GEORGIA: Kakheti Connectivity Improvement Project (P173782) Implementation Support Mission May 13 – 17, and June 19, 2024 Aide Memoire I. INTRODUCTION 1. The World Bank team1 conducted an implementation support mission for the Kakheti Connectivity Improvement Project (KCIP) during the period from May 13 to 17, 2024. The main objective of the mission was to review the overall implementation progress of the project, with a specific focus on the progress of the civil works contract. The site visit was carried out by the task team on May 13, 2024, to the Bank-financed section and the adjacent section funded by the Government of Georgia (GoG). 2. The mission’s findings and discussions are included in the Aide Memoire and agreed upon during the wrap-up meeting on June 19, 2024, with the Chairman, Mr. Giorgi Tsereteli, and Deputy Chairs of the Roads Department of Georgia (RD). 3. The World Bank team wishes to extend their gratitude to RD and all other stakeholders who participated in the mission. II. KEY PROJECT DATA 4. Key project data is tabulated below: KCIP Key Project Data Project Number P173782 Approval Date March 22, 2022 Loan Effectiveness Date July 25, 2022 Project Age 26 months Loan Closing Date December 31, 2027 Loan Amount US$ 109 million Current Disbursement US$ 30.8 million (28 percent) III. SUMMARY OF PROGRESS 5. Summary of Progress: The Bank mission was pleased with the overall implementation progress. Satisfactory progress has been noted under Component 1 covering the civil works contract for the construction of the Sagarejo-Badiauri section (Lot 3) of the Tbilisi-Bakurtsikhe-Lagodekhi 1 The World Bank team was composed of Ms. Amali Rajapaksa, Task Team Leader, Senior Transport Specialist; Ms. Darejan Kapanadze, Senior Environmental Specialist; Mr. David Jijelava, Social Development Specialist; Mr. Nikoloz Chantladze, Procurement Specialist; Mr. Tural Jamalov, Senior Financial Management Specialist; Ms. Irma Patsia, Consultant; and Ms. Militsa Khoshtaria, Senior Operations Assistant. highway and the supervision consultancy contract. As of the end of April 2024, both the physical and financial progress achieved by the Contractor is approximately 8.2 percent against a target of 14.8 percent. The mission was impressed with the focus on the implementation of safeguards, including maintenance of health and safety standards at the camp site. The development of the business model for the marketplace under Component 2 is still at the planning stage considering the implementation towards the end of the civil works contract. The institutional strengthening activities foreseen under Component 3 will be identified once the grant finance available to RD is exhausted. Disbursement under the project stands at 27 percent. The progress of each project component is explained in detail in the implementation progress section. 6. Implementation of new World Bank’s Corporate Scorecard: The mission discussed with RD retrofitting of the new corporate indicator in the Project’s results framework, namely “Millions of people that benefit from improved access to sustainable transport infrastructure and services� and agreed on the calculation methodology to be followed in determining the baseline and target values. RD will use the traffic count data that are collected on an annual basis and use occupancy ratios in the feasibility study to convert into number of passengers. The baseline will be identified retroactively, whereas the same average occupancy rate will be applied to establish the end target based on traffic growth projections. RD is requested to update the Project Operations Manual once the Results Framework is adjusted to reflect the addition. IV. IMPLEMENTATION PROGRESS AND KEY FINDINGS Component 1: Connectivity Improvements on the Eastern Corridor Construction Contract 7. Progress of the Civil Works: The civil works contract was signed with GÖÇAY İNŞAAT TAAHHÜT VE TİCARET ANONİM ŞİRKETİON of Turkey in February 2023. The works commenced on May 1, 2023, with the intended completion by October 31, 2025. The mission reviewed the progress on the contract, visited the site, including campsite, waste material disposal sites, and carried out detailed discussions with RD, the construction Contractor, and the Supervision Consultant (SC). 8. The mission found earthworks (completed around 40 percent), bridgeworks (6 percent completed), construction of stone columns, filling embankment in the main road and local roads, relocation of electric and gas pipelines ongoing. It was noted that most of the main irrigation channels are completed. Currently, installation of prefabricated vertical drains is reported to be on the critical path with only 15.5 percent achieved. The mission was informed that, as of the end of April 2024, the Contractor achieved approximately 8.2 percent of physical and financial progress that is 6.6 percent behind the revised work program of January 2024 (planned progress was 14.8 percent). 9. Mobilization of Contractor’s Staff, Plant, and Equipment: It was indicated that the total number of staff on-site is 450 (among them 43 administration staff and engineers, 150 drivers and operators), which include workers from Turkey as well as local personnel. The list of equipment 2 mobilized by the Contractor includes a concrete batching plant, stationary and mobile crushers, stone column machine, and asphalt plant, as confirmed by the SC. The Contractor has agreed to mobilize on site by the end of June 2024 the required capacity of equipment necessary for completion of the civil works by the contract end date. 10. Establishment of Laboratory: The laboratory located at the Contractor’s camp is operational with most of the lab appliances installed and duly certified by the National Agency of Standards and Metrology of Georgia after calibration. Any specialized tests that cannot be carried out in this lab are sent to specialized labs in Tbilisi. According to the SC, initial inspection for accreditation of the site laboratory took place in March 2024, and a response from the Georgian Accreditation Center is awaited. 11. Design Changes: The mission was informed that the design has been adjusted to address the discrepancies found during the survey works between ground levels at certain locations. It was also noted that RD may consider extending the end point of Lot 3 by approximately 500 meters from the designed interchange to provide smoother connection to the existing S5 road and organize a temporary roundabout instead of having a sharp turn, as envisaged in the original design. If the proposed arrangement proves be a better technical solution, RD will further discuss appropriate changes to the design with the Contractor. 12. Access and Possession of Site: About ninety-eight percent of the land has been handed over to the Contractor. Supervision Consultancy Contract 13. Mobilization of SC Team: Key personal under the SC contract has been mobilized except for the Senior Bridge/Structural Engineer, adequate replacement of which is yet to be proposed. The mission was informed that the performance of the Team Leader, appointed on a three-month probation period, was satisfactory and his candidacy has been finally approved for the position of the Team Leader. 14. Road User Satisfaction Survey (RUSS): The mission was updated about the progress in relation to the baseline user satisfaction survey, which is being conducted by the SC through a research company. Prior to commencement of this assignment, the methodology for calculation of RUSS index, as well as qualitative and quantitative questionnaires used to conduct the RUSS as part of the ongoing East-West Highway Corridor Improvement Project, were shared with the consultant to employ the same tools and follow the already existing uniform approach. It was noted that the field work covering all target groups in the four villages is expected to take four weeks, starting from the end of May 2024. Component 2: Development of a New Local Marketplace 15. The mission was informed that RD discussed options for the development of the Badiauri market area with an inter-agency committee2 overseeing the development of the marketplaces along 2 The referred committee was appointed by the GoG and integrates the members from the Ministry of Economy and Sustainable Development and the Ministry of Regional Development and Infrastructure. 3 the Georgia's highways. It has been decided to use the same approach already applied in western Georgia and engage the private sector through a competitive tender process. Whilst the exact business model for the development of the market place is still being discussed, the option envisaged by RD will involve the purchase of the land by the private sector where they will be allowed to establish their own operation as required with a condition to construct and maintain the market place, following the design and arrangements to be agreed with RD and relevant authorities. The mission was also made to understand that one of the possibilities now being considered by the Ministry of Economy and Sustainable Development is establishment of the bus stop near the Badiauri market, where all busses heading to east Georgia will be required to stop to comply with the new legislation coming into force at the beginning of 2025. Considering the updated arrangements, the role of the municipality in the market development will be minimal. 16. Business advisory services and training of women entrepreneurs will be conducted under this component later in the project implementation and will finalize prior to opening of the market for operation. As communicated to RD during the previous mission, the Bank has commissioned the training and business advisory support to complement the above referred activity using the grant finance from Quality Infrastructure Investment (QII)3. The selected consultant presented initial findings from the training needs assessment, which were discussed with RD and comments were provided. Component 3: Institutional Strengthening and Implementation Support 17. RD indicated that there are no immediate training needs for the staff at this stage, as institutional strengthening activities are being implemented with the grant financing by different development partners. Therefore, the capacity development requirements will be assessed at a later stage and addressed under this component, as needed. 18. This component finances strengthening of environmental, social, occupational health and safety implementation through hiring the external consultants. In addition, two cost estimators have been recently recruited under the project to provide services for the ongoing Bank-financed projects. 19. RD shared its plans on further enhancing the Road Asset Management System by installation of automatic traffic counters. The mission welcomed the idea to procure and deploy one device as a pilot and, if proved to be effective, purchase the required number of devices utilizing the project funds. Procurement Performance 20. The Contractor for Lot 3 - financed by the Bank, is also the primary Contractor in the Joint Venture for Lot 2 – financed by state funds. Lot 2 is expected to be finalized by end of June 2024. Following Lot 2 completion, the Contractor is expected to intensify works on Lot 3 (which was anticipated and flagged to RD and the Contractor from the beginning). The Contractor is already lagging the January’s work program. The updated work program is expected to be submitted by the Contractor by the end of June 2024, to be approved by the SC by the end of July 2024. As discussed, 3 QII Grant will close on July 31, 2024. 4 the Contractor needs to increase the number of equipment, which should be in line with the work program to be revised. 21. As per the SC’s quarterly report covering January - March 2024, the Contractor has issues with the processing of documentation under the contract (additional time and iterations needed for the work program approval by January 2024; different method statements within the quality assurance program still not approved, etc.). The mission requested that the SC work closely with the Contractor for the finalization of the revised work program to avoid any delays in the preparation of the documentation that will extend to the implementation of actual physical works. 22. Engineer: SC’s report can be further improved in terms of language used ( grammar mistakes in the report leaves room for interpretation of the provided information), and by reporting on the critical path of the contract, with the description of the dependencies of the activities covered by the contract. Also, reports can be improved by highlighting the key issues in an executive summary at the beginning, with recommended actions to be taken to remedy the issues – all to be provided in a concise and clear manner, which can be further explored by the reader in detail down in the report. 23. The SC has submitted CV for substitution of the Key Expert – International Bridge/Structural Engineer (the originally proposed resigned from the company). RD was requested to ensure that the substitute Bridge Engineer has equal or better qualifications in comparison to the original candidate considering the extended time taken to propose an acceptable substitution. It was noted that considering completion of several highway contracts in Georgia, suitable candidates are likely to be readily available. Environmental and Social Performance 24. Environmental: Environmental performance of KCIP is Satisfactory, as works for the highway construction are compliant with the relevant Environmental and Social Standards of the World Bank, applicable national legislation, and site-specific environmental and social documents prepared by the Borrower for KCIP. 25. Cutting of Trees: Contractor holds documents required for vegetation clearance in the right- of-way: permission for cutting trees belonging to protected species appearing on the Red List and permission for cutting trees of non-protected species. According to the terms of these agreements, Contractor is handing over extracted timber to Sagarejo unit of Kakheti Regional Forest Service, National Forestry Agency. 26. Disposal of excess material: Contractor identified areas for the final disposal of excess material generated through excavation works. It is cleared by local authority however, the Agency for State Property Management must formally allocate the land plot for spoil disposal, and the Ministry of Environmental Protection and Agriculture (MEPA) must approve the design of spoil depository through the National Environment Agency (NEA) under it. Land plot allocation procedure is ongoing for both stockpiles. Tokhliauri village stockpile design is approved by NEA, while review and approval of Badiauri stockpile design is ongoing. 27. Borrow sites: Contractor has obtained a license for burrowing natural construction material from two locations close to the project site. National procedure applicable to burrowing from the 5 area of given size includes undertaking Environmental Impact Assessment (EIA) and issuance of environmental conclusion. Environmental Scoping was undertaken, decision to proceed with EIA was obtained from NEA, and EIA was also carried out. EIA report has been submitted to NEA in May and is currently being processed. Meanwhile, material borrowing is underway. Most part of spoil generated through borrowing is intended for backfilling to be undertaken for site reinstatement. Nonetheless, it is recommended to keep stockpile terraced and properly sloped to ensure convenience of machinery operation and worksite safety. 28. Extraction of ground water: Contractor applied to the National Agency of Mineral Resources for a license authorizing extraction of ground water for the construction needs. Prior to receiving it, contractor opted to re-submit the updated request for two separate licenses, one of which is subject to simplified procedure (direct transaction vis-à-vis auctioning) and expected to come through sooner than the other. 29. Hazardous Material: The mission was pleased to learn that in 2024, Contractor has formally handed over hazardous material to the contracted authorized entity. This included 44 cubic meters of used tires, 916 kg of used batteries, 20 kg of packaging materials polluted with hazardous substances, 436 kg of oil filters, and 100 kg of air filters. 30. Noise emissions: RD assured the mission that ongoing works do not generate noise emissions exceeding the established threshold and hence, no mitigation measures are required to protect residents of Badiauri settlement from the impact. 31. Occupational Health and Safety: One occupational health and safety accident occurred under KCIP since the previous implementation support mission of the World Bank. On February 21, 2024, a grader, and a truck collided while performing construction works. Medical examination of the involved drivers concluded that neither of them had any alcohol intake and neither got any injuries as a result of the incident. Root Cause Investigation found out that truck driver violated rules of safety applicable in the vicinity of heavy construction equipment during its operation. Key points of the Corrective Action Plan include employing an additional certified Occupational Health and Safety specialist, sensitizing workers to safety rules and overseeing their performance on regular basis and keeping accurate up-to-date lists of personnel and equipment deployed at the project site. 32. Social: The project rating on social performance remains Satisfactory. Progress on the implementation of Resettlement Action Plan (RAP) is almost complete: out of 657 impacted land plots, only 9 remain pending and are expected to be finalized by July 2024. There have been nine expropriation cases under KCIP, of which one is still on-going. Two physical resettlement cases also have been completed. Labor Management Procedures have been developed and labor conditions are satisfactory. The employees undergo periodic training on Gender Based Violence (GBV) and Sexual Exploitation and Abuse/Sexual Harassment (SEA/SH) issues. The Code of Conduct covers these issues as well and is part of the employee contracts. Stakeholder engagement activities, per Stakeholder Engagement Plan (SEP), are being conducted and recoded. According to the information provided by RD, as of April 2024, there were 99 consultation meeting conducted in and around the project area. Grievance Redress Mechanism (GRM) is established and functioning. RD’s grievance log lists 91 grievances, of which seven are still pending. 6 33. The Contractor continues engaging an Environmental and Social (E&S) monitoring firm, DG Consulting, at their own expense to conduct monitoring of E&S impacts of all properties in the area. This includes measuring levels of noise, dust, and vibration. In addition to the nine houses that were initially selected to monitor, the monitoring firm added five new structures, based on the requests from the local population. As the Bank team was informed by RD, all monitoring work that DG Consulting does will form part of the Contractor’s responsibilities which the Bureau can use when needed. Financial Management Performance 34. The fiscal management (FM) arrangements of the project were confirmed to be Satisfactory based on the latest monitoring visit completed in January 2024. All key FM and disbursement arrangements were in place, and the project was following the key FM requirements. Periodic interim un-audited project financial statements are submitted on time and found to be acceptable. Monitoring and Evaluation of the Project 35. Quarterly progress reports prepared by RD on an agreed format are submitted to the Bank at the right time. The Bank has received seven quarterly reports, the latest covering January 01 to March 31, 2024, period which, among others, provides information on achievement of the indicators to be assessed using the data calculation methodology as described in the Results Framework and Monitoring matrix of the Project Appraisal Document. V. NEXT STEPS SUMMARY OF ACTION ITEMS No. Task Responsible Deadline Entity 1. Sharing the findings of the Road User SC/RD July 1, 2024 Satisfaction Survey with the Bank 2. Approval of an updated work program for SC/RD July 31, 2024 monitoring the Lot 3 3. Acquisition of remaining 9 land plots RD July 31, 2024 Annexes Annex 1: List of officials met. Annex 2: Project ratings Annex 3: Results Framework 7 Annex 1: List of officials met. Name Organization Position Mr. Giorgi Tsereteli RD Chairman Mr. Levan Kupatashvili RD Deputy Chairperson Ms. Salome Tsurtsumia RD Deputy Chairperson Mr. Giorgi Eragia RD Head of Construction Division Mr. Mikheil Ujmajuridze RD Head of Environmental and Social Division Mr. Givi Kveladze RD Head of International Procurement Division Mr. Solomon Adeishvili RD Head of International Procurement Unit Ms. Anna Kikvadze RD Procurement Consultant Ms. Mariam Begiashvili RD Social Safeguards Consultant Mr. David Tevzadze RD Environmental Specialist Mr. Konstantine Kikalishvili RD Occupational Health and Safety Specialist Mr. George Tsagareli ETCIC Director of ETCIC Ms. Marina Majagaladze ETCIC Financial Manager Mr. Nirmal Shrestha IRD Engineering Team Leader Mr. Askin Ozbek Göçay Inşaat Project Manager 8 Annex 2: Project Ratings Implementation Ratings Previous Current Progress toward achievement of PDO Satisfactory Satisfactory Implementation Progress (IP) Satisfactory Satisfactory Project Management Satisfactory Satisfactory Financial Management Satisfactory Satisfactory Procurement Satisfactory Satisfactory Overall, ESS Performance Satisfactory Satisfactory Monitoring and Evaluation Satisfactory Satisfactory Overall Risk Moderate Moderate 9 Annex 3: Results Framework Project Development Objective Indicators Intermediate Targets End Target Baseline YR5 Indicator Name (2021) YR1 YR2 YR3 YR4 Actual (December 2027) Improved Connectivity Travel time along the target section of the 17.00 17.00 17.00 17.00 17.00 17.00 11.30 highway corridor (Minutes) Average Annual Daily Traffic of freight 1,013.00 1,059.00 1,106.00 1,162.00 1,217.00 970 1,275.00 vehicles on the corridor (Number) Improved Safety Number of fatal accidents per 100 million 4.70 4.70 4.70 4.70 4.70 6.5 3.76 vehicle-km traveled along the target section of the highway corridor (Number) Intermediate Results Indicators Intermediate Targets End Target Baseline YR5 Indicator Name (2021) YR1 YR2 YR3 YR4 Actual (December 2027) Component 1. Connectivity Improvements on the Eastern Corridor Roads constructed (Kilometers) 0.00 0.00 0.00 0.00 17.00 0.00 17.00 Number of km built to climate resilient standards (designed to 100-year climate 0.00 0.00 0.00 0.00 17.00 0.00 17.00 events for bridges and culverts) (Kilometers) Satisfaction of road users at target highway To be 20% increase corridor (Percentage) determined - from the the first year baseline Number of accidents involving pedestrians per 100 million vehicle-km travelled on the 2.40 2.40 2.40 2.40 2.40 5.3 1.92 target section Share of citizens who assess the information and consultation measures under the project 0.00 70.00 0.00 70.00 as effective (Percentage) Component 2. Development of a new local Marketplace Market stalls in the new Badiauri marketplace 0.00 0.00 0.00 0.00 50.00 50.00 reserved to women traders (Percentage) 0.00 At least 50 women receiving tailored business advisory services on how to start and/or 0.00 0.00 0.00 50.00 0.00 0.00 50.00 expand their entrepreneurial activities (Number) Component 3. Institutional Strengthening and Implementation Support Percentage of staff at RD receiving training in 0.00 0.00 70.00 contract management (Percentage) 11