The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) REPORT NO.: RES51012 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CO PLAN PAZCIFICO: WATER SUPPLY AND BASIC SANITATION INFRASTRUCTURE AND SERVICE DELIVERY PROJECT APPROVED ON OCTOBER 18, 2016 TO FTSP, REPRESENTED BY ITS FIDUCIARY AGENT AND TRUSTEE FIDUCIARIA LA PREVISORA, S.A. (FIDUPREVISORA) WATER LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Mark Roland Thomas Regional Director: Anna Wellenstein Practice Manager/Manager: David Michaud Task Team Leader(s): Veronique Verdeil, Hector Alexander Serrano The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) ABBREVIATIONS AND ACRONYMS CPF Country Partnership Framework ESMF Environmental and Social Management Framework FM Financial Management FTSP Fondo Todos Somos PAZcífico GoC Government of Colombia MTR Mid-Term Review MVCT Ministry of Housing City and Territory (Ministerio de Vivienda, Ciudad y Territorio) PDO Project Development Objective PIU Project Implementation Unit SMP Sanitation Master Plan SORT Systematic Operations Risk-Rating Tool The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) BASIC DATA Product Information Project ID Financing Instrument P156239 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 18-Oct-2016 15-Dec-2022 Organizations Borrower Responsible Agency FTSP, represented by its Fiduciary Agent and Trustee FIDUCIARIA LA PREVISORA, S.A. (FIDUPREVISORA) Project Development Objective (PDO) Original PDO The objectives of the Project are to improve: (i) coverage and service quality of water supply and basic sanitation in urban areas in the Municipality of Tumaco and the Municipality of Guapi; and (ii) operational efficiency of the service providers in said municipalities. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-86490 18-Oct-2016 07-Mar-2017 26-May-2017 15-Dec-2022 126.70 23.81 102.89 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Introduction 1. This Restructuring Paper seeks the Country Director’s (CD) approval of a project restructuring for the Colombia Plan PAZcifico Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239). The proposed restructuring entails the following adjustments: (i) extension of the loan closing date up to November 15, 2024 (23 months); (ii) changes in scope and amount of the water and sanitation subcomponents within Component 2 in Tumaco; (iii) related adjustments to the Results Framework; and (iv) subsequent revision of the implementation schedule, disbursement projections and risks. Those changes are necessary to allow the project to return to a satisfactory completion trajectory. 2. The IBRD 8649-CO loan of US$126.7 million was approved on October 18, 2016, and became effective on May 26, 2017. The scheduled end date of the is December 15, 2022. Following significant implementation challenges in some of the project’s activities, a first restructuring of the project was approved on July 24, 2021, and became effective on January 21, 2022, a period during which activities derived from the restructuring continued to take place. It allowed to: (i) trigger the Indigenous Peoples safeguards Policy; (ii) migrate the project to the Procurement Regulations; (ii) reallocate funds within components to adjust to changing realities; and (iv) simplify the Results Framework. An extension was then deemed premature but was anticipated in the restructuring paper (RES43610) and is now proposed under this second restructuring. 3. The project development objectives (PDO) are to improve: (i) coverage and service quality of water supply and basic sanitation in urban areas in the Municipality of Tumaco and the Municipality of Guapi; and (ii) operational efficiency of the service providers in said municipalities. Interventions are structured around four components: (1) Water Supply and Basic Sanitation Improvements in Guapi (US$30.9M); (2) Water Supply and Basic Sanitation Improvements in Tumaco (US$83.4M); (3) Capacity Building and Institutional Strengthening of Service Providers in both Municipalities (US$5.4M); and (4) Project Management and Environmental and Social Management (US$7.0M). 4. The project represents a strategic engagement for the Bank. The project is being implemented in the municipalities of Guapi and Tumaco, respectively in the Cauca and Nariño departments. These departments are among the most deprived parts of the Colombian territory, including marked by poverty, limited capacity and significant gaps in access to government services. In addition, they face a post-conflict context where persisting fragility and violence have hampered development to the detriment of vulnerable communities, including indigenous people and a significant Afro-Colombian population. It remains highly relevant vis-a-vis the CPF (for the period FY16-21, aligning primarily with Pillar II on enhancing social inclusion and mobility through improved service delivery and Pillar I on fostering balanced territorial development. The project is part of the GoC’s regional program for the Pacific Coast, Todos Somos PAZcífico (US$400M), developed after the Peace Agreement with the FARC in 2016 to improve the quality of life in the municipalities most affected by the conflict in the departments of Cauca, Chocó, Nariño and Valle del Cauca. In addition to this project, the Bank supports a second project of this program, “Enhancing Waterway Connectivity and Water Service Provision in Colombia’s Plan Pazcifico” (P156880), which component on water and sanitation services is implemented in the municipalities of Timbiqui and Francisco Pizarro, respectively located in the Cauca and Nariño departments and scheduled to close in December 2023. The Pacific region, and the municipalities being covered by both projects have been prioritized by the new Government who took office in August 2022. The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) B. Project status and performance to date 5. The Project’s overall progress towards the achievement of the PDO has been rated Moderately Unsatisfactory since June 2021, as it became clear that the PDO would not be achieved without an extension of the scheduled closing date of December 15, 2022. The November 2020 mid-term review (MTR) analyzed in detail the causes of the delays, including (i) poor quality of detailed designs of sub-projects initiated previous to project implementation, which led to cancel government-funded contracts and re-hire, as part of project implementation, consulting firms to revise and adjust feasibility and design studies for the major water and sanitation works; (ii) overestimation of capacity of municipalities on land acquisition and (iii) an escalation of the security situation in the project area, which hampered the recruitment and mobilization of contractors. Delays were exacerbated by the COVID-19 sanitary crisis and related travel restrictions, with several procurement processes that had started before the emergency declaration coming to a halt and with works unable to proceed. 6. By the original closing date, the project will not have achieved its PDO and will have a significant undisbursed balance. By the current closing date of December 2022, the PDO will not be achieved. Ongoing water works are not advanced enough to expect some beneficiaries will be provided with access to improved water services in 2022. Other results and intermediate indicators won’t be met either at the current closing date, except for the objectives added in the 2021 restructuring in response to the Covid-19 pandemic, which benefited 86,614 inhabitants in Tumaco and 14,975 inhabitants in Guapi. There will be an estimated undisbursed balance of US$103M or 81 percent of the loan by December 2022. 7. Overall Implementation Progress has been rated as Moderately Satisfactory in the last 24 months, including in the ISR archived in June 2022, based on slow yet continued progress since the MTR. However, during the last implementation support mission held in July 2022, additional delays were reported by the Project Implementation Unit (PIU), including due to longer than anticipated technical clearance, or viabilization,1 by the Ministry in charge of water (Ministry of Housing, City and Territory, Ministerio de Vivienda, Ciudad y Territorio, MVCT), contractual issues affecting two contracts in execution and availability of safeguards documents postponing the effective launch of other works on the ground. This is likely to keep disbursements low (currently at 19 percent) and prevent a clear progress over the next six months. The MS rating will have to be reassessed after effectiveness of the present restructuring.  Guapi: Works for phase I for the water system's expansion started in 2021 and were expected to be completed in 2022, until a recent contractual issue that will require to hire another contractor and postpone completion by mid-2023. The consultancy for adjusting the design of phases II and III has been signed and is expected to be completed by November 2022, with works’ completion by October 2024. The design studies for the construction of the Urban Restoration Center, the facility where material excavated by other works will be handled, were delivered, which will allow the contracting of the construction works, pending MVCT’s viabilization). Phase I of the consultancy for the strengthening of the local service delivery utility, EMGUAPI, has been completed.  Tumaco: Works for phases I and II for the water system's expansion started in 2021. Works for phase II are ongoing. Difficulties with the contractor for phase I are currently being addressed but have already generated 1 All terms of reference and studies are submitted for technical clearance to MVCT. This mechanism of ‘viabilization’ has been institutionalized by the project during preparation and allows potential adjustments to ensure the subproject complies with national standards and the project’s objectives, timing, and good use of funds. The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) several months of delay. Those works are expected to be completed between February and June 2023, while phase III.1 was completed in December 2021.  Covid-response: Activities conducted in response to the Covid-19 crisis in 2020-21 benefited over 100,000 people by providing materials and small-scale solutions to ensure the availability of potable water to the populations. Those activities were completed in 2021. 8. Sanitation activities, including condominial pilots, are progressing. Consultancies to prepare the respective Sanitation Master Plans (SMPs) and sewerage works in Guapi and Tumaco were initially under the responsibility of the counterpart. Both contracts failed, and new TORs were prepared in October 2020 to improve and complement the studies. The introduction of the alternative concept of condominial systems required strong and long technical support from the World Bank, resulting in an update of the regulatory framework to assess sanitation projects. In Guapi, MVCT’s viabilization in January 2022 allowed to proceed with the consultancy to update the design of sewerage works planned in the SMP, and design a pilot condominial system, for which bids are currently being evaluated. The studies are expected to be delivered by June 2023. In Tumaco, the recruitment of consulting firms to conduct feasibility studies of the condominial pilot and to update the SMP are pending viabilization, with the respective studies expected to be delivered by May and August 2023. The delivery of the studies in due time will be critical to ensure works could be completed within the extended implementation period. 9. Support to service providers is ongoing. Activities dedicated to strengthening the service providers (coverage water supply, basic sanitation and waste) are key to ensure an effective quality of service delivered, measured by the operators’ operational efficiency. In Tumaco, the contract with the consultancy to carry out a comprehensive assessment of Aguas de Tumaco, recommend a new management scheme and provide targeted technical assistance and capacity building activities is pending signature and is expected to last until the third quarter of 2023. In Guapi where a public operator is in place, phase I of support activities was completed in June 2022. The recruitment for phases II and III is at viabilization stage and would last under project closing. Given that some works will only be completed in the last quarter before closing, expected results in terms of reduction of water losses and increased billing ratio may only be measurable by that period. 10. Overall, ten contracts are already completed, six are under execution, and three are in the procurement stage. Eleven subprojects are currently awaiting MVCT’s viabilization before proceeding to the next stage. Besides those for waste management activities, which duration is short, and completion expected in 2023, the most critical packages include the water works for Tumaco (phases III.2, IV and V), representing US$37M of investments, for which completion dates spread from June 2023 to October 2024 for the longest ones. 11. Commitments and disbursements. Due to the delays in the procurement and award of the largest contracts, commitments total 27 percent (US$33.7M) of the loan to date and will not progress much by December 2022. The current disbursement rate is 19 percent or US$23.8M. Based on the various contractual stages (viabilization stage or procurement), it is estimated that commitments would increase by US$41.5M by the end of 2023 (33 percent of the loan) for a total commitment rate of 60 percent. The remaining 40 percent would be signed in early 2024, with the scope of work and duration consistent with the new end date. 12. Fiduciary compliance. Procurement is rated moderately satisfactory due to delays in procurement processes and planned activities with an end date beyond the current closing date. However, delays in the viabilization process by MVCT and security issues that are not directly in control of the PIU should be considered. After the March 2022 implementation support mission, WB procurement endorsed the client proposal to enhance the use of shopping, The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) rather than national bidding, for small contracts, which better fit the market and will speed up contractual processes. Additionally, it allowed the use of insurance policies, more flexible than the usual advance guarantees, which had proved difficult to access, to increase contractors’ cash flow and performance while boosting disbursements. Financial Management (FM) is rated satisfactory. Interim unaudited financial reports are submitted on time and are deemed satisfactory. The 2021 audit was submitted in due time, the auditors issued an unmodified opinion, and the report is considered acceptable by the WB. 13. Environmental and social safeguards compliance. The project was approved before the Environmental and Social Framework launch and still follows the Safeguards Policies. It is rated Category A and under the Regional Safeguards Advisor’s oversight. Environmental and social safeguards performance ratings are satisfactory and moderately satisfactory for the Involuntary Resettlement Policy OP/BP4.12. The 2016 Environmental and Social Management Framework (ESMF) was updated after the 2021 restructuring to reflect the revised scope of some activities, approved by the Bank and disclosed in May 2022. All other safeguards instruments (specific Environmental and Social Impact Assessments and Resettlement Action Plans) have been prepared, updated, and deemed satisfactory. While no specific issues have been raised to date, the PIU is hiring a firm to improve the quality and implementation of the specific Environmental and Social Management Plans. The Social Management Plan implemented under the ESMF includes: (i) an Information and Communications Program, (ii) a Community Participation Program and Customer Service, (iii) an Environmental Education Program, (iv) an Interinstitutional Coordination Program, (v) a Social Research Program and (vi) a Monitoring and Control Program. The 2021 restructuring triggered the Indigenous Peoples Policy OP/BP4.10, after the Indigenous Peoples Plan was prepared, approved by the Bank, and disclosed in December 2020. A Prevention Plan against Gender-Based Violence is in place and carefully monitored and a Code of Conduct applied to contractors has been approved. 14. A complaint around project implementation delays and community outreach was received by INT in July 2022, but the case was closed. The project’s grievance redress mechanism is in place and functioning. To mitigate risks of complaints and community miscontent due to the delays in work, communications activities have been strengthened to keep the communities and local leaders and stakeholders informed of the project developments. C. Rationale for Restructuring 15. The Government of Colombia (GoC) requested an extension of the project closing date by 23 months, from December 15, 2022, to November 15, 2024, based on an assessment of project implementation as of July 2022, to allow time to complete planned project activities, some of them with an adjusted scope, and achieve the PDO. 16. This will be the first extension of the project, which was originally approved for six years. It would account for delays incurred due to: (i) the weaknesses in readiness of design studies that have backlogged implementation for over two years, (ii) operational impacts of the COVID-19 pandemic, (iii) violence and insecurity that also have impacted procurement and implementation, and (iv) the viabilization process through MVCT, which has proved a source of delay affecting the overall implementation schedule. 17. The proposed extension is critical to achieving the PDO and project indicators. Given the current pace of works, the project will not be able to reach any beneficiaries and increase access to water and sanitation services by December 2022. Similarly, performance indicators of quality service, such as continuity (hours per day of full pressure service) and reduced water leakage and non-revenue water, would only be achieved when works to increase production and The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) storage capacity will be completed at a later stage. The setting up of professional service provision operators would also require more time beyond the current closing date and will need sufficient time to translate into measurable results. It is therefore important to allow additional time to complete the project’s activities to ensure full disbursement of the loan’s proceeds and reach the expected number of beneficiaries and all water supply objectives by November 2024. 18. The restructuring also aims to reflect adjustments in the scope of selected activities. Sanitation activities have suffered from the low-quality initial design studies and delays due to the introduction of alternative solutions (condominial systems) that needed the approval of the Colombian regulator before relaunching the studies. Considering the delayed studies, limited capacity to handle large sewerage works, and technical and safeguards challenges to intervene in stilts areas, the Bank team agreed in principle with the request to reduce the scope of sanitation works and further prioritize water coverage in all urban areas targeted by the project. Therefore, this restructuring proposes to reallocate funds from the sanitation to the water subcomponents and modify the target values for water and sanitation beneficiaries and connections accordingly. This will result in a substantially reduced but achievable number of beneficiaries provided with access to household wastewater connections by project closing (-65 percent of the initial target value), yet largely compensated by an increased number of people accessing to water supply (+122 percent of the initial target value). Overall, the number of beneficiaries will slightly increase, by 5 percent compared to the initial objective, for the same project amount. 19. Extending the project to successful completion is a unique opportunity to demonstrate results in a very challenging region and context. This operation has a strong potential to address Colombia’s social inclusion challenges and increase access to government services in the country’s most vulnerable areas, where past successful experiences are scant and government distrust widely established. Operating in such fragile, low-capacity contexts and achieving results take time, and an extension is therefore important to bring the project to a satisfactory outcome. Lessons have been learned in this project – and twin activities in the Connectivity project – that will help enhance implementation, such as using flexible fiduciary approaches, involving communities and possibly national armed forces (e.g. to help deliver materials and construction of small works and sites protection), building adequate monitoring and decision- making arrangements with beneficiary municipal entities and leaders. With enough time to show concrete results in improving water and sanitation services, the project could serve as a proof of concept and help support the development, by the new administration, of a national policy on regionalization, including infrastructure investment subsidies to incentivize regional management entities, and a focus on remote small towns where better basic services also mean strengthening of local authorities. II. DESCRIPTION OF PROPOSED CHANGES The proposed restructuring includes the following changes to the project: 20. Extend the project closing date by 23 months, from December 15, 2022, to November 15, 2024, as requested by GoC (August 19, 2022). This would be the first extension of the original closing date, for a total duration of the project of 7.9 years. The proposed closing date extension meets the requirements of the World Bank Investment Project Financing (IPF) Directive regarding extension of closing dates, specifically: (i) the project objectives remain achievable; (ii) the performance of the Borrower remains satisfactory; (iii) the World Bank and the Borrower agree on actions that The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) the Borrower will undertake to complete critical project activities; and (iv) there are no outstanding audits and none deemed no satisfactory to the Bank. 21. Modify the results framework to align the end date of each existing indicator with the new closing date; adjust the number of beneficiaries to reflect reallocations of funds within subcomponents, especially the targets associated with improved access to water sources and improved sanitation facilities, and the resulting total number of beneficiaries in both project municipalities (see updated results framework). An additional intermediate indicator will also be added to confirm the availability of the sanitation studies, allowing a potential follow-up program to pick up on this important agenda. The overall number of beneficiaries will not be reduced, the number of sanitation beneficiaries will decrease drastically while the number of water beneficiaries will increase substantially. As the initial economic analysis showed that the project’s positive results were mostly driven by the water interventions, with returns twice as high as those for the sanitation interventions, the economic analysis will not be revisited. 22. Modify the components’ costs in the Datasheet for Component 2 (Water Supply and Basic Sanitation Improvements in Tumaco) from US$90.20M to US$83.40M. The difference of US$6.80M is the counterpart funding to support compensations, among other things, not specifically targeted at Tumaco. The reallocation of funds within the component is presented in the table below, other component costs remaining unchanged: Initial Budget 2021 Revised Budget 2022 Revised Budget Subcomponent 2.1. Water Supply 28.00 43.07 58.07 Subcomponent 2.2. Sanitation 49.06 37.37 22.37 Subcomponent 2.3. Solid Waste Management 6.38 2.99 2.99 23. Modify the disbursement estimates and the implementation schedule, as detailed in the Borrower’s technical analysis, to reflect the extended implementation period until the revised project closing dates. 24. Modify the SORT, to reassess existing ratings in line with the SORT guiding principles as updated in May 2020 and better reflect residual risks on the project’s development outcomes considering the effectiveness of mitigation measures in place, in a changing context and considering the extended period of implementation (detail in Annex). Rating At approval Current Proposed Political and Governance Substantial High Substantial Macroeconomic Moderate Substantial Substantial Sector Strategies and Policies Substantial Substantial Moderate Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability High Substantial Substantial Fiduciary Substantial Substantial Substantial Environment and Social Substantial Substantial Substantial Stakeholders High High Moderate Other Substantial High Substantial Overall project risk High High Substantial The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1. Water Supply Component 1. Water Supply and and Basic Sanitation Basic Sanitation Improvements in 30.90 No Change 30.90 Improvements in the the Municipality of Guapi Municipality of Guapi Component 2. Water Supply Component 2. Water Supply and and Basic Sanitation Basic Sanitation Improvements in 90.20 Revised 83.40 Improvements in the the Municipality of Tumaco Municipality of Tumaco Component 3. Capacity Building Component 3. Capacity and Institutional Strengthening Building and Institutional of Service Providers in the 5.40 No Change Strengthening of Service 5.40 Municipalities of Guapi and Providers in the Municipalities Tumaco of Guapi and Tumaco Component 4. Project Component 4. Project Management and Management and Environmental 7.00 No Change 7.00 Environmental and Social and Social Management Management TOTAL 133.50 126.70 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-86490 Effective 15-Dec-2022 15-Nov-2024 15-Mar-2025 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2017 571,361.43 571,361.43 2018 1,577,460.48 1,577,460.48 The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) 2019 1,238,906.00 1,238,906.00 2020 6,871,006.84 6,871,006.84 2021 24,901,338.00 5,850,986.42 2022 36,176,393.00 7,699,259.15 2023 55,363,534.00 13,191,019.68 2024 0.00 43,700,000.00 2025 0.00 46,000,000.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Substantial  Substantial Macroeconomic  Moderate  Substantial Sector Strategies and Policies  Substantial  Moderate Technical Design of Project or Program  Substantial  Substantial Institutional Capacity for Implementation and  High  Substantial Sustainability Fiduciary  Substantial  Substantial Environment and Social  Substantial  Substantial Stakeholders  High  Moderate Other  Substantial  Substantial Overall  High  Substantial . The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) . Results framework COUNTRY: Colombia CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project Project Development Objectives(s) The objectives of the Project are to improve: (i) coverage and service quality of water supply and basic sanitation in urban areas in the Municipality of Tumaco and the Municipality of Guapi; and (ii) operational efficiency of the service providers in said municipalities. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 to improve coverage and service quality of water supply and basic sanitation in Guapi and Tumaco Direct project 0.00 0.00 0.00 0.00 0.00 0.00 106,670.00 150,000.00 beneficiaries (Number) Rationale: Action: This indicator has End target and target value revised according to the new implementation schedule been Revised Female beneficiaries 0.00 0.00 0.00 50.00 50.00 50.00 50.00 50.00 (Percentage) Action: This indicator has been Revised People provided with access to improved water 0.00 106,670.00 150,000.00 sources (CRI, Number) Rationale: Action: This indicator has End date and target value revised according to the new implementation schedule been Revised The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 People provided with access to improved water sources - 0.00 54,500.00 72,177.00 Female (RMS requirement) (CRI, Number) Action: This indicator Rationale: has been Marked for Sub-indicator redundant with the same that applies to the total number of beneficiaries. Deletion Guapi (Number) 0.00 9,070.00 23,700.00 Rationale: Action: This indicator End date and target value revised according to the new implementation schedule has been Revised Tumaco (Number) 0.00 97,600.00 126,300.00 Rationale: Action: This indicator End date and target value revised according to the new implementation schedule has been Revised People provided with access to ‘improved sanitation facilities” 0.00 0.00 0.00 0.00 0.00 0.00 30,200.00 under the proj. (CRI, Number) Rationale: Action: This indicator has End date and target value revised according to the new implementation schedule and revised scope of works, following reallocations between the water and been Revised sanitation components and decision to prioritize water access, leading to reduced objectives in sanitation coverage The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Guapi (Number) 0.00 11,395.00 11,395.00 Rationale: Action: This indicator End date and target value revised according to the new implementation schedule has been Revised Tumaco (Number) 0.00 18,900.00 Rationale: Action: This indicator End date and target value revised according to the new implementation schedule. The scope of works have been reduced to account for delays in feasibility studies has been Revised and complexity of interventions in Tumaco, and for a reduced budget due to reallocation of US$15M to the water component. to improve operational efficiency of the service providers in Guapi and Tumaco Water supply continuity in the Project's 7.00 7.00 19.00 intervention area (Hours/day) (Hours) Action: This indicator has been Marked for Deletion Guapi (Hours) 2.00 8.00 12.00 18.00 Action: This indicator has been Marked for Deletion Tumaco (Hours) 6.00 9.70 15.00 20.00 The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Action: This indicator has been Marked for Deletion Water supply continuity in project areas in Guapi 2.00 11.00 18.00 (Hours/day) (Hours) Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco. Water supply continuity in project areas in 6.00 8.00 18.00 Tumaco (hours/day) (Hours) Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco. PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Component 1. Water Supply and Basic Sanitation Improvements in the Municipality of Guapi The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 New piped household water connections that are resulting from the 0.00 1,814.00 5,159.00 project intervention (Number) Rationale: Action: This indicator has End target revised according to the new closing date. Unit revised to set a number of connections provided under the project, rather than a percentage, as it been Revised was unclear what exactly the indicator was aimed to measure (confusion with the coverage rate). New household sewerage connections that are 0.00 2,606.00 resulting from the project intervention (Number) Rationale: Action: This indicator has End target revised according to the new closing date. Unit revised to set a number of connections provided under the project, rather than a percentage, as it been Revised was unclear what exactly the indicator was aimed to measure (confusion with the coverage rate). Treatment and/or utilization of urban solid 0.00 2.00 2.00 waste (Metric tons/year) Rationale: Action: This indicator has End date revised been Revised Area in the municipality that has been sanitized 0.00 11,000.00 (Square Meter(m2)) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator has End date revised been Revised Component 2. Water Supply and Basic Sanitation Improvements in the Municipality of Tumaco New piped household water connections that are resulting from the 0.00 17,682.00 project intervention (Number) Rationale: Action: This indicator has End target revised according to the new closing date. Unit revised to set a number of connections provided under the project, rather than a percentage, as it been Revised was unclear what exactly the indicator was aimed to measure (confusion with the coverage rate). New household sewerage connections that are 0.00 3,789.00 resulting from the project intervention (Number) Rationale: Action: This indicator has End target revised according to the new closing date. Unit revised to set a number of connections provided under the project, rather than a percentage, as it been Revised was unclear what exactly the indicator was aimed to measure (confusion with the coverage rate). Increase in the useful life of the final waste 0.00 3.00 3.00 disposal site (Years) Rationale: Action: This indicator has End date and target value revised, based on changes in design of the waste activities (Bucheli landfill) been Revised The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Treatment and/or utilization of urban solid 0.00 2.00 waste (Metric tons/year) Rationale: Action: This indicator has End date revised been Revised Component 3. Capacity Building and Institutional Strengthening of Service Providers in the Municipalities of Guapi and Tumaco Public service provision scheme strengthened in No Yes Guapi (Text) Rationale: Action: This indicator has End date revised. been Revised Institutional and operational model for basic water supply and sanitation services No Yes developed and implemented in Tumaco (Text) Rationale: Action: This indicator has End date revised, been Revised Loss index by billed customer (IPUF index) in 25.00 10.00 m3/subscriber/month (Cubic Meter(m3)) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator has This indicator is included under operational efficiency, in favor of non-revenue water. IPUF is an indicator that is used across the country, with recognized been Marked for procedures by the Ministry of Housing, Communication, and Transport (MVCT) and the national regulator (CRA). Deletion Guapi (Cubic 25.00 10.00 Meter(m3)) Action: This indicator has been Marked for Deletion Tumaco (Cubic 19.90 10.00 Meter(m3)) Action: This indicator has been Marked for Deletion Index of water losses in Guapi 25.00 10.00 (m3/subscriber/month) (Cubic Meter(m3)) Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco Index of water losses in Tumaco 19.90 10.00 (m3/subscriber/month) (Cubic Meter(m3)) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco. Collection rate in in 15.00 18.00 23.00 32.50 project area (Percentage) Action: This indicator has been Marked for Deletion Guapi (Percentage) 4.00 10.00 16.00 30.00 Action: This indicator has been Marked for Deletion Tumaco (Percentage) 26.00 26.00 30.00 35.00 Action: This indicator has been Marked for Deletion Collection rate in Guapi 4.00 30.00 (Percentage) Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco Collection rate in Tumaco 26.00 35.00 (Percentage) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator is The existing indicator was aggregating Guapi and Tumaco, providing a weighted target value for both, which is not relevant for such a system-specific indicator. It New is therefore split to have one indicator for Guapi and one for Tumaco Installed capacity of potable water in project areas with humanitarian 0.00 409,650.00 409,650.00 support for COVID-19 (Liter) Guapi (Liter) 0.00 153,000.00 153,000.00 Tumaco (Liter) 0.00 256,650.00 256,650.00 Feasibility/design studies for the condominium pilots in Guapi and No Yes Yes Tumaco have been validated by MVCT (Yes/No) Rationale: Due to various difficulties, the sanitation studies have been delayed. Their availability has become critical for the planning and implementation of planned Action: This indicator is sanitation works, especially for the pilots of condominial systems, and the PDO objectives related to sanitation. The studies and pilots, once available, could allow New scale up and the effective development of sanitation solutions. The indicator is therefore added as a leverage to enhance progress of the sanitation component. IO Table SPACE The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) ANNEX. DETAILED RISK RATING REASSESSMENT This restructuring proposes to reassess existing project ratings in line with the SORT guiding principles as updated in May 2020 and better reflect residual risks on the project’s development outcomes considering the effectiveness of mitigation measures in place, in a changing context and considering the extended period of implementation. Rating At approval Current Proposed Political and Governance Substantial High Substantial Macroeconomic Moderate Substantial Substantial Sector Strategies and Policies Substantial Substantial Moderate Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability High Substantial Substantial Fiduciary Substantial Substantial Substantial Environment and Social Substantial Substantial Substantial Stakeholders High High Moderate Other Substantial High Substantial Overall project risk High High Substantial  Political and Governance: Implementation so far has been affected by a difficult country-level operating environment, including violence and insecurity in the targeted municipalities. While it’s too early to fully assess how the election of a new president on June 19, 2022, may impact the project, it is likely that the pro-poor agenda and fight against armed groups and violence should help maintain GoC’s priorities for the Plan Pazcifico program. Additionally, lessons learned so far on working with the Army to prevent security risks and facilitate logistics and accessibility issues for contractors, as well as the importance of citizen engagement activities and inclusion of indigenous community leaders, will be key to mitigating those risks. At approval, the rating was Substantial, then High. The team suggests maintaining Substantial but reassessing in six months once the new administration is in place to possibly downgrade the residual risk to Moderate.  Macroeconomic: Macroeconomic impacts of both the pandemic and the global supply chain (and Ukraine) crisis translate into high inflation and higher costs for contractors that may affect the implementation of the project activities. To mitigate risks, the Bank endorsed the client’s proposal to allow alternative methods to commercial bank guarantees, which were too difficult to access for firms with limited capacity, ensuring contractors would have enough cash flow to advance works. While some materials must be imported, others may be available locally, reducing the risks of increased costs. However, the team suggests maintaining the rating as Substantial as these measures may be limited, and the project does not have much control over the economic context.  Sector Strategies and Policies: As for the two items below, this risk is considered Moderate. Colombia has a comprehensive legal and institutional framework for water supply and sanitation. The project is aligned with the priorities and sector policy of the new administration. The project has helped develop the technical and implementation capacity at the local level, including a program to redesign a management structure after a failed concession contract (Tumaco). It also strengthens the local service provider (Guapi) to establish economically sustainable operators to provide the population with quality water, sanitation, and waste management services. The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) Demonstrating results through this project could even drive GoC to strengthen its policy towards improving access to these basic services in rural and small-town settings where it faces significant backlogs.  Technical Design: Water and sanitation works proposed in the project design did not entail any particular technical difficulties or complex technologies, even though their implementation in the local context has since proved difficult (remoteness, specifics of the urban fabric and types of settlements). The Bank proposal to introduce condominial systems as an alternative to promote sanitation facilities well-adjusted to the socio-economic context, was well received as an opportunity to speed up access to sanitation. However, it has taken time to be incorporate systems into Colombia’s authorized solutions and the delayed preparation of the condominial studies demonstrates that this new approach requires specific technical and engineering capacities from both contractors and MVCT. To mitigate the risks and support the achievement of the PDO on sanitation, the Bank will continue to mobilize its global expertise through trust-funded technical assistance, to further train government and local experts to strengthen the management of condominial systems, among other topics, including sustainable utility management. The residual risk is considered Substantial.  Institutional Capacity for Implementation and Sustainability: The rating was initially considered High due to potential overexertion of the PIU, municipalities' capacity, and interagency and intergovernmental coordination. Since 2017 however, the PIU team has received training on Bank safeguards, fiduciary policies, and project management aspects. The project Executive Committee is functional, and key stakeholders are committed to moving the project forwards. However, while the Operations Manual has been revised to clarify roles and ensure adequate involvement of the municipalities and service providers, their limited capacity continues to require strong follow-up. The activities to strengthen the respective service providers provide a mitigation measure, but their implementation is due to last until the very end of the project, with limited time to effectively support them once the full systems will be operational. The residual risk is considered Substantial.  Fiduciary: With the current project’s end date, risks of not committing and disbursing the project proceeds and recruiting all needed contractors to implement planned activities would be high. Considering an additional period of implementation, skills in place and the measures below, the residual risk is considered Substantial, subject to reassessment by the end of 2022 on the impact of said measures. - The project transitioned from the Procurement Guidelines to the Regulations in 2021, positively impacting implementation. Recent measures to speed up implementation and disbursements include: i) a pilot for the use of insurance policies as an alternative to bank guarantees to cover the risk of good management and correct investment of the advance payments in contracts following the national market approach, and ii) increase the threshold for the use of the request of quotations for small civil works contracts. These measures aim to mitigate risks linked to delayed procurement processes, availability of qualified contractors and the latter’s ability to address local implementation challenges. - The FM Risk Rating is assessed as Moderate, considering that FM arrangements are in place, with PIU’s good mastership of Bank procedures, monitoring and reporting. There are no significant FM risks and issues.  Environmental and Social: The project is designed to generate positive long-term impacts for the populations of Guapi and Tumaco. Planned works will bring important benefits to public health, economic growth, and the territory's environmental sustainability (eliminate unimproved latrines and septic pits that contaminate surface water, groundwater sources and water networks, end the discharge of untreated municipal wastewaters to surface water and beaches, increasing coverage and improving quality of drinking water systems, assist in eliminating the practice of burying garbage in urban areas and roadways). Conversely, while the scale of the respective works remains limited, poor design (e.g., sanitation facilities in stilts areas) or the location of some subprojects to be negotiated with communities could affect implementation and related outcomes. The project The World Bank CO Plan PAZcifico:Water Supply and Basic Sanitation Infrastructure and Service Delivery Project (P156239) has provided environmental and social safeguards training to all contractors and supervision firms, and safeguards instruments are duly prepared and implemented, therefore mitigating the risks.  Stakeholders: The rating was initially considered High due to potential opposition from water users to the introduction of volumetric billing, from waste pickers to waste management activities, the tension between residents and administrative authorities not based in the field, the prevalence of criminal structures, and residents whose homes or businesses are outside the expanded coverage area. To date, implementation has allowed smoothening many of these concerns through extensive communication and citizen engagement activities, including an Inclusion Plan to involve waste pickers in expanding the existing landfills. The PIU includes decentralized staff from the region to ensure constant interaction with local authorities. The project has worked closely with the Army and local police to protect project sites, ongoing works and the firms’ and other project stakeholders’ personnel on the ground. The project has also moved to respond to communities’ demands, reduce financial allocations dedicated to sanitation and expand coverage of the water system both in the mainland area and islands of the municipality of Tumaco. The residual risk is considered Moderate.  Others: Violence remains pregnant in the project areas. As mentioned, work with the Army and local public forces has been an important mitigation measure and will continue to be. Important efforts are implemented to maintain communications between all contractors and firms, local authorities, and representatives of various stakeholders’ groups (women, youth, heads of neighborhoods, indigenous communities and other social leaders) through WhatsApp groups, events, etc. Yet, a sustained reduction in violent events may be needed to downgrade the current risk to Substantial.  Overall project risk: Given the distribution of Substantial and Moderate ratings for the different dimensions of the overall project risk, the latter is considered Substantial. A reassessment within six months after the effectiveness of the present restructuring will allow identifying the impact of the most recent mitigation measures, progress made with all activities that were pending an extension to proceed, and the evolution of the country and regional context under the new administration.