000 0.00 0.3000 0.1500 0.1500

2020 5.6500 0.4360 4.3400 1.0340 11.4600 0.3000 0.3650 0.1849 0.4340 1.2839

2021 0.4000 0.4000 0.2500 0.1500 1.5259 1.9259

2022 0.0000 0.9000 1.1600 0.1500 0.9998 3.2098

2023 0.0000 0.1500 1.7001 0.1500 2.8789 4.8790

2024 0.0000 0.1100 0.3000 0.3307 0.4000 1.1407

2025 0.6800 0.6800 0.1000 0.0507 0.1000 0.2507

12.8400 12.8400

Disbursements (in $ million)Contract Awards (in $ million)

Total Total

Year

17

Table 14: Contract Awards and Disbursements for Loan

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2019 0.0000 0.0000

2020 6.2689 9.8200 16.0889 0.6290 0.9403 0.7987 2.3680

2021 4.04108 4.0411 0.9820 1.4730 0.9820 0.1150 3.5520

2022 0.0000 1.5000 2.4133 0.9820 1.0247 5.9200

2023 0.0000 1.6089 2.4133 2.0130 2.9632 8.9984

2024 0.0000 0.3000 0.3000 0.4200 0.3600 1.3800

2025 2.9000 2.9000 0.3000 0.5700 0.5916 1.4616

23.0300 23.6800

YearContract Awards (in $ million) Disbursements (in $ million)

Total Total

-

5.00

10.00

15.00

20.00

25.00

1 2 3 4 5 6 7

Cumulative Contract Awards Cumulative Disbursements

18

Fund Flow Diagram

ADB

Ministry of Finance

PRGIKO (IA)

DDWSSD under the Gosstroy

(EA)

PIO under Balykchy

PIO under Karakol

Contractors

Suppliers of Goods

Consultants

Contracts

Invoice IPCs

Withdrawal Applications for Direct Payment

Direct payment by ADB

Document flow

Funds flow

PMO and PMC

Certification of IPCs and Invoices

Withdrawal Applications for Advance & Replenishments

Replenishment of the Advance Account

1

2

3

4

5b

5a

19

V. FINANCIAL MANAGEMENT

Financial Management Assessment

11. The financial management assessment (FMA) was conducted in June 2018 in accordance with ADB’s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note. The FMA considered the capacity of DDWSSD, including funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. 12. The financial management risk rating of the DDWSSD within Gosstroy has been deemed High because (i) they have staff who are experienced in procurement, design and WSS facility construction but do not have adequate staff to handle the project financial management, particularly ADB’s disbursement guidelines and procedures; (ii) their existing accounting system is adequate but will require an upgrade to integrate appropriate project-specific accounting, budgeting, auditing, and reporting requirements; (iii) they have no prior experience as an executing agency with responsibilities for loan and grant disbursements and advance account management; and (iv) they lack capacity in internal audit. The risk rating of the Balykchy and Karakol vodokanals is Moderate and this rating is justified for the following reasons: (i) they have some qualified and trained staff for the PIOs but additional staff will still be required as project implementation progresses; (ii) are experienced in budget preparation as part of the process of requesting counterpart funding for donor-funded projects, and (iii) they have undertaken project management with other donors but with rather limited involvement on ADB project implementation.

13. The advance fund and SOE procedures will be used for the project. Given the lack of experience by DDWSSD in implementing ADB-funded projects, DDWSSD is also not familiar with the use of Advance Fund and SOE procedures. To address this weakness, a Financial Manager who is familiar with ADB disbursement guidelines and procedures will be recruited at the PMC and will support the PMO Director in the administration of the Advance Fund and SOE. 14. The borrower and DDWSSD have agreed to implement an action plan as key measures to address the deficiencies. The financial management action plan is provided in Table 15.

Table 15: Financial Management Action Plan

Risk Description Risk

Rating Action Period

Responsible Agency

Inherent Risk Country Specific: The Chamber of Accounts has limited capacity for external audits

Substantial

Conduct external audits, both at the entity and project levels, with project funding to ensure compliance with ADB’s requirements.

Every Q1 of each year, beginning Q1 2020 up to Q1 2025

DDWSSD/MOF/PMO/ PRGIKO/Cities/PIOs

Implementing Entity Failure to report or delays in reporting suspected fraud, waste or misuse of project resources or assets.

Moderate Prepare and submit monitoring reports on suspected fraud, waste or misuse of project resources or assets.

Quarterly, beginning end of Q4 2019

DDWSSD/MOF (Chamber of Accounts)/PRGIKO/ PMO/Cities/ Vodokanals/ PIOs

Fund Flow Misunderstanding and misinterpretation of ADB’s guidelines on

Substantial

Provide online and on-the-job training on ADB disbursement and payment procedures using an

On-line training: Before project start up at Q1 2019

ADB/Project Consultant/ DDWSSD/PMO/PRGIKO/ Vodokanals/PIOs

20

3 ADB to provide the ADB Handbook on Financial Management and Loan Disbursement Handbook to facilitate training

and capacity development.

disbursement and withdrawals of the grant proceeds.

advance account to DDWSSD/PMO and the vodokanals/PIO.

On-the-job training: Beginning Q1 2019

The PIOs will be involved in the preparation of supporting documents for loan and grant withdrawal applications so they will also be provided with online and on-the-job training on ADB disbursement and payment procedures.

On-line training: Quarterly beginning Q1 2019 On-the-job training: Beginning Q1 2019

DDWSSD/ ADB/PRGIKO/PIOs/ Project Consultants

Staffing Inadequate number of staff and insufficient knowledge and understanding of ADB’s disbursement policies and procedures.

Substantial DDWSSD and the vodokanals to recruit and/or appoint additional staff to handle project financial management in the PMO/PIOs to be established under the project. ADB to support the recruitment of a financial management consultant for project start-up financial management activities and to provide on-the-job training during project implementation based on an agreed work program. 3

At project start-up, Q1 2019 through to project completion, Q4 2024

ADB/DDWSSD/PMO/ PRGIKO/Cities/ Vodokanals/PIOs

Accounting Policies and Procedures Inadequate project accounting and financial reporting system.

Moderate Configure the accounting system of Gosstroy/DDWSSD and those of the vodokanals to incorporate project-specific accounting and financial reporting, training and monitoring.

At project start up, Q1 2019

ADB/Project Consultant/DDWSSD/ PMO/Cities/Vodokanals/PIOs

Budgeting Inability of the IAs to develop realistic budget and raise counterpart funds.

Moderate Prepare and issue budgeting policies and procedures for requesting the counterpart funding contribution of the government for the project promptly and accurately.

Before project start up, by Q4 2018

MOF/DDWSSD/ PMO/Cities/ Vodokanals/PIOs

Internal audit Absence of internal audit unit.

Substantial Gosstroy to assign an internal auditor from its Internal Audit Unit exclusively to the PMO. DWSSD/PMO to prepare and agree on a project work plan for internal audit with PRGIKO and the vodokanals.

At project start-up, Q1 2019 through to project completion, Q4 2024

Gosstroy/ DDWSSD/PMO

The MOF has not established an internal audit system in the vodokanals. Gosstroy/DDWSSD to agree a work plan with the PRGIKO/IA for the internal audit of the financial statements (FS) and transactions of the two vodokanals throughout the project implementation period.

By Q2 2019

MOF/Chamber of Accounts/ DDWSSD/PMO/ PRGIKO/Cities/ Vodokanals/ PIOs and ADB

21

Disbursement

1. Disbursement Arrangements for ADB Funds

15. The loan and grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time),4 and detailed arrangements agreed upon between the government and ADB. Online training for project staff on disbursement policies and procedures is available.5 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. 16. Direct payment procedure. This procedure will generally be used for payment to contractors, suppliers of goods, and supervision consultants. There are four anticipated civil works contracts under the project. The contractors will submit an invoice along with an interim progress certificate (IPC) showing the completed civil works for the period. The construction supervision consultants will review the interim progress certificate against the contract and endorse the invoice to PIO. Upon satisfactory review, PIO will endorse the IPC to PMC who will then prepare a withdrawal application for direct payment to the contractor and have this signed by the loan authorized signatories. ADB will make a direct payment to the contractor based on the submitted withdrawal application.

4 ADB. 2017. Loan Disbursement Handbook. Manila 5 ADB. 2017. Disbursement eLearning. Manila.

External audit Delayed audit process and submission of audited financial statements in accordance with the loan agreement.

Substantial For the externa audit of the vodokanals’ 2016-2018 financial statements, MOF/Gosstroy (DDWSSD) to agree a timetable with the State Chamber of Accounts. For the project implementation period from 2019-2024, the project will fund the external audits to be able to comply with ADB’s audit requirements. Arrangements will be made by DDWSSD/PMO for the annual external audits of the project financial statements and entity financial statements of the vodokanals of Balykchy and Karakol.

For the external audit of their 2016 FS by Q4 2018; their 2017 FS, by Q1 2019, and their 2018 FS by Q2 2019 For the external audits during the project implementation period, annually by Q1 of the following year

MOF/Chamber of Accounts/ DDWSSD/PMO ADB/Project Consultants/PRGIKO/ Cities/Vodokanals/PIOs

Reporting and Monitoring. Delay in submission of audited financial reports and non-compliance with government requirements and with international public accounting standards.

Substantial Configure the accounting systems of Gosstroy/DDWSSD and those of the vodokanals for project financial reporting, training and monitoring. Conduct formal training and on-the-job training on the project accounting system in accordance with an agreed training program.

During project start-up, by Q1 2019, through to project completion, 2024

DDWSSD/PMO ADB/Project Consultant/PRGIKO Cities/Vodokanals/PIOs

Management Information systems Lack of appropriate safeguards or security system measures to protect records and transactions in the electronic MIS.

Moderate Configure the accounting systems of Gosstroy/DDWSSD and those of the vodokanals with features that appropriately safeguard and secure the confidentiality and integrity of the data in the system.

By Q1 2019 DDWSSD/PMO ADB/Project Consultants/PRGIKO/ Vodokanals/PIOs

https://www.adb.org/documents/loan-disbursement-handbookhttp://wpqr4.adb.org/disbursement_elearning

22

17. Direct payment procedure will generally be used for payment to consultants. Individual consultants and three consulting firms are anticipated to be recruited. The consulting firms will submit their invoices to PIO for verification. Once the invoices and inputs are verified, PMC will prepare a withdrawal application for direct payment and have this signed by the loan authorized signatories. ADB will make direct payment to the account of the consultant based on the withdrawal application. 18. The suppliers of equipment and vehicles will prepare their invoices according to the conditions in the contract and submit these to PMC for approval. Upon approval, PMC will prepare a withdrawal application for direct payment to the supplier, for signature of the loan authorized signatories. ADB will make direct payment to the account of the supplier based on the withdrawal application. 19. Advance fund procedure. This procedure will be used for small payments of eligible project expenditures. An advance account will be established at a commercial bank acceptable to ADB in the name of the project. The DDWSSD, through PMO, will administer the advance account including preparation of applications for replenishment and liquidation. Separate advance accounts should be established and maintained by DDWSSD for each funding source. The currency of the advance accounts is the US dollar. The advance account is to be used exclusively for ADB’s share of eligible expenditures. DDWSSD is accountable and responsible for proper use of advances to the advance account. 20. The total outstanding advance to the advance account should not exceed the estimate of ADB’s share of expenditures to be paid through the advance account for the forthcoming six months. In view of the ‘Substantial’ financial management risk rating of DDWSSD, the administration of the advance account will be supported by the Financial Manager at PMC. The estimated expenditure for the forthcoming six months will continue to be the basis for the advance amount. However, review and endorsement by ADB project team of the estimated expenditures and amount of initial advance and additional advances, if any, will be required before these are endorsed to ADB Controllers. DDWSSD may request for initial and additional advances to the advance account based on an Estimate of Expenditure Sheet6 setting out the estimated expenditures to be financed through the account for the forthcoming 6 months. Supporting documents should be submitted to ADB or retained by DDWSSD in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time) when liquidating or replenishing the advance accounts. 21. Statement of expenditure procedure.7 The SOE procedure may be used for reimbursement of eligible expenditures or liquidation of advances to the advance accounts. The ceiling of the SOE procedure is the equivalent of $50,000 per individual payment. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. Reimbursement and liquidation of individual payments in excess of the SOE ceiling should be supported by full documentation when submitting the withdrawal application to ADB.

6 Estimate of Expenditure sheet is available in Appendix 8A of ADB’s Loan Disbursement Handbook (2017, as

amended from time to time), 7 SOE forms are available in Appendix 7B of ADB’s Loan Disbursement Handbook (2017, as amended from time to

time).

https://www.adb.org/documents/loan-disbursement-handbookhttps://www.adb.org/documents/loan-disbursement-handbook

23

22. Payment for land acquisition and resettlement. The Advance Fund and SOE procedures will be used for payment of the land acquisition and resettlement costs. The payments should be supported by the following documents: (i) legal agreement between the payment beneficiary and the government, (ii) evidence of payment through cheque/ bank transfer, and (iii) acknowledgement receipt of the payment received signed by the beneficiary, in case of cash payment. Third-party independent verification of the payments will be initiated by ADB. For individual payments below the SOE ceiling, DDWSSD shall keep the relevant documents and make them available for review when requested by ADB. 23. Before the submission of the first WA, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the government, together with the authenticated specimen signatures of each authorized person. The minimum value per WA is stipulated in the Loan Disbursement Handbook (2017, as amended from time to time). Individual payments below such amount should be paid (i) by DDWSSD and subsequently claimed to ADB through reimbursement, or (ii) through the advance fund procedure, unless otherwise accepted by ADB. The borrower should ensure sufficient category and contract balances before requesting disbursements. Use of ADB’s Client Portal for Disbursements (CPD)8 system is encouraged for submission of withdrawal applications to ADB. 24. DDWSSD, through the PMO, will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting and retaining supporting documents, and (iv) preparing and sending withdrawal applications to ADB. 25. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the government, together with the authenticated specimen signatures of each authorized person.

Condition for withdrawal. 26. Prior to the first disbursement, PMO Director should have been appointed and Financial Manager already recruited. 27. Disbursement Arrangements for Counterpart Fund. DDWSSD will be responsible for (i) preparing disbursement projections, and (ii) requesting budgetary allocations for counterpart funds for financing local taxes and duties.

Accounting

28. DDWSSD, through the PMO, will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the project following International Public Sector Accounting Standard for cash-based accounting. DDWSSD, through the PMO, will prepare project financial statements in accordance with the government's accounting laws and regulations which are consistent with international accounting principles and practices.

8 The CPD facilitates online submission of WA to ADB, resulting in faster disbursement. The forms to be completed by

the Borrower are available online at https://www.adb.org/documents/client-portal-disbursements-guide.

https://www.adb.org/documents/client-portal-disbursements-guide

24

Auditing and Public Disclosure

29. DDWSSD, through the PMO, will cause the detailed project financial statements to be audited in accordance with International Standards on Auditing by an independent auditor acceptable to ADB. The audited project financial statements together with the auditor’s opinion will be presented in the English language to ADB within 6 months from the end of the fiscal year by DDWSSD.

30. The audit report for the project financial statements will include a management letter and auditor’s opinions, which cover (i) whether the project financial statements present an accurate and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting standards; (ii) whether the proceeds of the loan and grant were used only for the purpose of the project; and (iii) whether the borrower or executing agency was in compliance with the financial covenants contained in the legal agreements (where applicable). 31. Compliance with financial reporting and auditing requirements will be monitored by review missions and during normal program supervision, and followed up regularly with all concerned, including the external auditor. 32. The government, DDWSSD and PRGIKO have been made aware of ADB’s approach to delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements.9 ADB reserves the right to require a change in the auditor (in a manner consistent with the constitution of the borrower), or for additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures. 33. Public disclosure of the audited project financial statements, including the auditor’s opinion on the project financial statements, will be guided by ADB’s Public Communications Policy 2011.10 After the review, ADB will disclose the audited project financial statements and the opinion of the auditors on the project financial statements no later than 14 days of ADB’s confirmation of their acceptability by posting them on ADB’s website. The management letter, additional auditor’s opinions, and audited entity financial statements will not be disclosed.11

9 ADB’s approach and procedures regarding delayed submission of audited project financial statements:

(i) When audited project financial statements are not received by the due date, ADB will write to the executing agency advising that (a) the audit documents are overdue; and (b) if they are not received within the next 6 months, requests for new contract awards and disbursement such as new replenishment of advance accounts, processing of new reimbursement, and issuance of new commitment letters will not be processed.

(ii) When audited project financial statements are not received within 6 months after the due date, ADB will withhold processing of requests for new contract awards and disbursement such as new replenishment of advance accounts, processing of new reimbursement, and issuance of new commitment letters. ADB will (a) inform the executing agency of ADB’s actions; and (b) advise that the loan may be suspended if the audit documents are not received within the next 6 months.

(iii) When audited project financial statements are not received within 12 months after the due date, ADB may suspend the loan.

10 Public Communications Policy: http://www.adb.org/documents/pcp-2011?ref=site/disclosure/publications 11 This type of information would generally fall under public communications policy exceptions to disclosure. ADB. 2011.

Public Communications Policy. Paragraph 97(iv) and/or 97(v).

http://www.adb.org/documents/pcp-2011?ref=site/disclosure/publications

25

VI. PROCUREMENT AND CONSULTING SERVICES

Advance Contracting and Retroactive Financing

34. All advance contracting and retroactive financing will be undertaken in conformity with ADB Procurement Guidelines (2015, as amended from time to time) and ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The borrower, DDWSSD and PRGIKO have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the project. 35. Advance contracting. Advance contracting will be undertaken for the recruitment of the Project Management Consultants and Project Design and Supervision Consultants. Prior to loan effectiveness (i) detailed terms of reference and cost estimates will be will be drafted and agreed, (ii) invitation for Request for Proposal and individual consultants’ assignments will be advertised, and (iii) Request for Proposal will be issued to shortlisted firms.

36. Retroactive financing. Retroactive financing will be applied for payment of the maximum amount of eligible expenditures up to the equivalent of 20% of the total ADB loan, incurred for a period not exceeding 12 months before loan and grant signing.

Procurement of Goods, Works, and Consulting Services

37. All procurement of goods and works will be undertaken in accordance with ADB’s Procurement Guidelines (2015, as amended from time to time). 38. International competitive bidding procedures will be used for civil works contracts estimated to cost $1.0 million or more, and supply contracts valued at $1.0 million or higher. Shopping will be used for contracts for procurement of works and equipment worth less than $0.10 million. 39. Before the start of any procurement using national competitive bidding, ADB and the government will review the public procurement laws of the central and state governments to ensure consistency with ADB’s Procurement Guidelines (2015, as amended from time to time). 40. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C.

41. DDWSSD agreed to include the relevant sections of ADB’s Anticorruption Policy (1998) in all bidding and contractual documents.

42. All contracts are subject to ADB prior review. 43. All consultants will be recruited according to ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time).12 The terms of reference for all consulting services are detailed in Section D.

12 Checklists for actions required to contract consultants by method available in e-Handbook on Project

Implementation at: http://www.adb.org/documents/handbooks/project-implementation/

http://www.adb.org/documents/handbooks/project-implementation/

26

44. An estimated 641 person-months (204 international, 437 national) of consulting services are required to (i) facilitate project management and implementation, (ii) civil works supervision, and (iii) strengthen the institutional and operational capacity of the executing agency. Consulting firms will be engaged using the quality- and cost-based selection (QCBS) method with a standard quality–cost ratio of 90:10.

Procurement Plan

45. The procurement plan is detailed in Attachment 1.

Consultant's Terms of Reference

46. The consultants’ terms of reference are in Attachment 2.

VII. SAFEGUARDS

Land Acquisition and Resettlement

47. The project is categorized as ‘B’ for involuntary resettlement. A land acquisition and resettlement plan (LARP) and land acquisition and resettlement framework (LARF)13 have been prepared to mitigate and address all the associated losses in accordance with ADB’s SPS 2009 and relevant national legislation. The LARP will be disclosed on the ADB website on 1 August 2018. Project information was disclosed and meaningful consultations with project stakeholders and displaced persons were undertaken during LARP preparation and will continue throughout implementation. When the project design is finalized, or additional land requirements or involuntary resettlement impacts are identified, the LARP will be updated in accordance with applicable laws and ADB’s SPS 2009, and ADB approval obtained prior to any further implementation. All displaced people will receive compensation in accordance with the LARP provisions. A Grievance Redress Mechanism is in place in accordance with the LARP, to assist affected persons to resolve grievances and complaints. The DDWSSD will submit semiannual safeguards monitoring reports to ADB for review and disclosure. 48. DDWSSD will ensure that land acquisition and resettlement will be carried out in accordance with ADB’s SPS (2009) requirements, and applicable laws and regulations of Kyrgyz Republic that have been referred to in the LARP. DDWSSD will ensure that the LARP will be implemented and monitored to ensure that no project affected persons will suffer by unattended impacts associated with land acquisition and resettlement. The detailed measurement survey carried out during project preparation identified approximately 26 affected households with a total of 99 household members. Out of the 26 affected households, approximately 15 households with 67 members will experience severe impact on their livelihood since they will be required to relocate. No household was found to belong to vulnerable groups. DDWSSD will be responsible to pay compensation to the affected households due to land acquisition and resettlement as well as the temporary effects, according to the process outlined in the LARP. The civil works could only be commenced after compensation is fully paid in any given construction section or any part thereof.

13 LARF was prepared as final alignment of the construction of 21.6 km of sewerage, and 1.7 km of effluent outfall

pipelines will only be decided after detailed design is completed.

27

49. For implementing the LARP, DDWSSD will ensure that:

(i) The PMO will recruit a resettlement consultant as part of the PMO team to implement the LARP and address grievances and complaints related to compensation, if any.

(ii) The draft LARP will be updated after final SPZ boundaries and the detailed design are available. The resettlement consultant will continue to carry out adequate consultations with the affected persons through the project implementation period. The updated LARP should indicate any change in land acquisition and resettlement due to the final SPZ area, detailed design, change in the number of the affected persons, and change in budget for the LARP implementation. However, the standards set in the entitlement matrix in the approved draft LARP shall not be lowered that provided clear guidance on entitlements for compensation.

(iii) The updated LARP has to be submitted to ADB for concurrence prior to implementation and have to be submitted as early as possible after the final SPZ area and detailed engineering design becomes available.

(iv) The updated LARP will be disclosed through ADB’s website and DDWSSD will be responsible to disclose relevant information from the updated LARP to the affected people.

(v) The awarding of civil works contract will be done only after the affected households receive full payment of compensation, and a report on full payment of compensation needs to be submitted to ADB. The advance payment to the contractor can only be released after the report on full compensation payment is received by ADB.

(vi) A report on monitoring the implementation of the LARP, including any grievances will be submitted to ADB on semi-annual basis until the payment of compensation to the affected households is completed.

(vii) DDWSSD, through the resettlement consultant of PMO will observe any unanticipated impacts due to land acquisition and take necessary measures in accordance to the provision described in the LARP

Environment

50. The project is categorized as B for environment safeguards. Following ADB’s SPS 20019, initial environment examination (IEE) and environment management plan (EMP) have been prepared by the DDWSSD. To ensure compliance with the ADB’s SPS 2009 and the country environmental legislation, DDWSSD and vodakanals will follow the IEE and EMP. The PMO and PIOs will ensure:

(i) The institutional capacity building elements of the project should be strongly pursued to ensure long-term sustainability of the infrastructure and environmental management systems put in place.

(ii) The technical capacity building should complement the institutional strengthening with focus on environmental monitoring, data management analysis and information sharing.

(iii) The EMPs are included in bidding documents for all contracts. (iv) All measures in the EMP, should be fully implemented in a competent and timely

manner to ensure that the project realizes its positive potential. (v) Non-compliance notice will be issued to the contractor if the PIO requires action to be

taken. The contractor is required to prepare a corrective action plan which is to be implemented by a date agreed with the PIO.

(vi) The environment-related documents, specifically IEE, EMP and Environmental Monitoring Reports, are disclosed on the project website.

28

(vii) In case of unpredicted environmental impacts occurring during project implementations, corrective action plans are prepared and implemented.

(viii) Semi-annual safeguard monitoring reports are submitted to ADB within 1 month after the reporting period.

51. The following action plan should be taken to carry out item (iv) desludging a reservoir in Karakol by removing 100,000 cubic meters (m3) of sludge under Output 1: Balykchy and Karakol wastewater systems improved:

(i) Conduct Sludge Sampling and Analysis (a) Before commencement of any removal activity on the sludge, sampling and

analysis will be undertaken by a reputable certified firm; (b) Prior sampling, a Sludge Sampling and Analysis Plan to be prepared and

submitted to ADB for approval – plan will contain, but not limited to: parameters to analyze, proper sampling and transport plan to recognized and certified labs, methodologies, standards to use for comparison, and other necessary activities.

(c) Once results of the analysis are ready, an assessment on the level or not of contamination must be undertaken, including comparing the results with international standards.

(ii) In case of no contamination, the following steps for cleaning, transport, management and disposal will be undertaken:

(a) Isolate an area of up to 10 ha within the lagoon for stockpiling of sludge. (b) Construct a temporary but impermeable wall to separate the stockpiling area

from the storage area. (c) Construct sumps in the stockpile area to pump out water seeping from the

excavated sludge to keep the area dry. (d) Dredge sludge from the remaining lagoon area and place in the stockpile area. (e) As the sludge dries in the stockpile area, transport dry sludge at a controlled

rate for either land application or disposal at the landfill in accordance with demand at those areas.

(iii) If the sludge is contaminated, removal and disposal of the sludge will not be undertaken under ADB project.

Indigenous Peoples

52. The project has been classified as category C for indigenous peoples safeguard. There are no indigenous people’s communities in the project area or in the country in general, as defined in the ADB SPS (2009) for operational purposes. Accordingly, no indigenous peoples planning documents will be required. 53. Prohibited investment activities. Pursuant to ADB’s Safeguard Policy Statement (2009), ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the Safeguard Policy Statement (2009).

VIII. GENDER AND SOCIAL DIMENSIONS 54. The Project is classified as effective gender mainstreaming (EGM) thus, a gender action plan (GAP) is prepared. The GAP details the gender responsive measures included in the project design, that address the gender issues relevant to the project, specifically, that poor sanitation services burdens women who are responsible for household work, and exacerbate their

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time poverty. Specific gender-related activities of the project include the following: (i) ensuring improved wastewater service services to households, either by direct connections to the centralized wastewater system or through the provision of sanitary septage collection services, (ii) ensuring women’s participation in local working committees, as well as in each vodokanal, (iii) increasing women’s participation in the management level of vodokanals, including participation in technical trainings, (iv) establishing gender sensitive customer care units in the vodokanals, and (v) ensuring women’s participation (both as spokespersons and as audience) in public awareness raising activities on sanitation and hygiene and the importance of wastewater connection, treatment and disposal, among others. 55. A national Gender Specialist will be engaged as part of the PMO and PMC, and will be responsible for GAP implementation, monitoring and reporting. An international Social, Gender, and Resettlement Specialist will provide technical guidance and advice in the implementation of the GAP. Technical support may be provided by gender specialists from the ADB Resident Mission in Kyrgyzstan, as well as from ADB Headquarters, as needed. Progress towards the achievement of gender targets in the design and monitoring framework as well as those reflected in the GAP will be monitored and reported quarterly by the Gender Specialist and included in the regular monitoring reports, with a distinct section that provides concrete sex-disaggregated data demonstrating the reach of the gender activities implemented as well as describing challenges met and actions taken to overcome the challenges. The indicative total budget for the implementation of the GAP and Stakeholder Participation and Communication Program (SPCP) is $145,400, which includes (a) consultative activities throughout the project preparation until WTP operations, (b) capacity building training programs for the vodokanal staff, (c) public awareness activities, and (d) hiring of a gender specialist who will assist through project preparation and implementation.

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Gender Action Plan (GAP)

Activities Indicators/Targets Responsibility Timeframe

Outcome. Improved and expanded access to reliable, sustainable, and affordable wastewater services in Balykchy and Karakol

0.1 Conduct a consumer satisfaction survey on the quality of wastewater services in Balykchy and Karakol, with equal number of female and male respondents.

0.1.1. At least 60% of women and 60% of men surveyed are satisfied with the quality of wastewater services provided by the vodokanals (2018 Baseline: 22%)

0.1.2. At least 60% of women and 60% of men surveyed, find the cost of wastewater tariffs reasonable

Social and gender specialist with support from PIO staff

2024

0.2 Monitor the incidence of waterborne and other sanitation-related diseases in each city

0.2.1. Baseline data (2018), age- and sex-disaggregated, on the incidences of waterborne and other sanitation-related diseases, collected for each city

0.2.2. At least 25% decrease in the incidences of waterborne and other sanitation-related diseases in each city in 2024

Social and gender specialist with support from PIO staff, and city health offices

Baseline: Q3 2019 End line: Q3 2024

Output 1. Wastewater collection and treatment systems rehabilitated and operational in Balykchy and Karakol

1.1. Conduct gender sensitive consultations and public awareness campaign on the project that may include but not limited to: (i) overview of the project; (ii) benefits of wastewater connection; (iii) importance of tariff payment for water and wastewater services; (iv) water use and conservation; (v) procedures and costs of piped sewerage connections; among others

1.1.1 At least 2 public meetings/consultations/awareness campaign activities conducted per city, per year of project implementation

1.1.2 At least 40% female participation in each public meeting/consultation/awareness campaign activity

1.1.3 At least 80% of male and female participants have increased knowledge on the importance of wastewater services, as well as on water use and conservation

1.1.4 At least 3 types of IEC campaign materials (e.g., posters, brochures, radio/tv advertisements/broadcasts, social media advertisements, etc.) with gender-sensitive messages produced and disseminated

Social and gender specialist with support from PIO staff, and city health offices Communication specialist with support from social and gender specialist

Q3 2018 – Q1 2024

2.1. Ensure household connections to centralized wastewater system

1.2.1 At least 850 households (45%) in Balykchy connected to centralized wastewater system by 2024 (2018 Baseline: 35%)

1.2.2 At least 1,200 households (60%) in Karakol connected to the centralized wastewater system by 2024 (2018 Baseline: 45%)

PMO and PIOs 2024

1.3 Ensure schools’ connection to centralized wastewater system

1.3.1 At least XX (number of) schools in Balykchy connected to the centralized wastewater system

1.3.2 At least XX (number of) schools in Karakol connected to the centralized wastewater system

Vodokanals PIOs, PMO

2024

Output 2. WSS institutional and service-oriented capacity enhanced in Balykshy and Karakol, and project implementation capacity improved

2.1. Ensure women’s participation in the Local Working Committee14 per city

2.1.1. At least 30% female membership in the Local Working Committee Vodokanal PIOs, monitored by the Social and gender specialist

Q3 2018 - onwards

14 Each Local Working Committee consists of representatives from the territorial self-governance committees, quarter committees, city women’s committees,

business group representatives, Aksakaldar (Elders) court, community-based women groups, condominium associations and youth committee leaders

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2.2. Ensure participation of women in senior positions in Vodakanals in technical trainings with international qualification accreditation

2.2.1 At least 1 woman in a senior position in each vodokanal, completed the corporate utility management training module with international qualification accreditation by 2024

2.2.2 At least 1 woman in a senior position in each vodokanal, completed the operation and maintenance training module with international qualification accreditation by 2024

2.2.3 At least 1 woman in a senior position in each vodokanal, completed the utility financial management training module with international qualification accreditation by 2024

Vodokanal PIOs, and monitored by the Social and gender specialist

Q2 2020 – Q3 2023

2.3. Conduct gender capacity building training for Vodokanal staff, key city/municipality staff, and technical working committee members

2.3.1 At least 95% of Vodokanal staff for both Balykchy and Karakol, and each of their Local Working Committees acquired basic knowledge on gender mainstreaming and its implications on the work of Vodokanals

2.3.2 At least 50% of City/Municipality staff whose jobs have some relevance to water supply and sanitation, acquired basic knowledge on gender mainstreaming and its implications on their mandate to provide quality water supply and sanitation services

Social and gender specialist; with technical inputs from International social, gender, and resettlement specialist

Q4 2018 – Q4 2019

2.4. Strengthen gender-sensitive customer relations in each vodokanal

2.4.1 At least 50% women staff in each vodokanal’s customer care unit 2.4.2 Each vodokanal has a consumer grievance redress mechanism

commissioned, with clear gender sensitive procedures, including (i) ensuring the presence of female members of the grievance committee when requested by a female consumer, (ii) recording of the consumer’s gender, when recording complaints filed as well as actions taken, (iii) use of gender sensitive language when dealing with complainants, and (iv) opening other venues for filing of complaints, such as through text, or online, among others

2.4.3 At least 50% female members in each consumer grievance redress committee

Vodokanal PIOs, PMO, Local Working Committee

2024

Output 3. Septage management services improved and sanitation and hygiene awareness increased

3.1. Ensure that households not connected to the central wastewater system are serviced by environmentally compliant septage collection services

3.1.1 At least 2,000 additional households and institutional and commercial establishments receive environmentally-compliant septage collection services in Balykchy

3.1.2 At least 2,800 additional households and institutional and commercial establishments receive environmentally-compliant septage collection services in Karakol

Vodokanal and PIO Q4 2019 - onwards

3.2. Conduct sanitation and hygiene awareness campaigns

3.2.1 At least 50% of project households and institutional and commercial facilities are included in sanitation and hygiene awareness campaigns in each city, of which at least 50% are represented by women and school-age girls

3.2.2 At least 10 female community members developed and trained to be spokespersons on good hygiene practices, in the project’s sanitation and hygiene awareness campaigns

PIOs, Communication specialist with support from social and gender specialist

Q3 2019 - onwards

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IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION

Project Design and Monitoring Framework

Impact the Project is Aligned with Living standards, health, and economy in the Issyk-Kul Region improved (Strategy for the Development of Drinking Water Supply and Sanitation Systems for Human Settlements in the Kyrgyz Republic up to 2026)a

Results Chain Performance Indicators with Targets

and Baselines

Data Sources and Reporting Mechanisms

Risks

Outcome Access to sustainable and reliable wastewater services in Balykchy and Karakol improved and expanded

By 2025: a. At least 40% of the Balykchy population and 55% of the Karakol population receive centralized wastewater services that meet environmental discharge standards (2018 baseline: 0)

b. Consumer satisfaction (sex-disaggregated) with quality of wastewater services increased to 60% (2018 baseline: 22%)

c. Collection efficiency of wastewater tariffs maintained above 95% (2018 baseline: Above 90% for households, and above 95% for institutional and commercial establishments)

a.–c. Executing agency project completion report and survey report

Wastewater tariffs not increased as expected because of political uncertainty

Outputs 1. Balykchy and Karakol wastewater systems improved

1a. At least 40% of households in Balykchy and 55% of households in Karakol connected to environmentally compliant centralized wastewater systems by 2024 (2018 baseline: 0) 1b. Wastewater treatment plant in Balykchy (4.2 MLD) and Karakol (12.0 MLD) upgraded and commissioned by 2024 (2018 baseline: 0 and not commissioned) 1c. 21.6 km of sewerage pipelines constructed by 2024 (2018 baseline: 0) 1d. 1.7 km of effluent pipelines upgraded by 2024 (2018 baseline: 1.7 km of dilapidated pipelines) 1e. One wastewater pump station constructed and 0.5 km of pumping main upgraded by 2024 (2018

1a.–1g. Quarterly vodokanal project progress reports, executing agency project completion report

Changes in government approval procedures by oversight agencies delays project completion High financial management risk because staff lack knowledge and understanding of ADB’s disbursement guidelines and procedures

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Results Chain Performance Indicators with Targets

and Baselines

Data Sources and Reporting Mechanisms

Risks

baseline: 0.5 km of dilapidated pumping main)

1f. One reservoir desludged by 100,000 m3 of sludge by 2024 (2018 baseline: 0) 1g. Seven septage vacuum trucks commissioned by 2023 (2018 baseline: 0)

Department of Drinking Water Supply and Sewerage Development personnel’s unfamiliarity with ADB procurement procedures results in procurement deficiencies and implementation delays

2. Vodokanal capacity strengthened

2a. One corporate business plan with service standards and performance benchmarking established by each vodokanal by 2020 (2018 Baseline: 0) 2b. Training completed in corporate utility management, operation and maintenance, and utility financial management in each vodokanal by 2023 (2018 baseline: 0) 2c. At least six personnel (of which three personnel are women) in each vodokanal with improved skills in corporate utility management, operation and maintenance, and utility financial management by 2023 (2018 baseline: 0) 2d. Gender-inclusive consumer grievance redress mechanism commissioned by 2019 (2018 baseline: 0) 2e. One agreement on twinning arrangements with an international water supply and sanitation knowledge-based facility reached by 2020 (2018 baseline: 0)

2a.–2e. Quarterly vodokanal project progress reports, biannual project monitoring reports, executing agency project completion report

3. Septage management services improved and sanitation and hygiene awareness increased

3a. One septage management unit established in each vodokanal by 2019 (2018 baseline: Not established)

3b. Septage management program developed in each vodokanal by 2020 (2018 baseline: 0) 3c. At least 50% of project community stakeholders and institutional and commercial facilities staff (including at least 50% women) have increased awareness on sanitation and hygiene by 2021 (2018 baseline: 0)

3a.–3e. Quarterly vodokanal project progress reports, biannual project monitoring reports, participant feedback surveys, executing agency project completion report

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Results Chain Performance Indicators with Targets

and Baselines

Data Sources and Reporting Mechanisms

Risks

3d. At least 2,000 households and institutional and commercial establishments not connected to the centralized wastewater system receive improved septage collection services in Balykchy by 2024 (2018 baseline: 0)

3e. At least 2,800 households and institutional and commercial establishments not connected to the centralized wastewater system received improved septage collection services in Karakol by 2024 (2018 baseline: 0)

Key Activities with Milestones 1. Balykchy and Karakol wastewater systems improved 1.1. Issue request for proposal for project management consultant through advance contracting by Q4

2018. 1.2. Mobilize project management consultant by Q1 2019. 1.3. Mobilize project design and supervision consultants by Q1 2020. 1.4. Commence design-build contract procurement by Q2 2019. 1.5. Award design-build contract by Q1 2020. 1.6. Commence civil works contract procurement by Q2 2020. 1.7. Award civil works contract(s) by Q4 2020. 1.8. Complete equipment procurement by Q2 2021. 1.9. Complete civil works contract(s) by Q2 2024. 2. Vodokanal capacity strengthened 2.1. Mobilize consultants by Q4 2019. 2.2. Formulate corporate business plans by Q2 2020. 2.3. Design and prepare training modules by Q2 2020. 2.4. Organize international twinning arrangement by Q4 2020. 2.5. Deliver trainings between Q3 2020 and Q3 2023. 2.6. Submit final reports by Q1 2024. 3. Septage management improved and sanitation and hygiene awareness increased 3.1. Conduct first sanitation and hygiene awareness campaign by Q3 2019. 3.2. Develop septage management programs by Q4 2020. Project Management Activities Strengthen project implementation capabilities in the two vodokanals. Convene regular steering committee and local working committee meetings. Prepare and submit project progress reports.

Inputs ADB: $12.84 million (ADF grant) $23.68 million (concessional OCR loan) Government of the Kyrgyz Republic: $5.30 million

Assumptions for Partner Financing Not applicable ADB = Asian Development Bank, ADF = Asian