Document of The World Bank FOR OFFICIAL USE ONLY Report No: 66735-GE PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT AND RESTRUCTURING IN THE AMOUNT OF SDR 27.7 MILLION (US$43 MILLION EQUIVALENT) TO GEORGIA FOR THE THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT May 3, 2012 Sustainable Development Department South Caucasus Country Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 29, 2012) Currency Unit = Georgian Lari (GEL) GEL 1.66 = US$ 1.00 US$ 1.552 = SDR 1.00 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ISR Implementation Status and Results Reports AF Additional Financing JBIC Japanese Bank for International Cooperation CPS Country Partnership Strategy JICA Japan International Cooperation Agency CY Calendar Year LA Loan Agreement EBRD European Bank for Reconstruction and MoED Ministry of Economic Development Development EDPRP Economic Development and Poverty NPV Net Present Value Reduction Program EIB European Investment Bank MRDI Ministry of Regional Development and Infrastructure EIRR Economic Internal Rate of Return PAD Project Appraisal Document EMP Environmental Management Plan PDO Project Development Objective FEWHIP First East-West Highway Improvement PP Project Paper Project FM Financial Management RAP Resettlement Action Plan FMR Financial Monitoring Report RD Roads Department FPU Foreign-funded Projects Unit PRSP Poverty Reduction Strategy GDP Gross Domestic Product SDR Special Drawing Rights GEL Georgian Lari (Currency Unit) SEWHIP Second East-West Highway Improvement Project GNI Gross National Income SIL Specific Investment Loan IBRD International Bank for Reconstruction TEWHIP Third East-West Highway and Development Improvement Project IDA International Development Association TRRC Transport Reform and Rehabilitation Center IFR Interim-unaudited Financial Report VOC Vehicle Operating Costs Vice President: Philippe H. Le Houerou Country Director: Asad AlaPj Sector Director Laszlo Lovei Sector Manager: Henry Kerali Task Team Leader: Rodrigo Archondo-Callao GEORGIA THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT ADDITIONAL FINANCING CONTENTS PROJECT PAPER DATA SHEET PROJECT PAPER I. Introduction...................................................... 1 II. Background and Rationale for Additional Financing and Restructuring... ...............1 III. Proposed Changes..................................................... 4 IV. Appraisal Summary .............................7..... .............7 ANNEX 1: RESULTS FRAMEWORK AND MONITORING. .......... ............ 14 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) ............ 19 ANNEX 3: PROCUREMENT PLAN . ................................ ........ 24 ANNEX 4: MAP......................................................... 25  GEORGIA THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT ADDITIONAL FINANCING ADDITIONAL FINANCING AND RESTRUCTURING DATA SHEET Basic Information - Additional Financing (AF) Country Director: Asad Alam Sectors: Rural/Inter Urban (98%), Pub Sector Manager: Henry Kerali Administration (2%) Team Leader: Rodrigo Archondo-Callao Themes: Infrastructure Services, Trade Project ID: P128863 Facilitation, Regional Integration Expected Effectiveness Date: August 1, 2012 Environmental category: A Lending Instrument: SIL Expected Closing Date: June 30, 2015 Additional Financing Type: Scale Up Joint IFC: NA and Restructuring Joint Level: NA Basic Information - Parent Project Project ID: P112523 Environmental category: A Project Name: Third East-West Highway Expected Closing Date: June 30, 2013 Improvement Project Lending Instrument: SIL AF Project Financing Data [ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: IDA terms of 25 years maturity with 5 years grace. AF Financing Plan (US$m) Source Total Amount (US $m) Total Project Cost: 53.75 53.75 Co-financing: Borrower: 10.75 Total Bank Financing: 43.00 IDA 43.00 New Recommitted Client Information Recipient: Georgia Responsible Agency: Roads Department of the Ministry of Regional Development and Infrastructure (MRDI) Contact Person: Mr. Nugzar Gazviani Telephone No.: (995 32) 237 50 68 Fax No.: (995 32) 313-052 Email: ngasviani@yahoo.com 1 AF Estimated Disbursements (Bank FY/US$m) FY 2012 2013 2014 2015 Total Annual 10.75 19.35 10.75 2.15 43.00 Cumulative 10.75 30.10 40.85 43.00 43.00 Project Development Objective and Description The Project Development Objectives are: (i) to contribute to the gradual reduction of road transport costs and to improve access, ease of transit, and road safety along the central part of Georgia's East-West Corridor; and (ii) to strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve road safety. The Project development objectives incorporate a change in the text from improving "traffic" safety to improving "road" safety, reflecting the broader impact of project activities. The results framework and the outcome indicators have been updated to reflect the added scope of the Additional Financing. Project Description: The Project consists of the Parent Project with the following modifications: Part A: Sveneti-Ruisi-Agara Road Link 1. Upgrading the existing E60 East-West Highway from Sveneti to Ruisi to a dual carriageway road including: (i) partial rehabilitation of the existing road; (ii) realignment and construction of new carriageways; (iii) construction of surface drainage, culverts and underpasses; (iv) construction of bridges, including approach roads, particularly a bridge of about 877 meters long over the Liakhvi River and an existing railway line; (v) construction of two tunnels of about 800 meters long; (vi) installation of safety barriers, road signs and markings; (vii) demolition of existing structures and relocation of various utilities; (viii) construction supervision services; and (ix) design services for future investments in the road sector, all through the carrying out of civil works and the provision of goods and consultants' services. 2. Upgrading the existing Ruisi-Agara road section and the construction of the Agara bypass as a dual carriageway road and conducting a technical quality review of such works through the carrying out of civil works and the provision of goods and consultants' services. Part B: Institutional Strengthening 1. Strengthening the capacity of the RD to improve its operational effectiveness through: (i) carrying out a functional analysis for establishing the appropriate organizational structure for the RD to meet its current and anticipated future needs; (ii) improving the capacity of the RD to plan, design, manage and maintain the road network; and (iii) strengthening the RD capacity in environmental monitoring, through provision of goods, consultants' services and training. 2. Developing a framework for the introduction of performance based contracts (PBC) for maintenance of main roads, through the provision of consultants' services. ii 3. Improving road safety along the entire E60 East-West Highway corridor by: (i) preparing and implementing a corridor road safety management plan to cover engineering, enforcement, emergency response and publicity campaigns; and (ii) establishing a road crash database, through the provision of goods, consultants' services, and training. 4. Strengthening the curriculum and training at the technical university, including provision of training for lecturers, twinning with overseas universities, as well as the provision of consultants' services and goods. Part C: Project Management 1. Institutional support to the RD and the TRRC related to Project management, financial audits and Project monitoring and evaluation. Safeguard and Exception to Policies Safeguard Policies Triggered: Environmental Assessment (OP/BP 4.01) [X]Yes [ ] No Natural Habitats (OP/BP 4.04) [ ]Yes [X] No Forests (OP/BP 4.36) [ ]Yes [X] No Pest Management (OP 4.09) [ ]Yes [X] No Physical Cultural Resources (OP/BP 4.11) [X]Yes [ ] No Indigenous Peoples (OP/BP 4.10) [ ]Yes [X] No Involuntary Resettlement (OP/BP 4.12) [X]Yes [ ] No Safety of Dams (OP/BP 4.37) [ ]Yes [X] No Projects on International Waterways (OP/BP 7.50) [ ]Yes [X] No Projects in Disputed Areas (OP/BP 7.60) [ ]Yes [X] No Does the project require any waivers of Bank policies? [ ]Yes [X] No If so, have these been endorsed or approved by Bank management? [ ]Yes [ ] No Conditions and Legal Covenants Financing Agreement Description of Condition/Covenant Date Due Reference Schedule 2 The Recipient shall carry out the Project through the RD with Project Section I.A. I due diligence and efficiency and in conformity with appropriate Duration administrative, financial, engineering, public utility, environmental practices and in accordance with the Operations Manual and shall provide the RD with the resources and staff necessary for implementing the Project. The Recipient shall not assign, amend, abrogate or waive the Operations Manual or any provision thereof, without the prior approval of the Association. The RD shall be responsible for the overall coordination and oversight of the Project implementation. 111 Schedule 2 By not later than one month as of the Effective Date, the RD One month Section I.A. 2 and TRRC shall duly amend the Project Implementation after Agreement for the purposes of setting forth the obligations of Effectiveness both parties in relation to the Project implementation in a manner satisfactory to the Association. Pursuant to the terms and conditions of the Project Implementation Agreement, the RD shall be assisted in Project-related financial management and disbursement by the TRRC. The Recipient shall: (i) maintain the TRRC with terms of reference, resources and staff necessary for proper Project implementation and satisfactory to the Association; and (ii) require TRRC to carry out the financial management and disbursement for the Project in accordance with the Project Implementation Agreement. Schedule 2 During Project implementation, the RD shall maintain the FPU Project Section I.A. 3 with terms of reference, resources and staff necessary for Duration proper Project implementation and satisfactory to the Association to assist RD in Project-related procurement, monitoring and evaluation and Project reporting. Schedule 2 The Recipient shall permit the use of standards for Project Section I.A. 4 construction, planning and design of highways adopted by the Duration European Union (in addition to the national standards), acceptable to the Association, in the design, construction and maintenance of road works under the Project. Schedule 2 The Recipient shall ensure that adequate budgetary resources Project Section I.A. 5 are made available for the Project in the Recipient's annual Duration budget for the duration of the Project. Schedule 2 By not later than July 1,2012, the Recipient shall, through the July 1,2012 Section I.A. 6 TRRC, recruit a financial auditor under terms of reference and conditions satisfactory to the Association. Schedule 2 The Recipient shall ensure that the Project is carried out in Project Section I.C 1 accordance with the provisions of the EIA, EMP, RPF and Duration RAP. The Recipient shall not assign, amend, abrogate or waive the EIA, EMP, RPF and/or RAP or any provision thereof, without the prior approval of the Association. Schedule 2 The Recipient shall, prior to the commencement of works under Prior to Section I.C 2 the Project, ensure that: (i) the provisions of the EMP are commence- adequately included in the proposed contract(s) for said works; ment of and (ii) the owners and users of the land where said works are works to be implemented are fully compensated in accordance with the provisions of the RAP. iv I. Introduction 1. This Project Paper seeks the approval of the Board of Executive Directors to provide an additional credit in the amount of SDR 27.7 million (US$43.0 million equivalent) to Georgia for the Third East-West Highway Improvement Project (TEWHIP) (Loan IBRD-77410 GE). The proposed Additional Financing (AF) would finance the costs associated with upgrading the existing E60 East-West Highway' from Ruisi to Agara and construction of the Agara Bypass (19 km in total) to a dual carriageway standard, as well as additional institutional strengthening activities. The AF includes a scale-up and restructuring of the activities under the TEWHIP. The restructuring is required to accommodate a revision of the results framework and monitoring indicators, an increase in the Project scope, a slight change to the text of the Project Development Objectives, and an extension of the Project closing date. The Implementation Status and Results Reports (ISR) of the TEWHIP are generally satisfactory. By December 2011, 83 percent of the TEWHIP funds had been disbursed. 2. There is no co-financing from other donors for this Project per se. However, there is close coordination among the various donors supporting the upgrade of the E60 East-West Highway in Georgia - of which TEWHIP is an important part. Those donors include the Asian Development Bank (ADB), the European Investment Bank (EIB), and the Japan International Cooperation Agency (JICA). II. Background and Rationale for Additional Financing and Restructuring 3. Original Project: The TEWHIP was approved by the Board on September 10, 2009 for an amount of US$147 million, and became effective on November 3, 2009. The project development objectives are: (i) to contribute to the gradual reduction of road transport costs, and to improve access, ease of transit, and road safety along the central part of Georgia's East-West Corridor; and (ii) to strengthen the capacity of the Roads Department (RD) and relevant Government entities to plan and manage the road network and to improve road safety. The TEWHIP upgrades the existing E60 East-West Highway from Sveneti to Ruisi to a dual carriageway road including: (i) partial rehabilitation of the existing road; (ii) realignment and construction of new carriageways; (iii) surface drainage, culverts and underpasses; (vi) construction of bridges - in particular, a bridge of about 877 meters over the Liakhvi River; (v) construction of two tunnels, each of which is about 800 meters long; (vi) safety barriers, road signs and marking; (vii) demolition of existing structures and relocation of various utilities, (viii) construction supervision services; and (ix) design services for future investments in the road sector. The TEWHIP also supports road sector institutional development and capacity-building. The civil works for the upgrading of the Sveneti-Ruisi road sections have been largely completed. The construction of the Liakhvi River Bridge has been delayed by 5-6 months due to quality control problems experienced during the construction of the bridge deck - which is not unusual for these types of civil works. Thus, the bridge completion date is now expected to be sometime between August and October 2012. Overall, progress on the construction of the two tunnels is good - and the completion date is estimated to be in April 2012. The institutional development component is under implementation. 1 The East-West Highway is a part of the European route E-60, which runs from Brest, France to Irkeshtam, Kyrgyzstan (on the border with China). 1 4. Project Performance: The implementation of the TEWHIP has been well-managed, and ratings in all of the ISRs have been moderately satisfactory or better. The latest ISR indicates that: (i) the development objectives - which are essentially linked to the road construction - are likely to be met; (ii) the environmental compliance of the Project has improved, and institutional support activities are now under implementation; (iii) progress towards achievement of the PDO is satisfactory; and (iv) overall implementation progress (IP) is moderately satisfactory. The ISR rating over the past 12 months for overall implementation progress is moderately satisfactory; for progress towards achievement of the PDO, it is satisfactory. The TEWHIP does not have unresolved fiduciary, environmental, social, or other safeguard problems. 5. Institutional Strengthening: The main activities undertaken by the TEWHIP are: (i) improvement of road safety along the entire E60 East-West Highway Corridor; (ii) development of a framework for introduction of performance-based contracts (PBCs); (iii) strengthening the capacity of the RD to improve its operational effectiveness; and (iv) strengthening the curriculum and training at the Georgian Technical University. There are a number of outstanding road safety issues on the E60 Corridor - including the absence of central crash barriers on some sections - which will be addressed with financing from the TEWHIP. A contract with international consultants is ongoing to assess the readiness and capacity of the construction industry in Georgia and to develop a framework for the introduction of PBCs. The TEWHIP financed the installation at the Georgian Technical University of: (i) laboratories for asphalt and concrete testing; (ii) textbooks for the library; and (iii) software for the computer laboratory. 6. Country Context: Over the past five years, Georgia has achieved significant economic progress. Due to sustained reforms, Georgia's economy rapidly grew from 2004 through July 2008 - with an average growth rate of over 9 percent per year. Georgia also managed to overcome the 2008 double shock caused by the August conflict and the global economic crisis. Growth did contract in 2009 - by 3.8 percent. However, this was followed by a strong recovery: growth was 6.3 percent in 2010, and an estimated 7.0 percent in 2011. The recovery and growth during 2010 and 2011 was driven by an uptick in exports, tourism, commercial bank lending, and continued high levels of public investment and foreign direct investment. The government of Georgia (Government) has sustained public investments in infrastructure - focusing on the road network. In order to counter global risks and to create jobs, the Government developed a 10- point economic action plan in December 2011. The plan outlined key points to make Georgia "successful and prosperous". The Plan includes investment in transport infrastructure and logistics capacity. The success of the investment described above rests on improved connectivity and accessibility to local and international markets. 7. Transport Sector Overview: Transit and bilateral trading with its neighbors is important to Georgia's economy. To maximize benefits from transit and trade, the Government has focused on two areas: (i) rehabilitation and modernization of the neglected transport infrastructure along the main transit East-West Corridor, through increased investment into the East-West Highway; and (ii) improvement of countrywide accessibility, through increased investment in the rehabilitation of the secondary and local road network. Two Ministries are responsible for the transport sector. The Ministry of Economy and Sustainable Development (MESD), through its Transport Policy Department, determines the transport sector policy and regulates transportation. 2 The Ministry of Regional Development and Infrastructure (MRDI) implements road infrastructure policies and decisions pertaining to all roads infrastructure investments. The Roads Department (RD) of the MRDI manages and administers the entire road network except for non- core local and all municipal roads. The latter are managed by local governments and municipalities. The RD is also responsible for implementing all donor-funded projects in the road sector. The Foreign Projects Unit (FPU) of the RD, established by Ministerial Decree, is responsible for technical, procurement, monitoring and reporting, contract management, and other implementation matters. The Transport Reform and Rehabilitation Center (TRRC), established in 1995 to help implement Bank-supported transport projects, is responsible for the flow of funds, accounting, budgeting, financial reporting, and auditing. 8. Roads are the lifeline for economic activity for most Georgians. Even in the main foreign trade corridors, local movement represents up to 90 percent of the traffic. The transport costs and the risk of accidents are often high due to: (i) challenging topography; (ii) low-capacity highways (often only 7 meters wide without shoulders); (iii) inadequate maintenance regimes; (and (iv) other adverse conditions. Consequently, there is a need to improve the road network. The two main transit corridors are the E60 East-West Highway (Senaki-Tbilisi-Red Bridge) and the E70 (Senaki-Poti-Batumi-Sarpi/Turkish Border). The E60 is the major road - it carries over 60 percent of the total foreign trade that uses the road network in Georgia. Transit on this corridor is associated with flows connecting European trade with Caucasus and Asian regions. 9. Consistency with the Country Partnership Strategy (CPS): Improving road infrastructure has been the Government's declared priority since 2004. Investments in essential infrastructure and service delivery represent the central components for supporting Georgia's reforms and development in the CPS covering 2010-2013. In terms of road infrastructure investments, the focus is on strengthening internal connectivity and on strengthening Georgia's role as a transport corridor within the South Caucasus. The Bank has been involved in the Georgian road sector since the early 1990s. In 2004, the Bank started to support the upgrade of the East-West Highway. The Bank's strategy for engagement with Georgia is based on: (i) meeting post-conflict and vulnerability needs; and (ii) building long-term competitiveness. The proposed AF supports both of the above priorities. 10. Rationale for the Additional Financing: The proposed AF would scale-up the TEWHIP in order to cover: (i) the upgrading of the Ruisi-Agara road section and the construction of the Agara Bypass; and (ii) additional institutional-strengthening activities. The Bank has been financing three projects along the East-West Highway that are focused on the section between Tbilisi and Rikoti. The First East-West Highway Improvement Project (FEWHIP) was approved in 2006; it upgrades the E60 from Agaiani to Igoeti, a 13 km section. In 2011, the Bank - through the AF for the FEWHIP - rehabilitated the Rikoti Tunnel, which is a crucial link on the highway between East and West Georgia. That Project was followed by the Second East-West Highway Improvement Project (SEWHIP), which was approved in 2007; it continues the upgrade from Igoeti to Sveneti, a 25 km section. The TEWHIP, which was approved in 2009, continues the upgrade from Sveneti to Ruisi, a 15 km section. Thus, the upgrading of the Ruisi-Agara road section and the construction of the Agara Bypass under the AF is a logical extension of the Government's Program to upgrade the E60 Highway to a dual carriageway standard from Tbilisi to Rikoti. 3 11. Rationale for Project Restructuring: The Level II restructuring is required in order to slightly revise the Results Framework and the PDO indicators to incorporate the upgrading of the Ruisi-Agara road section and the construction of the Agara Bypass, to include additional institutional-strengthening activities, and to extend the Project closing date from June 30, 2013 to June 30, 2015. III. Proposed Changes 12. TEWHIP PDO: The AF and restructuring incorporates a change to the text of the PDO for the original TEWHIP from improving "traffic" safety to improving "road" safety, reflecting the broader impact of project activities. The updated PDO is: (i) To contribute to the gradual reduction of road transport costs and to improve access, ease of transit, and road safety along the central part of Georgia's East-West corridor; and, (ii) To strengthen the capacity of the Roads Department and relevant Government entities to plan and manage the road network and to improve road safety. 13. The Results Framework and PDO Indicators have been updated to include the additional investment for upgrading from Ruisi-Agara road section and the construction of the Agara Bypass and institutional-strengthening activities (see Annex 1). Table 1. PDO Indicators Revised Original TEWHIP Revised TEWHIP TEWHIP Indicator Indicator Target in 2015 Transit time from Sveneti to Ruisi Transit time from Sveneti to the Agara (minutes) Bypass (minutes) 20 Vehicle operating costs from Vehicle operating costs from Sveneti to Sveneti to Ruissi (cars in US$/km) the Agara Bypass (cars in US$/km) 0.18 Vehicle operating costs from Vehicle operating costs from Sveneti to Sveneti to Ruissi (trucks in the Agara Bypass (trucks in US$/km) 0.72 US$/km) Percentage reduction in road Unchanged 30% fatalities on E60 East-West Highway from Senaki to Tbilisi Improvement in road capacity from Ruisi to the Agara Bypass (passenger car space 8,000 equivalent - PCSE/hour) International roads in good or fair 85% condition as a share of total International roads (percentage) 4 14. The proposed Additional Financing will scale up the existing TEWHIP by financing the following activities: * Upgrading of the Ruisi-Agara road section and the construction of the Agara bypass (19 km in total) to a dual carriageway standard, and consultancy services for a technical quality review (US$51.1 million equivalent). A technical quality consultant firm will be employed to review if the works have been carried out in accordance with the technical specifications and standards and the working relationship between RD, the contractor and the supervision engineer. * Employment by the RD of a Road Safety Adviser, and financing of the purchase/development of a road crash database (US$0.50 million equivalent). * Additional staff for the FPU comprising a Contract Manager, an Environmental Specialist, and a Monitoring and Reporting Specialist consultants; and procurement of vehicles and office equipment (US$0.66 million equivalent). * TRRC salaries and operating costs, and additional Project financial audits (US$0.42 million equivalent). 15. Project Components: The restructured TEWHIP incorporating the AF will therefore comprise the following components: Component A: Sveneti-Ruisi-Agara Road Link (a) Upgrading the existing E60 East-West Highway from Sveneti to Ruisi to a dual carriageway road including: (i) partial rehabilitation of the existing road; (ii) realignment and construction of new carriageways; (iii) construction of surface drainage, culverts and underpasses; (iv) construction of bridges, including approach roads, particularly a bridge of about 877 meters long over the Liakhvi River and an existing railway line; (v) construction of two tunnels of about 800 meters long; (vi) installation of safety barriers, road signs and marking; (vii) demolition of existing structures and relocation of various utilities; (viii) construction supervision services; and (ix) design services for future investments in the road sector, all through the carrying out of works and the provision of goods and consultants' services. (b) Upgrading the existing Ruisi-Agara road section and the construction of the Agara bypass as a dual carriageway road and conducting a technical quality review of such works through the carrying out of works and the provision of goods and consultants' services. Component B: Institutional Strengthening (a) Strengthening the capacity of the RD to improve its operational effectiveness through: (i) carrying out a functional analysis for establishing the appropriate organizational structure for the RD to meet its current and anticipated future needs; (ii) improving the capacity of the RD to plan, design, manage and maintain the road 5 network; and (iii) strengthening the RD capacity in environmental monitoring, through provision of goods, consultants' services and training. (b) Developing a framework for the introduction of performance based contracts (PBC) for maintenance of main roads, through provision of consultants' services. (c) Improving road safety along the entire E60 East-West Highway corridor by: (i) preparing and implementing a corridor road safety management plan to cover engineering, enforcement, emergency response and publicity campaigns; and (ii) establishing a road crash database, through the provision of goods, consultants' services, and training. (d) Strengthening the curriculum and training at the technical university, including provision of training for lecturers, twinning with overseas universities, as well as provision of consultants' services and goods. Component C: Project Management (a) Institutional support to the RD and the TRRC related to Project management, financial audits and Project monitoring and evaluation. 16. Project Closing Date: Completion of the expanded activities is expected to be within two years from the current TEWHIP closing date of June 30, 2013. The revised closing date would therefore be June 30, 2015. The closing of the TEWHIP (Loan 7741) will also be extended for the same period. 17. Project Costs: The total Project costs for all components of the AF would be US$53.75 million, including US$1.09 million for contingencies. The AF will cover 80 percent of all components, so that the IDA/Government financing ratio will be 80/20 for all eligible expenditures. Table 2. Project Expenditures Summary Original Revised Project Expenditure by Components Cost Changes with Cost (US$ AF (US$ million) (US$ million) million) [A] Sveneti-Ruisi-Agara Road Link 155.86 51.082 206.94 [B] Institutional Strengthening 2.60 1.16 3.76 [C] Project Management 0.62 0.42 1.04 Contingencies 24.67 1.09 25.76 Front-end Fee3 0.37 0.00 0.37 Total 184.12 53.75 237.87 2 Includes US$3.60 million for physical and price contingencies. The front end fee is not applicable to the AF with IDA financing. 6 18. Implementation Arrangements: The institutional arrangements will remain the same. All responsibilities for Project implementation are with the RD. The Foreign-funded Projects Unit (FPU) within the RD, is responsible for procurement, monitoring and reporting, technical audits, and other implementation matters under all Bank-financed road Projects. The AF will strengthen the capacity of the FPU. The TRRC will continue to assist the RD with financial management activities. The TRRC has performed this function for previous and on-going projects. IV. Appraisal Summary 19. Technical: The upgrading of the Ruisi-Agara road section and the construction of the Agara Bypass raises the existing road from a two lane road to amotorway standard - i.e., to a two-lane dual carriageway road. The Project area is located approximately 100 km northwest of Tbilisi. Most sections of the E-60 Highway between Tbilisi and Ruisi have either already been upgraded or are under construction for upgrading to a dual carriageway road. From Ruisi to Agara (Km 95-Km 105), the first 10 km of the upgraded highway follows the existing E60 alignment. From Agara to the Agara Bypass (Km 105-Km 114), the highway includes a greenfield bypass of the town of Agara of about 9 km - the alignment was selected after a comparison of four alternatives. This alignment was selected in order to avoid impacts on the agricultural land north of the existing road. The selected alignment would branch off the village of Aradeti and make a loop around Agara - it would avoid the demolishing of buildings, but it would cross some private land parcels. The existing Ruisi-Agara Bypass road is a two-lane carriageway with a width of about 9 m - it crosses a relatively flat area, and is in good to fair condition. The Project adopts Class 1 standards for a design speed of 120km/hour - i.e., four lanes 3.75 m each with paved shoulders. The total width of the platform will be 28.5 m. The pavement will be cement concrete. 20. Economic Analysis: The analysis covers the upgrading of the Ruisi-Agara road section and the construction of the Agara bypass to dual carriageway. The cost-benefit analysis is based on: (i) actual traffic volumes and forecasts; (ii) vehicle operating costs and travel time savings for users; and (iii) maintenance cost savings. The 2011 average annual daily traffic (AADT) on the Ruisi-Agara Bypass road section was 12,578 vehicles per day, of which 81 percent were light vehicles and 19 percent trucks and buses. The average annual growth rate of GDP from 2000- 2009 was about 6.2 percent per year. Between 2005 and 2010, highway traffic volumes grew at an average annual rate of 6.8 percent for passenger cars and 5.0 percent for minibuses and trucks. There has been rapid growth in car ownership in Georgia over the period between 2000 - 2010. The economic analysis adopted an average annual traffic growth rate for all vehicles of 5.7 percent for the period from 2012-2016; of 5.1 percent for the period from 2017-2021; of 3.7 percent for the period of 2021-2031. These figures were based on the elasticity of traffic growth to forecasted GDP growth. No generated or induced traffic was considered in the analysis. The economic costs of road works - net of taxes - were computed at the equivalent of US$1.79 million per km. The evaluation adopted an evaluation period of 20 years and a discount rate of 12 percent. 21. The economic analysis yielded an Economic Internal Rate of Return (EIRR) of 21.6 percent and a Net Present Value (NPV) of US$37.6 million, which shows that the economic 7 justification for the proposed investments is satisfactory. The TEWHIP had an EIRR of 16.3 percent. Although they carry the same traffic, the economic justification for the AF is higher than for the TEWHIP, because the TEWHIP had a concentration of expensive structures in a short length. The sensitivity analysis for the Ruisi-Agara Bypass road section shows the following results: (i) a construction cost increase of 20 percent reduces the EIRR to 19.3 percent; (ii) an annual traffic growth decrease of 20 percent reduces the EIRR to 20.2 percent; and (iii) a construction cost increase of 20 percent plus a traffic growth decrease of 20 percent reduces the EIRR to 17.9 percent. Construction costs would have to increase by 130 percent for the EIRR to reach 12.0 percent. The table below shows the results of the economic analysis. Table 3. Results of the Economic Analysis Road Section Length Total Base NPV Base A: B: Traffic- A+B (km) Cost (US$ M) EIRR Costs+20% 20% EIRR (US$ M) (%) EIRR (%) EIRR (%) (%) Km 95-Km 105 10.0 24.79 20.2 22.0% 19.6% 20.6% 18.3% Km 105-Km 114 9.0 23.69 17.4 21.2% 18.9% 19.8% 17.6% Total 19.0 48.48 37.6 21.6% 19.3% 20.2% 17.9% 22. Road Safety. The Government wishes to improve road safety in the country, and has developed a road safety strategy that is under implementation. There is a Road Safety Unit (RSU) within the RD that is responsible for: (i) implementing a blackspot improvement program on the national road network; (ii) reviewing new road designs; and (iii) approving temporary traffic management schemes at road works. Under the World Bank Program, consultants have been employed to prepare a series of manuals, and to provide training to RSU staff and others. These manuals cover: (i) Road Safety Audits (RSAs); (ii) Road Safety Inspections; (iii) Traffic Management at Road Works; and (iv) Standard Countermeasures. The AF will finance the capacity-strengthening of the RSU. The AF will employ a Road Safety Engineering Adviser for one year to provide 'on the job' training and technical support to RSU staff, and to conduct RSAs jointly with the RSU on selected sections of the road network as needed. The Adviser's role is to provide technical advice, act as mentor to the Unit's staff, and to assist the staff in their application of the guidance provided in the manuals listed above. In addition, the AF will finance the development and implementation of a road crash database that will be a country-wide system of crash and injury data collection, storage, retrieval and analysis. A Swedish consulting firm has already carried out the first phase of this work, which was comprised of evaluating the existing situation, defining options for improvements, and designing an improved system. The second phase - which will be financed by the AF - will be comprised of the supply and installation of a road crash data base, and its testing and validation. 23. Strengthening the Technical Capacity of the FPU. The Project will strengthen the technical capacity of the implementing agency FPU, by financing the costs of individual consultants to provide training, and to support the efficient and timely performance of FPU's tasks. The AF will support the employment of a Project Manager, an Environmental Specialist, and a Monitoring and Reporting Specialist for the remaining duration of the Project (three years). 8 24. Procurement: Procurement under the AF will be carried out in accordance with: (i) the "World Bank's Guidelines: Procurement of Goods, Works, and Non-consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" - which was published by the Bank in January 2011; (ii) "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" - which was published by the Bank in January 2011; and (iii) the provisions stipulated in the Credit Agreement. The RD - assisted by FPU - will carry out procurement activities. All procurement and disbursement arrangements for the TEWHIP will apply to the AF. The procurement risk impact is high, but the likelihood of the occurrence of the risk is low. The procurement unit of the RD has experience with World Bank-financed procurement and additional procurement staff is being appointed to deal with the many ongoing Projects. 25. Works contracts to be procured under the AF will finance the upgrading of the Ruisi- Agara road section, construction of the Agara Bypass and related services. Consultants' services contracts to be procured will aim to: (i) increase the FPU and RD capacity for project management, environmental works and monitoring and evaluation; (ii) improve road safety in Georgia through the provision of a Road Safety Adviser; (iii) assist with Project financial audits; and (iv) ensure proper construction quality through the services of a quality assurance consulting firm. The Project will also include the supply and installation (or the development) of a road crash database, and the purchase of vehicles and office equipment. The procurement Plan for the AF (see Annex 3) sets forth those contracts that will be subject to the Bank's prior review. All other contracts will be subject to post review by the Bank. Retroactive financing - not to exceed US$9.9 million - will be available for eligible expenditures. This amount represents 23% of the credit amount.4 The Table below presents the prior review thresholds. Table 4. Prior Review Thresholds Procurement Method Prior Review Threshold 1 ICB (Goods) All 2 NCB (Goods) First Contract & >U$300 thousand 3 ICB (Works) All 4 NCB (Works) First Contract & >US$2 million 5 ICB (Non-Consultant Services) All 6 SH First Contract Selection Method Prior Review Threshold 1 Competitive Methods (Firms) more than US$100 thousand All 2 Single Source (Firms) All 3 IC above US$50K All (First Contract regardless of value) 26. Financial Management: There will be no changes in the financial management arrangements for the TEWHIP due to the AF. The financial management functions - including the flow of funds, staffing, accounting, reporting and auditing - will remain under the TRRC's responsibility. The financial management arrangements under the existing TEWHIP have been periodically reviewed as part of the Bank's implementation support and have been found to be 4 This represents an exception to standard policy that was approved by Bank management. 9 satisfactory. A comprehensive joint fiduciary review, conducted in February 2011, included the FM arrangements at the TRRC. Overall, the internal control procedures applied by the TRRC are acceptable to the Bank. The FM systems are adequate for implementation of the on-going Projects and the TEWHIP, and are suitable for providing timely Project reporting. In the meantime, the TRRC needs to enhance the staffing arrangements in place by recruiting an additional accountant as planned under the existing TEWHIP. The RD is in compliance with the audit covenant: the audit reports on the Project have been received by their due dates with unmodified opinions on the Project financial statements and no serious internal control issues in the management letters. The FM risk rating for the on-going Projects implemented by the TRRC was previously rated as substantial. Given the significant progress with implementation of the action plan agreed upon during the fiduciary review in February 2011 - including the recruitment of one of the two proposed accountants - the overall financial management risk for the Project was assessed as Moderate. 27. The AF will adopt audit arrangements similar to those adopted for the TEWHIP. The audit of consolidated TEWHIP and AF financial statements will be conducted by independent private auditors acceptable to the Bank and contracted by the TRRC in accordance with terms of reference acceptable to the Bank. The annual audited financial statements will be submitted to the Bank within six months from the end of each reporting period, and also at the Project closing. The audited financial statements will be posted on the TRRC's website - or published in a national newspaper - within one month of the receipt of audited reports from the auditor. In addition, following the Bank's formal receipt of the financial statements from the recipient, the Bank will make them available to the public in accordance with Bank Policy on Access to Information for Bank-financed operations. The cost of the audit will be financed from the proceeds of the Project. Project management-oriented Interim Un-audited Financial Reports (IFRs) will be used for the AF monitoring and supervision. The existing formats of the IFRs will be used. The TRRC will produce a full set of IFRs every quarter throughout the life of the Project, and will submit them to the Bank no later than 45 days from the calendar quarter end. To facilitate timely disbursements for eligible expenditures, the TRRC will establish a Designated Account (DA) in US dollars and maintain it until the Project completion. The DA will be opened as a Treasury's foreign currency account at the NBG, on terms and conditions acceptable to the Bank. The DA will be drawn upon to meet payments to contractors, suppliers, and consultants under the Project. The DA Statement will be audited in conjunction with the annual audit of the Project. Detailed instructions on withdrawal of IDA Credit proceeds will be provided in the Disbursement Letter. 28. The AF will adopt the same disbursement arrangements as those adopted by the TEWHIP. The AF will disburse through transaction-based disbursement methods that will include: (i) reimbursements with full documentation; (ii) reimbursements on the basis of Statements of Expenditures for small expenditures with defined thresholds; (iii) payments against Special Commitments; (iv) direct payments to third parties; and (v) payments through the Designated Account. To facilitate Project implementation, a separate DA will be opened at the same financial institution as the TEWHIP. The DA will be managed by the TRRC; it will be replenished on a quarterly basis, as needed. The total ceiling will be limited to US$7.0 million. The DA will be audited annually in conjunction with the audit of the Project financial statements. Disbursements will be made on the basis of full documentation for: (i) contracts for goods 10 costing more than the equivalent of US$300,000 each; (ii) contracts for works costing more than the equivalent of US$2,000,000 each; and (iii) services under contracts of more than the equivalent of US$100,000 for each consulting firm and more than the equivalent of US$50,000 for each individual consultant. Disbursements below these thresholds and expenditures for incremental operating costs and training, would be made according to certified Statements of Expenditures (SOEs). For all expenditures financed under SOEs, full documentation in support of those SOEs will be retained in the FPU for at least two years after the Project closing date. This information will be available for review by Bank missions during Project supervision and by the Project auditors. SOEs will be audited in conjunction with the annual audit of the Project. Further instructions on the size of the minimum application and on the method for withdrawing funds from this Credit will be provided in the Disbursement Letter. The following table specifies the category of Eligible Expenditures that may be financed out of the proceeds of the Additional Financing. All disbursements will be under one Category, and the percentage of expenditures to be financed for eligible expenditures will be 80 percent. Table 5. Percentage of Expenditures to be Financed Amount of the Credit Percentage of Expenditures Category Allocated (expressed to be Financed in US$) (inclusive of Taxes) (1) Works, non-consulting services, consultants' services, 43,000,000 80% Training, Goods and Incremental Operating Costs for the Project TOTAL AMOUNT 43,000,000 29. Safeguards: The Environmental Assessment (OP/BP 4.01), Involuntary Resettlement (OP/BP 4.12), and Physical Cultural Resources (OP/BP 4.11) policies were triggered under the TEWHIP, which was assessed as Environmental Category A. There is no change to the environmental category under the AF - and no new safeguard policies are triggered. 30. Social: The AF will require land acquisition and therefore the timely and fair compensation of the affected communities will be closely monitored by the Bank. The RD has gained experience in implementing the Bank's safeguards policies on previous projects; and it has a unit devoted to resettlement issues. The TEWHIP Resettlement Policy Framework (RPF) - which was prepared in 2009 - provides fundamental principles and standards for the Project, including the AF. The RD revised the TEWHIP RPF in December 2011, and disclosed the revised RPF on February 7, 2012. A Resettlement Action Plan (RAP) for the Ruisi-Agara Bypass road section was prepared in December 2011, in accordance with relevant Georgian laws and regulations, and with the World Bank Operational Policy 4.12 on Involuntary Resettlement. The draft RAP was reviewed by the Bank, and cleared for disclosure and public consultation. The finalized RAP was re-disclosed in country on February 9, 2012 and submitted for publication through the InfoShop on February 21, 2012. 11 31. The major social impacts stem from land acquisition associated with the highway construction works. The Project will affect about 1,439 persons through the acquisition of about 1,129,079m2 of land from about 489 plots. No residential houses will be affected by the Project. In addition, road construction will affect five commercial structures: four fuelling stations and one flower shop. All five owners of the affected structures will receive compensation in accordance with compensation standard specified in the RAP. Extensive public consultations were held during the RAP preparation in order to: (i) limit the adverse impacts on household relocation; (ii) confirm appropriate compensation entitlements; and (iii) identify vulnerable persons. Out of a total of 369 affected households, 82 households (212 persons) were identified as vulnerable. Special attention will be given to women and other vulnerable groups who will receive special assistance for their livelihood restoration. Resettlement costs will amount to about US$2.3 million and will be financed from counterpart funds. 32. Environment: An Environmental Impact Assessment (EIA) of the highway section between Ruisi and the Agara Bypass was carried out, and an Environmental Management Plan (EMP) was developed. RD disclosed the EIA in-country on February 7, 2012 and organized stakeholder consultation on the EIA report in the vicinity of Agara on February 15, 2012. Earlier public consultations were held to discuss the scope and methodology of the EIA. The EIA report was disclosed in InfoShop on February 13, 2012, and the Executive Summary of the EIA was sent to the Board of Executive Directors on February 24, 2012. The EMP will be integrated into the civil works contract and provisions will be made to keep the contractor liable for any infringement of EMP requirements. The Bill of Quantities for the civil works will itemize environmental mitigation costs (i.e., tree planting and hydro-seeding). In addition, the implementation of general environmental mitigation activities and the clean-up of the work site will be paid from an allocation of U$500,000 in the Bill of Quantities and payable on a per- kilometer basis once the completed road work is accepted. 33. Risks: The Project implementation risk was assessed as moderate. The main implementation risks are as follows: (i) the capacity of the implementing agencies (the RD and the TRRC) may be overstretched due to an increased workload - this could lead to less effective Project management, weaker financial management and internal controls, and inadequate attention to coordination and communication activities; (ii) fraud and corruption - risks that are always present in large civil works projects; (iii) land acquisition and resettlement may be handled inadequately or cause delays; and (iv) Project works may fail to meet the projected EIRR due to insufficient maintenance funding. The implementation risk is mitigated by: (i) the added capacity for managing the increased workload; (ii) the continual technical assistance for maintenance and planning; (iii) the excellent track record of the RD in implementing road projects; and (iv) the experience of the Bank team in the sector. Therefore, the Project implementation risk is rated as moderate. 34. Implementation Readiness: The engineering design for the upgrading of the Ruisi- Agara road section and construction of the Agara Bypass has been finalized. The bidding documents are advertized with bid closing date of April 27, 2012. There will be no prequalification for the upgrading of the Ruisi-Agara Bypass road section; the contract will be processed through open competition with post-qualification including robust criteria to ensure qualifications of the winning bidder. This procurement procedure and the retroactive financing 12 will expedite the process. Thus, civil works are expected to start in June 2012 - which coincides with the beginning of the road construction season. The land acquisition and resettlement issues on the first 10 km of the Ruisi-Agara Bypass road - where the current road will be widened following the same alignment - are minimal. Therefore, the road construction will start along this section first, while the land acquisition and resettlement issues are being addressed on the Agara Bypass section. 13 ANNEX 1: RESULTS FRAMEWORK AND MONITORING GEORGIA THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT ADDITIONAL FINANCING Results Framework Comments/ Revisions to the Results Framework Rationale for Change PDO Current (PAD) Proposed Project Development Continued Objectives: (i) to contribute to the gradual reduction of road transport costs and to improve access, ease of transit, and road safety along the central part of Georgia's East-West corridor; and, (ii) to strengthen the capacity of the Roads Department and relevant Government entities to plan and manage the road network and to improve traffic safety. PDO Indicators Current (PAD) Proposed change* Transit time from Sveneti to Transit time from Sveneti to the Agara Change reflects additional road Ruisi Bypass (hours) section to be improved with the AF (Ruisi to the Agara Bypass) Vehicle operating costs from Vehicle operating costs from Sveneti to the Change reflects additional road Sveneti to Ruisi Agara Bypass (US$/km) section to be improved with the AF (Ruisi to the Agara Bypass) Percentage reduction in road Continued fatalities on the E60 East-West Highway from Senaki to Tbilisi Improvement in road capacity from Ruisi Additional PDO indicator to reflect to the Agara Bypass measured in terms of PDO (i): ease of transit passenger car space equivalent (PCSE) per hour International roads in good or fair Additional indicator to reflect PDO condition as a share of total International (ii): strengthen the capacity to plan roads (percentage). and manage the road network. Core Indicator consistent with other World Bank financed sections of the East-West Highway. 14 Intermediate Results Indicators Current (PAD) Proposed change* Number of kilometers Number of kilometers upgraded Sveneti to Change reflects additional road upgraded Sveneti-Ruisi the Agara Bypass section to be improved with the AF (Ruisi to the Agara Bypass) Endorsement by RD of Implementation of road safety audit Scaling-up of road safety activity Georgia road safety audit manuals manuals for new and existing roads All new IBRD financed road All new World Bank financed road The focus of road safety audits will sections subject to formal road sections managed by RD will be subject to be on Bank financed road sections safety audit using Georgian formal road safety audit using Georgian managed by RD. manuals manuals. Percentage of E60 Corridor Continued Senaki to Tbilisi with road safety engineering improvements completed Annual detailed Annual road safety actions undertaken as The Georgian National Traffic implementation plans for specified by the Georgian National Traffic Safety Strategy identifies existing priority investments from Safety Strategy conditions of road transportation National Road Safety Action safety and defines priority Plan measures for increasing road transportation safety Completion of framework for Continued E60 performance based road maintenance contracts Purchase/Development of the Road Crash For new institutional development Database activity * Indicates if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value. 15 REVISED PROJECT RESULTS FRAMEWORK Project Development Objective (PDO) PDO Statement: (i) To contribute to the gradual reduction of road transport costs and to improve access, ease of transit, and road safety along the central part of Georgia's East-West corridor; and (ii) To strengthen the capacity of the Roads Department and relevant Government entities to plan and manage the road network and to improve road safety. Baseline Cumulative Target Values a Unit of Parent Progress Responsibility 2012 2013 2014 2015 Data Source/ PDO Level Results Indicators 0 Measure- Project To Date Frequency for Data Comments ment Start (2011)' Methodology Collection (2009) 1. Transit time from Sveneti to the E minutes 27 24 24 24 20 20 Annually Travel time RD Agara Bypass survey 2. Vehicle operating cost from Road dataRD SVeete opAgratin Bys(rs) ED US$/km 0.20 0.19 0.19 0.19 0.18 0.18 Annually a aRD Sveneti to Agara Bypass (cars) IIbank 3. Vehicle operating cost from Road data R SVeete topAgratBypasstrucs E US$/km 0.76 0.74 0.74 0.74 0.72 0.72 Annually akRD Svenety to Agara Bypass (trucks) bank 4. Percentage reduction in road Project fatality rate per 10,000 vehicles on F % 0 30 30 30 30 30 Annually Monitoring RD E60 corridor from Senaki to Tbilisi Reports (PMR) 5.Improvement in road capacity from Ruisi to Agara Bypass in PCSE 2,800 2,800 2,800 2,800 2,800 8,000 Annually PMR RD passenger car space equivalent per hour (PCSE) per hour 6. International roads in good or fair condition as a share of total Z 85% 85% 85% 85% 85% 85% Annually PMR RD International roads (percentage) 5 For new indicators introduced as part of the AF, the progress to date column reflects the baseline values. 16 Beneficiaries Direct beneficiaries: # of population living Project beneficiaries Number in the area of 17,240 17,240 17,240 17,240 17,240 17,240 Annually PMR RD intuence of mnfluence of the Sveneti to Agara Bypass road Direct beneficiaries: # of female Of which female (beneficiaries) 51.0 51.0 51.0 51.0 51.0 51.0 Annually PMR RD population living in the area of influence of the Sveneti to Agara Bypass road Intermediate Results and Indicators Baseline Target Values Intermediate Results Unit of Parent Progress 2012 2013 2014 2015 Data Source/ Responsibility n aMeasure- Project To Date Frequency for Data Comments Indicators Methodology a ment Start (2011) Collection (2009) Intermediate Result 1: Improvements to the E60 East-West Highway Corridor 1. Number of kilometers upgraded Sveneti - Agara Z Km 0 10 19 27 34 34 Annually PMR RD Bypass Intermediate Result 2: Strengthening Institutional Capacity 2. Implementation of road safety - Yes/No No Yes Yes Yes Yes Yes Annually PMR RD audit manuals 3. All new World Bankfinanced road sections managed by RD will be subject to formal road F Yes/No No Yes Yes Yes Yes Yes Annually PMR RD safety audit using Georgian manuals 4. Percentage ofE60 Corridor Senaki to Tbilisi with road safety [] % 0 50 90 100 100 100 Annually PMR RD engineering improvements 17 Intermediate Results and Indicators Baseline Target Values Intermediate Results Unit of Parent Progress 2012 2013 2014 2015 Data Source/ Responsibility Measure- Project To Date Frequency for Data Comments Indicators Methodology o ment Start (2011) Collection (2009) completed 5. Annual road safety actions undertaken as specified by the p Gnergian Natseiolrfic Safy the Yes/No No Yes Yes Yes Yes Yes Annually PMR RD Georgian National Traffic Safety Strategy 6. Completion offramework for E60 performance based road E Yes/No No Yes Yes Yes Yes Yes Annually PMR RD maintenance 7. Purchase/Development of the E Yes/No No No No No No Yes Annually PMR RD Road Crash Database 18 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) GEORGIA THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT ADDITIONAL FINANCING PotStakeholder Risk s Stakeholder Risk Rating Low Description: Road Risk Management: There are no particular risk-mitigation measures envisaged, besides monitoring any possible (but unlikely) improvements in Georgia change in the Government's road investment program. The upgrading of the East-West Highway to a four-lane motorway generally benefit from a strong standard is universally supported in Georgia, both by political actors and also by road-users; it is very unlikely that this support support from the various will be withdrawn in the future. The Project will ensure that proper consultations are done with the Project stakeholders. The stakeholders and the particular Project has a high economic justification, due to the high traffic on the existing road. Project has high Government support. However, locally there is a risk that particular categories of populations from the town of Agara - such as shop and facility owners/workers - may be dissatisfied by the construction of a bypass that may affect their professional activities. There is a risk of insufficient coordination with Project stakeholders. IpeetnAgny(ARik(ichangeing thecar GvRmns ras netetpora.Teugaigo)heEs-etHgwytoafu-aemtra Capacity Rating Moderate Description: The RD may not Risk Management: FM capacity building actions agreed upon will be implemented. Throughout the Second Secondary and be able to retain acquired Local Roads Project negotiation the Bank and the Borrower agreed and recorded in the minutes to finalize appointment of one capacity in Project management additional full-time M staff i The new staff will be put in charge of maintaining the software module to strengthen contract and enviroinmental management and accounting. It was also agreed that the RD will hire an additional contract manager. management. The existing Resp: Client Stage: Preparation Due Date: March 2012 Status: In Progress 19 M/accounting staff is Risk Management: The proposed additional financing Project will finance for the duration of the Project the salaries of three overloaded with the current FPU/RD consultants (Project Manager, Environmental Specialist Monitoring and Reporting Specialist), and the operating costs volume of work. During the last and salaries of the TRRC. two Bank FM missions, the RD Resp: Client Stage: Implementation Due Date: June 2015 Status: In Progress was advised to enhance the staffing arrangements in place at the TRRC - it was agreed that a full-time disbursement specialist and a contract monitoring officer would be hired. However, this was not carried out. Considering the increasing workload for the existing staff, this may result in a deterioration of FM and disbursement arrangements (including impacting internal controls) under the Projects. The procurement risk impact is significant, but the likelihood of risk is low. The procurement track records of the RDMRDI and the TRRC in the ongoing Project has been satisfactory. In addition, the procurement unit of the RDMRDI has experience with World Bank-financed procurement. Governance Rating Low Description: The MRDI has Risk Management: No mitigation measure has been proposed. proven to have institutional staeni to hvefcti sield Resp: Bank Stage: Implementation Due Date: June 2015 Status: In Progress standing to effectively shield the Projects from outside interference. The risk is low as the governance structure of the Project is well-defined and has proven to be well-functioning. 20 Design Rating Moderate Description: The Project Risk Management: The Project road design is straightforward, and follows the design of the TEWHIP. The design of the bypass design risk is moderate would involve examining various technical solutions that are not complicated. The first 11 kmn is ready for implementation, and because, this is an additional the Team will review options of phasing the works to ensure timely implementation. Cost-saving from the on-going Project is financing Project extending the expected to be in the US$5-7 million range, which would go towards the contingency for the AF. upgrading of the East-West Highway being upgraded under During Project supervision, an independent quality assurance firm will be hired to review the quality of construction and the the ongoing TEWHIP Project, performance of the contractor, the supervision consultant and the road agency managing the Project. with similar terrain and proven Resp: Bank Stage: Implementation Due Date: June 2015 Status:In Progress technical design features. The AF scope and scale are smaller than the ongoing Project - without the construction of large bridges or tunnels, as is the case on the TEWHIP. The first 11 kmi follow the existing alignment and have low design risk. The design risk for the remainder is moderate, as it involves a bypass. The contingency amount for the AF is low. Social and Environmental Rating Moderate Description: The ongoing Risk Management: The RD has successfully implemented the Bank's safeguard policies on previous Projects, and has a unit Third East-West Highway devoted to resettlement issues. No residential houses will be affected, and only one commercial structure that has been Improvement Project was operational during the past five years will be demolished. The Resettlement Policy Framework (RPF) - which sets out policies assigned Environment and procedures to be used in determining the Project's social impacts and mitigating them - has been prepared for the ongoing Category A, and the proposed Project; it was revised in December 2011 to address terms and definitions to compensate those defined as significantly affected. AF will also be Category A. The RD has confirmed explicitly that the revised RPF applies to the AF, and the RPF has been re-disclosed. A Resettlement The Project will finance the Action Plan (RAP) for the AF was cleared and disclosed on February 10, 2012. addition of two new lanes to the existing carriageway, and Resp: Client Stage: Preparation Due Date: June 2012 1Status: In Progress the construction of a bypass. The environmental risks of the AF are typical for highway improvement projects that include realignment. The 21 potential impacts are moderate Risk Management: An Environmental Impact Assessment (EIA) of the highway section between Ruisi and the Agara bypass - and mostly limited to the has been carried out - and an Environmental Management Plan (EMP) was developed. Both the EIA and the EMP were reviewed construction period. by the Bank; the EIA was disclosed in-county on February 7, 2012. The EMP will be integrated into the works contact and provisions will be made to ensure that the contractor is liable for infringement of EMP requirements. The Project will require land acquisition and will carry the risks related to the timely and fair compensation of the Risk Management: In order to address the deficiencies identified in the environmental review, the works contact will include affected communities, the costs for environmental management in the bills of quantity. The environmental supervision capacity of the RD will be strengthened by hiring an environment specialist and a social safeguards specialist. Environmental monitoring functions will be An environmental review of included among the responsibilities of the construction supervision consultant. past road projects in Georgia ______________________________________________ countatrsevionenta Resp: Client Stage: Implementation Due Date: June 2015 Status: In Progress Rikoaagmnttnrrertoadrsttedeiiecisidnifeeinheevionetareve,nhmwrkeonrctwllicld performance has been a relative weakness of the client and will be improved. Program and Donor Rating Low Description: There is a low Risk Management: Continue close cooperation with other donors. risk regarding Program and Continue close cooperation with other donors. donor coordination. There is an - active coordination between Resp: Bank Stage: Implementation Due Date: June 2015 Status: In Progress donors through regular donor- Government conferences. Donors active in the road sector include: the ADB, the JICA, and the EIB. In addition, the RD supports information exchange between donors that fCirther supports effective donor coordination. The execution of the Project is not dependent on any other project or donor. Delivery Monitoring and Moderate Sustainability Description: The RD is Risk Management: The procurement of the Ruisi to the Agara Byapss section is in progress - thus, timely project delivery is undertaking an ambitious road expected. The risk therefore resides with the RD successfully implementing the procured contracts. Road supervision has been rehabilitation and improvement and results monitoring will be enhanced by increased staffing and funding, as described in risk sections above. program; there is a risk that the RD's capacity will be over- 22 stretched. The previous East- Resp: Bank Stage: Implementation Due Date: June 2015 Status: In Progress West Highway Projects have achieved overall success, but Risk Management: Supervision of the works will be done by an international firm in order to ensure construction quality. In there have been issues with. ctheructioebn suy t the addition, the RD will be supported by an independent quality assurance firm hired to review the work done by the contractor, the RD addressed and will continue supervision engineer, the RD itself, and the quality of the road works. In order to develop capacity further, the RD technical audit to address, team will also be provided with training. The sustainability of the Resp: Bank Stage: Implementation Due Date: 3 Jun 2015 Status: In Progress benefits of the proposed road improvement investments are Risk Management: The Bank supports the strengthening of the current RAMS under a technical assistance component of the achieved by proper First EWHIP - and through on-going policy dialogue, such as the recently completed ESW on "Improving the Sustainability of maintenance and operation of Road Management and Financing in Georgia". the Project road. There is a risk that without proper maintenance the road will deteriorate faster than expected - and that without proper road operation management, road- user satisfaction will decrease due to the lack of proper road services. There is a risk that without a proper road asset management system (RAMS), maintenance and rehabilitation works on the network will not be properly managed by the RD. Resp: Bank Stage: Due Date: June 2015 Status: In Progress Preparation Risk Rating: Moderate 7.2 Implementation Risk Rating: Moderate Description: The AF will scale up activities under the existing TEWHIP. The Preparation and Implementation Risks are both rated Moderate for the restructured TEWHIP due to the construction of the Agara Bypass. 23 ANNEX 3: PROCUREMENT PLAN GEORGIA THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT ADDITIONAL FINANCING (P0128863) - March 22, 2012 Cost Issue of Bid Evaldone- Contract Contract Contract Description Type Method PQ PR Packs Estimate TQFP Opening Evaid Sitrat Ctrt Conre ___________________________________ _____ - ___- ____ j(U $ ) DIIQIFP peing NOissed Siged Stat inihe Component 1: Civil Works and Associated Services 1 Ruisi-Agara Bypass Road Section CW ICB N Y 1 05-Mar-12 23-Apr-12 10-May-12 25-May-12 06-Jun-12 05-Jun-14 2 Land Acquisition and Resettlement NBF N/A N/A N/A N/A Total Works 3 Technical Quality Consulting Firm CS ICS N Y N/A 30-Apr-12 15-May-12 05-Jun-12 10-Jun-12 15-Jun-12 30-May-14 Total Services TOTAL COMPONENT I Component 2: Institutional Strengthening 4 Road Safety Adviser for 1 Year CW ICS N Y 1 30-Mar-12 20Apr-12 05-May-12 15-May-12 01-Jun-12 01-Jun-12 5 Purchase\Development of Road Crash Database CS QCBS N Y 1 30-May-12 25-Jun-12 15-Jul-12 25-Jul-12 05-Aug-12 TBD 6 Project Manager for 3 Years CS ICS N/A Y 1 10-Apr-12 25-Apr-12 15-May-12 25-May-12 01-Jun-12 01-Jun-15 7 FPU Consultant Fee (Environmental Consultant) for 3 CS ICS N/A Y 1 10-Apr-12 25-Apr-12 15-May-12 25-May-12 01-Jun-12 01-Jun-15 Years 8 FPU Consultant Fee (Monitoring and Reporting CS ICS N/A Y 1 10-Apr-12 25-Apr-12 15-May-12 25-May-12 01-Jun-12 01-Jun-15 Consultant) for 3 Years Total Services 9 Vehicles, Office Equipment and Computers for RD G SH N N N/A 05-May-12 25-May12 15-Jun-12 20-Jun-12 20-Jun-12 TBD Total Goods TOTAL COMPONENT 2 Component 3: Project Implementation 10 TRRC Salaries for 2 Years IOC N/A N N N/A N/A N/A N/A N/A N/A N/A 11 TRRC Operating Costs for 2 Years IOC N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 12 Project Financial Audits CS CQS N/A Y 1 TBD TBD TBD TBD TBD TBD TOTAL COMPONENT 3 Unallocated/contingencies N/A N/A N/A N/A N/A N/A TOTAL FOR ALL COMPONENTS 24 生