The World Bank Integrated Transport (P102368) REPORT NO.: RES29204 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INTEGRATED TRANSPORT APPROVED ON MAY 28, 2009 TO MINISTRY OF FINANCE AND DEVELOPMENT PLANNING TRANSPORT & ICT AFRICA Regional Vice President: Makhtar Diop Country Director: Paul Noumba Um Senior Global Practice Director: Jose Luis Irigoyen Practice Manager/Manager: Benedictus Eijbergen Task Team Leader: Petrus Benjamin Gericke The World Bank Integrated Transport (P102368) ABBREVIATIONS AND ACRONYMS MFED Ministry of Finance and Economic Development MTC Ministry of Transport and Communications MTR Mid-Term Review PDO Project Development Objective RAP Resettlement Action Plan VOC Vehicle Operating Cost The World Bank Integrated Transport (P102368) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P102368 Specific Investment Loan Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 28-May-2009 31-Jan-2020 Organizations Borrower Responsible Agency MINISTRY OF FINANCE AND DEVELOPMENT PLANNING Ministry of Transport and Communications Project Development Objective (PDO) Original PDO The primary development objective of the project is to enhance the efficiency of the transport system by building modern business management capacity and improving the strategic planning aspects of inter-regional and critical transport infrastructure. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-77130 28-May-2009 16-Nov-2009 17-May-2010 31-Jan-2020 186.00 51.27 134.73 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Integrated Transport (P102368) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Background The Integrated Transport Project (the Project) is financed through an International Bank for Reconstruction and Development Loan in the amount of US$186.00 million. The Project was approved by the Board on May 28, 2009 and became effective on May 17, 2010. The Project’s closing date is January 31, 2020. The Project Development Objective (PDO) is to enhance the efficiency of the transport system by building modern business management capacity and improving the strategic planning aspects of inter-regional and critical transport infrastructure. The PDO is supported by three components; (i) Capacity Building, Institutional strengthening and Training; (ii) Road sector Investment and (iii) Urban Sector Investment. The Ministry of Transport and Communications (MTC) implements the Project with the Ministry of Finance and Economic Development (MFED) being responsible for overall Project oversight. The Project has been lagging with implementation across all three components. Overall Implementation Progress At present, with about 75.0% of the implementation period completed, the cumulative disbursement is 27.5% or US$51.3 million of the US$186.0 million. The implementation progress has been unsatisfactory since December 2015 with results monitoring, financial management and project management all considered unsatisfactory. The achievement of PDO was downgraded to unsatisfactory in June 2017 considering the low disbursed amount coupled with the remaining project life and given the fact that there were no disbursements made during the last 14 months. The last disbursement was made in April 2016. Implementation support missions consistently noted this deficiency and identified the lack of a dedicated project office for Project implementation (Project Office) as one of the main reasons for the poor implementation progress. In 2011, the Bank and the MTC agreed to establish a dedicated Project Office but due to high senior management turnover within the MTC, this initiative faltered and only a dedicated Project Coordinator was appointed. This measure initially had some success, but over time the respective Directorates of the MTC clawed back the day-to-day management of the agreed activities, leading to a dysfunctional Project implementation arrangement. The Bank undertook the Mid-Term Review (MTR) from August 29 to September 7, 2016, and supported the recommendations of a Mid-Term Review Consultant that advised the MTC to immediately establish a stand-alone dedicated Project Office. The MTR mission agreed that the establishment of the Project Office could take place in phases, starting with: (a) the appointment of staff in the five essential Project management positions to support the immediate project implementation requirements by September 30, 2016; and (b) to be followed by a completely established Project Office by March 31, 2017. The Government failed to implement these agreed actions within the agreed timelines. The Management Letter for the MTR also advised, that based on the weak implementation performance to date, the signing of new contracts will pose a further risk to implementation performance if the agreed Project implementation structures are not put into place. In addition, the MTR mission identified several opportunities to restructure the Project, from amending the financing percentages to cancellation of unutilized amounts and it was agreed that the Borrower would consider options and respond with firm proposals to finalize the restructuring of the Project. The World Bank Integrated Transport (P102368) The Bank, at the request of the incoming Minister for Transport and Communications, Minister K O Mokaila, participated in a special meeting on January 23, 2017, to discuss the ongoing implementation bottlenecks. Subsequently, the Bank received a letter, dated February 9, 2017, from the Permanent Secretary of MTC in which it was confirmed that the Ministry is finalizing the Project implementation arrangements and that the Ministry is in the process of identifying staff to assign to the dedicated Project Office. The Country Director followed up on this by letter on March 21, 2017, writing to the Honourable Minister K O Mokaila that the pending follow-up actions on the restructuring proposals of the MTR-mission and the establishment of the dedicated Project Office were long overdue and that a continued lack of response might lead to the Bank considering its remedies under the Loan Agreement and the applicable General Conditions. The continued weak implementation performance of the Project was also discussed in a bilateral meeting during 2017 Spring Meetings and it was agreed that the Bank would conduct a restructuring mission (Restructuring Mission) to follow up on the progress made by the Borrower on the agreed actions to both restructure and improve implementation of the Project. The Restructuring Mission took place from May 17 to 19, 2017. Prior to the mission, the Bank team received the draft proposal from the MTC on the proposed restructuring of the Project and the phased establishment of the Project Office, led by a Project Manager and supported by suitably qualified staff. The Restructuring Mission used these proposals as a basis to agree with the Borrower on the follow-up actions. Three specific milestones were discussed and agreed as described below (Milestones). The Bank confirmed the Milestone Delivery Dates in a letter dated June 23, 2017. (i) Milestone 1 (Milestone Delivery Date of July 31, 2017). Appointment of essential Project management team satisfactory to the Bank (ii) Milestone 2 (Milestone Delivery Date of August 31, 2017). Appointment of suitably qualified additional Government staff, satisfactory to the Bank, to the Project management team (iii) Milestone 3 (Milestone Delivery Date of December 31, 2017). Appointment of suitably qualified consultants, where required, satisfactory to the Bank The meeting of these Milestones by the Milestone Delivery Dates has been assessed by the Bank as essential to continued Project implementation and to get back into compliance with the Loan Agreement. As part of the delivery of these Milestones, the Borrower will also need to meet other agreed actions, as per the Aide Memoire of the Restructuring Mission, such as submission of the Government’s restructuring proposal for the Project. In response to the Bank’s letter, Government submitted evidence showing that it achieved the requirements for the first two Milestones. The Bank confirmed this position in two letters, the last following the completion of an Implementation Support Mission (September 11-21, 2017) and during which the evidence for achieving the second milestone was reviewed and accepted. Government is already implementing actions to achieve the third and last Milestone by December 31, 2017. Specific actions taken were to identify the specific positions where consultants would be required and preparing job descriptions for these. The actions required to achieve the first two milestones mostly focused on the establishment of the dedicated Project Office. The September mission already noted much improved project management with the Project Team already taking responsibility for the implementation of all activities and the Bank receiving regular monthly progress reports. It is still too early to see the benefits of the Project Office on overall implementation and the mission concluded to monitor the improvement in project management over the next six months to ensure that the Project Manager and his team take on the full responsibility for implementation. The World Bank Integrated Transport (P102368) The Bank Team also used the September mission to discuss and agree on the actions required to restructure the Project following receipt of Government’s restructuring proposals. These are described below. Project Activities Status Component A: Capacity Building, Institutional Strengthening and Training The majority of the originally agreed studies and activities have been completed with the remainder currently under implementation. Of these, the development of a National Multi-Modal Transport Master Plan and the implementation of an agreed Training Plan are the main activities still to be completed before the Project Closing Date. Component B: Road Sector Investment This Component supports the introduction of long-term performance-based contracts on about 335 km of roads in south-eastern Botswana. The two works packages for rehabilitation, upgrading and maintenance works commenced in May 2014 with a contract completion date of April 2024. Both packages are delayed when compared with the original work plan. Government is currently reviewing claims for extension of time that, if approved would reduce the overall delays to acceptable levels. The September 2017-mission undertook a site visit to the respective works sites and saw improved progress overall. However, the new Project Team has not been able to take full responsibility of these contracts yet and the mission used the site visit to discuss deficiencies in contract management and agree on actions to mitigate these. Examples are better Traffic Management on site and faster implementation of the outstanding resettlement actions included in the respective RAPs. Currently, rehabilitation on about 77km of roads is complete with all the roads under maintenance. Component C: Urban Roads Infrastructure Investment This Component suffered substantial delays due to weak Project Management. However, since July 2017, several actions by the Project Office shows improved project management and oversight. The contract for the new Traffic signalling system for greater Gaborone is in place with the contractor mobilizing to site and the last works package, the civil works associated with the new traffic signaling system already advertised for bids. Rationale for Restructuring As described above, the lack of a dedicated project office for Project implementation (Project Office) was identified as the main reason for the poor implementation progress, as seen in the overall delay of the Project activities, the delayed implementation of the RAPs and the weak works contract management oversight; the last, among others, leading to poor Traffic and Health and Safety Management Plan implementation. The Loan Agreement requires under Sections I.A.1 (b) and I.A.2 of Schedule 2 to the Loan Agreement, that there should be a Special Project Management Unit (referred to in this paper as the Project Office) in place that be responsible for, among others, the day-to-day implementation of the Project with a Project Manager responsible for the day-to-day management and supervision of the Project. The agreed Project management structure, based on the recommendations of the MTR, implements the requirements described in the above-mentioned clauses of the Loan Agreement. The agreed Project Office and the Government oversight is designed to ensure that all Project components are efficiently expedited. The slower than expected implementation progress requires restructuring of the Project to ensure full utilization of the available funding and to ensure that the Results Framework reflects the planned progress from the MTR to Project closure in January 2020. The efforts made by Government to establish the Project Office already led to improved implementation planning and oversight. The expectation is that with the achievement of the third Milestone, the Project Office would be fully established and all aspects of project implementation and oversight would be properly resourced. The World Bank Integrated Transport (P102368) II. DESCRIPTION OF PROPOSED CHANGES The proposed restructuring entails (a) increase of financing percentage on the works contracts from 50% to 60% Bank financing to utilize the remaining funds, (b) reallocation of funds among Components, and (c) an amendment to the Results Framework to drop some and update other indicators The Project Development Objective remains unchanged. Increase of financing percentage on the works contracts As per the Loan Agreement, the Bank financing percentage for works is 50%. It is proposed to increase to this financing percentage to 60% on all payments made from September 1, 2017, to fully utilize the current undisbursed proceeds of the Bank Loan prior to Project closure. The higher disbursement percentage incorporates the slower disbursements to date due to project delays as well as the Bank funds currently committed to works and supervision consulting services payments on contracts that will go beyond year 2020. The Table below summarises the calculations based in the disbursements and outstanding commitments at the end of August 2017. Table 1: Disbursement % Calculation to Utilise remaining Bank funds by January 2020 (US$ rounded to 1k) All except works Original Already Total est. works contract to be paid up to Component and Description allocation paid value to be paid up to Project closure Project Closure A B C A. Capacity building and Institutional Strengthening A.1 8,300 6,400 1,000 A.2 12,200 4,800 6,800 B. Road Sector Investment Works 114,100 21,100 165,300 * Consulting Services 8,600 3,500 3,000 C. Urban roads Infrastructure Investment Works 38,700 300 53,100 * Consulting Services 4,100 0 4,200 Total 186,000 36,100 15,000 Remaining funds to be paid under works contracts (A-B-C) 134,900 D Estimated total works payments to be made up to Project closure 218,400 E Estimated disbursement percentage to utilize all funds (D/E) 61% *Calculated as total contract value minus total payments made up to August 31, 2017 minus estimated total payments to be made beyond January 2020 minus the US$40 million support provided by OFID for works under Component C. The World Bank Integrated Transport (P102368) Reallocation of funds among Components Based on current contract figures and estimates, all three Components require some reallocation to reflect the updated costs of the agreed activities. Table 2 below shows the reallocation amounts per Category. Table 2: Proposed reallocation of Funds per Disbursement Category (Table in Section IV (A) (2) of the Loan Agreement) Category Current Allocations and Percentages Proposed new Allocations and Percentages (From September 1, 2017) Amount of the Loan Percentage of Amount of the Loan Percentage of Allocated (Expressed Expenditures Allocated (Expressed in Expenditures in US$) to be financed US$) to be financed (inclusive of (inclusive of taxes) taxes) 1) Works under: a) Part B of the Project 114,100,000 123,600,000 50% 60% b) Part C of the Project 38,700,000 32,700,000 (2) Consultants' services, Training and Goods a) under Part A.1 of the Project, other than 8,300,000 7,400,000 Part A.1 (e) 100% 100% b) under Parts A.2, B 24,900,000 22,300,000 and C of the Project TOTAL AMOUNT 186,000,000 186,000,000 Amendment to Results Framework to update indicators Government rarely updated the Results Framework and never collected data on the two indicators relating to satisfaction surveys among road users using the roads under contract. With the road rehabilitation works now almost 50% complete, starting with satisfaction surveys now would not achieve the original intent, namely, to measure performance over time starting with the existing road, through the rehabilitation phase and into the maintenance phases. These indicators are therefore proposed to be dropped. Several of the remaining indicators need amendment to show the actual progress under the Project. The number of km under contract (number decreased form the original 800 km to 335 km due to higher costs) while the delays to date resulted in several of the interim targets not being achieved. The Table shows the current Results Framework and the proposed Results Framework with a column providing detailed comments on the proposed changes. The World Bank Integrated Transport (P102368) Comments on Indicators Original Restructuring following Mid-Term Review restructuring Baselin Baselin Project Outcome YR3 YR5 YR7 YR10 YR3 YR5 YR7 YR10 e e Length of roads under successful long term PBPs >500 >600 The total number of 0 km 250 km 800 km 0 km 0 km 335 km 335 km 335 km for rehabilitation and km km km under contract maintenance Level of satisfaction by road At least At least At least At least No Satisfaction survey users 0% 10% 25% 40% 50% Drop indicator done prior to (customer satisfaction more more more more construction. survey) nly Avg. vehicle operating cost (VOC) Works contracts per Veh-km on PBP road (US Same Same Same Same significantly delayed Cents): as as as as and VOCs will only Car 26 beginni <26 <20 <18 26 beginni beginni beginni <18 decrease from YR8 Bus 48 ng of <44 <40 <38 48 ng of ng of ng of <38 onwards. Hvy Truck 79 Project <72 <70 <68 79 Project Project Project <68 Works contracts Decrease in number of significantly delayed annual road accidents on 0% 5% 10% 15% 20% 0% 5% 10% 10% 20% and decreases likely Project roads as related to only from YR8 road conditions (%) onwards. Works contracts Avg. travel time reduction significantly delayed (Gaborone Same Same Same Same and decreases likely City) per 10 kms travel, in %: as as as as only from YR8 Car 0% beginni 15% 30% 35% 0% beginni beginni beginni 15% onwards. Bus 0% ng of 10% 15% 20% 0% ng of ng of ng of 10% Hvy Truck 0% Project 5% 10% 15% 0% Project Project Project 5% Completion of Sector 0 75% 100% 100% 100% 0 75% 75% 75% 100% Studies The World Bank Integrated Transport (P102368) Comments on Indicators Original Restructuring following Mid-Term Review restructuring Baselin Baselin Intermediate Outcome YR3 YR5 YR7 YR10 YR3 YR5 YR7 YR10 e e It is already a PDO- Sector Studies Completed 0 75% 100% 100% 100% Drop indicator Indicator Length of roads under PBPs 0 >100 >300 >500 800 Drop indicator It is like PDO-Indicator (km) under implementation Satisfactory procurement functions by RD -- No. of pre-qualified Project did not use bidders for first contract -- Min 3 -- Drop Indica tor pre-qualification at all. nly -- First PBP-Contract awarded None Yes None Yes — Number of contracts successfully awarded within the 0% 75% 80% 100% 100% 0% 75% 80% 100% 100% bid/proposal validity period (%) - Number of complaints on procurement processes -- Not None None None -- Not None None None determined to be justified exceed exceed by the Bank ing 2 ing 2 Satisfactory financial management 0% 70% 100% 100% 100% 0% 70% 100% 100% 100% reporting (%): 50% 35% 25% 15% No Satisfaction survey Number of complaints on 100% reducti reducti reducti reducti Drop indicator done prior to Project roads conditions (%) on on on on construction. The World Bank Integrated Transport (P102368) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. I. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Reallocation between Disbursement Categories ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ The World Bank Integrated Transport (P102368) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Length of roads under successful long term OPRCs for rehabilitation and maintenance. Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0 335km 335km Revised Date 12-Nov-2009 30-Sep-2014 30-Apr-2020 Level of satisfaction by road users Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action More than 50% Value 0% not yet done Marked for Deletion increase Date 12-Nov-2009 31-Mar-2015 31-Jan-2020 Average vehicle operating costs per vehicle-km on OPRC roads Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Car - <18 US Cents; Car - 26 US Cents; Bus - Bus - <38 US Cents; Value 48 US Cents; Heavy Survey not yet done No Change Heavy Truck - <68 US Truck - 79 US Cents Cents Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Decrease in number of annual road accidents on project roads as related to road conditions (%) Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0% not yet measured 20% No Change Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Average travel time reduction (Gaborone City) per 10 kms travel (%) The World Bank Integrated Transport (P102368) Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Car - 0% Bus - 0% Heavy Car - 15% Bus - 10% Value not yet measured Revised Truck - 0% Heavy Truck - 5% Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Completion of Sector Studies Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0 75 100% No Change Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Intermediate Indicators IO_IND_TABLE Length of roads under OPRCs (km) under implementation Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0 km 335km 860 km Marked for Deletion Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Number of pre-qualified bidders for first contract Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value None 6 Minimum 3 Marked for Deletion Date 30-Jun-2009 30-Sep-2014 31-Dec-2012 First OPRC contract awarded successfully Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value None Yes Yes No Change The World Bank Integrated Transport (P102368) Date 12-Nov-2009 30-Sep-2014 31-Dec-2012 Number of contracts successfully awarded within the bid/proposal validity period (%) Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0% 100% 100% No Change Date 12-Nov-2009 30-Sep-2014 31-Jan-2020 Number of complaints on procurement processes determined to be justified by the Bank Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value None None None No Change Date 30-Jun-2009 30-Jun-2016 31-Jan-2020 Satisfactory financial management reporting (%) Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0% 100% 100% No Change Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 Number of complaints on project road conditions Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value 100% None received 15% Marked for Deletion Date 12-Nov-2009 31-Mar-2016 31-Jan-2020 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed The World Bank Integrated Transport (P102368) IBRD-77130-001 | Currency: USD iLap Category Sequence No: 1A Current Expenditure Category: 7713 - CIVIL WORKS PART B 114,100,000.00 11,630,349.39 123,600,000.00 50.00 60.00 iLap Category Sequence No: 1B Current Expenditure Category: 7713 - CIVIL WORKS PART C 38,700,000.00 0.00 32,700,000.00 50.00 60.00 iLap Category Sequence No: 2A Current Expenditure Category: 7713 -CS,TRNG,GDS PRTA.1OTH PRTA1e 8,300,000.00 6,448,406.86 7,400,000.00 100.00 100.00 iLap Category Sequence No: 2B Current Expenditure Category: 7713 -CS,TRNG,GDS PRT A.2, B AND C 24,900,000.00 11,108,329.55 22,300,000.00 100.00 100.00 Total 186,000,000.00 29,187,085.80 186,000,000.00 Note to Task Teams: End of system generated content, document is editable from here.