Bhutan: Air Transport Connectivity Enhancement Project

Project Administration Manual

Project Number: 44239 Grant Number: GXXXX May 2012

Kingdom of Bhutan: Air Transport Connectivity Enhancement Project

Contents ABBREVIATIONS 4 I. PROJECT DESCRIPTION 5 A. Project Rationale, Location and Beneficiaries 5 B. Impact and Outcome 7 C. Outputs 7 II. IMPLEMENTATION PLANS 8 A. Project Readiness Activities 8 B. Overall Project Implementation Plan 9 III. PROJECT MANAGEMENT ARRANGEMENTS 10 A. Project Stakeholders – Roles and Responsibilities 10 B. Key Persons Involved in Implementation 10 C. Project Organization Structure 12 IV. COSTS AND FINANCING 13 A. Cost Estimates by Expenditure Category 14 B. Allocation and Withdrawal of Grant Proceeds 14 C. Fund Flow Diagram 15 V. FINANCIAL MANAGEMENT 16 A. Financial Management Assessment 16 B. Disbursement 16 C. Accounting 17 D. Auditing 18 VI. PROCUREMENT AND CONSULTING SERVICES 19 A. Advance Contracting 19 B. Procurement of Goods, Works and Consulting Services 19 C. Procurement Plan 20 D. Consultant's Terms of Reference 20 VII. SAFEGUARDS 21 VIII. GENDER AND SOCIAL DIMENSIONS 22 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 23 A. Project Design and Monitoring Framework 23 B. Monitoring 25 C. Evaluation 25 D. Reporting 26 E. Stakeholder Communication Strategy 26 X. ANTICORRUPTION POLICY 26 XI. ACCOUNTABILITY MECHANISM 26 XII. RECORD OF PAM CHANGES 27 XIII. ATTACHMENTS 28 Attachment A: Procurement Plan 29 Attachment B: Outline Terms of Reference for Consulting Services 35

Project Administration Manual Purpose and Process

1. The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM includes references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM.

2. The executing and implementing agencies are wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB’s policies and procedures. ADB staff is responsible to support implementation including compliance by executing and implementing agencies of their obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures.

3. At Grant Negotiations the borrower and ADB shall agree to the PAM and ensure consistency with the Grant Agreement. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan Agreements, the provisions of the Grant Agreements shall prevail.

4. After ADB Board approval of the project's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

Abbreviations

ADB = Asian Development Bank ADF = Asian Development Fund AFS = audited financial statements CQS = consultant qualification selection CSC = construction supervision consultant DCA = Department of Civil Aviation DMF = design and monitoring framework EARF = environmental assessment and review framework EIA = environmental impact assessment EMP = environmental management plan ESMS = environmental and social management system GACAP = governance and anticorruption action plan GDP = gross domestic product ICB = international competitive bidding IEE = initial environmental examination IPP = indigenous people plan IPPF = indigenous people planning framework LAR = land acquisition and resettlement LIBOR = London interbank offered rate MOIC = Ministry of Information and Communications NCB = national competitive bidding NGOs = nongovernment organizations PAI = project administration instructions PAM = project administration manual PIU = project implementation unit QBS = quality based selection QCBS = quality- and cost based selection RRP = report and recommendation of the President to the Board SBD = standard bidding documents SOE = statement of expenditure SPS = Safeguard Policy Statement SPRSS = summary poverty reduction and social strategy TOR = terms of reference

I. PROJECT DESCRIPTION

A. Project Rationale, Location and Beneficiaries

1. Landlocked Bhutan faces unique development challenges and opportunities. The expansion and maintenance of physical infrastructure is critical for increasing the country’s measure of gross national happiness. The country’s small population of about 700,000, 1 mountainous terrain, and formidable weather condition mean that achieving economies of scale in service delivery is difficult, and building and maintaining vital infrastructure, particularly the road network, is costly. Consequently, high external and domestic transport costs, and lack or limited accessibility have constrained the country’s economic and social development.

2. Paro International Airport (PIA), Bhutan’s only operating airport until recently and still the only one providing international air access, is located near the capital city of Thimphu in the western region. Due to the lack of domestic air connectivity, other regions of the country— particularly in the center, south, and, east—have limited access to regional and global markets. The tourism industry, for instance, a substantial economic contributor, is much better developed in the west compared with other regions. This imbalance in accessibility—to opportunity, enterprise, markets, and services—has been an obstacle to achieving broad-based economic growth, which is one of the government’s major development goals.

3. Following the country’s vision statement, 2 the government’s Tenth Five-Year Plan (2008–2013) highlights the development objectives for the country’s transport system, focusing on enhancing connectivity to facilitate greater coverage of basic social services, including health and education in isolated regions, and improving transport efficiency—reducing travel time and cost—to boost domestic trade and cross-border transport. This will stimulate private sector development and generate employment opportunities for the poor.

4. To help achieve these objectives, the government decided to develop a safe, reliable, and efficient network of domestic air transport connecting urban and rural centers to help overcome current limitations of road transport, increase accessibility, and promote tourism and high-value agriculture in less-developed regions. In keeping with this strategy and based on airport master plans and feasibility studies, in 2010 the government selected and started developing three domestic airports—upgrading an existing airfield at Yonphula in the east, and constructing new airfields at Bumthang in the center, and Gelephu in the south.3 By December 2011, domestic flights, although limited in frequency, started operating at Bumthang and Yonphula, and flight operations at Gelephu are expected to start during 2012. However, due to limited available funding, the current facilities at these airports are very basic and only for initial air operation and passenger accommodation. Deficiencies include inadequate or lack of aircraft parking apron and taxiways, runway wearing course and drainage, communication equipment, security fencing, and other support facilities.

5. Overall, air transport activity in Bhutan is set to increase substantially as a result of the government’s continued effort to brand and market tourist attractions in the country and the new initiative under way to introduce domestic air links. In 2010, the air passenger volume at PIA reached 127,181 passengers per annum (ppa), tripling from about 33,890 in 2000. Based on the

1 ADB. 2011. Basic Statistics 2011. Manila. 2 Government of Bhutan. 1999. Bhutan 2020: A Vision of Peace, Prosperity and Happiness. Thimphu. 3 Airport Development Programme and Master Plans for Yonphula and Bumthang under the Bhutan Aviation Sector Capacity Development Project (2006–2008) financed by the Swedish International Development Cooperation Agency, and the Gelephu Site Feasibility Study (2008) financed by the government.

6 updated air traffic forecast, if unconstrained by capacity,4 total air passenger traffic could grow to about 491,200 ppa by 2020, of which approximately 12% (59,900 passengers) would be carried on the new domestic services. By 2030, total ppa is forecast to increase on an unconstrained basis to 915,100 ppa, 5 of which domestic passengers would account for 17.4% (159,600 passengers).

6. In view of the anticipated increase in aircraft movements and passenger volume, current deficiencies must be addressed, and initial developments undertaken by the government at the three domestic airports expanded to strengthen safety and security, and enhance capacity. The project will include (i) improving air operation safety by providing required air rescue and firefighting system facilities, aeronautical communication and navigation, and runway drainage; (ii) strengthening security with an airport cordon around the perimeter; and (iii) expanding capacity for terminal space, aircraft parking apron, and taxiway. The improvements were prioritized based on development needs identified in updated master plans for the three airports, projected traffic forecasts in terms of peak hour aircraft movements and passenger volume, as well as updated assessment of current developments and priorities for air transport in the country.6 By improving safety, security, and capacity at the three domestic airports, the project will help ensure operation of aircrafts with adequate capacity for continued passenger traffic growth and improved service and safety.

7. In keeping with lessons from similar projects in the region, regulatory and institutional capacity is critical to ensuring sustainable development of air transport in the country. An assessment of the organizational and management capacity of the Department of Civil Aviation (DCA) (footnote 2), including policy dialog with the government regarding the current regulatory framework, identified needed improvements. These include updating civil aviation acts and regulations to reflect current needs, developing a strategy to adapt a regulatory and operating framework based on international standards, and improving human resource development with technical training in the critical areas of regulatory oversight and airport operations. To help meet these needs, capacity development technical assistance (TA) from the Asian Development Bank (ADB) will be implemented starting in 2012.7 It will strengthen the country’s air transport regulatory and operating performance, and help ensure that the benefits from the project—the first ADB-financed investment in air transport in Bhutan—will be optimized and sustainable.

8. The project and its outcome is consistent with the strategic objective set out in the interim country partnership strategy, 2012–2013: to assist the government in achieving broad- based economic growth.8 It will enhance the country’s air transport connectivity, help improve access to regional and global markets throughout the country, and support tourism growth in less-developed regions. The project is included in the Bhutan country operations business plan, 2012–2014.9

4 The unconstrained scenario assumes the PIA runway maintains the current peak hour capacity of 4 aircraft movements per hour, and the tourist infrastructure is able to accommodate the increasing number of tourists. 5 The unconstrained scenario assumes improvements at PIA increase the peak hour capacity from 4 aircraft movements per hour to 5 by 2022, and to 6 by 2027. 6 Previous airport master plans and feasibility studies were reviewed and updated under the technical assistance for the Air Transport Connectivity Enhancement Project (footnote 2). 7 ADB. 2011. Technical Assistance to the Kingdom of Bhutan for Strengthening Air Transport Regulatory and Operational Performance. Manila (TA 7945-BHU, $300,000, approved on 5 December). 8 ADB. 2011. Interim Country Partnership Strategy: Bhutan, 2012–2013. Manila. It extends the validity of ADB. 2005. Country Strategy and Program: Bhutan, 2006–2010. Manila to guide ADB operations for the remainder of the government’s Tenth Five-Year Plan (2008–2013). 9 ADB. 2011. Country Operations Business Plan: Bhutan, 2012–2014. Manila.

B. Impact and Outcome

9. In support of the country partnership strategy, the project impact will be improved air transport connectivity. The immediate outcome will be improved safety, security, and capacity at three domestic airports in Bumthang, Gelephu, and Yonphula.

C. Outputs

10. The outputs will be improved infrastructure at the three domestic airports, comprising (i) perimeter fencing of 4 kilometers (km), runway asphalt overlay of 36,000 square meters (m2), a general service and maintenance vehicle, and all-weather access road of 1 km in Bumthang; (ii) perimeter fencing of 4 km including security gate and guard house, air rescue and firefighting service support facilities, a general service and maintenance vehicle, all-weather access road of 2 km, expansion of terminal area of 1,000 m2, apron and taxiway of 6,000 m2, runway drainage system, flood protection structures, and communication and navigation aids equipment in Gelephu; (iii) removal of small hills beside runways, air rescue and firefighting service support facilities, a general service and maintenance vehicle, and repair of runway strip drainage of 500 meters in Yonphula.

11. The outputs will be achieved through key activities including (i) engagement of design and supervision consultant to prepare detailed engineering design, specifications, bill of quantities, cost estimates, and bidding documents; (ii) procurement of contracts for works and equipment; and (iii) execution of contracts to carry out the works and install equipment.

12. The project airports and their location are described below:

GELEPHU AIRPORT Item Description 1 Install perimeter fencing including security gate and guard house 2 ARFFS support facilities (apron, housing for fire tender plus airport maintenance, and airside access to runway) 3 All weather access road 4 Terminal expansion 5 Apron and taxiway 6 Drainage system for runway 7 Flood protection structures 8 Communications equipment 9 DVOR/DME (1) 10 General service and maintenance vehicle

BUMTHANG AIRPORT Item Description 1 Install perimeter fence 2 Runway asphalt wearing course 3 All weather access road 4 General service and maintenance vehicle

YONPHULA AIRPORT Item Description 1 Removal of small hills besides runway 2 ARFFS support facilities (apron, housing for fire tender plus airport maintenance, and airside access to runway) 3 Repair runway strip drainage 4 General service and maintenance vehicle

II. IMPLEMENTATION PLANS

A. Project Readiness Activities

13. The project readiness activities, responsibilities, and estimated timeframe as follows:

Mon Date Project Processing Milestones Procurement Activities Year Design and Supervision Works and Equipment Consultant (Advance Action) Responsible ADB/Government MOIC/DCA MOIC/DCA by: Jan 27 ADB Fact-Finding Mission 2012  MOU/Project Administration Manual Feb 10  Wrap-up meeting

20 Government confirm signed MOU

Mar Apr 02 Staff Review Meeting  Approval for advance contracting 16 ►Review ADB report & recommendation of the President & draft grant agreement May 1 ►Grant negotiations

►Report 1 Shortlist/RFP

June ►ADB Board Consideration/Approval

►Report 2 Technical Evaluation July ►Grant Signing

►Report 3 Financial Evaluation and Ranking Aug ►Government’s legal opinion

►Report 4 Draft Negotiated Contract Sep ►ADB declare grant effective ►Report 5 Signed Negotiated ►Mobilize and commence Oct Nov Dec Jan ►Invitation For Bids 2013 Feb Mar ►Bid submission Apr May ►Bid evaluation report June July ►Award contracts Aug ►Sign contracts Sep ►Commence ADB = Asian Development Bank, PAM = project administration manual, RDA = Road Development Authority

B. Overall Project Implementation Plan

D N O S A J J 2017 M A M F J D N O S A J J 2016 M A M F J D Year 4 Year N O S A J J 2015 M A M F J D Year 3 Year N O S A J J 2014 M A M F J D Year 2 Year N O S A J J 2013 M A M F J D Year 1 Year N O S Defects & Liability Period Defects & Liability A J J 2012 M A IMPLEMENTATION SCHEDULE IMPLEMENTATION M F J Grant Processing and Approval by ADB by Grant Approval Processing and Grant Signing Effectivenessand Services Consulting Consultant 1. and Supervision Design Select 2. and Procurement Design 3. Supervision 1. Procurement 2. and Supply/Installation Construction Item Preparation Project A. Implementation B. Project Consultants C. Works and Equipment ADB = Asian Development Bank Source: Asian Development Bank

III. PROJECT MANAGEMENT ARRANGEMENTS

A. Project Stakeholders – Roles and Responsibilities

Project Stakeholders Management Roles and Responsibilities

Executing agency (EA) Ministry of Information and Communications (MOIC)  overall coordination of project implementation  interagency coordination Project Implementation Unit Department of Civil Aviation (DCA) (PIU)  day-to-day project management  consultant recruitment and procurement of works  project accounts management – maintain second generation imprest account, preparing withdrawal applications and supporting documentation, including procedures for State-of-Expenditure, and submitting through DPA/MOF.  project progress reports Department Public Accounts  establish and maintaining first generation imprest (DPA) of MOF account, and forward DCA’s withdrawal applications and supporting documentation to ADB  establish second generation imprest account ADB  Monitor and review overall implementation of the project in consultation with the EA/PIU including: the project implementation schedule; actions required in terms of poverty reduction, environmental impacts, and resettlement plans (RPs) if applicable; timeliness of budgetary allocations and counterpart funding; project expenditures; progress with procurement and disbursement; statement of expenditure when applicable; compliance with particular grant covenants; and the likelihood of attaining the project’s immediate development objectives.

B. Key Persons Involved in Implementation

Executing Agencies MOIC Mr. Kinley Dorji Secretary Ministry of Information and Communications Thimphu, Bhutan Telephone: (975) 2 329223 Fax: (975) 2 329208 Email: [email protected]

Mr. Phala Dorji Director General Department of Civil Aviation Ministry of Information and Communications Address: Woochu – Paro, Bhutan Telephone: (975) 8 271910 Fax: (975) 8 271909 Email: [email protected]

Mr. Karma Wangchuk Deputy Director and Paro Airport Director Department of Civil Aviation Ministry of Information and Communications Address: Paro International Airport Telephone: (975) 8 271403 Fax: (975) 8 271751 Email: [email protected] ; [email protected]

ADB Transport and Communications Ms. Sri Widowati Division of South Asia Regional Director, SATC Department (SATC) – Telephone: (63) 2 632 6794 Email address: [email protected]

Mr. Dong-Kyu Lee (Mission Leader) Senior Transport Specialist, SATC Telephone No.: (63) 2 632 5992 Email address: [email protected]

Note: Update as changes occur

C. Project Organization Structure

14. The flow chart below shows the reporting lines essential internal structures of key organizations involved in implementation, including the executing agencies, project implementation units, and their staffing assignments.

Ministry of Information and Communications (MOIC)

Executing Agency

Department of Civil Aviation (DCA)

Director General

Project Implementation Unit (PIU) Project Director [1]

Key positions:  Senior Aerodrome Officer [2]  Project Coordinator: Bumthang Airport [3]  Project Coordinator: Gelephu Airport [4]  Project Coordinator: Yonphula Airport [5]  Environment/Social Focal [6]  Account Officer [7]  Account Assistant [8]

Staffing Assignment and Recruitment Plan

Serial Position Name Status No. 1 [1] Project Director Mr. Karma Wangchuck appointed 2 [2] Senior Aerodrome Officer Mr. Sangay Wangdi appointed 3 [3] Project Coordinator: Bumthang Airport Mr. Lham Dorji appointed 4 [4] Project Coordinator: Gelephu Airport Ms. Tashi Thamo appointed 5 [5] Project Coordinator: Yonphula Airport Ms. Dawa Dem appointed 6 [6] Environment/Social Focal To be determined by July/2012 7 [7] Account Officer Ms. Tshering Dekar appointed 8 [8] Account Assistant To be determined by July/2012

IV. COSTS AND FINANCING

15. The project is estimated to cost $7.6 million (Table 1)

Table 1: Project Investment Plan ($ million) Item Amount A. Base Costa 1. Works and equipment 5.13 2. Consulting services for design and supervision 0.77 3. Taxes and duties 0.60 Subtotal (A) 6.50 B. Recurrent Costs 0.10 C. Contingenciesb 1.00 Total (A+B+C) 7.60 a In late-2011 prices. b Physical contingencies are computed at 10% for civil works and consulting services contract values. Price contingencies are computed at 5% on foreign exchange costs and 5% on local currency costs, including provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. Source: Asian Development Bank estimates.

16. The government has requested a grant 10 not exceeding $6.92 million from ADB’s Special Funds resources to help finance the project, including works and equipment, consulting services, and recurrent costs for project management. The government’s financing will cover recurrent costs for office accommodation in kind, and taxes and duties in form of an exemption.

17. The financing plan is in Table 2.

Table 2: Financing Plan Amount Share of Source ($ million) Total (%) Asian Development Bank 6.92 91.00 Government 0.68 9.00 Total 7.60 100.00 Source: Asian Development Bank estimates.

10 A country's eligibility for Asian Development Fund (ADF) grants under the revised grant framework is determined by its risk of debt distress. The latest debt sustainability analysis determined that Bhutan had moderate risk of debt distress and was, therefore, eligible to receive 50% of its ADF allocation as grants.

A. Cost Estimates by Expenditure Category

18. The detailed cost estimates by expenditure category and detailed cost estimates by financier are presented below.

Detailed Cost Estimates and Financing Plan ($ million)

Total ADB % of Total Government % Total % of Total Item ADB Government Base Cost A. Investment Costs [a] 1. Civil Works 2.96 2.96 100 0.00 0 38.9 a. Airport Improvements 2.96 2.96 100 0.00 0 38.9 2. Equipment 2.17 2.17 100 0.00 0 28.6 a. Communication/Navaids Equipment and Vehicles 2.17 2.17 100 0.00 0 28.6 3. Consultants 0.77 0.77 100 0.00 0 10.1 a. Design and Supervision 0.77 0.77 100 0.00 0 10.1 4. Taxes and Duties (b) 0.60 0.00 0 0.60 100 7.9 Subtotal (A) 6.50 5.90 91 0.60 9 85.5 B. Recurrent Costs 1. Project Management [c] 0.02 0.02 100 0.00 0 0.3 2. Office Accommodation 0.08 0.00 0 0.08 100 1.1 Subtotal (B) 0.10 0.02 20 0.08 80 1.3 C. Contingencies 1. Physical Contingency [d] 0.68 0.68 100 0.00 0 8.9 2. Price Contingency [e] 0.32 0.32 100 0.00 0 4.2 Subtotal (C) 1.00 1.00 100 0.00 0 13.2 Total Project Cost (A+B+C) 7.60 6.92 91 0.68 9 100.0 [a] In late-2011 prices based on feasibility design. [b] Local taxes and duties computed at 10% for civil works contract values, consultant services, and equipment. [c] Incremental administrative expenditures, including bank charges related to imprest accounts. [d] Computed at 10.0% for civil works and equipment, and consulting services contract values. [e] Computed at 5.0% for foreign currency costs, and 5.0% for local currency costs. Source: Asian Development Bank

B. Allocation and Withdrawal of Grant Proceeds

19. The following table should be read in conjunction with the narrative paragraphs contained in the grant agreement – schedule entitled ―Allocation and Withdrawal of Loan Proceeds‖. ADB Grant (Special Funds) GXXXX-BHU Table of Allocation and Withdrawal of Grant Proceeds ALLOCATION AND WITHDRAWAL OF Grant PROCEEDS (Air Transport Connectivity Enhancement Project) CATEGORY ADB FINANCING BASIS Number Item Total Amount Percentage and Basis for Allocated for ADB Withdrawal from the Financing Grant Account $ Category 1 Civil Works 2,960,000 100% of total expenditure* 2 Equipment 2,170,000 100% of total expenditure* 3 Consulting Services 770,000 100% of total expenditure* 4 Project Management 20,000 100% of total expenditure 6 Unallocated 1,000,000 Total 6,920,000 * Exclusive of taxes and duties imposed within the territory of the Recipient.

C. Fund Flow Diagram

20. The following diagram show how the funds will flow from ADB and the Borrower to implement project activities.

First Generation Imprest Asian Account ($) Development @ Royal Monetary Bank Authority of Bhutan (Central Bank)

DPA/MOF

Second Generation Imprest Account (Nu.) @ state owned bank

DCA

B A

Consultants/Contractors, Equipment, Project Management

[A] Payments below $100,000 or as required [B] Payments above $100,000 or as required

Note: Cash flow Reports for reconciliation and replenishment (with copy to Ministry of Finance) Direct payment procedure (withdrawal application/payment) to be utilized for all payments in dollar

Notes on funds flow: From ADB to the Imprest Accounts. Grant proceeds will be channeled through FGIA opened at the Royal Monetary Authority (the Central Bank of Bhutan) to SGIA at commercial bank acceptable to the government and ADB. DCA will process all other disbursement requests to ADB through the Department of Public Accounts (DPA) of the Ministry of Finance, including direct payment to consultants (above $100,000). The Imprest Account will be replenished according to the ADB's Loan Disbursement Handbook.

From ADB to contractors/consultants. Payments for foreign contractors (above $100,000), and international consultant fees contracted by DCA, will be paid directly by ADB, which requires DCA's submission of approved invoices and documentation to ADB through DPA in accordance with ADB's Loan Disbursement Handbook.

V. FINANCIAL MANAGEMENT

A. Financial Management Assessment

21. Financial management assessment was carried out for DCA and its project implementation unit (footnote 6). DCA has prior and ongoing experience with implementing international donor funded projects and has satisfactory capacity in terms of project financial accounting. Within the project implementation unit, DCA will include a suitably qualified accountant officer. DCA will maintain separate project records and accounts to identify the financing resources received and expenditures made for the project, ensuring an adequate audit trail. The Royal Audit Authority (RAA) will annually audit the project accounts and related financial statements in accordance with international auditing standards. To further minimize any risks, ADB's direct payment procedure will be utilized for substantial disbursement of payments for works, goods, and consulting services.

22. Financial management risks should be considered and updated11 throughout the life of the project. Risk mitigation measures should also be updated accordingly.

B. Disbursement

23. The Grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time),12 and detailed arrangements agreed upon between the Government and ADB.

24. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS),13 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list (Appendix 5 of the SPS) to subprojects financed by ADB.

25. Direct payment procedure by ADB will be utilized for progress payments on civil works (above $100,000 or as required), and consultant's fees. Reimbursement and or the imprest fund procedure will be utilized for progress payments on civil works (below $100,000 or as required), procurement of goods, recurrent costs (project management).

26. DCA will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications, through DPA/MOF, to ADB.

27. A separate first generation imprest account and a separate second generation imprest account will be established and maintained, respectively, by DPA/MOF and DCA as follows:

First Generation Imprest (1) account ($) established at the Royal Monetary Authority in the name Account of DPA/MOF Second Generation Imprest (1) account (Nu.) established at Bank of Bhutan in the name of DCA Account

11 Available at: http://www.adb.org/Documents/Others/FM-toolkit/Methodology-Note.pdf, and Financial Management. See also Analysis of Projects Guidelines (2005): http://www.adb.org/Documents/Guidelines/Financial/default.asp. 12 Available at: http://www.adb.org/Documents/Handbooks/Loan_Disbursement/loan-disbursement-final.pdf 13 Available at: http://www.adb.org/Documents/Policies/Safeguards/Safeguard-Policy-Statement-June2009.pdf

28. The FGIA and SGIA will be established, managed, replenished and liquidated in accordance with the Loan Disbursement Handbook. DPA of MOF and MOIC through DCA will be responsible establishing and administering FGIA and SGIA, respectively. The maximum ceiling of FGIA will not at any time exceed the estimated ADB financed expenditures to be paid from the imprest account for the next 6 months or 10% of the grant amount, whichever will be lower. The maximum ceiling of SGIA will be equivalent to 6 months estimated expenditures to be funded from SGIA or 10% of the grant amount, whichever will be lower. The government will be responsible for the exchange rate difference at the time of refund of remaining balance of SGIA. The request for initial advance to the imprest account should be accompanied by an Estimate of Expenditure Sheet 14 setting out the estimated expenditures for the first six (6) months of project implementation, and submission of evidence satisfactory to ADB that the imprest account has been duly opened. For every liquidation and replenishment request of the imprest account, the Recipient will furnish to ADB (a) Statement of Account (Bank Statement) where the imprest account is maintained, and (b) the Imprest Account Reconciliation Statement (IARS) reconciling the above mentioned bank statement against the EA’s records.15

29. ADB's statements of expenditure (SOE) will be utilized for reimbursement and liquidation and replenishment of the imprest accounts for any individual payments not exceeding the equivalent of $100,000. SOE records should be maintained by DCA and made readily available through DPA of MOF for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit.16

30. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing.

C. Accounting

31. The DPA of MOF and MOIC through DCA will maintain separate records and accounts adequate to identify financing resources received and expenditures made on the project, including all goods, works, and services financed by the loan proceeds and government funds. The separate records and accounts will follow international accounting principles and practices, or those of the government as acceptable to ADB, and will be audited annually in accordance with sound auditing standards by auditors acceptable to ADB.

14 Available in Appendix 29 of the Loan Disbursement Handbook. 15 Follow the format provided in Appendix 30 of the Loan Disbursement Handbook. 16 Checklist for SOE procedures and formats are available at: http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-100-Below.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-Over-100.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Operating-Costs.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Free-Format.xls

D. Auditing

32. The MOIC through DCA and DPA of MOF will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing and in accordance with the Government's audit regulations by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 9 months of the end of the fiscal year by the executing agency. The annual audit report will include a separate audit opinion on the use of FGIA and SGIA and the SOE procedures (as applicable). The Government, MOIC and DCA have been made aware of ADB’s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited accounts. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures. For revenue generating projects only, ADB requires audited financial statements (AFS) for each executing and/or implementation agency associated with the project.

VI. PROCUREMENT AND CONSULTING SERVICES

A. Advance Contracting

33. All advance contracting will be undertaken in conformity with ADB’s Procurement Guidelines (April 2010, as amended from time to time) (ADB’s Procurement Guidelines)17 and ADB’s Guidelines on the Use of Consultants (April 2010, as amended from time to time) (ADB’s Guidelines on the Use of Consultants).18 The issuance of invitations to bid under advance contracting will be subject to ADB approval. The government, MOIC, and DCA have been advised that approval of advance contracting does not commit ADB to finance the ensuing Project.

34. Advance contracting will be utilized for procurement of goods, works, and consulting services; and the steps to be concluded in advance – (i) preparation for procuring goods and works of low value, and (ii) recruitment of consultants.

B. Procurement of Goods, Works and Consulting Services

35. All procurement of goods and works will be undertaken in accordance with ADB’s Procurement Guidelines.

36. International competitive bidding (ICB) procedures will be used for works contracts valued above $1 million and goods valued above $500,000, National competitive bidding for works and goods beneath that stated for ICB. Shopping will be used for contracts for procurement of works and equipment worth less than $100,000.

37. When and if any national competitive bidding (NCB) is proposed, the use of Bhutan's Procurement Rules & Regulations 2009, issued by the Royal Government of Bhutan, Ministry of Finance, together with ADB issued Bhutan NCB Annex shall be used.

38. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C.

39. All consultants will be recruited according to ADB’s Guidelines on the Use of Consultants.19 The terms of reference for all consulting services are detailed in Section D.

40. A firm of international consultants will be recruited to carryout detail engineering design, prepare bidding documents, assist with procurement activities, and assume the role of the "Engineer" for supervision works and equipment installation. An estimated 63.5 person-months (13.5 international, 50 national) of consulting services are required. Consulting firm will be engaged using the quality- and cost-based selection (QCBS) method with a weighting of 90% technical and 10% financial as the nature of the assignment related to civil aviation requires priority consideration for quality

17 Available at: http://www.adb.org/Documents/Guidelines/Procurement/Guidelines-Procurement.pdf 18 Available at: http://www.adb.org/Documents/Guidelines/Consulting/Guidelines-Consultants.pdf 19 Checklists for actions required to contract consultants by method available in e-Handbook on Project Implementation at: http://www.adb.org/documents/handbooks/project-implementation/

C. Procurement Plan

41. The procurement plan, prepared in accordance with the country specific template, is in Attachment A, describing all procurement of good and works to be undertaken for the Project.

D. Consultant's Terms of Reference

42. The outline terms of reference for consulting service is provided in Attachment B.

VII. SAFEGUARDS

(a) Environment

43. An Initial Environmental Examination (IEE) report including an Environment Management Plan (EMP) covering generic and site specific issues has been prepared in accordance with the ADB’s ADB's Safeguard Policy Statement, 2009. The EMP will be attached to the bidding documents and made mandatory for implementation by the respective contractor. Hence, EMP implementation and its related costs will be the responsibility of the contractor while monitoring and technical guidance will be provided by the environmental specialist under the supervision consultant’s team. DCA’s project coordinator of the respective domestic airports will also be responsible for ensuring proper implementation and monitoring of the EMP by the contractor and supervision consultant respectively. Any updates to the EMP, if required, will be made by the environmental specialist under the supervision consultants and reviewed and approved by the overall environment safeguards coordinator of DCA. An initial coordination cum training workshop will be conducted by ADB before the start of construction works for DCA, contractors, and supervision consultant to agree on modalities for implementing the EMP and carrying out necessary monitoring and reporting activities.

(b) Social – Involuntary Resettlement

44. The project is classified category C in accordance with ADB's Safeguard Policy Statement (2009). The civil works for the project will be undertaken within the airport boundaries. There will be no acquisition of private land or property. A due diligence was undertaken to find out about the status of compensation paid to the affected people for land acquired by DCA during the previous development undertaken by the government. For these, all the affected people have either been paid cash compensation or provided with land for land.

45. As the civil works will be undertaken within the airport boundary, there will be no acquisition of private land or property. There are no indigenous people present in the project area. As there will be no physical or economic displacement, no impact on indigenous people is envisaged.

VIII. GENDER AND SOCIAL DIMENSIONS

46. Gender consultation and participation. The project will have no direct interface with the community as it is confined within the airport boundaries. However gender participation was ensured during the course of the socio economic study by undertaking the process of gender analysis to assess the possible gender impacts. Women from the project influence area are mainly engaged in agriculture and home based income generation activities. Focus group discussions were undertaken with women belonging to different socio economic groups. Majority of women felt positively about the possible benefits including employment opportunities during construction and from growth in tourism. Equal benefits for women are expected to be attained under the project. Provisions in bidding documents require contractors to ensure that all civil works comply with all applicable labor laws; do not employ child labor for construction or maintenance; encourage the employment of the poor, particularly women; and do not differentiate wages between men and women, particularly for work of equal value.

47. HIV and AIDS. Bhutan continues to have low HIV prevalence. The Royal Government of Bhutan acted early and initiated HIV/AIDS prevention activities in the country. DCA will ensure that all civil works contractors (i) carry out awareness programs for labor on the risks of sexually transmitted diseases/ AIDS and human trafficking; and (ii) disseminate information at worksites on the risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction. Contracts for the project will include specific clauses on these undertakings, and compliance will be strictly monitored by DCA, with the support of construction supervision consultants during project implementation.

48. Health. DCA shall ensure that contractors provide adequately for the health and safety of construction workers and further ensure that bidding documents include measures on how contractors will address this, including an information and awareness raising campaign for construction workers on sexually transmitted diseases, HIV/AIDS, and human trafficking. Contractors will carry out HIV/AIDS awareness activities for laborers at work sites, which will be monitored by the supervision consultants.

49. Labor. DCA shall ensure that (i) civil works contractors comply with all applicable labor laws and regulations, do not employ child labor for construction and maintenance activities, and provide appropriate facilities for women and children in construction campsites; (ii) people directly affected by the project are given priority to be employed by the contractor; (iii) contractors do not differentiate wages between men and women for work of equal value; and (iv) specific clauses ensuring these will be included in bidding documents. The construction supervision consultants monitor the provisions.

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION

A. Project Design and Monitoring Framework Design Performance Targets and Indicators Data Sources and/or Assumptions Summary with Baselines Reporting Mechanisms and Risks Impact Number of air passengers per annum Monitoring report of the Risk Improved air increases to 431,300 international and Department of Civil Air traffic transport 59,900 domestic by 2020 (2010 Aviation volume is connectivity baseline: 127,181 international and nil adversely domestic) affected by the global economy. Outcome Completion by 2016: (For all indicators) Assumption Improved Safety standards improved to meet Annual audit and The safety, security, ICAO requirements for air craft parking, inspection report of the government and capacity at aeronautical communication, and air Department of Civil provides three domestic rescue and fire fighting service support Aviation adequate airports in facilities funds for Bumthang, operation and Gelephu, and Security standards improved to meet maintenance Yonphula ICAO requirements for security cordon expenses on around perimeter time.

Capacity for level of service in terminal areas improved from IATA standard grade E to B Outputs Completion by 2016: (For all indicators) Assumption Improved 1. Bumthang airport: Perimeter fencing Monitoring report of the Civil works infrastructure at of 4 km, runway asphalt overlay of Department of Civil and equipment three domestic 36,000 m2, a general service and Aviation installation airports in maintenance vehicle, and all-weather progress on Bumthang, access road of 1 km schedule. Gelephu, and Yonphula 2. Gelephu airport: Perimeter fencing of 4 km including security gate and guardhouse; air rescue and firefighting service support facilities; a general service and maintenance vehicle, all-weather access road of 2 km; expansion of terminal of 1,000 sqm, apron and taxiway of 6,000 m2, runway drainage system and flood protection structures; and installation of communication and navigation aids equipment

3. Yonphula airport: Removal of small hills beside runway, air rescue and firefighting service support facilities, a general service and maintenance vehicle, and repair of runway strip drainage of 500 meters

Activities with Milestones Inputs Asian Development Bank: $6.92 million 1. Improved infrastructure at three domestic Asian Development Fund (Grant) airports in Bumthang, Gelephu, and Yonphula Item Amount ($ million) 1.1 Engage consultant for detailed design and supervision by August 2012 Works and equipment 5.13 1.2 Complete engineering design, specifications, bill of Consulting services 0.77 quantities, cost estimates, and bidding documents Project management 0.02 by September 2013 Contingencies 1.00 1.3 Procure works and equipment by September 2013 Government: $0.68 million 1.4 Complete all civil works and installation of equipment by June 2016 Item Amount ($ million) Taxes and duties 0.60 Office accommodation 0.08

IATA = International Air Transport Association, ICAO = International Civil Aviation Organization, km = kilometer, m2 = square meter Source: Asian Development Bank.

B. Monitoring

50. Project performance monitoring: The achievement of the project performance targets will be assessed following the design and monitoring framework. DCA, assisted by the Design and Supervision Consultant will establish a project performance management system. The DMF indicators will be monitored before and after construction for the project airports. Disaggregated baseline data for output and outcome indicators gathered during project processing will be updated and reported quarterly through the quarterly progress reports from DCA, and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system.20

51. Compliance monitoring: Compliance with covenants will be monitored through ADB's Project Administration Missions – including project inception mission to discuss and confirm the timetable for compliance with the loan covenants; project review missions to review the borrower's compliance with particular loan covenants and, where there is any noncompliance or delay, discuss proposed remedial measures with the Government; and mid-term review mission if necessary to review covenants to assess whether they are still relevant or need to be changed, or waived due to changing circumstances.

52. Safeguards monitoring - Environment: The respective project coordinator of the three domestic airports will also be the environmental safeguards focal persons at the site level, and will monitor implementation of the EMP by the contractor with the support of the environment specialist of the supervision consultants.

53. EMP implementation records in the form of monthly or quarterly checklists will be maintained by the contractor and cross checked and verified by the environment safeguards focal person at the site level. These will also be reviewed by the environment specialist of the supervision consultants. Based on these checklists and site observations, the environmental specialist will prepare an annual monitoring report and submit it to the overall environment safeguards coordinator under DCA. After review and approval by DCA, the report will be forwarded to ADB for disclosure on the ADB website in accordance with the requirements of ADB’s SPS 2009.

54. Safeguards monitoring - Resettlement: This will be carried out by the supervision consultants. If there are any IR impacts during project implementation such issues should be included in the semiannual safeguards monitoring report. Semiannual monitoring reports will be submitted to EA and ADB.

C. Evaluation

55. A project inception mission will be fielded soon after the legal agreements for the Project are declared effective; thereafter, regular reviews will follow at least annually. As necessary, special loan administration missions and a midterm review mission will be fielded, under which any changes in scope or implementation arrangement may be required to ensure achievement of project objectives. DCA will monitor project implementation in accordance with the schedule and time-bound milestones, and keep ADB informed of any significant deviations that may result

20 ADB's project performance reporting system is available at: http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

26 in the milestones not being met. Within 6 months of physical completion of the Project, DCA will submit a project completion report to ADB.21

D. Reporting

56. The DCA will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions; (c) updated procurement plan and (d) updated implementation plan for next 12 months; and (iii) a project completion report within 6 months of physical completion of the Project. To ensure projects continue to be both viable and sustainable, project accounts and the executing agency AFSs, together with the associated auditor's report, should be adequately reviewed.

E. Stakeholder Communication Strategy

57. Once a year, DCA will hold one-day workshop to share information on project progress, issues, lessons learned, and performance improvement measures if appropriate.

58. Various information regarding the Project, including scope, general progress status, beneficiaries, invitation for bid, and consultant recruitment notices, will be provided to the general public. The information will be made available and updated through the official websites of DCA.

X. ANTICORRUPTION POLICY

59. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the Project. 22 All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all Project contractors, suppliers, consultants and other service providers. Individuals/entities on ADB’s anticorruption debarment list are ineligible to participate in ADB- financed activity and may not be awarded any contracts under the Project.23

60. To support these efforts, relevant provisions are included in the loan agreements, regulations and the bidding documents for the Project.

61. DCA’s website will provide updated, detailed information on project implementation. For example, it will include procurement-related information, such as the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods and/or services procured.

XI. ACCOUNTABILITY MECHANISM

62. People who are, or may in the future be, adversely affected by the project may submit complaints to ADB’s Accountability Mechanism. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted projects can voice, and seek a resolution of their problems, as well as report alleged violations of ADB’s

21 Project completion report format available at: http://www.adb.org/Consulting/consultants-toolkits/PCR-Public- Sector-Landscape.rar 22 Available at: http://www.adb.org/Documents/Policies/Anticorruption-Integrity/Policies-Strategies.pdf 23 ADB's Integrity Office web site is available at: http://www.adb.org/integrity/unit.asp

27 operational policies and procedures. Before submitting a complaint to the Accountability Mechanism, affected people should make a good faith effort to solve their problems by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, should they approach the Accountability Mechanism.24

XII. RECORD OF PAM CHANGES

63. All revisions/updates during course of implementation should be recorded and retained under this Section to provide a chronological history of changes to implemented arrangements recorded in this PAM.

Rev. Date Description of Revisions 0 February 10, 2012 Initial Project Administration Memorandum 1 March 15, 2012 Revised for peer review 2 March 27, 2012 Revised per peer review comments 3 April 16, 2012 Revised per grant negotiation invitation 4 April 30, 2012 Revised per grant negotiation discussion 5 May 21, 2012 Revised per OSEC edited RRP

24 For further information see: http://www.adb.org/Accountability-Mechanism/default.asp.

XIII. ATTACHMENTS

Attachment A: Procurement Plan Attachment B: Outline Terms of Reference for Consulting Services

Attachment A 29

PROCUREMENT PLAN

Basic Data Project Name Air Transport Connectivity Enhancement Project Country Kingdom of Bhutan Executing Agencies Ministry of Information and Communications Loan Amount $ 6.92 million Loan/Grant Number GXXXX Date of First Procurement Plan 10 February 2012 Date of This Procurement Plan 30 April 2012

A. Process Thresholds, Review, and 18-Month Procurement Plan

1. Project Procurement Thresholds

1. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold International Competitive Bidding (ICB) for Works Above $1,000,000 International Competitive Bidding (ICB) for Goods Above $500,000 National Competitive Bidding (NCB) for Works Beneath that stated for ICB, Works National Competitive Bidding (NCB) for Goods Beneath that stated for ICB, Goods Shopping for Works Below $100,000 Shopping for Goods Below $100,000

2. ADB Prior or Post Review

2. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the Project.

Procurement Method Prior or Post Comments Procurement of Goods and Works ICB Works Prior ICB Goods Prior NCB Works and Good Post Prior review for the bidding documents (for first package) and bid evaluation reports (for all). Shopping for Works Post Shopping for Goods Post Recruitment of Consulting Firms Quality- and Cost-Based Selection (QCBS) Prior

30 Attachment A

3. Goods and Works Contracts Estimated to Cost More Than $ 1 Million

3. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description Contract Procurement Prequalification Advertisement Comments Value Method of Bidders Date (Yes/No) (quarter/year) Civil Works: CW2 Airport $1.36 International No Q1/2013 Improvements at million Competitive Gelephu Bidding Equipment: E2 for $1.35 International No Q1/2013 Navaids Equipment million Competitive Bidding

4. Consulting Services Contracts Estimated to Cost More Than $100,000

4. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description Contract Value Recruitment Advertisement International Comments Method Date or National (quarter/year) Assignment Design and About Quality and Cost Q4/2011 International Supervision $0.77 million Based Selection firm Consultant (90:10)

5. Goods and Works Contracts Estimated to Cost Less than $ 1 Million and Consulting Services Contracts Less than $100,000

5. The following table groups smaller-value goods, works, and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description Value of Number of Procurement / Comments Contracts Contracts Recruitment (cumulative) Method Civil Work: CW1 (Airport $0.62 1 International Improvements – Bumthang) Competitive Bidding Civil Work: CW3 (Airport $0.80 1 International Improvements – Yonphula) Competitive Bidding Civil Work: CW4 (Perimeter Fencing $0.09 1 Shopping – Gelephu) Civil Work: CW5 (Security Gate and $0.09 1 Shopping Guard House – Gelephu) Equipment: E1 (Communication $0.73 1 International Equipment) Competitive Bidding Equipment: E3 (General Service $0.09 1 Shopping Vehicles)

Attachment A 31

B. Indicative List of Packages Required Under the Project

6. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the project. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the comments section.

General Estimated Value Estimated Number Procurement Domestic Comments Description (cumulative) of Contracts Method Preference Applicable Civil Works $2.78 million 3 ICB No

Civil Works $0.18 million 2 Shopping No

Equipment: E1 $2.08 million 2 ICB No (Communication Equipment) and E2 (Navaids Equipment) Equipment: E3 $0.09 million 1 Shopping No (General Service Vehicles) General Estimated Value Estimated Number Recruitment Type of Comments Description (cumulative) of Contracts Method Proposal Design and About $0.77 1 Quality and Simplified Supervision million Cost Based Technical Consultant Selection Proposal (90:10)

WORKS and EQUIPMENT PACKAGES Estimated Contract Value Contract Procurement Package Description Nu. million $ million Period Mode (months) Civil Works CW1 Airport Improvements - Bumthang 27.90 0.62 6 ICB CW2 Airport Improvements - Gelephu 61.20 1.36 18 ICB CW3 Airport Improvements - Yonphula 36.00 0.80 6 ICB CW4 Perimeter Fencing - Gelephu 4.05 0.09 6 Shopping CW5 Security Gate and Guard House - Gelephu 4.05 0.09 6 Shopping Subtotal Works: 133.20 2.96 Equipments E1 Communication Equipment 32.85 0.73 6 ICB E2 Navaids Equipment 60.75 1.35 6 ICB E3 General Service Vehicles 4.05 0.09 3 Shopping Subtotal 97.65 2.17 Total: 230.85 5.13

32 Attachment A

C. Bhutan National Competitive Bidding Annex

1. General

7. The procedures to be followed for national competitive bidding shall be the open tendering/bidding method set forth in the Procurement Rules and Regulations 2009 issued by the Ministry of Finance of the Royal Government of Bhutan with the clarifications and modifications described in the following paragraphs.

2. Domestic Preference

8. No preference of any kind shall be given to domestic bidders or for works of domestically manufactured goods. Clause 1.1.2.2 of the Procurement Rules and Regulations 2009 shall not apply.

3. Registration

9. Foreign suppliers and contractors from ADB member countries shall be allowed to apply for pre-qualification and to bid, without national registration, licensing and other government authorizations, leaving compliance with these requirements until after notice of award and before signing of contract.

10. Where registration is required prior to award of contract, bidders: (i) shall be allowed a reasonable time to complete the registration process; and (ii) shall not be denied registration for reasons unrelated to their capability and resources to successfully perform the contract, which shall be verified through post-qualification.

4. Exclusion of Bidders / National Sanctions List

11. Exclusion of bidders for reasons cited in paragraph 2.1.4.1 of the BPM, including inclusion on national sanctions lists may be applied only with prior approval of ADB. Rejection of bids on account of "past poor performance" of bidders shall also be subject to ADB's prior approval.

5. Qualifications

12. Post qualification shall be used unless prequalification is explicitly provided for in the loan agreement/procurement plan.

13. If prequalification is undertaken, the prequalification criteria shall be based on ADB’s Guide to Pre-Qualification.

14. From the date of advertisement, a minimum period of 28 days shall be allowed for the preparation and submission of prequalification applications.

6. Eligibility of Bidders

15. The eligibility of bidders shall be as defined under Eligibility provisions of ADB’s Procurement Guidelines (―Guidelines‖), accordingly, no bidder or potential bidder should be declared ineligible for reasons other than those stated the Guidelines.

Attachment A 33

7. Procurement Thresholds and Procurement Methods

16. In cases of conflict between the thresholds as prescribed in Clause 4.1 of the BPM and the Procurement Plan, the lower threshold shall prevail. The procurement methods specified on the Procurement Plan shall be followed.

8. Procurement Process

17. One envelope open bidding process shall be used unless two stage process is explicitly provided for in the loan agreement/procurement plan.

9. Advertising

18. Bidding of contracts estimated at $500,000 or more for goods and related services or $1,000,000 or more for civil works shall be advertised on ADB’s website via the posting of the Procurement Plan.

10. Bidding Documents

19. Procuring entities shall use standard bidding documents acceptable to ADB for the Procurement of Goods, Works and related Services.

11. Packaging

20. Slicing or splitting of contracts within a package shall not be used to change the contract sizes and the corresponding methods of procurement indicated in the loan agreement/procurement plan.

12. Bid Security and Performance Security

21. Where required, bid security (earnest money), retention money (or security deposit) and performance security (or performance guarantee) shall be in the form of a demand draft, certified check, letter of credit, or bank guarantee from a reputable bank.

22. The terms and conditions of bid security as well as retention money and performance security shall be clearly specified in the forms provided and/or conditions of contract in terms of periods of validity and grounds for forfeiture, or release of the bank guarantees, or refund of the cash security deposits.

13. Rejection of All Bids and Re-bidding

23. Bids shall not be rejected and new bids solicited without the ADB’s prior concurrence.

14. Low Bids and Unbalanced Bids

24. Bids shall not be rejected solely because the bid price seriously lower or unbalanced. The bidder whose bid is determined to be the lowest evaluated substantially responsive bid may be required by the Executing Agency/Implementing Agency (EA/IA) to provide a higher performance security to a level sufficient to protect the EA/IA against financial loss in the event of default of the successful bidder under the Contract.

34 Attachment A

15. Disclosure of Decision on Contract Awards

25. At the same time that notification on award of contract is given to the successful bidder, the results of bid evaluation shall be published in a local newspaper, or a well-known freely accessible website identifying the bid and lot numbers and providing information on (i) name of each Bidder who submitted a Bid, (ii) bid prices as read out at bid opening; (iii) name of bidders whose bids were rejected and the reasons for their rejection, and (iv) name of the winning Bidder, and the price it offered, as well as duration and summary scope of the contract awarded. The executing agency/implementing agency/contracting authority shall respond in writing to unsuccessful bidders who seek explanations on the grounds on which their bids are not selected.

Attachment B 35

OUTLINE TERMS OF REFERENCE FOR CONSULTING SERVICES BHU (P44239): AIR TRANSPORT CONNECTIVITY ENHANCEMENT PROJECT

DETAIL DESIGN AND SUPERVISION SERVICES

A. Background and Objectives

1. The Government of Bhutan has applied for a loan/grant from the Asian Development Bank (ADB) for the Air Transport Connectivity Enhancement (the Project) and intends to apply a portion of proceeds to engage a firm of international consultants (the consultant) to carry out detail design and supervision. The main objective of the consultant is to assist the Department of Civil Aviation (DCA) by: (a) providing project management assistance; (b) carrying out the detail engineering design and preparing bidding documents; (c) assisting with procurement of works and equipment; (d) supervising and administering of works and equipment installation contracts; (e) conducting on-the-job training for the Employer's staff; and (f) preparing/updating Project Performance Management System (PPMS) based on ADB's Design and Monitoring Framework, and (f) updating social and environmental assessment and conducting monitoring during construction.

2. The major components of the improvement works and equipment are as follows:

BUMTHANG AIRPORT Item Description 1 Install perimeter fence 2 Runway asphalt wearing course 3 All weather access road 4 General service and maintenance vehicle

36 Attachment B

B. Scope of Services

Component 1: Overall Project Management

3. The consultant will provide the following overall project management functions:

Task (01) Provide project management services throughout detail design, procurement, construction, and commissioning stages.

Task (02) Prepare project schedule in conjunction with DCA, and provide to the ADB a realistic schedule for design, approvals, tendering, construction and commissioning, allowing for traffic, seasonality and operational requirements of the airports in Bumthang, Gelephu, and Yonphula. The project schedule is to enable the airports to remain operational through the project period, with daytime closure of the runway limited to an absolute minimum, and construction planned accordingly. The consultant is to maintain and update the project schedule throughout the project.

Task (03) Undertake project performance management system in the format acceptable by the Employer and ADB, which consists of (1) preparing in the initial stage a project performance management system, in accordance with the ADB's project design and monitoring framework, to monitor (i) the progress of the overall project implementation, and (ii) the development impact of the project; and (2) collecting/updating the project performance indicator benchmarks.

Component 2: Detail Design Engineering and Cost Estimate

Task (04) Review the preliminary design, prepared during the project preparatory stage, validate/improve in accordance with best international standards and recommended practices. This includes carrying out value engineering - evaluating and proposing cost effective alternatives as deemed necessary.

Task (05) Review the existing surveys, identify and carryout additional detail surveys required.

Carry out detail design for all improvement works and equipment in accordance with best applicable international standards – including preparation of detail design drawings in sufficient details for accurate determination of quantities and cost.

Task (06) Prepare estimated quantities and cost of all proposed improvement works and equipment with best possible accuracy (within +/- 5%).

Component 3: Procurement

Task (07) Review the indicative contract packages, prepared during the project preparatory stage, and, if warranted, recommend better alternatives to in order to optimize contract administration, construction coordination, and competitive pricing.

Task (08) Based on the type of bidding procedures and contracts, as advised by the Employer, prepare bidding documents for all works and equipment packages.

Attachment B 37

The bidding documents shall be prepared in accordance with ADB's latest applicable Standard Bidding Documents (SBD) available in the ADB website.

Task (09) Provide all necessary assistance for the procurement of contracts, including but not limited, to advertising the invitation to bid, bid clarifications, addenda, pre-bid meetings, bid openings, bid evaluation and reports, and draft contract documents.

Component 4: Construction Supervision

Task (10) Approving contractor's work program, method statements, material sources, and safety plan.

Task (11) Approving and/or issuing working drawings, approving the setting out of the works, and giving instructions to the contractor.

Task (12) Reviewing the quality control programs of the contractors.

Task (13) Inspecting materials and works to ensure compliance with specifications and giving immediate notice to the contractor in the event that such materials and works fail to comply with the specifications.

Task (14) Accepting or rejecting any part or parts of the completed works.

Task (15) Making measurements and keeping measurement records.

Task (16) Maintaining records, correspondence, and diaries.

Task (17) Certifying work volume and interim certificates for progress payments.

Task (18) Assisting the Employer's representative with the maintenance of consolidated project accounts, and with preparation of financial statements and withdrawal applications for submission to ADB.

Task (19) Certifying completion of part or all of the works.

Task (20) Assisting the Employer in preparing withdrawal applications for contractor payments.

Task (21) Periodically checking the remaining quantities, and undertaking constant monitoring of each contract’s costs.

Task (22) Reviewing and recommending to the Employer variation orders, extensions of time, claims, and other matters that may come from each contractor.

Task (23) Negotiating with each contractor and recommending to the Employer the rates for any unscheduled items of work that may arise.

Task (24) Advising the Employer's representative on all matters relating to the execution of the works; and assisting the representative with processing the contractor's possible claims.

38 Attachment B

Task (25) Preparing, at the completion of the contracts, a consolidated project completion report in a format provided by ADB.

Task (26) Checking and certifying as-built drawings for the works prepared by the contractors.

Task (27) Inspecting the works at appropriate intervals during the defects liability period and certifying the defects liability certificate for issuance by the Employer's representative.

Task (28) Providing the Employer with complete records, and inception, monthly, and completion reports.

Task (29) Assisting the Employer to provide on-site training where required for the Employer's field staff on quality assurance and contract administration.

Task (30) Assisting and training the Employer's staff to monitor and administer the performance based maintenance portion of the civil works contract (immediately following the full or sectional transfer of completed works).

Component 5: Social Assessment and Monitoring

Task (31) Design, prepare and conduct HIV/AIDS, anti trafficking and child labor awareness campaign and gender sensitization at the project influence areas, monitor the status of contractor’s compliance with HIV/AIDS, Child labor, labor laws, and equal payment for equal work provisions in the Civil Works Contracts.

Task (32) Ensuring compliance with social impact mitigation requirements of civil works contracts, and providing information to ADB on those processes in the monthly progress reports.

Component 6: Environmental Assessment and Monitoring

Task (33) Review the Initial Environment Examination (IEE) report and carry out additional studies and public consultations as recommended in the IEE. If necessary, in discussion with the engineering team, review and update recommendations provided in the IEE report on specific issues such as drainage works, river bank protection and tree plantation and ensure these are incorporated appropriately in the detail design. Update the EMP and provide more specific details based on site visits, the revised design and new information acquired, if any. Review the bidding documents and ensure the inclusion of the EMP, related mitigation costs and all necessary provisions for compliance to environment safeguard requirements.

Task (34) Monitor implementation of the EMP by the contractor and ensure compliance with the environmental safeguard requirements of civil works contracts. Provide necessary training and technical advices including on-site advisory to the contractors as found necessary. Review and confirm that the EMP implementation records are maintained by the contractor. Prepare annual environmental monitoring reports based on these records and on-site spot checks carried out and submit to DCA.

Attachment B 39

C. Implementation Arrangements

4. The consulting services will be implemented by a firm of international consultants. An association or direct engagement of suitable national consultants is encouraged to compliment consultant's local knowledge and experience. It is anticipated that the following international and local staff will be required:

International Staff: Position Qty Number of Total Person-Months Person-Months Detail Design and Procurement Phase * Airport Civil Engineer / Team Leader 1 5.00 5.00 CNS/ATM Engineer 1 0.50 0.50 Contract and Procurement Specialist 1 1.00 1.00

Construction Supervision Phase * Airport Civil Engineer / Team Leader 1 7.00 7.00

Subtotal 4 13.50

National Staff: Position Qty Number of Total Person-Months Person-Months Detail Design and Procurement Phase * Senior Civil Engineer 1 8.00 8.00 * Civil Engineer 1 2.00 2.00 Contract and Procurement Specialist 1 5.00 5.00 Quantity and Cost Estimate Specialist 1 3.00 3.00

Construction Supervision Phase * Senior Civil Engineer 1 15.00 15.00 * Civil Engineer 1 8.00 8.00 Environmental Specialist 1 3.00 3.00 Social Safeguard Specialist 1 3.00 3.00

Subtotal 8 47.00

Note: (*) Submit one expert for both the detail design and supervision phase (i) CNS/ATM=Communication Navigation Surveillance / Air Trafic Management (ii) The estimated person-months are indicative and actual requirements and will be paid on actual time-basis. As common basis for financial proposal, the Consultants MUST propose the staff person-months indicated above. (iii) Other support staff (such as CAD person, administrative secretary, etc) necessary to implement the assignment should be included in the consultant’s financial proposal under Out-Of-Pocket expense items. (iv) Other expense items (such as communication, report production, local support staff, stationary, in-country transport, including vehicle rental and fuel, and etc.) necessary to implement the assignment should be included in the consultant’s financial proposal under Out-Of-Pocket expense items. The Consultant will bear at its own expense any of essential out-of-pocket expense items that are not priced in the financial proposal.

40 Attachment B

D. Reports, Deliverables, and Time Schedule

5. The consulting services will be implemented over about 23 calendar months from the commencement date – consisting of overlapping period of detail design (about 5 months), procurement (about 8 months), and construction (about 18 months).

6. The Consultant shall prepare and submit the following reports in the English language (5 copies for Client and 2 copies for ADB). The final report shall be prepared in hardcopy and in CD-ROM.

Detail Design Stage: Report Description/Technical Accomplishments Timeframe Inception Report (i) Initial findings, project schedule, and, if appropriate, recommendations for preliminary design and procurement 1.00 month from the packages. commencement date (ii) Staff mobilization schedule Standard Bidding Standard bidding documents for preliminary review 1.50 month from the Documents (excluding BOQ, specification, and design drawings). commencement date Final Bidding For all works and equipment packages – incorporating 3.50 month from the Documents Employer/ADB's comments on SBD and including BOQ, commencement date specification, and design. Design Completion Design criteria and approach, survey reports, and 4.00 month from the Report progress of design for all contract packages. commencement date Construction Supervision Stage: Report Description/Technical Accomplishments Timeframe Monthly Progress Brief details of the work carried out during the previous Monthly Reports month (all components), the problems encountered or (by the 10th day of each anticipated, together with the steps taken or month following the recommendations for their correction, and financial and inception report) physical progress to date. Project Completion In accordance with ADB's format. Within 3.00 months from Report the completion of the contract packages.

E. Data, Local Services, Personnel, and Facilities to be provided by the Government

7. DCA will provide the consultant with the following: Detail Design Stage: (i) Office space and utilities; (ii) Access to site, data, survey reports, and other relevant records and information required to perform the assigned tasks; and Construction Supervision Stage: (iii) Main office space and utilities at DCA headquarter; (iv) Access to data, survey reports, records, and other information required to perform the assigned tasks;

8. Civil Works contractors will provide the consultant with the following: Construction Supervision Stage: (v) Site office space and utilities