Public Disclosure Authorized...2011/12/09 · despite large royalty revenues from La Guajira‟s...

Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 64938-CO

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF THE

COLOMBIA: LA GUAJIRA WATER AND SANITATION INFRASTRUCTURE AND SERVICE MANAGEMENT PROJECT

(Loan 7434-CO)

TO THE DEPARTMENT OF LA GUAJIRA

WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA

November 30, 2011

Sustainable Development Department Colombia and Mexico Country Unit Latin America and the Caribbean Region

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s Policy on Access to Information.

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Abbreviations and Acronyms

EA Environmental Assessment

EMP Environmental Management Plan

EAAB Bogota Water and Sewerage Company

(Empresa de Agua y Alcantarilladlo de Bogotá)

Gerencia Project Management Agency under PDA Program

ISR Implementation Status Report

IPP Indigenous Peoples Plan

IFR Interim Financial Report

MAVDT Ministry of Environment, Housing and Territorial Development

(Ministerio de Ambiente, Vivienda, y Desarrollo Territorial)

MVCT Ministry of Housing, Cities, and Territories

(Ministerio de Vivienda, Ciudades, y Territorio)

NGO Non- Government Organization

OP Operational Policy

PDA Departmental Water Plan

(Plan Departmental de Agua)

PGEI General Strategic Plan of Investments

(Plan General Estratégico de Inversiones)

PDO Project Development Objective

RAP Resettlement Action Plan

SOE Statement of Expenses

SGP General System of Participation

RESTRUCTURING PAPER

COLOMBIA: LA GUAJIRA WATER AND SANITATION INFRASTRUCTURE AND

SERVICE MANAGEMENT PROJECT

TABLE OF CONTENTS

1. Summary ........................................................................................................................................................ 1

2. Project Status and Background ............................................................................................................. 1

3 Proposed Changes ....................................................................................................................................... 2

4. Appraisal Summary ................................................................................................................................... 6 A. Institutional and Implementation Arrangements: .............................................................. 6

B. Implementation Schedule .................................................................................................. 6

C. Financial Analysis: ............................................................................................................ 7

D. Technical Analysis: ........................................................................................................... 7

E. Safeguard Analysis: ........................................................................................................... 9

F. Financial Management ..................................................................................................... 13

G. Procurement: .................................................................................................................... 14

5. Key Risks and Mitigation Measures.................................................................................................. 14

Annex 1: Results Framework and Monitoring .................................................................................. 16

Annex 2: ISR Ratings and Key Milestones for Project Supervision in 2012 .......................... 21

DEPARTMENT OF LA GUAJIRA

WATER AND SANITATION INFRASTRUCTURE AND SERVICE MANAGEMENT

PROJECT

RESTRUCTURING PAPER

DATA SHEET

1. Basic Information

Project ID & Name P096965: CO (APL1) La Guajira Water and Sanit.

Country Colombia

Task Team Leader Greg J. Browder

Sector Manager/Director Guang Zhe Chen

Country Director Gloria M. Grandolini

Original Board Approval Date 03/15/2007

Original Closing Date: 10/15/2011

Current Closing Date 12/31/2011

Proposed Closing Date [if applicable] 10/15/2015

EA Category B-Partial Assessment

Revised EA Category B-Partial Assessment-Partial Assessment

EA Completion Date 02/15/2006

Revised EA Completion Date N/A

2. Revised Financing Plan (US$m)

Source Original Revised

BORR 50.00 50.00

IBRD 90.00 90.00

MUNI 10.20 10.20

OLBC 8.00 8.00

Total 158.20 158.20

3. Borrower

Organization Department Location

Gobernación del Departamento de

La Guajira Colombia

4. Implementing Agency

Organization Department Location

Gerencia Plan Departamental de Agua

de La Guajira Colombia

5. Disbursement Estimates (US$m)

Actual amount disbursed as of 12/02/2011 10.00

Fiscal Year Annual Cumulative

2011 10.00 10.00

2012 0.00 10.00

2013 20.00 30.00

2014 40.00 70.00

2015 20.00 90.00

Total 90.00

6. Policy Exceptions and Safeguard Policies

Does the restructured project require any exceptions to Bank policies? N

Does the restructured projects trigger any new safeguard policies? If yes, please select from the

checklist below and update ISDS accordingly before submitting the package.

N

7a. Project Development Objectives/Outcomes

Original/Current Project Development Objectives/Outcomes

The original PDO is to improve the quality of water supply and sanitation services in urban and peri-urban areas of

the Borrower‟s territory by: (a) supporting utility institutional performance through the use of “specialized

operators”; and (b) delivering the necessary water and sanitation infrastructure.

7b. Revised Project Development Objectives/Outcomes [if applicable]

The PDO has been slightly modified to include rural areas in its geographic scope as follows: “to improve the quality

of water supply and sanitation services in urban, peri-urban, and rural areas of the Borrower‟s territory by: (a)

supporting utility institutional performance through the use of “specialized operators”; and (b) delivering the

necessary water and sanitation infrastructure.”

1

DEPARTMENT OF LA GUAJIRA

COLOMBIA: LA GUAJIRA WATER AND SANITATION INFRASTRUCTURE AND

SERVICE MANAGEMENT PROJECT

RESTRUCTURING PAPER

1. Summary

1. The Project is a US$90.0 million investment loan approved by the Board on March 15,

2007 to the Department of La Guajira (Borrower) with a sovereign guarantee by the Republic

of Colombia. The Project experienced start-up delays which have now been addressed, and

the Regional Vice President has approved the associated Project closing date extension from

December 31, 2011 to October 31, 2015.

2. There has been a fundamental change in Colombia‟s water policy since the Project was

approved. In late 2008, the Ministry of Environment, Housing, and Regional Development

(MADVT)1 issued Decree 3200 which provides the regulations for the national program

referred to as Department Water Plans (Plan Departmental de Agua-PDA). Under the original

Project design, the municipal governments, through their specialized water operators, were

responsible for implementing urban infrastructure investments. In order to align the Project

with national policy and facilitate implementation, it is proposed to modify organizational

arrangements to allow the Department to execute all Project components.

3. This is a proposed first-order restructuring as the PDO description has been slightly

modified, there are adjusted organizational arrangements, and a new safeguard policy, Dam

Safety-OP4.37, was triggered in 2009.

2. Project Status and Background

4. The Project was designed as a pilot to start up Colombia's national PDA program. In

Colombia, water service is the constitutional responsibility of the municipal government, and

the main thrust of the PDA program is to empower the 32 Colombian departments

(intermediate level of public administration, akin to provinces) to play a greater role in the

planning and oversight of for water services. The Project is an important and strategic element

of the Bank‟s engagement in Colombia‟s water sector and, more broadly, is linked to the

critical governance and poverty agendas in Colombia's lagging regions.

5. La Guajira is one of Colombia‟s less developed regions with a high incidence of poverty,

low performance in terms of service provision, and public sector management challenges, all

despite large royalty revenues from La Guajira‟s abundant endowment of natural resources,

primarily coal. Water and sanitation coverage rates for the urban areas of La Guajira stand at

68% and 35%, respectively, compared with Colombia‟s average of 88% and 74%. In this

context, the Bank was requested by the national government to help design and supervise a

1 In late 2011, MADVT was split into two ministries, with the new Ministry of Housing, Cities, and Territories

(MVCT) assuming responsibility for the urban water sector. The term MADVT will be maintained in this

Project Paper for consistency.

2

program to improve the quality of service delivery in light of the challenging governance

environment. The operation was seen as a high-risk, high-reward project and the Bank‟s

deliberative process focused on these challenges, particularly in terms of the governance,

fiduciary, and safeguards issues. The project documentation (PAD, etc.) was explicit on the

riskiness of the engagement. The Bank‟s engagement remains important to the Government

which values the Bank‟s implementation support.

6. The key design feature of the Project and the PDA program in general, is the appointment

of an external project management agency (hereafter referred to as the Gerencia) to manage

the sector on behalf of the department. Due to procurement delays, the La Guajira Gerencia

was not mobilized until early 2010 and then performed below expectations. In April 2011,

the Gerencia undertook a fundamental reorganization with new staff and management

oversight. The Department is now programmed to execute approximately US$152 million of

works over the period 2011-2014, a significant percentage of which would be financed with

the Bank loan.

7. As of June 2011, the date of the last financial management report, approximately US$17

million (COP $35 billion) of investment has been accumulated under the Project. The most

recent Implementation Status Report (ISR) ratings show overall implementation as

moderately satisfactory and progress towards PDO as moderately unsatisfactory due to delays

in improving water supply service. The PDO objectives will continue to be achievable after

the Project restructuring and within the proposed period.

3 Proposed Changes

8. All of the proposed changes have been incorporated into the Project Operations Manual

and endorsed by the Project Executive Committee. The Bank has provided its no-objection to

the Operational Manual, contingent on the execution of the Loan Amendment.

9. Project Development Objective: The PDO has been slightly modified to include rural

areas in its geographic scope as follows: “to improve the quality of water supply and

sanitation services in urban, peri-urban, and rural areas of the Borrower‟s territory by: (a)

supporting utility institutional performance through the use of “specialized operators”; and (b)

delivering the necessary water and sanitation infrastructure.” Rural areas were included in the

revised PDO because Component 2: Rural Pilot Projects has been fully defined since the

Project was initially approved. A new PDO indicator for this activity is included in the

Project Monitoring Framework.

10. Closing Date: In September 2011, the MHCP and DNP endorsed the proposed Project

restructuring and recommended a Closing Date extension until October 15, 2015. With this

endorsement, the Borrower submitted a request to the Bank for both a short-term extension

until December 31, 2011 to allow time for Loan Amendment processing and a long-term

extension to October 15, 2015. The Bank notified the Borrower on October 7, 2011 in

response to its request to extend the Loan closing date to December 31, 2011. The Regional

Vice President has approved the associated Project closing date extension to October 31,

2015.

3

11. The Project was originally designed to be implemented in four years, which was

unrealistic given the complexity of the design and the political complications of a change in

administration. The organizational arrangements are now in place for much improved

implementation, but executing the investment program and improving water service

performance is still expected to require an additional four years.

Project Components: Each of the components and proposed changes are described below:

12. Component 1: Urban Water Supply and Sanitation Infrastructure: There are no changes

to this component, although the specific procedures and requirements for urban infrastructure

requirements have been modified as described below.

13. Component 2: Rural Pilots: The original Project design did not identify the specific pilot

projects, as it was recognized that the consultation process with indigenous communities

would take considerable time and was best left to the implementation phase. In 2009, the

Department developed a “small rural reservoir program” consisting of the construction of

approximately 11 small reservoirs to supply water for adjacent indigenous rural communities

in the municipality of Uribia. As of November 2011, ten of the eleven small reservoirs have

been constructed or are in the process of being constructed, and are financed entirely with

counterpart-funding. The Amendment will incorporate the rural reservoirs in the description

of Component 2 as rural pilot projects, and Bank financing will be used to construct ancillary

infrastructure, such as small water treatment plants, conveyance facilities, and storage tanks,

and develop organizational and financial mechanisms to ensure sustainability of the

reservoirs. In addition, the Amendment will require the Borrower to specifically designate one

person reporting to the Gerencia to serve as the coordinator for the rural reservoir program.

14. Component 3: Project Management and Analytical Activities: There is no change in this

component, although the Amendment will explicitly clarify that this component finances the

costs of the Gerencia’s services.

15. Implementation Arrangements: The original Project design called for the Department

of La Guajira to enter a financial support agreement (Convenio) with each participating

municipality. The Convenio would specify the amount of grant financing provided by the

Department for urban infrastructure works in Component 1. Under this scheme, a specialized

water operator—which has a contract with the municipal government, would be responsible

for contracting the infrastructure works. The Department would establish a Project

Implementation Unit (PIU) to supervise and support the specialized water operators.

16. In August 2008, there was a fundamental policy change in the Colombian water sector

when the MADVT issued Decree 3200 which provides the regulations for the national

program referred to as Planes Departamentales de Agua (PDA). Under the PDA program,

which was inspired by the La Guajira Project, department governments were given the right

and encouraged to directly implement infrastructure works in municipalities, provided there

was agreement between the municipality and the department, i.e, a Convenio.

4

17. In late 2008, the Department of La Guajira, through a formal agreement with MADVT,

formally entered into the PDA program. At this point, the Bank-financed Project and the La

Guajira PDA became essentially synonymous. Per the national PDA regulations, the

Department of La Guajira established an external project management agency—the Gerencia.

The fundamental change in implementation arrangements in the Amendment consists in

specifying that Gerencia will supplant the PIU, and the Department with the assistance of the

Gerencia will be responsible for contracting infrastructure works.

18. Since the original Loan Agreement contemplated that the specialized water operators

would be responsible for contracting under the Project, there was a series of additional

requirements, in the form of sub-agreements, between the Department (the Borrower), the

municipalities, and the operators that would bind them follow the provisions of the Loan

Agreement. Since the Borrower is now implementing all aspects of the Project with support

from its Gerencia, the Amendment simplifies that matter and removes these requirements.

19. Procurement: Due to the changes in implementation arrangements, all of the

procurement will be undertaken by the Department through the Gerencia. This arrangement is

consistent with the prevailing national PDA regulations, and will also ensure more efficient

and standardized procurement procedures. Under the original Loan Agreement, all contracts

regardless of size are subject to Bank prior review. The Amendment will allow the

Procurement Plan to specify prior review requirements.

20. Requirements for Municipal Participation in the Project: The basic requirement in

the original Loan Agreement for municipalities to participate in the Project will be maintained

and are as follows:

i. the municipality must enter into a Financial Support Agreement (Convenio) with the

Department that meets PDA requirements;

ii. the municipality must have an acceptable contract with a specialized water operator;

and

iii. the contract with the specialized water operator must include acceptable performance

standards consistent with the increased investment and technical assistance provided

by the Project.

21. In every single case, a municipality must meet the first requirement and enter into a

Convenio with the Department in order to participate in the Project. In practice, quickly

meeting the second and third requirements has in some specific circumstances proved

difficult. Therefore the Amendment will allow the Project Executive Committee, with the

approval of the Bank, to temporarily relax the second and third conditions to allow for more

flexibility in implementing in the Project.

22. The table below shows that as of this date only five of the 15 La Guajira municipalities

have entered into Convenios with the Department. Fortunately, this includes the two largest

municipalities, Riohacaha and Maicao, which collectively account for 75% of the urban

population in La Guajira. It is anticipated that at least 3 more municipalities will participate in

the Project.

5

N. Municipality Urban PDA PDA PDA Convenio: Specialized

Operator

Service

Standards Population Invest.

(US$Mil)

Invest.

(COP

M)

% Municipality

Department

Municipalities with Convenios as of November 2011

1. Riohacha 178,162 42,864 81,441 28% Yes Aguas la Guajira

No

2. Maicao 97,109 22,944 43,594 15% Yes Aguas de Peninsula

Yes

3. Fonseca 19,84 9,152 17,388 6% Yes Aguas del Sur Yes

4. Manaure 12,423 13,844 26,303 9% Yes EAAA de Manaure No

5. Uribia 10,080 12,742 24,210 8% Yes AAA de Uribia

No

Municipalities without Convenios as of November 2011

6. Barrancas 15,247 4,956 9,417 3% No Aguas del Sur No

7. Distracción 4,286 3,064 5,822 2% No Aguas del Sur

No

8. El Molino 5,711 1,612 3,062 1% No Aguas del Sur

No

9. Hatonuevo 11,285 3.159 6,001 2% No Aguas del Sur No

10. San Juan

Cesar

22,643 14,949 28,403 9% No Aguas del Sur

No

11. Villanueva 18,836 9,418 17,895 6% No Aguas del Sur

No

12. Albania 11,962 1,906 3,621 1% No APC de Albania

No

13. Urumita 8,842 2,840 5,397 2% No EAAA Urumita

No

14. Dibulla 4,286 398 757 0.3% No Aguas de Dibulla

No

15. La Jagua 2,212 673 1,279 0.4% No ESP de La Jagua

No

16. Others 7,576 14,395 5%

TOTAL 422,924 152,097 288,985 100%

Total Convenios 317,614 101.546 192.936

% Convenios 75,10% 66,76% 66,76%

Safeguards:

23. Dam Safety Policy: The Dam Safety Policy (OP4.37) was not originally triggered by the

Project, but the inclusion of the rural reservoir program as pilot projects in Component 2

activated the policy in 2009. As of November 2011, ten of the eleven small reservoirs have

been constructed or are in the process of being constructed, and are financed entirely with

counterpart-funding provided by the Department. The Amendment will incorporate the rural

reservoirs in the description of Component 2 as rural pilot projects, and Bank financing will

be used to construct ancillary infrastructure, such as small water treatment plants, conveyance

and storage facilities, and develop institutional mechanisms to ensure sustainability of the

reservoirs and their associated dams. All of the dams in the program are defined as small

dams requiring generic dam safety measures (See Section 4.E for more information).2

2 The International Commission on Large Dams (ICILD) defines a large dam as: i) a dam over 15 meters in

height; or ii) if the dam is between 10-15 meters and reservoir capacity more than 1 million m3.

6

4. Appraisal Summary

A. Institutional and Implementation Arrangements:

24. During the first year of the Gerencia in 2010 there was considerable confusion and lack

of clarity between the role of the Department and its Gerencia. The Gerencia is a consortium

led by the Bogota Water and Sewerage Company (EAAB) and its subsidiary consulting

company, Aguas de Bogotá. In September 2011, the final version of the Operation Manual

was submitted to the World Bank which clearly defines the roles and responsibilities of the

Department and the Gerencia. Elections at the departmental and municipal level in Colombia

took place on Oct. 30, 2011 and new administration in La Guajira will assume office in

January 2012. The continuity of the Gerencia should help ensure a smooth transition between

administrations.

B. Implementation Schedule

25. The Regional Vice President has approved a closing date extension until October 15,

2015 contingent on Board approval of Project restructuring. Based on the analysis of the

implementation schedule conducted by the Bank, as well as analysis of the Colombian

National Planning Department (DNP), the Loan closing date would need to be extended by

approximately four years to October 15, 2015 in order to allow adequate time to

implementation of works as well as the necessary technical assistance to ensure improvements

in water services, the primary development objective of the Project. In addition, the new La

Guajira administration will serve until the end of 2015 and the proposed extension will allow

time for all the work to be completed within the term of the next administration.

26. The foundation of the investment program is based on the General Strategic Investment

Plan (Plan General Estrategico de Inversiones-PGEI) which was prepared by the Gerencia

and approved by the PDA Executive Committee (which includes MAVDT) in June 2010. The

PGEI presents a sector diagnostic, goals, and a strategic investment plan with a total cost of

approximately US$152 million (COP 288,955 million).

27. The analysis shows that the work program for the Project is well defined with most of the

works planned, designed, and packaged into specific contracts in the Procurement Plan. The

Bank-approved August 2011 procurement plan contains 31 works contracts worth US$80

million (US$25 million in execution) and an additional 32 consultant contracts worth US$22

million (US$9 million in execution). In total, the Procurement Plan (2012-2014) accounts for

approximately US$100 million of works and consultancies which will be implemented over

the period 2012-2014. Many of the consultancy contracts in the Plan are designed to prepare

an investment program for the period 2014-2015, which is tentatively estimated at US$40

million. Annex 2 contains the key milestones for 2012, which will be closely monitored to

ensure that the Project is proceeding as planned.

7

C. Financial Analysis:

28. Department Level: The delays in project implementation and extension in the Loan

closing date will modify the Borrower‟s forecast repayment schedule. The principle payments

will be lower than originally forecast between 2011 and 2014, and higher between 2014 and

2022 at the end of the repayment period. Counterpart funds for the project are pledged by the

Government of La Guajira through its royalty transfers from the Government of Colombia

and are controlled by an independent fiduciary agent. The Department of La Guajira should

therefore have sufficient funds for counterpart payments and loan repayments, only the timing

of the payments would change under the proposed extension.

29. Municipal Level: In order to enter into the La Guajira PDA/Project, the most important

step is signing the Department-Municipality Convenio. As of June 1, 2011 five municipalities

have signed Convenios with the Department government, accounting for 75% of the urban

population and 73% of the overall estimated overall PDA budget. It is expected that more

municipalities will join the PDA/Project in the coming years. Some municipalities are

reluctant to join the PDA, primarily because they must pledge future national government

transfers for water, through the Sistema General de Participacion (SGP), to an independent

fiduciary which is supervised by MAVDT and the Department through the PDA program.

This reduces local control over the financial transfers which some municipalities are reluctant

to agree to.

30. Operator Level: There are currently three main operators in La Guajira: i) Aguas de la

Guajira (Riohacha); ii) Aguas de la Peninsula (Maicao); and iii) Aguas del Sur (seven small

municipalities in the south). Aguas de la Peninsula and Aguas del Sur are owned by the same

group of investors, and have the same management team. All three operators are suffering

financially, have fragile working ratios and rely on supplementary revenue from construction

supervision services and municipal subsidies.

31. Financial forecasts indicate that Aguas de la Guajira and Aguas del Sur can achieve

financial equilibrium by improving water service, supported by the project investment and

better operational, commercial and social practices. Aguas de la Peninsula faces a

fundamental challenge due to lack of raw water supply, which limits the amount of water it

can sell. The Project will explore various alternatives to augmenting Maicao‟s water supply

(as well as Manure and Uribia). However, in both Manaure and Uribia the operators are

sustained only through municipal subsidies that prevent tariff increases. The operator in

Uribia recently undertook internal restructuring and could achieve financial equilibrium with

investment projects and enhanced operational, commercial and social practices. Conversely,

Manaure requires a complete structural reform of operational framework (e.g. mixed capital,

concession) given the company‟s serious service problems which have resulted in significant

liabilities and led to its current state of insolvency.

D. Technical Analysis:

32. Component 1: The proposed extension is intended to allow the operators to complete the

necessary investments and improve operational performance in order to meet the agreed-upon

8

performance indicators shown in Annex 1. In addition to the physical investments, it will be

necessary to improve operational performance. The Gerencia is providing technical support to

the specialized operators to help them meet their performance objectives.

33. The general conceptual approach is to move from intermittent water supply where

customers rely on household tanks or cisterns, to continuous supply 24 hours per day seven

days a week. Water supply systems are designed to provide continuous supply but without

proper maintenance and operation, critical components can deteriorate thus forcing the

operator to shift to intermittent supply generating a host of technical problems including poor

water quality and customer dissatisfaction—typically resulting in insufficient payment which

reduces operator revenues and reinforces the vicious circle.

34. The strategy for moving towards continuous service includes removing infrastructure

bottlenecks (raw water supply, treatment, conveyance, and distribution mains), sectorization

of the distribution network, pressurizing and employing micro-meters in one sector at time to

provide 24 hour continuous service, and a vigorous social outreach program to restore

confidence in the water service and encourage payment. The Gerencia will also work with

operators to improve their commercial systems, including metering, billing, and collection.

The recently completed ICR for the Colombia Water Sector Reform Assistance Project

(P065937) demonstrated that this is a viable approach and that a number of cities along the

Caribbean coast, generally with strong operators, have achieved resounding success with this

methodology

35. Component 2: Rural Water Pilot Program: In 2009, the Department and the National

Government developed a “small rural reservoir program” consisting of the construction of

approximately 11 small reservoirs in the municipality of Uribia. The rural reservoir program

is a priority national project to attend to the severe water shortages affecting indigenous

communities in La Guajira. As of November 2011, ten of the eleven small reservoirs

(Jotomana has not yet been constructed) have been constructed or are in the processing of

being constructed, and are financed entirely with counterpart-funding. The basic technical

features of the reservoirs are presented below:

9

36. There was an extensive consultation process with the indigenous communities, organized

by a non-governmental organization (Corporación para el Desarrollo Sostenible Ambiental-

CORDES) and the national government. The communities expressed strong demand and

support for the reservoirs during the consultation process. After the program had been

technically and environmentally approved by MAVDT, the Department requested the Bank to

include the program in the Project under Component 2 in order to enhance the program and its

sustainability. The reservoirs are located in Uribia municipality in upper La Guajira and are

difficult to access with no paved roads, frequent washouts of the dirt trails leading to the sites,

and persistent security concerns.

37. The rural reservoir program has been divided into two phases. The first sub-component is

the actual construction of the reservoirs which is being financed entirely by the Department

through funds provided by the national government. In order to ensure a sustainable program,

it was agreed that the reservoir program would be incorporated into the Project as the pilot

projects under Component 2, which would finance the second phase which focuses on

providing sustainable water supply and sanitation services and includes construction of

ancillary facilities (treatment, storage tank, distribution, etc.) and developing institutional and

financial arrangement to ensure sustainability of the project. The Cerrejon Fundacion de

Agua has signed an agreement with the Department to help provide technical assistance

related to the second phase. Cerrejon is one of the largest coal mines in the world, and has

established the Fundacion de Agua to provide support to indigenous communities in its area

of influence. The Fundacion de Agua will work closely with the Gerencia in the

implementation of the rural pilot projects.

E. Safeguard Analysis:

38. The Project ISDS has been updated and disclosed to reflect the issues below. The

restructuring operation will have an environmental category of "B" which is the same as the

original operation.

AMULAMANA 7 7.2 223,363 450 306,283

LA GRAN VIA 11.75 4.4 184,769 304 425,190

PUERTO VIRGEN 60.75 8.7 1,671,622 800 812,175

UTAIKALAMANA 22.05 9 245,086 652 378,636

SHAPURRAITU 10.87 6.3 146,252 500 310,422

JOTOMANA 5.1 12 231,450 1500 725,488

MAIWO 10,60 12 475,622 450 766,057

WUINMUCHASTIRRA 1,38 6.52 20,413 350 367,611

MORROCOMANA 25,89 8.81 787,113 550 522,352

KAIWA 1,55 98,447 831 718,831

MAURARU 11,57 7.5 257,244 750 707,763

Total 7,137 6,040,808

Volume (m3)

Cost (US$)

Population BenefitedHeight (m)Reservoir

Area (Ha)Reservoir

10

39. Indigenous Peoples Policy (OP/BP 4.10): The Borrower prepared an Indigenous

Peoples Planning Framework in 2007 to meet the Bank´s appraisal requirements. During

Project implementation, three sub-projects have triggered this policy:

i) Rural reservoir program in Component 2 involving 11 small reservoirs for indigenous

communities with a total beneficiary population of around 7,000 people. The Borrower

has prepared and Indigenous Peoples Plan (IPP) for the rural reservoir program which has

been approved by the Bank and disclosed in the Infoshop on June 15, 2011 and locally on

August 2, 2011.

ii) Wastewater treatment lagoons in Riohacha, requiring the resettlement of approximately

100 indigenous families. The Borrower has also prepared a document which serves as

both an IPP and a Resettlement Action Plan (RAP) for the Riohacha wastewater treatment

lagoons which has been approved by the Bank and disclosed in the Infoshop on August

12, 2011 and locally on August 2, 2011.

iii) New wastewater treatment lagoons in Maicao, potentially affecting approximately 25

indigenous households. The Borrower is in the process of formulating the IPP for this

subproject. Finalization of the IPP will depend on the results of consultations and

agreement reached between the Ministry of Interior and Justice and the potentially

affected indigenous community. One of the considerations in these consultations will be

the determination of the area of environmental influence of lagoons which the regional

environmental authority, Corpoguajira, is currently studying. The Gerencia is in close

communication with the municipal water operator, the Ministry of Interior, and

Corpoguajira on these issues.

The Maicao water operator (Aguas de la Pennisula) currently operates existing

wastewater treatment lagoons within the urban area of Maicao; the existing lagoons are

undersized and generate an environmental nuisance for the surrounding community. The

Operator is under court order to close down the existing lagoons, and construct new

lagoons outside of the existing urban area. The Operator has purchased a suitable plot in a

rural area, and the local indigenous community has permitted to construction to proceed

while consultations are underway. The Gerencia has initiated the IPP preparation for this

subproject and will rapidly finalize the IPP after the Ministry of Interior completes their

consultations. The Loan Amendment shall include a covenant requiring the IPP to be

completed before the Maicao wastewater treatment lagoons are put into operation.

40. Involuntary Resettlement Policy (OP/BP 4.12): The Borrower prepared a Resettlement

Policy Framework in 2007 to meet the Bank‟s appraisal requirements. During Project

implementation, the wastewater treatment lagoons subproject in Riohacha, involving the

resettlement of approximately 100 indigenous families, activated the policy. The Borrower

has prepared an acceptable RAP for the subproject which has been approved by the Bank and

disclosed in the Infoshop on August 12, 2011 and locally on August 2, 2011.

11

41. Projects on International Water Ways (OP 7.50): Although the Bank task team has

determined with the Gerencia that the Project will not affect the quantity or quality of waters

to other riparian states, OP 7.50 requires that all riparian states be informed of the planned

investments under Bank-financed projects. The municipality of Maicao in La Guajira lies

within the Carraipla-Paraguachon watershed which is shared by Colombia and Venezuela.

During Project preparation, it was envisioned that the Project would finance small water

supply and sanitation works in Maico. In compliance with OP 7.50, on September 28, 2006

the Government of Colombia, through MADVT, notified the Government of Government of

the proposed Project. There has been no response from the Venezuelan government.

42. The Project will finance wastewater collection works in the La Guajira municipality of

Maicao. The collected wastewater will be conveyed to a new wastewater treatment lagoon

system located on the outskirts of the Maicao. The lagoons are expected to become

operational in 2012. The treated effluent from the lagoons, with an average flow of

approximately 0.18 m3/s, will be discharged into a normally dry stream bed which runs

northward in Colombian territory before terminating in the desert still within Colombia. The

dry stream bed is generally parallel to the Venezuelan border which is approximately 1-2

kilometers to the east. There is not expected to be any measurable impact on water quality or

quantity in Venezuela due to the treated effluent. The Colombian government, through the

Ministiy of Foreign Affairs, notified the Venezuelan government on February 17, 2011 of the

proposed Maicao wastewater treatment lagoons and offered to provide additional technical

information upon request. To-date, the Venezuelan government has not responded to the

notification.

43. Safety of Dams (OP4.37): In 2009, the Department and the National Government

developed a “small rural reservoir program” consisting of the construction of approximately

11 small reservoirs in the municipality of Uribia. The rural reservoir program is a priority

national project to attend to the severe water shortages affecting indigenous communities in

La Guajira. As of November 2011, ten of the eleven small reservoirs have been constructed or

are in the process of construction, and are financed entirely with counterpart-funding.

44. The original design for the reservoir dams was prepared by local NGO (CORDES) and

approved by the MADVT. During the first Bank site visit to the two of the reservoirs in

February 2010, it was clear that there were deficiencies in the construction supervision and

design. The reservoir civil works contract was suspended until these issues could be

addressed. In mid-2010, the Gerencia‟s contract was modified to include design review and

construction supervision of the rural reservoir program. In order to comply with OP 4.37, the

Gerencia has prepared a Dam Safety report which summarizes how the design and

construction issues are being addressed, and provides a general framework for future dam

safety operations and maintenance. The Dam Safety report has been found to be acceptable by

the Bank. In general, no major embankment stability problems have been identified, however

there are deficiencies in the design of the spillways and the water intake structures which are

being corrected. The long-term maintenance of the structures is a concern due to limited

capacity of the communities, and the Loan Amendment includes a covenant requiring the

Borrower to ensure the formulation and implementation of a Dam Management and

Sustainability Plan for the Rural Reservoir Program by no later than December 31, 2013.

12

45. Environmental Assessment (OP4.01): In 2006 as a condition of Project approval, the

World Bank approved the Project Environmental Assessment Report, which included the

Environmental Management Plan. The Report was disclosed in the Infoshop on January 1,

2007 and locally on June 26, 2007. In addition, the Gerencia has developed an environmental

management system based upon its experience with water and sanitation projects in Bogota.

The main document governing the environmental management system is the “Guide for

Managing Environmental Impacts in Urban and Rural Areas for the La Guajira PDA.”

Construction contracts will include the relevant environmental management requirements, and

a Construction Supervision Manual has been prepared by the Gerencia which specifies how

environmental management actions are to be monitored and confirmed. As of mid-2011, the

Gerencia is still in the process of incorporating good environmental practices into its

construction and supervision contracts. The Bank is closely monitoring the Projects

environmental management activities and offering technical assistance as required.

46. Specific subprojects under the Project require Environmental Assessments under

Colombian law, which must be approved by the relevant environmental authorities. To date,

the Riohacha and Maicao wastewater treatment lagoons have required environmental license

from the regional environmental authority, Corpoguajira. The Department completed its

environmental assessment for the Riohacha wastewater treatment lagoons and received its

environmental license from Corpoguajira in 2004 (Resolución No.049). The environmental

license was provided before the Bank-financed project was even conceptualized. After

approval of the Bank project in 2007, the Bank requested the Department of La Guajira to

undertake a study of wastewater treatment alternatives, including submarine disposal with

preliminary treatment. The Riohacha Wastewater Treatment Study (September 2007)

confirmed wastewater treatment lagoons as the preferred alternative.

47. The Maicao wastewater treatment lagoons subproject received its environmental license

from Corporguajira in 2008 (Resolución 1382). During the initial stages of construction,

however, local indigenous communities requested that the discharge point for the treated

effluent be moved to another location. The specialized water operator for Maicao (Aguas de la

Peninsula) is currently investigating other discharge points, which would necessarily require a

modification of the environmental license.

48. The rural reservoir program was also subjected to environmental review and is under the

environmental management of the Gerencia. The selection and project preparation for each of

the 11 reservoirs was undertaken by a local NGO (CORDES) in consultation with the local

communities and with the guidance of the regional environmental authority, Corpoguajira.

Due to the relatively small size of the reservoirs, a formal environmental license was not

required. However, for each reservoir CORDES prepared an environmental management plan

which was reviewed and approved by Corproguajira. The Gerencia is currently supervising

the implementation of the environmental management plan by the contractors constructing the

reservoirs. In addition, to managing the construction environmental impacts, there are also

some potential operational environmental issues, particularly with respect to water quality and

salinity, control of aquatic vegetation, and maintenance of the reservoir embankments. The

13

Gerencia will continue to monitor the environmental conditions during the operation phase

and take mitigation actions where necessary.

49. Natural Habitats (OP4.04). According to the EA and the Gerencia’s „Guide for

Managing Environmental Impacts,” if any natural habitats (as defined by OP 4.04) could

potentially be significantly degraded or converted either directly or indirectly as a result of the

Project, the screening criteria will assess for this possibility, and accompanying environmental

management guidelines ensure that sub-projects would be in compliance with OP 4.04. To

date, no subproject has triggered this policy.

50. Cultural Property (OP4.11). In accordance with Bank‟s policies, the Project has

adapted and will apply existing good practice guidelines for screening of sub-project locations

and chance find procedures. The procedures are codified in the Gerencia’s „Guide for

Managing Environmental Impacts,” are in compliance with OP4.11. To date, no subproject

has triggered this policy.

F. Financial Management

51. The Gerencia has overall responsibility for financial management under the Project,

including forecasting cash flow, authorizing payments, Bank reporting, and auditing. The

Department of La Guajira has contracted an independent Fiduciary, FiduBogota, under terms

of reference acceptable to the Bank, to manage fund flows, keep project accounting and

reporting in coordination with the Gerencia and the Department. Only FiduBogota handles the

loan funds, not the Gerencia or the Department. The Bank‟s financial management updated

review concluded that the ongoing FM arrangements among the Department, the Gerencia

and FiduBogota, provide proper assurance that the project funds are being executed under

Bank FM policies and procedures.

52. A comprehensive action plan for strengthening the Project‟s Financial Management

system was agreed from early 2011, and has been substantially complied with, by the

Gerencia and FiduBogota; the Financial Director of the Gerencia‟s lead consortium company

(Aguas de Bogota), has been a key staff in the process of FM action plan compliance. In

September 2011, the Gerencia‟s recent appointed finance sub-director resigned, creating a gap

in the local organizational structure, The Gerencia is in the process of hiring a new Financial

Sub-director. The Gerencia is also in the process of installing a Project Management software

system, which is expected to be fully operational by the end of 2011. The audit for the period

from the first Bank disbursement (December 2010) to the close of December 31, 2011 is in

process to be contracted. The overall financial management risk is considered to be

substantial.

53. The original 2007 Disbursement Letter specified the use of Financial Management

Report (FMR) as the mechanism for documenting expenses. Based upon the 2011 financial

management review of the Project, it was agreed to justify the expenses using the “Statement

of Expense” (SOE) procedure and the Disbursement Letter is being modified accordingly. In

addition, since FidoBogota cannot open the Project Account in US Dollars, the Bank loan

14

funds in US dollars deposited into the Designated Account, and then are converted to

Colombian pesos and transferred to FidoBogota‟s account.

G. Procurement:

54. A formal Bank evaluation of the procurement capacity of the Borrower was initiated in

mid-2011 and concluded that the Gerencia has adequate capacity to undertake the Project

procurement functions, although the overall procurement risk is still considered to be high.

Under the original Loan Agreement, all contracts regardless of size are subject to Bank prior

review. The Loan Agreement will be modified to allow the Procurement Plan to specify prior

review requirements. However all ICB contracts for works and goods and consultants‟

services above $200,000 shall be subject to Prior Review by the Bank. Nevertheless, given

the high procurement risk, the Procurement Plan will continue to specify that all contracts are

subject to prior review until a revised formal Procurement Assessment in the future

determines that the procurement risk has been reduced.

55. The Operations Manual contains a detailed description of the different procurement

procedures and functions, and the Gerencia is fully staffed with the necessary technical and

procurement staff, including a new procurement specialist. However, since most of the key

personal are still relatively new to the Project, the efficiency of the procurement system in the

Gerencia is still developing. Although the Gerencia has primary responsibility for carrying out

the procurement functions, the contracts are ultimately signed by the Governor of La Guajira,

and at times reviewed by different La Guajira government departments, creating

complications and duplication of effort. Although the procurement procedures are well

articulated in the Operations Manual, in practice there is a need to ensure better coordination

between the Department and the Gerencia.

5. Key Risks and Mitigation Measures

56. Exceptions to Bank Policy: No exemptions to Bank policy are requested.

57. Risk: The table below summarizes the proposed risks and mitigation measures. The

Project will remain a high-risk, high-reward project that will require intensive Bank (and

MVCT) supervision, resulting in well above average supervision costs. The potential rewards

include the provision of improved water and sanitation services to over 300,000 urban

residents and over 7,000 rural indigenous people. As importantly, a successful Project in La

Guajira would demonstrate that the PDA program can function successfully in a relatively

underdeveloped department such as La Guajira, which has historically suffered from

governance issues and low capacity. A successful Project would help support as well shape

future water policy in Colombia.

Annex 2 contains the key milestones for Project implementation in 2012, which will be

closely monitored by the Bank task team, MVCT, and the DNP. In the event the Borrower

cannot substantially meet these key milestones the Bank will consider taking appropriate

action on the Project, in consultation with the national government.

15

Description of Risk Risk

Rating

Mitigation Measure Residual

Rating

New LG Department Administration

(2012-2016) does not support

PDA/Project;

S LG has formally committed to PDA

through the Departmental Assembly

(ORDENANZA Nº 268 DE 2009)

LG has commitment with municipalities

through Convenios, including Riohacha

No reason to opt out of smoothly

performing project

M

Poor performance by Gerencia S Close supervision by World Bank and

MAVDT

Commitment by EAAB and Aguas de

Bogota to successful project

Stable Gerencia team in place

S

Dissatisfaction and complaints by

Indigenous Communities over

reservoir management and

sustainability issues

H Ensure reservoir construction quality

Implement IPP

Provide close supervision of reservoir

program

Support of Cerrejon Fundacion de Agua

S

Infrastructure investments will not

result in improved water and

sanitation service

H Gerencia will focus on both infrastructure

and technical assistance

Existing proven methodology for

improving service in Colombia

Close Bank and MAVDT supervision to

ensure an emphasis on service

improvement

Potential modification of Gerencia contract

to include incentive for improved service

performance.

S

Overall Risk Rating S

H = High; S = Substantial; M = Moderate; L = Low

16

Annex 1: Results Framework and Monitoring

Colombia: La Guajira Water and Sanitation Infrastructure and Service Management Project

Original Project Development Objective (PDO): Improve the quality of water supply and sanitation services in urban, peri-urban, of the Borrower‟s

territory by: (a) supporting utility institutional performance through the use of “specialized operators”; and (b) delivering the necessary water and sanitation

infrastructure.”

Revised Project Development Objective: Improve the quality of water supply and sanitation services in urban, peri-urban, and rural areas of the Borrower‟s

territory by: (a) supporting utility institutional performance through the use of “specialized operators”; and (b) delivering the necessary water and sanitation

infrastructure.”

PDO Level Results Indicators* Co

re

D=Dropped

C=Continue

N= New

R=Revised

Unit of

Measure Baseline

Cumulative Target Values**

Frequency Data Source/

Methodology

Responsibility for Data

Collection 2012

2013

2014 2015

Indicator One:

Number of Municipalities with Specialized Operators Participating

in the PDA/Project with Adjusted

Performance Standards

N

o

N

Number

0

2

4

5

6

Annual

Aide Memoires

Gerencia

Indicator Two:

Level of water service as measured

by the core indicators in Annex 1.

No

R

See Annex

1

U MU MS MS S Annual PAEI Gerencia

Indicator Three: Satisfaction Level of Indigenous

Communities with Reservoirs

N

o

N Satisfaction Level

N/A MS S After Construction

and End of

Project

Beneficiary Survey

Social Consultants for Reservoir PPI

PDO Indicator 2: Service Level Rating

1. Highly Satisfactory-HS: All Targets Achieved

2. Satisfactory-S: Improvements in All Indicators and At Least 5 Targets Achieved For Indicator Numbers 3-9

3. Moderately Satisfactory-MS: Improvements in all Indicators At Least 3 Targets Achieved For Indicator Numbers 3-9

4. Moderately Unsatisfactory-MU: Improvement in At Least 4 Indicators For Indicator Numbers 3-9

5. Unsatisfactory-U: Improvement in Less than 4 Indicators For Indicator Numbers 3-9

PDO Indicator 3: Satisfaction Level of Indigenous Communities with Rural Reservoir Program :

1. Highly Satisfied: Expectations realized with respect to water availability and quality

2. Satisfied: Expectations realized with respect to water availability, and partially with respect to quality

3. Moderately Satisfied: Expectations partially realized with respect to water availability and quality.

4. Moderately Unsatisfied: Expectations partially realized with respect to water availability but not quality.

5. Unsatisfied: Expectations not realized with respect to water availability and quality.

INTERMEDIATE RESULTS

17

Revised Intermediate Result (Component One): Construction of Water Supply and Sewerage Infrastructure

Intermediate Result indicator

One: Value of water supply and sewerage works constructed

N

o

New US$ millions 0 10 40 80 100 Annual Financial

Management Reports

Gerencia

Revised Intermediate Result (Component Two): Rural Water Supply Pilot Projects: Rural Reservoir Program

Number of Rural Reservoirs Constructed

N

o

C No. 4 (11)

8 (12)

11 (13)

11 (14)

11 (15)

Part 1-PDO 2: Core Indicators for Water and Sanitation Service Delivery:

Source: FINAL TARGET PDAG (Metas finales ajustadas), 25 August 2011. The goals correspond to the population-weighted values for the five

municipalities participating in the Project: Riohacha, Maicao, Fonseca, Uribia, and Manure. In the event that other municipalities join the Project

they will be accounted for in the same manner.

INDICATORS Unit 2011 2012 2013 2014 2015

1. Urban Population Hab. 327.635 337.876 348.354 359.050 378.403

2. Potential Subscribers # 69.444 71.538 73.678 75.858 80.873

3. Unaccounted for Water % 68,6% 58,7% 49,9% 41,8% 40,0%

4. Revenue Collection Rate % 35,1% 49,1% 56,3% 63,1% 63,1%

5. Water Supply Infrastructure Coverage % 67% 71% 77% 82% 86%

6. Continuity of Water Supply Service H/Day 8,8 10,5 13,7 18,7 19,7

% 37% 44% 57% 78% 82%

7. Household Micro-Metering # 14.532 29.950 41.255 51.881 64.122

% 21% 42% 56% 68% 79%

8. Wastewater Treatment Rate % 15,6% 22,7% 33,3% 73,2% 73,6%

9. Sewerage Infrastructure Coverage % 50% 53% 60% 62% 72%

10. Subscribers Water Supply Infrastructure # 46.446 51.116 56.488 62.178 69.687

11. Subscribers Sewerage Infrastructure # 34.484 37.798 44.450 46.829 58.344

18

Part 2-PDO Indicator 2 - ANNUAL GOALS BY MUNICIPALITIES

INDICATORS UNIT 2011 2012 2013 2014 2015

FONSECA

1. Urban Population Hab.

20.103 20.395 20.715 21.064 21.093

2. Potential Subscribers #

5.975 6.062 6.157 6.260 7.081

3. Unaccounted for Water %

80,0% 70,0% 55,0% 45,0% 40,0%

4. Revenue Collection Rate %

40,0% 48,0% 54,0% 65,0% 65,0%

5. Water Supply Infrastructure Coverage % 78,0% 84,0% 88,0% 90,0% 90,0%

6. Continuity of Water Supply Service (hrs/d) H/Day 14,0 18,0 24,0 24,0 24,0

7. Household Micro-Metering # susc 1.165 5.092 5.418 5.634 6.373

% 25,0% 100,0% 100,0% 100,0% 100,0%


9. Sewerage Infrastructure Coverage % 60,0% 65,0% 75,0% 81,0% 81,0%



MAICAO

1. Urban Population Hab. 99.383 101.567 103.671 105.665 116.622

2. Potential Subscribers # 23.456 23.972 24.469 24.939 27.525

3. Unaccounted for Water % 60,0% 55,0% 50,0% 45,0% 40,0%




7. Household Micro-Metering # susc 6.003 11.794 12.773 13.467 20.313

% 32,6% 60,0% 60,0% 60,0% 82,0%





19

URIBIA


10.456 10.846 11.251 11.670 12.103


2.078 2.155 2.236 2.319 2.405


100,0% 70,0% 60,0% 40,0% 40,0%




7. Household Micro-Metering # susc 0 0 1.000 1.500 1.800

% 0,0% 0,0% 50,0% 64,7% 74,8%

8. Wastewater Treatment Rate %

60,0% 60,0% 60,0% 60,0% 70,0%




MANAURE


12.886 13.367 13.866 14.383 14.900


3.196 3.316 3.440 3.568 3.696


100,0% 70,0% 60,0% 40,0% 40,0%

4. Revenue Collection Rate %

10,0% 45,0% 58,0% 63,0% 63,0%



7. Household Micro-Metering # susc

0 0 1.000 2.200 2.700

% 0,0% 0,0% 66,7% 81,5% 84,4%

8. Wastewater Treatment Rate %

70,0% 70,0% 70,0% 70,0% 70,0%


10. Subscribers Water Supply Infrastructure # 480 997 1.500 2.700 3.200

11. Subscribers Sewerage Infrastructure #

993 993 993 993 1.848

20

RIOHACHA

1. Urban Population X Hab. 184.807 191.701 198.851 206.268 213.685

2. Potential Subscribers X # 34.738 36.034 37.378 38.772 40.166

3. Unaccounted for Water

Dificil % 68,0% 58,0% 48,0% 40,0% 40,0%

4. Revenue Collection Rate

Dificil % 38,0% 53,0% 58,0% 63,0% 63,0%

5. Water Supply Infrastructure Coverage

Facil % 60,9% 65,6% 70,3% 75,0% 82,0%

6. Continuity of Water Supply Service (hrs/d)

Dificil H/Day 10,1 12,0 15,0 22,0 24,0

7. Household Micro-Metering

Dificil # susc 7.364 13.064 21.064 29.079 32.936

% 34,8% 55,2% 80,1% 100,0% 100,0%

8. Wastewater Treatment Rate

Facil % 0,0% 0,0% 0,0% 70,0% 70,0%

9. Sewerage Infrastructure Coverage

Facil % 46,6% 50,0% 50,0% 52,0% 70,0%



21

Annex 2: ISR Ratings and Key Milestones for Project Supervision in 2012

Recent ISR Ratings: The last three Implementation Status Ratings for the Project are

provided below.

ISR Date Implementation Progress Progress Towards PDO

October 4, 2011 Moderately Satisfactory Moderately Unsatisfactory

February 10, 2011 Moderately Unsatisfactory Moderately Unsatisfactory

May 14, 2010 Moderately Unsatisfactory Moderately Unsatisfactory

Project Monitoring Framework for 2012: Given the recent poor ISR ratings, the Project

will be closely monitored in 2012 to ensure performance and provide confidence that Project

Development Objectives can be achieved by the proposed closing date of Oct. 15, 2015.

Three dimensions will be monitored: i) local government commitment; ii) procurement

efficiency; and iii) construction progress and financial management. To facilitate monitoring

and reporting, an assessment will be undertaken every four months.

Indicator 1—Local Government Commitment: The new Governor shall send to the Bank

and DNP an official letter demonstrating his administration‟s commitment to the Project and

to following the requirements set forth in the Loan Agreement no later than April 30, 2012.

Indicator 2—Procurement Efficiency: The Bank-approved August 2011 procurement plan

contains 31 works contracts worth US$80 million (US25 million in execution) and an

additional 32 consultant contracts worth US$22 million (US$7.5 million in execution). All

contracts are expected to be completed no later than mid-2015. The key activities which will

be monitored in 2012 to ensure the progress of the Project are:

A. Construction Supervision: Contacting and mobilizing the Project-wide construction

supervision consultants (two contracts worth US$3.1 million in total). To-date construction

supervision contracts are being split into smaller contracts for groups of works.

B. Communication and Outreach: Consultant contract (US$436,000) to socialize the Project

in the Department of La Guajira and specific municipalities.

C. Riohacha Water Supply Works: Works contract (US$26 million) to reconfigure the

Riohacha water supply system, including dividing the distribution network into sectors, with

macro and micro metering.

D. Safeguard Consultant: Consultant contract (US$752,000) to implement the IPP the Rural

Reservoir Program. To-date implementation of IPP is being undertaken by the Gerencia and

through small consultant contracts.

The dates presented are conservative estimates and actual implementation could proceed more

rapidly provided there are no procurement complications.

22

First Trimester: April 30, 2012

Activity Milestone

A. Construction Supervision Technical Evaluation Report Submitted

B. Communication and Outreach Technical Evaluation Report Submitted

C. Riohacha Water Supply Works Bank approval of Bidding Documents

D. Safeguard Consultant Technical Evaluation Report Submitted

Second Trimester: August 31, 2012

Activity Milestone

A. Construction Supervision Consultant Contracted

B. Communication and Outreach Consultant Contracted

C. Riohacha Water Supply Works Contractor Selected

D. Safeguard Consultant Consultant Contracted

Third Trimester: December 31, 2012

Activity Milestone

A. Construction Supervision Consultant Working

B. Communication and Outreach Consultant Working

C. Riohacha Water Supply Works Contractor Working

D. Safeguard Consultant Consultant Working

Indicator 3—Construction Progress and Financial Management: The following table

shows the accumulated investment under the Project and the accumulated recorded expenses

in the Bank‟s Client Connection. The lag between accumulated expenses and registered

expenses are due to: i) the Borrower has decided to use counterpart funding for the some

initial projects; and ii) the Borrower has been waiting to record the eligible expenses in the

Bank system until the revised Disbursement Letter was revised (in November 2011):

Item Nov. 1, 2011 April 30, 2012 August 31, 2012 Dec. 31, 2012

Accumulated Investment

Per FM Reports

US$17 million US$20 million US$25 million US$30 million

Registered Expenses in

Client Connection

US$0.0 US$5 million US$10 million US$15 million

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