Project Readiness Financing Project Administration Manual People's Republic of Bangladesh: Dhaka Mass Rapid Transit Development Project Readiness ...
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Project Readiness Financing Project Administration Manual Project Number: 49258-002 Loan Number: PRFXXXX October 2019 People’s Republic of Bangladesh: Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route)
CONTENTS I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLAN 2 A. Overall Implementation Plan 2 III. PROJECT MANAGEMENT ARRANGEMENTS 3 A. Project Implementation Organizations: Roles and Responsibilities 3 B. Key Persons Involved in Implementation 4 IV. COSTS AND FINANCING 5 A. Key Assumptions 5 B. Allocation and Withdrawal of Loan Proceeds 5 C. Detailed Cost Estimates by Expenditure Category and Financier 7 D. Detailed Cost Estimates by Year 7 E. Contract and Disbursement S-Curve 8 F. Fund Flow Diagram 9 V. FINANCIAL MANAGEMENT 10 A. Financial Management Assessment 10 B. Disbursement 14 C. Accounting 14 D. Auditing and Public Disclosure 15 VI. PROCUREMENT AND CONSULTING SERVICES 16 A. Advance Contracting 16 B. Procurement of Consulting Services 16 C. Procurement Plan 17 D. Consultant’s Terms of Reference 17 VII. SAFEGUARDS 17 VIII. PERFORMANCE MONITORING 17 A. Monitoring 17 B. Reporting 18 IX. ANTICORRUPTION POLICY 18 X. ACCOUNTABILITY MECHANISM 18 XI. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 19 APPENDIX Appendix A Procurement Plan Appendix B Terms of Reference for Engineering Design for Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route) Appendix C Outline Terms of Reference for Individual Consultants (Advisory Service) Appendix D Outline Terms of Reference for Internal Audit (Advisory Service) Appendix E Statement of Cash Receipts and Payments
Project Administration Manual for Project Readiness Financing: Purpose and Process The project administration manual (PAM) for the project readiness financing (PRF) is an abridged version of the regular PAM of the Asian Development Bank (ADB) and describes the essential administrative and management requirements to implement the PRF following the policies and procedures of the government and ADB. The PAM should include references to all available templates and instructions either by linking to relevant URLs or directly incorporating them in the PAM. The executing agency, the Dhaka Mass Transit Company Limited (DMTCL), is wholly responsible for the implementation of ADB-financed PRF projects, as agreed between the borrower and ADB, and following the policies and procedures of the government and ADB. ADB staff is responsible for supporting implementation, including compliance by the DMTCL of its obligations and responsibilities for PRF project implementation following ADB’s policies and procedures. In the event of any discrepancy or contradiction between the PAM and the loan agreement, the provisions of the PRF loan agreement will prevail. After ADB’s approval of the PRF proposal, 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 this PAM.
ABBREVIATIONS ADB – Asian Development Bank DMTCL – Dhaka Mass Transit Company Limited FY – fiscal year JICA – Japan International Cooperation Agency MRT – mass rapid transit OCR – ordinary capital resources PAM – project administration manual PIU – project implementation unit PRF – project readiness financing QCBS – quality- and cost-based selection Tk – taka TOR – terms of reference
I. PROJECT DESCRIPTION 1. Rationale. Dhaka, the capital city and industrial and commercial center of Bangladesh, plays a significant role in the country’s rapid economic growth, which registered an annual average of 6.5% over the last 10 years. Transport sector interventions, however, are deemed necessary to address serious traffic congestion and the lack of an alternative mass transit network. In 2016, the government formulated the Revised Strategic Transport Plan (RSTP) as an urban transport master plan for Dhaka. The RSTP proposes five mass rapid transit (MRT) lines and two bus rapid transit lines along six distinct public transport corridors that will connect Dhaka’s central business district with surrounding satellite regional centers. 2. The proposed project readiness financing (PRF) will support the preparation and high project readiness of the ensuing loan to the People’s Republic of Bangladesh for the Dhaka Mass Rapid Transit Development Project Readiness Financing for Line 5, Southern Route. The Dhaka MRT Line 5 (Southern Route) will be constructed between Gabtoli and Dasherkandi stations with a length of about 17.4 kilometers (km). The PRF will prepare the detailed feasibility study, engineering design, and procurement documents, and provide assistance in procurement-related processes. The project is in line with ADB’s country partnership strategy, 2016–2020, which aims to ease infrastructure constraints by undertaking transformational investments in key sectors including transport. The proposed PRF is listed in ADB’s country operations business plan, 2019– 2021 for Bangladesh. 3. Impact and outcome. The impact of the project is the development of an essential and priority MRT line to create an effective public transport network in Dhaka, serving one of the few east–west corridors and providing intermodal stations with other MRT and BRT lines in the north– south direction. The outcome of the ensuing project is aligned with ADB’s operational priorities under Strategy 2030: (i) sustainable and climate-resilient urban transport with low levels of greenhouse gas emissions; (ii) an integrated approach for sustainable urban development through transit-oriented development;1 (iii) safe, high-quality public transport with women-friendly designs; (iv) improved access to business and job opportunities, particularly for those living in surrounding areas; and (v) capacity development of the executing agency. 4. Output. The PRF will support the preparation of a full-fledged feasibility study and engineering design for civil works and equipment components of MRT Line 5 (Southern Route).2 It will also provide support for carrying out topographical, geological, and hydrological investigations; traffic surveys; safeguard studies; economic and financial analyses; and other technical assessments needed for preparing the engineering design. Measures for climate and natural disaster resilience and features for the elderly, women, children, and people with disabilities will be integrated into the engineering design. Technical compatibility with other metro lines, where relevant, will be secured in the design specifications. The design will also include advanced technology, such as an automated ticketing and fare collection system with an integrated database for operations management. The PRF will help prepare procurement documents and activities in line with the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). The PRF will also support the executing agency by engaging individual consultants to review the consultant’s engineering design proposal because an underground metro is a relatively new concept for the agency and Bangladesh. 1 Transit-oriented design involves integrated urban and public transport development that maximizes residential and commercial space within walking distance of public transport. It increases public transport (i) ridership and revenue, (ii) financial viability (through increased property values), and (iii) tax revenue (from value capture). 2 Detailed design will be prepared for the civil works for both the underground and elevated sections. The basic design will be prepared for the equipment components, including the rolling stocks, signaling communication system, power supply system, and electrical and mechanical equipment.
2 II. IMPLEMENTATION PLAN A. Overall Implementation Plan 5. Table 1 shows a Gantt chart recording outputs with key implementation activities updated annually and submitted to ADB with contract and disbursement projections for the following years. Table 1: Overall Project Implementation Plan 2019 2020 2021 2022 2023 2024 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 A. Implementation Consultant Selection EOI RFP Evaluation Contract Award Implementation Engineering Design Phase 1 Phase 2 (design) Phase 2 (bid document) Phase 2 B. Management Activities Loan approval Loan signinig Loan effectiveness Fist APFS Expected esuing loan approval APFS = audited project financial statement, EOI = expression of interest, RFP = request for proposal. Source Asian Development Bank estimates.
3 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations: Roles and Responsibilities Table 2: Project Implementation Organizations Project Implementation Organizations Management Roles and Responsibilities A. Executing agency Dhaka Mass Transit (i) Day-to-day project management Company Limited (ii) Consultant recruitment and management (iii) Preparation and submission of withdrawal applications (iv) Preparation and submission of project progress reports (v) Maintaining project accounts and complete loan financial records B. Asian Development Bank (i) Monitoring and review of overall implementation of the project, including the project implementation schedule, in consultation with the executing agency (ii) Actions required in terms of poverty reduction, social assessment, environment impacts, and resettlement plans, if applicable (iii) Timeliness of budgetary allocations and counterpart funding (iv) Project expenditures (v) Progress with procurement and disbursement (vi) Compliance with particular loan covenants (vii) Likelihood of attaining the project’s immediate development objectives Source: Asian Development Bank.
4 B. Key Persons Involved in Implementation 6. The project implementation unit (PIU) will be established in the Dhaka Mass Transit Company Limited (DMTCL) to implement the project. The PIU will be composed of one project director, five additional directors (for civil works, rolling stocks, electrical and mechanical equipment, safeguards, finance and administration), and project management and supporting staff. Key persons involved in implementation are as follows: Executing Agency Dhaka Mass Transit Company M.A.N. Siddique Limited Managing Director Telephone: +880 2 5513 8099 Email address: firstname.lastname@example.org Probashi Kallyan Bhaban, Level 14 71-72 Old Elephant Road, Eskaton Garden Dhaka 1000 Bangladesh Md. Mahboob Ul Alam Project Director (ADB Focal) Telephone: +880 2 4103 0436 Email address: email@example.com Probashi Kallyan Bhaban, Level 14 71-72 Old Elephant Road, Eskaton Garden Dhaka 1000 Bangladesh Asian Development Bank South Asia Transport and Ravi Peri Communications Division Director, SATC (SATC) Telephone: +63 2 632 6745 South Asia Department Email address: firstname.lastname@example.org Mission Leader Kanzo Nakai Principal Transport Specialist, SATC Telephone: +63 2 632 6260 Email address: email@example.com Resident Mission Focal Md. Humayun Kabir Associate Project Officer (Transport) Telephone: +880 2 5566 7000 Email address: firstname.lastname@example.org
5 IV. COSTS AND FINANCING 7. The project is estimated to cost $44.58 million, including taxes and duties, physical and price contingencies, interest, and other charges during implementation. Table 3: Summary Cost Estimates ($ million) Item Amounta A. Base Costb 1. Feasibility study, engineering design, and procurement support 38.76 2. Recurrent costsc 1.27 Subtotal (A) 40.03 B. Contingenciesd 3.28 C. Interest During Implementatione 1.27 Total (A+B+C) 44.58 a Includes taxes and duties of $10.05 million. The government will finance taxes and duties of $10.05 million as cash contribution. b In mid-2019 prices as of April 2019. c Includes salaries of the executing agency employees assigned to the project and project management office administrative costs. d Physical contingencies computed at 5.0% of the consulting service cost. Price contingencies computed at 1.6% on foreign exchange costs and 4.5% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. e Interest during implementation for the concessional ordinary capital resources loan has been computed at 2.0% per year. Source: Asian Development Bank estimates. 8. The government has requested a concessional loan of $33.26 million from ADB’s ordinary capital resources (OCR) to help finance the project. ADB will finance the expenditures in relation to consulting services, contingencies, and financial charges during implementation. The government will finance taxes and duties and recurrent costs for a total of $11.32 million. A. Key Assumptions 9. The following key assumptions underpin the cost estimates and financing plan: (i) Exchange rate: Tk84.25 = $1.00 (as of 1 April 2019). (ii) Price contingencies based on expected cumulative inflation over the implementation period are as follows: Table 4: Escalation Rates for Price Contingency Calculation (%) Item 2019 2020 2021 2022 2023 Average Foreign rate of price inflation 1.5 1.5 1.6 1.6 1.6 1.6 Domestic rate of price inflation 6.1 6.1 6.1 6.1 6.1 6.1 Source: Asian Development Bank estimates. (iii) In-kind contributions cannot be easily measured and have not been quantified. B. Allocation and Withdrawal of Loan Proceeds 10. Allocation and withdrawal of loan proceeds are in Table 5.
6 Table 5: Concessional OCR Loan – Allocation and Withdrawal of Loan Proceeds CATEGORY ADB FINANCING Number Item Amount Allocated Percentage and Basis for Withdrawal ($ million equivalent) from the Loan Account 1 Consulting services 28.71 100% of total expenditure claimed* 2 Interest charge 1.27 100% of amount due 3 Unallocated 3.28 Total 33.26 ADB = Asian Development Bank, OCR = ordinary capital resources. *Exclusive of taxes and duties imposed within the territory of the borrower. Source: Asian Development Bank estimates.
7 C. Detailed Cost Estimates by Expenditure Category and Financier Table 6: Cost Estimate by Expenditure Category and by Financier ($ million) Government ADB Total Cost % of Cost % of Cost Taxes and Item Amount Category Amount Category Amount Duties A. Consulting Services 1. Consultants 10.05 25.9 28.71 74.1 38.76 10.05 2. Recurrent Costs 1.27 100.0 0.00 0.0 1.27 0.00 Subtotal (A) 11.32 28.3 28.71 71.7 40.03 10.05 Total Base Cost 11.32 28.3 28.71 71.7 40.03 10.05 B. Contingencies 0.00 0.0 3.28 100.0 3.28 0.00 C. Financial Charges During Implementation 0.00 0.0 1.27 100.0 1.27 0.00 Total Project Cost (A+B+C) 11.32 25.4 33.26 74.6 44.58 10.05 % Total Project Cost 25.4 74.6 100% ADB = Asian Development Bank estimates. Notes: 1. Numbers may not sum precisely because of rounding. 2. The costs of the audit of the project are minor and will be borne by the government. Source: Asian Development Bank estimates. D. Detailed Cost Estimates by Year Table 7: Detailed Cost Estimates by Year ($ million) Total Item Cost 2020 2021 2022 2023 A. Consultant Costs 1. Consultants 38.76 5.75 13.59 13.67 5.75 2. Recurrent Costs 1.27 0.25 0.38 0.38 0.25 Subtotal (A) 40.03 6.00 13.97 14.05 6.00 Total Base Cost 40.03 6.00 13.97 14.05 6.00 B. Contingencies 3.28 0.33 1.02 1.29 0.64 C. Financial Charges During Implementation 1.27 0.05 0.20 0.43 0.59 Total Project Cost (A+B+C) 44.58 6.38 15.19 15.77 7.24 % Total Project Cost 100% 14.3% 34.1% 35.4% 16.2% Source: Asian Development Bank estimates.
8 E. Contract and Disbursement S-Curve 11. Contract award and disbursement projections for the project are summarized as follows: Figure 1: Contract Award and Disbursement 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2019 2020 2021 2022 2023 Contract Award Disbursement Source: Asian Development Bank estimates. Table 8: Contract Award and Disbursement ($ million) Item Total 2019 2020 2021 2022 2023 Contract Award 31.99 0.00 28.41 0.30 3.28 0.00 Disbursement 33.26 0.00 4.64 11.29 11.83 5.50 Source: Asian Development Bank estimates.
9 F. Fund Flow Diagram 12. The following diagram shows how the funds will flow from ADB and the borrower to implement project activities. Figure 2: Fund Flow Diagram ADB GOB MOF RTHD (District Treasury Office - for counterpart fund) (iii) (viii) (ii) (iv) (v) DMTCL–PIU–Line 5 (Southern Route) Account in BDT in Commercial Bank Documents Flow Funds Flow (i) (vi) (vii) Consulting Firm and Individual Consultants Consulting Firm and Individual Consultants ADB Component – Direct Payment GOB Component/ADB Component – Procedure Reimbursement Procedure ADB = Asian Development Bank, BDT = Bangladesh taka, DMTCL = Dhaka Mass Transit Company Limited, GOB = Government of Bangladesh, MOF = Ministry of Finance, PIU = project implementation unit, RTHD = Road Transport and Highways Division. Notes on funds flow: 1. For direct payment to contractors and consultant: (i) Contractors and consultants issue claims to PIU (ii) PIU sends request to ADB for payments together with contractors/consultants’ invoices (iii) ADB makes direct payment to contractors and consultants 2. For other payments and expenditures and counterpart fund: (iv) Request for counterpart fund quarterly basis to MOF by RTHD (v) Release of counterpart fund (vi) Consultants/contractors submit claim for GOB share payment (vii) Payments to consultants/contractors 3. For reimbursement procedure for ADB component: (viii) Contractors and consultants issue claims to PIU (ix) Payments to consultants/contractors by PIU (x) PIU sends request to ADB for payments together with contractors/consultants’ invoices (xi) ADB disburses funds to the PIU account Source: Asian Development Bank.
10 V. FINANCIAL MANAGEMENT A. Financial Management Assessment 13. A financial management assessment (FMA) for the DMTCL was conducted in May 2019 in accordance with ADB’s Guidelines for the Financial Management and Analysis of Projects and Financial Due Diligence: A Methodology Note, and Technical Guidance Notes. 3 The FMA considered the capacity of the DMTCL, including funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. Based on the assessment, the key financial risks identified are (i) lack of experience of the DMTCL in implementing ADB-funded projects and lack of familiarity with ADB financial management requirements; (ii) vacant positions of all PIU staff, including finance and accounts positions; and (iii) necessity of strengthening internal auditing function at the DMTCL. Overall pre-mitigation financial management risk of the DMTCL is considered moderate. Table 9: Financial Management and Internal Control Risk Assessment Risk Mitigation Measures Risk Assessment Risk Description or Action Plans Inherent Risk 1. Country-specific M Absorption capacity of GOB The CPS final review validation risks departments for capital rated ADB’s strategic positioning expenditure may not be satisfactory and the program adequate relevant to the country’s needs, as well as effective and likely sustainable. Close monitoring of activities will reduce the risks related to country-specific risks in the project. S Overall public financial Dialogue is needed between ADB, management risk: external GOB, and ICAB aimed at (i) scrutiny and audit still capacity building of CAG auditors, remain in the weak areas in and (ii) strengthening of the PFM based on 2011- statutory/regulatory requirements 2015 PEFA. to ensure that audits look beyond transactions and focus on systems of the audited entities. 2. Entity-specific M Lack of experience of the The DMTCL has experience in risks DMTCL as executing implementing JICA-financed agency and implementing projects. However, it is agency for ADB-funded implementing an ADB-funded projects project for the first time. A separate PIU established within the DMTCL, staffed with personnel with experience in externally funded projects along with provision of appropriate trainings for PIU staff, will reduce the entity- specific risks in managing the project. 3 ADB. 2005. Financial Management and Analysis of Projects. Manila. https://www.adb.org/documents/financial- management-and-analysis-projects; ADB. 2015. Financial Due Diligence: A Methodology Note. Manila. http://www.adb.org/documents/financial-due-diligence-methodology-note.
11 Risk Mitigation Measures Risk Assessment Risk Description or Action Plans Overall Inherent M Risk Control Risk 1. Implementing M MRT Line 5 (Southern Staffing must be in place before entity Route) under the DMTCL loan effectiveness. is proposed to manage and implement the project. Appropriate staff may not be hired on timely basis. 2. Matching fund M Timely release of The DMTCL will ensure correct counterpart fund to the budgeting and the timely release project may not take place, of counterpart funds from the resulting in shortage of MOF. funds. 3. Staffing M Dedicated finance and The establishment of a PIU accounting staff for the PIU headed by a Project Director with is not in place during the sufficient staff for the financial project preparation. management of the project, composed of an additional project director (finance and administration) and assisted by an assistant project manager (finance and accounts), is in process. 4. Accounting M Proper well documented Existing GOB procedures are procedures procedures are not in place followed by the DMTCL. To ensure to ensure compliance with full compliance with ADB’s ADB requirements. requirements at all levels, it is recommended to supplement these with a procedures manual with project-specific financial management procedures. 5. Internal audit M Internal audit function The existence of an effective needs to be further independent internal audit function strengthened. strengthens the overall internal control framework and reduces fiduciary risk. It is recommended to outsource the internal audit function to a professional audit firm. They should conduct the internal audit on annual basis and submit their reports directly to the board of directors, after obtaining comments from the Managing Director and Project Director of the PIU (Line 5). 6. External audit L The audit of the project The current arrangement of getting financial statements should the audit done by FAPAD of CAG be done in accordance with is acceptable to ADB. Annual the International Standards project audit reports are produced on Auditing and by the within 6 months at the end of the independent auditor financial year.
12 Risk Mitigation Measures Risk Assessment Risk Description or Action Plans acceptable to ADB. FAPAD issued qualified audit opinion on the project financial statements of the Line 6 project, due to incorrect presentation of opening cash and bank balances. A template for statement of cash receipts and payments has been included in Appendix C to serve as guidance for the PIU. 7. Reporting and M Quarterly progress reports The DMTCL/PIU will submit monitoring may not be submitted on quarterly progress reports within time, resulting in lack of 45 days after the reporting period effective project progress in a format agreed with ADB, monitoring. which will include physical and financial progress. Overall Control M Risk H – High, S - Substantial, M – Moderate, L – Low. ADB = Asian Development Bank, CAG = Comptroller and Auditor General, CPS = country partnership strategy, DMTCL = Dhaka Mass Transit Company Limited, FAPAD = Foreign Aided Project Audit Directorate, GOB = Government of Bangladesh, ICAB = Institute of Chartered Accountants of Bangladesh, JICA = Japan International Cooperation Agency, MOF = Ministry of Finance, MRT = mass rapid transit, PFM = public financial management, PIU = project implementation unit. Source: Asian Development Bank. 14. The DMTCL agreed to implement an action plan as key measure to address the deficiencies. The financial management action plan is provided in Table 10. Financial management risks and risk-mitigation measures should be reviewed and updated throughout the life of the project. Table 10: Financial Management Action Plan Risk Description Mitigation Actions Timeline Responsibility The PIU staff, The DMTCL will appoint qualified staff Before loan DMTCL including finance with experience in implementing effectiveness and accounts staff, externally funded projects for the yet to be hired positions of additional project director (finance and administration) and assistant project manager (finance and accounts). Sufficient budgetary Budgeting of sufficient counterpart fund Before start of the DMTCL allocation and timely provision is required in every annual project and release of budget. thereafter annually counterpart funds to at the time of budget be ensured preparation Strengthening of An internal audit firm will be engaged to Appointment of DMTCL internal audit conduct internal audits annually and to internal audit firm function report within 45 days after the end of within the first the reporting period. The internal audit quarter of project reports shall be presented to the board implementation and of directors of the DMTCL, after annual internal
13 Risk Description Mitigation Actions Timeline Responsibility obtaining comments of the Project audits to be Director of the PIU (Line 5) and the conducted by the Managing Director of the DMTCL. internal audit firm throughout the project implementation period DMTCL’s lack of Training will be provided for the Before loan ADB experience in financial management staff of the PIU effectiveness implementing ADB- on ADB policies and procedures, funded projects including disbursement procedures, financial management in ADB projects, and ADB financial management and auditing requirements. To ensure full compliance with ADB’s The manual will be DMTCL requirements at all levels, a policies prepared within 6 and procedures manual with project- months of loan specific financial management effectiveness. procedures needs to be developed and Internal and external implemented by the DMTCL. auditors will review compliance with the manual during performance of their audits. Effective progress Prepare quarterly report for the ADB As project starts DMTCL reporting and project with financial and disbursement monitoring to be report as well as variance analysis of ensured physical and financial progress. ADB = Asian Development Bank, DMTCL = Dhaka Mass Transit Company Limited, PIU = project implementation unit. Source: Asian Development Bank. 15. Dhaka Mass Transit Company Limited. The DMTCL was established in 2013 through the Association of Agreement in accordance with the Company Act 1994 of Bangladesh. The Government of the People’s Republic of Bangladesh (GOB) holds 100% ownership of the DMTCL through the Secretary of Road Division, Ministry of Road Transport and Bridges (MORTB). The DMTCL is governed by a dynamic board of directors composed of various senior government officials and technocrats, including a representative from the Bangladesh University of Engineering and Technology (BUET) and the president of the Institute of Chartered Accountants of Bangladesh (ICAB). The DMTCL is operationally headed by a Managing Director and is currently staffed with a total number of 41 staffers, working in PIUs established for various metro lines. The DMTCL is implementing Dhaka Metro Line 1 and Line 6 and also plans to implement Line 5 (North), all with the support of the Japan International Cooperation Agency (JICA). Line 1 and Line 6 are each managed by a separate PIU with its own project director and support staff. The establishment of the PIU for project Line 5 (Southern Route) is in progress. The DMTCL’s entity-level financial statements are audited by a private firm of chartered accountants, whereas project financial statements are audited by the Foreign Aided Project Audit Directorate (FAPAD). As per the latest available financial statements, the auditors issued an unqualified audit opinion for fiscal year (FY) 2018. The DMTCL follows the International Financial Reporting Standards (IFRS) for the preparation of its financial statements. For project financial statements of JICA- funded project (Line 6), FAPAD issued a qualified audit opinion for FY2017 due to the incorrect presentation of opening cash and bank balances. Project financial statements for Line 6 are
14 prepared on the cash basis of accounting and follows the cash basis standards of the International Public Sector Accounting Standards (IPSAS). B. Disbursement 16. The DMTCL will disburse the project readiness loan proceeds following ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB. Online training for project staff on disbursement policies and procedures is available.4 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. 17. ADB’s disbursement procedures (direct payment and/or reimbursement) will be used for withdrawal of project funds. The DMTCL will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications to ADB. The SOE procedure may be introduced at a later stage by a request from the government in consideration of the achievement of the financial management action plan. 18. Before submitting the first withdrawal application, the government 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 withdrawal application is stipulated in ADB’s Loan Disbursement Handbook. Individual payments below such amount should be paid by the DMTCL and subsequently claimed from ADB through reimbursement 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 system is encouraged for submission of withdrawal applications to ADB.5 19. No further disbursements will be made from the PRF account upon refinancing under an ensuing or ongoing loan. The PRF loan amount and accrued financing charges are paid out under the PRF cost category of the ensuing or ongoing loan that will refinance the PRF loan. Provided the following costs are eligible expenditures, the ensuing or ongoing loan will finance (i) costs incurred under the PRF that have not yet been paid from the PRF account by the refinancing date, (ii) costs for activities initiated under the PRF and continuing beyond the refinancing date, and (iii) costs incurred during PRF implementation but ineligible under the PRF. C. Accounting 20. The DMTCL will maintain separate PRF project accounts and records by funding source for all expenditures incurred on the PRF project, following the cash basis of accounting. PRF project accounts will follow standards prescribed by the government’s accounting laws and regulations that are consistent with international accounting principles and practices. The financial statements shall include, at the minimum, a statement of receipts and payments with accompanying notes and schedules, and the statement of budgeted and actual expenses. A template of statement of cash receipts and payments provided in Appendix C is to be referred to as a guide. 4 Asian Development Bank. Disbursement eLearning. http://wpqr4.adb.org/disbursement_elearning. 5 ADB’s Client Portal for Disbursements system facilitates online submission of withdrawal applications to ADB, resulting in faster disbursement. The forms to be completed by the borrower are available at ADB’s Guide to the Client Portal for Disbursements.
15 D. Auditing and Public Disclosure 21. The DMTCL will cause the detailed project financial statements to be audited following the International Standards on Auditing and with the government’s auditing regulations, by an independent auditor acceptable to ADB. The DMTCL will present the audited project financial statements together with the auditor’s opinion, in English, to ADB within 6 months from the end of the fiscal year. 22. The annual project financial statements should include withdrawal application-wise reconciliation between amounts reported in the project financial statements and the disbursement amounts appearing in the Loan Financial Information System (LFIS) of ADB. The LFIS can be accessed online and ADB will provide LFIS access to project staff on request. 23. The DMTCL will submit the audited entity financial statements together with the auditor’s report and management letter, in English, to ADB within 1 month after approval by the relevant authority. 24. 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, following the applicable financial reporting standards; and (ii) whether the proceeds of the loan were used only for the purpose(s) of the project. From the second audit onwards, the management letter will include a follow-up on the implementation status of previous audit recommendations (where applicable). 25. The DMTCL will monitor compliance with financial reporting and auditing requirements during review missions and normal program supervision and will follow up regularly with all concerned, including the external auditor. 26. ADB has made the government and the DMTCL aware of ADB’s approach to delayed submission and the requirements for satisfactory and acceptable quality of the audited project financial statements.6 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 its policies and procedures were followed when the share of ADB’s financing was used. 27. ADB’s Access to Information Policy 2018 will guide the public disclosure of the audited project financial statements, including the auditor’s opinion on the project financial statements. 6 ADB’s approach and procedures regarding delayed submission of audited project financial statements: (i) When ADB does not receive the audited project financial statements by the due date, ADB will write to the executing agency to inform it 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 ADB does not receive the audited project financial statements 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 inform the executing agency (a) of ADB’s actions and (b) that the loan may be suspended if the audit documents are not received within the next 6 months. (iii) When ADB does not receive the audited project financial statements within 12 months after the due date, ADB may suspend the loan.
16 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.7 28. In addition to the external audit described above, the DMTCL's organogram includes a dedicated internal audit department that is being set up. An audit committee of the board is already in place and vested with the responsibility to oversee internal audit activities at the DMTCL, including monitoring of internal audit and compliance functions and ensuring that it is adequately resourced. For the proposed project, the DMTCL will hire a firm of chartered accountants to conduct internal audit of the PRF project. The audit firm will be hired to conduct annual internal audits and reporting to the board of directors, after receiving comments from the Managing Director of the DMTCL and the Project Director of the PIU (Line 5, Southern Route), within 45 days after the end of the reporting period. The scope of the internal audit will focus in particular on the financial activities carried out by the PIU. An outline of terms of reference for the internal audit firm to be hired is provided in Appendix B-3. The board of directors will consider key issues pointed out by the auditors and ensure timely resolution of observations by project management. VI. PROCUREMENT AND CONSULTING SERVICES 29. Procurement risk assessment. ADB’s Bangladesh Country and Sector Procurement Assessment (2015) rates the degree of procurement risk as moderate at both the country and the transport sector levels. It also observes that the national legal and regulatory framework is robust and largely free from significant risk. At the entity level, although the DMTCL is relatively a new organization and does not have experience in implementing ADB projects, it is currently implementing MRT Lines 1, 5 (North), and 6 with financing from JICA, which has similar procurement regulations as those of ADB. Based on the above, the project’s procurement risk is considered to be low. A. Advance Contracting 30. All advance contracting will follow the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). The issuance of consulting service recruitment notices or invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. ADB has advised the borrower and the DMTCL that approval of advance contracting and retroactive financing does not commit ADB to finance the PRF project. 31. Advance contracting will be carried out for recruitment of consulting services. B. Procurement of Consulting Services 32. The DMTCL will recruit all consultants following the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). The terms of reference for all consulting services are detailed in Section D and Appendix B. 7 Such information generally falls under exceptions to disclosure (ADB. 2018. Access to Information Policy 2018. Manila).
17 33. About 566 person-months of international consulting services and 998 person-months of national consulting services are required to prepare detailed engineering designs and bidding documents. The DMTCL will engage consulting firms using the quality- and cost-based selection method with a quality–cost ratio of 90:10. Individual consultants with about 24 person-months of inputs (international, 6 person-months, and national, 18 person-months) are to be recruited to assist the PIU in reviewing outputs of the engineering design consultants. C. Procurement Plan 34. The procurement plan is in Appendix A and describes all procurement of consulting services to be undertaken. D. Consultant’s Terms of Reference 35. Outline terms of reference (TOR) of the consulting services for the engineering design and bidding document preparation to be financed under the project are in Appendix B. The outline TOR of the individual consultants include assisting the DMTCL in reviewing outputs of the engineering design consultants in terms of expertise required such as for underground civil works, railway system, and contract management (Appendix C). The TOR for the internal audit firm is in Appendix D. VII. SAFEGUARDS 36. 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 in Appendix 5 of the Safeguard Policy Statement. VIII. PERFORMANCE MONITORING A. Monitoring 37. Project monitoring. The DMTCL will monitor PRF project performance quarterly and provide consolidated reports to ADB. These reports will include (i) each activity’s progress measured against the implementation schedule, (ii) key implementation issues and solutions, (iii) an updated procurement plan, and (iv) an updated implementation plan for the next 12 months. To ensure PRF projects continue to be both viable and sustainable, the DMTCL should adequately review PRF project financial statements and the associated auditor’s report. In the event that an ensuing loan is not approved, the DMTCL will submit a PRF project completion report to ADB within 6 months of physical completion of the PRF project.8 38. Compliance monitoring. Compliance with loan covenants will be monitored through ADB’s (i) project administration missions, including the inception mission, to discuss and confirm the timetable for compliance with the loan covenants; (ii) review missions to check the compliance with particular loan covenants and, where there is any noncompliance or delay, to discuss proposed remedial measures with the DMTCL; and (iii) midterm review mission, if necessary, to review covenants to assess whether they are still relevant or need to be changed, or waived due to changing circumstances. 8 ADB. 2018. Project Completion Report for Sovereign Operations. Project Administration Instructions. PAI 6.07A. Manila.
18 B. Reporting 39. The DMTCL will provide ADB with: (i) quarterly progress reports on the PRF project in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports, including (a) progress achieved by output measured against the performance targets, (b) key implementation issues and solutions, (c) an updated procurement plan, and (d) an updated implementation plan for the next 12 months;9 and (iii) PRF project accounts, DMTCL’s audited financial statements, and the associated auditor’s report. IX. ANTICORRUPTION POLICY 40. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy (1998, as amended to date) relating to the PRF project following ADB’s Integrity Principles and Guidelines.10 All contracts financed by ADB will include provisions specifying ADB’s right to audit and examine the records and accounts of the executing agency and all PRF project contractors, suppliers, consultants, and other service providers. This includes the examination of project outputs, assets, and all other information that may be considered relevant for audit or inspection by ADB regardless of project completion, termination, or cancellation. Firms or individuals on ADB’s anticorruption debarment list are ineligible to participate in activities that are financed, supported, or administered by ADB; and may not be awarded any contracts under the PRF project.11 41. To support these efforts, ADB included relevant provisions in the loan agreement and the bidding documents for the PRF project. X. ACCOUNTABILITY MECHANISM 42. People who are, or may in the future be, adversely affected by the PRF project may submit complaints to ADB’s Accountability Mechanism. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted PRF projects can voice and seek a resolution for their problems, as well as report alleged violations of ADB’s operational policies and procedures. Before submitting a complaint to the Accountability Mechanism, affected people should make an effort in good faith to solve their problems by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, should they approach the Accountability Mechanism.12 9 The regional departments will present the performance of the completed PRF in the project completion report of the ensuing loan. 10 ADB. 2015. Integrity Principles and Guidelines (2015). Manila. 11 ADB. Anticorruption and Integrity. 12 ADB. Accountability Mechanism.
19 XI. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 43. All revisions and/or updates during implementation should be retained in this section to provide a chronological history of changes to implemented arrangements recorded in the project administration manual.
20 Appendix A PROCUREMENT PLAN Basic Data Project Name: Dhaka Mass Rapid Transit Development Project, Line 5 (South) Project Number: 49258-002 Approval Number: Country: Bangladesh Executing Agency: Dhaka Mass Transit Company Limited Project Procurement Classification: Category B Implementing Agency: N/A Project Procurement Risk: Medium Project Financing Amount: US$ 44,580,000 Project Closing Date: 30 June 2024 ADB Financing: US$ 33,260,000 Cofinancing (ADB Administered): Non-ADB Financing: US$ 11,320,000 Date of First Procurement Plan: 19 May 2019 Date of this Procurement Plan: 19 May 2019 Procurement Plan Duration (in months): 18 Advance Contracting: e-GP: Yes No A. Methods, Review and Procurement Plan Except as the Asian Development Bank (ADB) may otherwise agree, the following methods shall apply to procurement of goods, works, and consulting services. Consulting Services Method Comments Quality- and Cost-Based Selection for Consulting Firm 90:10 quality to cost ratio Competitive for Individual Consultant B. Lists of Active Procurement Packages (Contracts) The following table lists goods, works, and consulting services contracts for which the procurement activity is either ongoing or expected to commence within the procurement plan duration. Goods and Works Advertisement Package General Estimated Procuremen Bidding Review Date Comments Number Description Value (in US$) t Method Procedure (quarter/year) None Dhaka Mass Transit Company Limited Consulting Services Advertisement Package General Estimated Selection Type of Review Date Comments Number Description Value (in US$) Method Proposal (quarter/year) PRF-DM- Engineering 38,360,000.00 QCBS Prior FTP Q3 / 2019 Type: Firm CO-01 Design Assignment: International Quality-Cost Ratio: 90:10 Advance
21 Consulting Services Advertisement Package General Estimated Selection Type of Review Date Comments Number Description Value (in US$) Method Proposal (quarter/year) Contracting: Yes PRF-DM- Internal Audit 135,000.00 QCBS Post BTP Q3 / 2020 Type: Firm CO-02 (Samplin g) Assignment: National Quality-Cost Ratio: 80:20 Advance Contracting: Yes C. List of Indicative Packages (Contracts) Required Under the Project The following table lists goods, works, and consulting services contracts for which procurement activity is expected to commence beyond the procurement plan duration and over the life of the project (i.e., those expected beyond the current procurement plan duration). Dhaka Mass Transit Company Limited Goods and Works Package General Estimated Procurement Bidding Review Comments Number Description Value (in US$) Method Procedure None Consulting Services Package General Estimated Selection Type of Review Comments Number Description Value (in US$) Method Proposal PRF-DM-IC Individual 260,000.00 ICS Post (Sampling) Type: Individual consultants to support DMTCL Advertising: International Expertise: Transport planning and civil engineering
22 Appendix B Terms of Reference for Engineering Design for Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route) I. Project Background 1. General background. An efficient transportation system with good inter and intra city linkages is essential to ensure Dhaka’s position as a functional city with population of more than 15.9 million. Present transport system in the city is chaotic in terms of traffic congestion, pollution, accident, inefficient travel time. A huge number of modes of motorized and non-motorized traffic are observed everywhere on roads. The number of automobiles has steadily increased for the last decades. The city needs to provide efficient public transport infrastructure to address the growing population, vehicles and economic activities. 2. Mass Rapid Transit (MRT) network in Dhaka has been proposed as critical measures to mitigate the serious traffic congestion and improve economic efficiency in the area. Strategic Transport Plan (STP) was formulated by the Dhaka Transport Coordination Board (DTCB) under the technical assistance by the World Bank in 2005; STP emphasized necessity of a modern, clean, efficient system which will create a high level of service covering the whole metropolitan area and reaching out to the new communities in an integrated manner. Based on the STP study, Japan International Cooperation Agency (JICA) conducted Dhaka Urban Transport Network Development Project (DHUTS) in 2010 and the Revised Strategic Transport Plan (RSTP) in 2015. The concept of urban transport development under RSTP is to set up satellite regional centers to reduce the population density in central business district (CBD) and to connect CBD with the satellite cities by MRT and/or Bus Rapid Transit (BRT). RSTP proposed 5 MRT lines and 2 BRT lines as shown below. RSTP was approved as an official transport plan in August 2016 by Ministry of Road Transport and Bridges. In line with RSTP, JICA has conducted preparatory studies (feasibility studies [FS]) for three MRT lines in Dhaka: MRT Line 1, Line 5 (North) and Line 6. JICA is currently supporting construction of Line 6, and engineering designs for Line 1 and Line 5 (North) through ODA loans. 3. Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route). Meanwhile, the Asian Development Bank (ADB) approved the Project Preparatory Technical Assistance (PPTA) for Dhaka Metro Project in December 2015 to assess the RSTP and prepare a priority metro project for investment by ADB. While waiting for the Government’s endorsement of the PPTA, JICA started in June 2016 a feasibility study for Line 1 and Line 5 (North). Given the emerging development, the scope, schedule and implementation of the PPTA needed to be adjusted; the Government requested ADB to conduct a pre-feasibility study on Line 5 (Southern Route), which is the remaining part of Line 5 not covered by the JICA study, for preparation for ADB’s Project Readiness Financing (PRF) and future investment project. 4. Under the PPTA, a consulting team was recruited to conduct a pre-FS for Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route) (the Project) in May 2018. The objectives of the study are to formulate a proper project that is feasible in view of technical, economic, financial, social, and environment aspects. The study covers (i) confirmation of priority of the proposed Line 5 (Southern Route) among the other MRT lines; and (ii) preparation for pre-FS including demand forecast, operational parameters, preliminary engineering and cost estimates, economic and financial evaluation, and safeguards consideration.
23 5. The total length of the Project is about 17.4 km between Gabtoli station and Dasherkandi station with an underground section of about 12.8 km and an elevated section of about 4.6 km with 12 underground and 4 elevated stations; a depot accommodating rolling stocks and operational facilities for Line 5 (Southern Route) is planned near the east end of the Project at Dasherkandi station area. Line 5 (Southern Route) will be connected with Line 5 (North) at Gabtoli station, both of which will serve as east-west corridors and make it possible to transfer with north- south running MRTs/BRTs at several stations. Through-services between the two lines of North and South of Line 5 may be considered for the extension section of Line 5 (North). There will be 15 stations (including future stations at the east end but excluding Gabtoli station) to be constructed under the Project, 11 of which will be underground stations. Two stations at the most east side will not be operated in the beginning for the current undeveloped surrounding areas. About 9 km of future extension to the east to Borpa is planned but is not included in the scope of the Project. 6. Dhaka Mass Transit Company Limited (DMTCL) under Ministry of Road Transport and Bridges will be the executing agency of the Project. DMTCL will engage an eligible consulting firm or a joint venture of consulting firms (Consultant) to conduct consulting services for Engineering Design of the Project to implement the Project on a basis of “detailed design and execution” for civil works and “design, supply, and installation (DSI)” for rolling stocks, and electrical and mechanical system. The service also includes necessary bidding document preparation and assistance in tender procedures. The Engineering Design services will be financed by ADB through its loan of “Dhaka Mass Rapid Transit Development Project Readiness Financing (Line 5, Southern Route).” 7. The procurement of all packages including consulting services is to be approved by applying Paragraph 11. (3) of Public Procurement Rules 2008; thus, procurement will be approved by DMTCL Board. DMTCL shall not obtain any of the approval of the government’s Purchase Committee, and the endorsement of the respective ministry pertaining to any procurement of goods and services or employment of consultants.
24 II. Objectives of the Consulting Services 8. The objectives of the consulting services are 1) to prepare detailed feasibility study with Engineering Design Framework (EDF) by (i) reviewing the pre-FS of the Project including the proposed technical and operational parameters and design standards; (ii) making supplementary surveys such as topographic and geotechnical; (iii) conducting required social and environmental surveys in accordance with ADB Safeguard Policy Statement (SPS) (2009); (iv) develop conceptual design; (v) review cost estimates and relevant project evaluation, and (vi) develop EDF with design parameters to satisfy requirements for the project. 2) to develop Engineering Design packages based on the EDF that will meet all requirements by DMTCL for the Project functions, performance, quality, and cost control. Detailed engineering design shall be developed for civil works of elevated, underground, stations, and depot; meanwhile, basic design shall be developed for the other components of equipment such as rolling stock, signaling and communication, and power supply. 3) to provide procurement support including (i) preparation for bidding documents of the Engineering Design packages for (i) for civil works based on ADB’s standard bidding document (SBD) for works, and (ii) DSI for rolling stocks and system contracts based on ADB’s SBD for design, supply, and installation, by providing high-quality basic design, technical standards, specifications, and particular conditions of contracts; and (ii) assistance in advertising, issuing bidding documents, responding to queries, receiving and evaluating bids, and other procurement-related activities. 4) to review management, operational and maintenance requirements for the Project, and prepare institutional arrangement and countermeasures required for efficient operation of the Project.
25 III. Outline Scope of the Consulting Services 9. The assignment of the consulting services shall cover the following key areas. 1) to review the pre-FS of the Project (Line 5 [Southern Route]); 2) to review transport development plan of other MRTs, particularly MRT Line 5 (North); 3) to assess the results of existing surveys and carry out supplementary surveys including topographic, geotechnical, hydrologic, utility, material availability and traffic; 4) to review and revise traffic demand forecast; 5) to review and finalize technical and operational parameters and design standards; 6) to finalize alignment and location of the stations and depot; 7) to conduct land acquisition and resettlement assessment and prepare land acquisition plan (LAP) and resettlement plan (RP) for the entire project including depot in accordance with ADB SPS; 8) to conduct social impact assessment (SIA) including poverty, gender, and universal design elements; 9) to conduct environment impact assessment (EIA) in accordance with ADB SPS; 10) to assess climate change risk and vulnerabilities of the Project; 11) to assess labor requirements and occupational safety and health risks; 12) to prepare detailed feasibility study with Engineering Design Framework; 13) to prepare infrastructure/utilities relocation plan; 14) to prepare spoil management plan; 15) to prepare traffic management plan; 16) to prepare project cost estimate and financing plan; 17) to conduct economic and financial evaluation of the Project; 18) to prepare project implementation plan, including overall implementation schedule with due consideration of coordination and interface activities among components; 19) to review and identify optimal high technology and/or construction methodology, if any, to be incorporated into the project design in terms of sustainable and quality infrastructure development; 20) to develop engineering design packages for
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