Emergency Flood Damage Rehabilitation Project

Pro ject Administration Memorandum

Project Number: 43001 Grant Number: 0150 September, 2009

Nepal: Emergency Flood Damage Rehabilitation Project

The project administration memorandum is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document, however, may not reflect the latest project or program changes. CURRENCY EQUIVALENTS (as of 1 March 2009) Currency Unit – Nepalese rupee/s (NRe/NRs)

NRe1.00 = $0.0122 $1.00 = NRs81.823

ABBREVIATIONS

ADB – Asian Development Bank CQS – Consultants’ Qualifications Selection DADO – District Agriculture Development Office DOA – Department of Agriculture DOI – Department of Irrigation DOR – Department of Roads DWIDP – Department of Water Induced Disaster Prevention DWSS – Department of Water Supply and Sewerage DRO – District Road Office EA – Executing Agency GBO – Groundwater Branch Office IA – Implementing Agency ICB – International Competitive Bidding ICS – Individual Consultants Selection IEE – Initial Environmental Examination IDD – Irrigation Development Divisions LDO – Local Development Officer MOF – Ministry of Finance MPPW – Ministry of Physical Planning and Works NCB – National Competitive Bidding NVC – National Vigilance Center NGO – Non Government Organization NPMCC – National Project Management Coordination Committee PCO – Project Coordination Office PIU – Project Implementation Unit PSC – Project Steering Committee PPMO Public Procurement Monitoring Office PPA – Public Procurement Act PPR – Public Procurement Regulations SOE – Statement of Expenditures SPIU – Subproject Implementation Units STW – Shallow Tube Well UNDP – United Nations Development Programme VDC – Village Development Committee

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 15 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 15 July 2009. (ii) In this report, "$" refers to US dollars. 2

CONTENTS Page

MAP

GRANT PROCESSING HISTORY i

DESIGN AND MONITORING FRAMEWORK ii

I. PROJECT DESCRIPTION A. Project Area and Location 1 B. Impact and Outcome 1 C. Outputs 1 D. Special Features 5

II. COST ESTIMATES AND FINANCING PLAN A. Cost Estimates 6 B. Financing Plan 7 C. Allocation and Withdrawal/Grant Proceeds 7

III. IMPLEMENTATION ARRANGEMENTS A. Executing and Implementing Agencies 9 B. Project Steering Committee 9 C. Project Management 9

IV. IMPLEMENTATION SCHEDULE 11

V. COST ESTIMATES AND FINANCING PLAN DURING IMPLEMENTATION 11

VI. RECRUITMENT OF CONSULTANTS 11

VII. PROCUREMENT 14

VIII. DISBURSEMENT PROCEDURES 15

IX. PROJECT MONITORING AND EVALUATION 16

X. REPORTING REQUIREMENTS 17

XI. AUDITING REQUIREMENTS 17

XII. SAFEGUARD REQUIREMENTS 18

XIII. MAJOR GRANT COVENANTS 19

XIV. KEY PERSONS INVOLVED IN THE PROJECT 20

XV. ANTICORRUPTION 21

APPENDIXES

1. Detailed Cost Estimates, Financing Plan, and Allocation 2. Project Management Structure 3. Project Implementation Schedule 4. Detailed Cost Estimate during Implementation 5. Contract Award and Disbursement Projections 6. Detailed Terms of Reference for Consulting Services 7. Procurement Plan 8. Sample Withdrawal Application 9. Performa for Project Progress Report 10. Performa for Preparing the Project Completion Report 11. Sample Audit Letter 12. Summary IEE 13. Involuntary Resettlement Framework 14. Gender Equality and Social Inclusion Plan 15. Major Covenants 16. Copy of ADB’s Anticorruption Policy

GRANT PROCESSING HISTORY

Date

(a) Grant Fact-Finding 12-23 January 2009 (b) Management Review Meeting (MRM) 6 March 2009 (c) Grant Negotiations 19-20 March 2009 (d) Board Circulation 27 March 2009 (e) Board Consideration and Approval 21 April 2009 (f) Grant Agreement Signing 3 August 2009 (g) Grant Effectiveness 25 August 2009

DESIGN AND MONITORING FRAMEWORK

Design Performance Targets and Data Sources and Summary Indicators a Reporting Mechanisms Assumptions and Risks Impact Sustained growth of District level gross (i) National economic data economic activities by domestic product growth is and indicators minimizing the devastating restored to pre-flood level (ii) District statistics and impact of the 2008 1 year after project data, surveys monsoon floods mainly in completion the three flood-affected districts Outcome Assumptions Quickly restored economic (i) Agriculture productivity (i) Project progress reports (i) Complementary post-flood activities mainly in the three restored on 7,940 ha, (ii) Project review missions recovery assistance provided districts and improved including 2,500 ha of (iii) Surveys and (ii) Strong government livelihoods of about severely damaged land socioeconomic survey commitment to provide flood 300,000 flood-affected and 1,518 ha through as part of project recovery funds and counterpart people provision of 700 shallow completion report funds tube wells (iii) Adequate government (ii) Total income of flood- provision of annual affected people restored maintenance funds to the pre-flood level of (iv) Adoption of anticorruption NRs1,246 million measures (iii)Rehabilitated infrastructure adopts Risk appropriate flood- (i) Future floods may occurred resistant design during the project period standard (iv)Capacity of flood preparedness improved

Outputs Assumptions 1. Agriculture livelihoods (i) Agriculture revived by (i) Project progress reports (i) Timely recruitment of NGOs of affected people in distributing agriculture (ii) Audit reports (ii) Timely assignment of 22 village development inputs for damaged (iii) Project review missions counterpart staff committee areas restored farmland of 7,940 ha by (iv) Surveys June 2012

(ii) Some 2,840 families provided with technical and in-kind assistance to farm silted and riverbed land by June 2012

(iii) 52 fishponds, 70 on- farm watercourses, 22 agriculture collection centers, 19 markets centers, and 10 agriculture service centers rehabilitated

2. Damaged irrigation Irrigation structures of (i) Project progress reports Assumptions facilities reconstructed and 2 large and 25 small (ii) Audit reports (i) Timely awards of civil works rehabilitated surface irrigation schemes (iii) Project review missions contracts covering 11,540 ha (iv) Surveys (ii) Satisfactory performance by rehabilitated by June 2011 national contractors

iii

DESIGN AND MONITORING FRAMEWORK

Design Performance Targets and Data Sources and Summary Indicators a Reporting Mechanisms Assumptions and Risks

3. Access to drinking 28 gravity flow water supply (i) Project progress reports Assumptions water and sanitation of the systems in the far western (ii) Audit reports (i) Timely awards of civil works flood-affected people region rehabilitated by June (iii) Project review missions contracts improved 2011, 4 small overhead (iv) Surveys (ii) Satisfactory performance by water supply systems national contractors constructed by June 2012, and 3,500 shallow tube wells installed by June 2010 in Sunsari district for 22,000 households

4. Strategic road network About 50 km of strategic (i) Customs data Assumptions rehabilitated and improved roads in the far western (ii) Project progress reports (i) Timely import of essential region rehabilitated by June goods and services required 2011, and a bridge on the for flood and cyclone related Koshi River constructed by recovery and rehabilitation June 2012 at Chatara to (ii) Timely recruitment of substitute the present low consultants capacity ferries and provide better access during similar floods in the future

5. Project management (i) Effective and efficient (i) Project progress reports Assumptions system operational project implementation (ii) Audit reports (i) Timely recruitment of NGOs through timely recruited (iii) Project review missions and consultants consulting services by (ii) Close coordination between June 2009 and the project coordination office procurement of goods and the Department of Water and civil works by Induced Disaster Prevention October 2009

(ii) Strengthened capacity (i) Flood forecasting system of flood preparedness for Koshi River of the Government by (ii) Early warning system for June 2012 Koshi River

Activities with Milestones Inputs 1.1 Rehabilitate agriculture in 7,940 ha farmland by June 2012 by providing ADB agricultural inputs, materials and equipment in order to grow cash crops in the International consultants and highly affected areas and cultivate cereals in partly affected areas national consultants input, and 1.2 Train 7,730 families by June 2012 for reclaiming soil fertilities Asian Development Bank grant of 2.1 Rehabilitate 27 surface irrigation systems by June 2011 $25.60 million 2.2 Install 700 shallow tube wells for supplementary irrigation by June 2012 3.1 Rehabilitate 28 gravity flow water supply systems by June 2012 Government 3.2 Install 3,500 shallow tube wells to provide access drinking water by June 2012 Counterpart funding and in-kind 3.3 Construct four small overhead water supply systems by June 2012 contribution equal to $6.40 million, 4.1 Rehabilitate damaged 50 Kms of strategic roads in the far west by June 2011 and all relevant reports, documents, 4.2 Construct a Koshi bridge at Chatara by June 2012 and information made available as needed I. PROJECT DESCRIPTION

A. Project Area and Location

1. The Project is located in the three districts affected by the devastating 2008 flood in Nepal. The Three districts are Sunsari District in the Eastern Development Region and Kailali and Kanchanpur Districts in Far Western Development Region of Nepal.

B. Impact and Outcome

2. The Project will quickly restore the economic activities mainly in the three districts and improve the livelihood of about 300,000 people who are seriously affected by the 2008 floods. It will contribute to sustainable economic growth by minimizing the devastating impact of the floods and reduce future risk from similar disasters. The Project will focus on augmenting incomes and self-reliance through reviving agriculture in the affected farmland and restoring livelihood of the affected people, and rehabilitating infrastructure. The Project includes mitigation of damage from future recurrent floods by enhancing cost-effective construction specifications for rehabilitated infrastructure, supporting capacity building and the Government's disaster preparedness.

3. The Project outcome will be improved livelihood of the flood affected people through revival of agriculture and land fertility, rehabilitation of agriculture, irrigation, roads, and water supply and sanitation infrastructures , and enhanced capacity of the Government for mitigation and management of flood disaster in future in the three Project districts. The key indicators for the outcome during the project period are (i) restoration of agriculture productivity on 7,940 ha, including 2,500 ha severely damaged and 1,518 ha through provision of 700 shallow tube wells (ii) restoration of total income of flood affected people to the level of NRs1, 246 million prevalent before the floods (iii) rehabilitation of infrastructure adopting appropriate flood-resistant design standards, and (iv) improvement in capacity for flood preparedness.

C. Outputs

4. The Project comprises five parts: agriculture (A), irrigation (B), water supply and sanitation (C), roads (D), and project management (E). The Project will strengthen partnerships and synergies with other development partners.

Part A: Agriculture

5. The agriculture component will restore livelihood of the affected people from 22 VDCs in the project districts by supporting them to grow cash crops such as vegetables, water melon, peanuts, parwar, sun flower, jute, and arahar (pulse) in the highly affected areas, and cultivate cereals (paddy, wheat and maize) and vegetables in partly affected areas. Seeds, saplings, compost, and pesticides will be provided to affected farm families by organizing them into groups and the trainings will be provided to reclaim soil fertility so that livelihood is restored. The re-establishment of fruit orchards (such as banana, mango, and pineapple) and rehabilitation of fish ponds, agriculture products collection and marketing centers and agriculture service centers will be carried out. Likewise, other activities such as fingerlings and bee hives (with bee) will be provided to interested farm families to support their livelihood. There will be a provision of basic equipment to undertake agricultural programs. Management services and consulting inputs will be available to implement this component.

6. This component will support rehabilitation of agriculture in 7,940 ha farmland (3,688 ha in Sunsari, 2,264 ha in Kailali and 1,988 ha in Kanchanpur), covering 7,730 farm families (3,280 families in Sunsari, 2,640 families in Kailali and 1,810 families in Kanchanpur), and restoration of livelihoods of about 45,600 people (19,680 in Sunsari, 14,520 in Kailali, and 11,400 in Kanchanpur).The beneficiaries will comprise 45% women, and 25% dalit and janajati communities.

7. Project beneficiaries will be the flood-affected farm families. For support under this component, the farm families will be selected based on their demand and preparedness to restore their livelihood through revival of agriculture. The specific criteria will include that the farm families (i) are formally returned to their original places from camps; (ii) have land where cultivation of suitable cereal or cash crops is possible; (iii) willing to cultivate suitable crops through the project support; (iv) prepared to be a member of farmer groups formed in respective settlements; and (v) committed to continue agriculture after the Project is completed. The most affected people requiring immediate support will be given high priority. Cohesive groups will be formed through social mobilization taking into account their preference to grow crops suitable to their lands. Out of the targeted 7,940 farm families, 25% is expected to be covered in 2009, 50% in 2010 and the remaining 25% in 2011.

Part B: Irrigation

8. This component will rehabilitate the damaged 27 (two large and 25 small) surface irrigation systems, including their head works; main and branch canals and village channels; canal structures such as drain siphons, outlets; canal service roads and small bridges; and protection works for key canal structures. This will involve improvement of 25 head works; 127 km of main, branch and tertiary canals; 196 canal structures such as drains, aqueducts, gates, outlets and inlets; 36 km of canal service roads; 45 culverts and small bridges; 1 medium-sized bridge (on canal service road); and necessary protection works for the above structures Rehabilitation of the irrigation systems will restore irrigation facilities to 11,542 ha farmland. The irrigation projects to be rehabilitated in each district under the project are given in Table-1

Table 1: Irrigation Projects for Rehabilitated under the Project

District Project Name Sunsari Haripur Irrigation Project; Galpariya Irrigation Project; Paschim Kusaha Irrigation Project; Jharuwa Khola Irrigation Project; Sunsari-Morang Irrigation Project Kailali Gauri Irrigation Project ; Tedi Irrigation Project; Patharaiya Irrigation Project; Khurkhuriya Irrigation Project; Bhajani Irrigation Project; Mohana Irrigation Project; Bhagauli Irrigation Project; Sonaha Ajaraili Irrigation Project; Munuwa Irrigation Project; Bhursa Irrigation Project; Patreni Irrigation Project Kanchanpur Kalapani Irrigation Project; Maleriya Nala Irrigation Project; Rateula Irrigation Project; Siddhanath Irrigation Project; Bagun Irrigation Project; Brahmadev Irrigation Project; Baijanath Irrigation Project; Upper Jahari Irrigation Project; Bachhela Irrigation Project; Baluwa Nala Irrigation Project; Mahakali Irrigation Project

9. For immediate revival of agriculture in feasible areas, and supplement surface irrigation after their rehabilitation, 700 Shallow Tube Wells (STWs) will be installed in Sunsari district under this component. The STW program will cover farmland of 1,518 ha and benefit 1,650 families and 9,406 people. The Project will finance procurement of diesel pump sets or electric 3 motors, installation of STWs, procurement of flexible plastic pipe, land leveling, and operation and maintenance costs for a year. Project beneficiaries will be the flood affected farm families who intend to immediately start growing suitable crops and need irrigation. The specific criteria will include that the farm families (i) are formally returned to their original places from camps; (ii) have lands that are suitable to grow crops once irrigation is available; (iii) are willing to be a member of STW irrigation group formed in respective settlements, as STW will be provided to a group comprising 5 – 10 farmer families with 2.5 hectare land; (iv) are members of the groups, which are prepared to properly operate and maintain STWs, although operation and maintenance costs will be provided by the Project for one year, and (v) are members of the groups, which are committed to operate and maintain STWs after one year. Social mobilization services will be available to form cohesive groups. ADB will review the detail selection criteria and implementation plan. Out of the targeted 700 STWs, 40% will be installed in 2009, 40% in 2010 and the remaining 20% in 2011.

Part C: Water Supply and Sanitation

10. The expected benefits of this component are hygiene improvements in the flood affected areas, reduced pollution of groundwater and surface water, and access to drinking water. This component has three activities; (i) water supply scheme; (ii) sanitation; and (iii) community mobilization.

(a) Water Supply Scheme

11. The Project will rehabilitate 28 gravity flow water supply systems in Kailali and Kanchanur, and construct four small overhead water supply systems and install 3,500 shallow tube wells in Sunsari to provide access to drinking water and sanitation facilities. For Sunsari district, water supply schemes are designed to complement the Government's return package for returnees to meet the needs for drinking water and sanitation facilities. The gravity flow water supply system and small overhead water supply systems will be designed to give the disadvantaged and poor adequate access to drinking water and sanitation, and will be operated and maintained by the respective communities.

(b) Sanitation

12. This activity will cover health and hygiene education awareness program and support the construction of household latrines for returnees in Sunsari district. In Kailali and Kanchanpur districts, the Project will focus on promoting hygiene and sanitation behavioral change through an integrated community and school-based program. Revolving funds will be available to encourage rapid and significant expansion of latrine use and proper hand washing behavior in project-assisted communities. The health and hygiene education awareness program with a school led total sanitation or community-led total sanitation will be implemented for six months for each district.

13. It is envisaged that the active participation of community to ensure equitable access to benefits, and long term sustainability of water supply and sanitation facilities. As per the Government's strategy, project beneficiaries (users) and water supply and sanitation communities (WSSCs) are responsible for operation and maintenance of facilities. Under this activity (i) WSSCs will be formed or existing WUSCs will be strengthened; (ii) orientation program will be organized; (iii) optimum use of locally available resources, including labor and 4 skills will be made; and (iv)appropriate mechanisms for effective O&M will be established. This activity will be conducted by social mobilizers.

Part D: Roads

14. The project component comprises reconstruction and rehabilitation of damaged strategic roads in the far west and replacement of existing ferries by a permanent bridge at Chatara over the Koshi River. The permanent bridge would provide reliable alternative route of transport system linking the eastern part with the western part of the country and prevent possible negative impacts in case of similar floods in the future. Rehabilitation of flood damaged feeder and local roads in the Koshi area will be carried out under the ongoing Rural Reconstruction and Rehabilitation Sector Development Program funded by ADB. The roads part under the Project will cover rehabilitation of damaged infrastructure and where technically feasible and justified, the design of rehabilitation works will focus on preventive and mitigating measures to minimize the damaging effect of similar floods in the future.

15. The proposed road component of the Project in the far west consists (i) rehabilitation of damaged road section between Karnali and Gaddachowki (about 500m in total); (ii) re- gravelling of damaged feeder roads in Kailali and Kanchanpur districts (about 50 km); (iii) land slide stabilization and construction of retaining structures in Mahakali highway and Silgadi Sanfe road (5 to 6 major landslides); and (iv) bridge maintenance and protection works in Kailai and Kanchanpur districts ( 4-5 bridges).

Part E: Project Management Component

16. This component of the project includes (i) provision of a new Project Coordination Office (PCO) with adequate staff of the executing agency (EA) with consulting services and needed logistics in order to ensure efficient implementation and management of project activities; (ii) engagement of a combination of individual consulting services to support project supervision, monitoring, and capacity building for preparing the strategies and actions needed to prevent and mitigate the effect of future floods in the project districts; (iii) capacity building program for DWIDP (iv) a series of socioeconomic studies that focuses on the evaluation of the project's impact on poverty reduction will be carried out, including a benchmark study at the start of the Project, a follow up study on the third year, and final study at the end of project implementation. (v) return package designed to support initial return of displaced people together with additional inputs from Government and other humanitarian agencies. Each household is to be provided with the return package NRs 50, 000.00 in installments basis.

(a) DWIDP Capacity building Program

17. This activity mentioned above under the Project Management Component will mainly deal with the institutional strengthening of the DWIP for Disaster Risk Reduction with special case of the Koshi River. The specific objectives of the program are to (a) better understand the existing flood risk reduction provisions in the country with special focus on the Koshi river; (b) provide concrete recommendations to institutional strengthening of DWIDP including for flood forecasting and early warning; and (c) undertake a strategic and systematic approach for flood risk reduction thereby strengthening the existing capacities of DWIDP in flood risk reduction, mitigation and management, promoting institutional cooperation as well as to enhance the preparedness of the Department to implement the possible subsequent phases of flood risk reduction efforts in future. The expected outcomes from the program will be (i) preparation of flood forecasting system for the Koshi river; (ii) preparation of Early-warning system for the 5

Koshi river; (iii) assessment of institutional capacity of DWIDP including for flood management and recommendations for strengthening the capacity; and (iv) assessment of potential disaster risks and recommendation of management package of approach for the prevention and mitigation of disaster risks.

D. Special Features

18. The Project will lead to restoration of incomes for 11,700 affected families: 7,700 families through agricultural input supports and further 4,000 families through reconstructed irrigation schemes. Through the rehabilitation of surface irrigation, the provision of shallow tube wells for irrigating uneven farmlands, extension services for crops suitable for sandy soils and input supply for their startup, and the rehabilitation of fishponds, the incomes of families are expected to increase by NRs1, 300 per family within three years. Much of the agricultural support will be geared to obtaining incomes from land that has been heavily silted and that now requires different technologies to provide farming incomes. In addition to the Project activities, the ongoing ADB financed projects, the Community Livestock Development Project and the Rural Reconstruction and Rehabilitation Sector Project will improve the affected people by providing livestock for the disadvantaged group and rehabilitating rural roads and community infrastructure in the affected areas.

19. Being the first disaster rehabilitation project for Nepal, the Project will initiate activities related to disaster preparedness. The PCO under the direction of the Project Steering Committee (PSC) will analyze lessons learned from the past floods and, through a consultative process, draw up strategies and actions needed to prevent and mitigate future floods. The strategies and actions will be incorporated in a disaster preparedness action plan. ADB's disaster vulnerability assessment for the new Country Partnership Strategy will strengthen the Government's capacity of disaster preparedness and early warning system. Training will be provided to staff of the agencies to improve disaster awareness and preparedness. Civil works envisaged under the Project will provide greater protection to roads, bridges and irrigation works against flood and the construction of an alternative route to the east west highway through Chatara will provide a failsafe east-west transport link for preparedness for future floods in the Koshi River.

20. The project includes features that will help reduce poverty directly or indirectly. It will provide (i) short term employment to poor women and men in skilled and unskilled labor intensive construction works in the rehabilitation of damaged road and irrigation infrastructures; (ii) contribute to smooth transportation of goods and services to the market thereby improving access of the poor to services; (iii) improve participation of the poor and marginalized in user committees of rehabilitated infrastructures supported through social mobilization; and (iv) provide agriculture and irrigation support package in an integrated way for one year cropping cycle free for all affected for livelihood improvements.

21. The project components in four major sectors - roads, irrigation infrastructure, agriculture and water and sanitation will contribute in reducing vulnerability and risks of the affected people, displaced, poor and disadvantaged. Social mobilization activities will be integrated, which will improve group organization and management capacity of poor and disadvantaged in reconstruction of damaged irrigation and water supply infrastructures empowering them to access services. Gender and social inclusion guidelines and detailed action plan will be developed to ensure benefits to women and marginalized groups.

22. The project will analyze gender issues in each component while developing the plans 6 and during implementation to ensure equal benefit to women from the project services and resources. Through community mobilization activities women and disadvantaged groups will be actively involved in those works that directly benefit them in terms of employment and to improve income generation. They will be actively participated in user group and committees to raise their issues and voice to get equal benefits from project resources.

23. The rehabilitation of damaged water supply schemes in the project will greatly support women by reducing their work burden. Hygiene and sanitation program integrated with water component will help raise awareness in women on cleanliness and use of latrines which will have direct impact on family health. Short term employment created during rehabilitation of damaged infrastructure will provide employment to women and increase their access to income sources. Women's participation and representation in decision making will be ensured in user committees of Water and Sanitation, agriculture and irrigation programs.

II. COST ESTIMATES AND FINANCING PLANS

A. Cost Estimate

24. The project investment cost is estimated at $32.00 million, including taxes and duties of $3.19 million. Summary estimates by component are in Table 1. Detailed cost estimates by expenditure category and financiers are in Appendix -1.

Table 1: Project Investment Plan ($ million) Item Amounts A. Base Costb 1. Part A: Agriculture Part 3.86 2. Part B: Irrigation Part 8.77 3. Part C: Water Supply and Sanitation Part 4.56 4. Part D: Roads Part 12.10 5. Part E: Project Management 1.53 Subtotal (A) 30.82 Contingencies 1.18 Total 32.00 a Includes taxes and duties of $3.19 million financed by the Government. b In January 2009 prices. Sources: Asian Development Bank estimates

B. Financing Plan

25. The proposed ADB grant is $25.60 million from ADB’s Special Funds resources to help finance the project. The grant will finance 80% of the Project cost. The provision of grant assistance is justified by the pro-poor orientation of the Project and the country’s tight fiscal position. The Government is to provide the remaining Project Cost of $6.4 million equivalent, including taxes and duties of $3.19 million. The Financing Plan is in Table 2.

Table 2: Financing Plan

Totala

Source ($ million) %

Asian Development Bank 25.60 80.00 Government of Nepalb 6.40 20.00 Total 32.00 100.00 a In January 2009 prices. b Includes taxes and duties of $3.19 million. Source: Asian Development Bank estimates.

C. Allocation of Grant Proceeds

26. Grant allocations and withdrawals by component with related percentages of ADB financing is provided in Table 3.

Table 3: Allocation and Withdrawal of Grant Proceeds

CATEGORY ADB FINANCING No. Item Amount Percentage and Basis for Withdrawal Allocated from the Grant Account ($) 1 Civil Works 17,765,000 80 percent of total expenditure

2 Consulting Services 2,393,000 87 percent of total expenditure

3 Agriculture Inputs 2,581,000 85 percent of total expenditure

4 Training Workshops 337,000 65 percent of total expenditure

5 Vehicles 110,000 65 percent of total expenditure

6 Material and Equipment 1,175,000 75 percent of total expenditure

7 Recurring Cost 289,000 45 percent of total expenditure

8 Contingencies 950,000

Total 25,600,000

27. The goods, works, and consulting services and other items of expenditure to be financed out of the proceeds of the grant and the allocation of amounts of the grant among different categories of such goods, works, and consulting services and other items of expenditure shall be in accordance with the provisions of the Grant Agreement, as such Schedule may be amended from time to time by agreement between the Government and ADB.

28. Except as ADB may otherwise agree all goods, works, and consulting services to be finance out of the proceeds of the grant shall be procured in accordance with the provision of the Grant Agreement. 8

29. Withdrawals from the grant account in respect of goods, works, and consulting services to be finance out of the proceeds of the grant shall be procured in accordance with the provisions of the Grant Agreement.

30. Withdrawals form the grant account in respect of goods, works, and consulting services shall be made only on account of expenditures relating to: a) goods which are produced in and supplied from and services which are supplied from such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement, and b) goods, works, and consulting services which meet such other eligibility requirements as shall have been specified by ADB from time to time.

31. Reallocation: Notwithstanding the allocation of grant proceeds and the withdrawal percentages set forth in Table 3:

(a) If the amount of the grant allocated to any category appears to be insufficient to finance all agreed expenditures in that category, ADB may, by notice to the Government, (i) reallocate to such category, to the extent required to meet the estimated shortfall, amounts of the grant which have been allocated to another category but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such category may continue until all expenditures there under shall have been made; and

(b) If the amount of the grant then allocated to any category appears to exceed all agreed expenditures in that category, ADB may, by notice to the Government reallocate such excess amount to any other category.

III. IMPLEMENTATION ARRANGEMENTS

32. Executing and Implementing Agencies. The Executing Agency for the Project will be the Ministry of Physical Planning and Works (MPPW) and the Implementing Agencies for the project will be (i) the Department of Agriculture (DOA) for part A , agriculture component (ii) the Department of Irrigation (DOI) for part B , irrigation component (iii) the Department of Water Supply and Sewerage (DWSS ) for part C, water supply and sanitation component and (iv) the Department of Roads (DOR) for part D, roads component. A separate Project Implementation Unit (PIU) will be established in each IA and in each project districts; sub-project implementation units (SPIU) for each sector will be established to implement the project activities in respective districts. The Organizational structure for the management of the Project is outlined in Appendix – 2.

33. Project Coordination Office (PCO) will be established at MPPW to support the EA, and to coordinate with the IAs and the line ministries, including the National Planning Commission. MPPW will establish the PCO, headed by a full time coordinator, within one month of the Grant effectiveness. It will be headed by a full time project coordinator. The PCO will (i) prepare the overall project implementation plan and consolidated annual work plan; (ii) assist project implementation units (PIUs) in preparing estimates for annual budget and contract packaging; (iii) conduct a series of socioeconomic studies; (iv) monitor all project management activities; (v) organize monitoring and evaluation of project activities; (vi) maintain proper accounting for all project expenditures for auditing; (vii) manage and replenish the imprest fund; (viii) prepare 9 necessary progress reports and submit to ADB; and (ix) prepare the project completion report. The project coordinator will be supported by one full time deputy project coordinator. The PCO will be properly staffed and assisted by consultants with expertise in engineering, finance, accounting, monitoring and evaluation.

34. Project Steering Committee (PSC) and Project Management Coordination Committee (NPMCC). The PSC chaired by the Secretary, MPPW, will be established within one month of grant effectiveness to provide overall project coordination and facilitate project implementation. The PSC will include representatives from the Ministry of Finance, Ministry of Home Affairs, Ministry of Water Resources (MOWR), Ministry of Local Development, National Planning Commission, Ministry of Agriculture and Cooperatives DOA, DOI, DWSS, Department of Water Induced Disaster Prevention, and DOR. The Project Coordinator will act as member secretary of the PSC. ADB including other development partners may be invited by the Government to attend PSC meetings as observers. PSC will meet at least six times in the first year and as and when necessary in subsequent years, but not less than once a year. In order to coordinate planning and execution of various components across the sectors, a national project management coordination committee (NPMCC) will be established with representation from each PIU. PCO will coordinate the meeting of NPMCC. Meetings of NPMCC will be held every month.

35. Project Management : Each IA will be responsible in its respective sector/sub-sector for (i) preparation of annual work plan; (ii) design and approval of civil works; (iii) preparation of tender documents for civil works and goods and approval of respective contracts; (iv) appointment of consultants; and (v) submission of progress reports to the EA. Each PIU, established in each IA will be headed by a project director. The concerned PIU’s will be responsible for preparation, submission, approval, implementation, and benefits monitoring and evaluation of all subprojects. PIU will also be responsible for consolidation of physical and financial information received from the field, circulate physical progress reports to PCO. PCO will then consolidate reports for submission to ADB. PCO will also compile financial expenditures and will submit withdrawal application to ADB for reimbursement of eligible expenditure. The SPIU’s for each sector will implement the project activities in the respective project districts.

36. In each Project district, a local project coordination committee will be established under the chief district officer (CDO) to coordinate project activities. Each SPIU will participate in the meetings of the existing District Disaster Response Committee (DDRC) in the districts to coordinate project activities with other flood related activities supported by the Government and other various funding agencies. DDRC is already established under the coordination of the district office in Sunsari and is coordinating all Koshi flood related activities. Similar arrangement need to be established for Kanchanpur and Kailali.

Part A: Agriculture

37. DOA, the IA under the Ministry of Agriculture and Cooperatives will establish a project implementation unit (PIU) headed by a deputy director general and supported by a senior agriculture officer, an account officer and an administrative staff. DOA will implement the project through its district agriculture development offices (DADOs). DADO chiefs will be responsible for planning and implementation, under the guidance of the district agriculture development committee and coordinated by local development officer of the respective district development committees. From among the existing DADO staff, DOA will assign for the project one each agronomist, horticulturist, fisheries specialist, an account officer and three junior technicians. 10

38. Good implementation arrangements for agricultural input distribution need to be in place to implement this component effectively. Consultants should be mobilized in time to support DADOs in procurement of agricultural inputs and their distribution to affected families whose lands have limited silt deposit or have cleared high silt deposit by themselves. Over- procurement should be avoided, but inputs should reach farm families on time using systematic procedures.

Part B: Irrigation

39. The IA, DOI under MOWR will establish a project implementation unit (PIU) headed by a deputy director general and coordinated by a senior divisional engineer and supported by one each civil engineer, account officer and administrative staff. DOI will rehabilitate surface irrigation through its respective irrigation development divisions (IDDs) and the STWs through Biratnagar Groundwater Branch Office (BGBO). Chiefs of respective IDDs and BGBO will be responsible for planning and implementation, and coordination with local development officers of the respective district development committees. DOI will assign (i) two design engineers, two civil engineers, an account officer, and four sub-engineers to rehabilitate the surface irrigation projects, and (ii) one each hydro-geologist, civil engineer, account officer, sub-engineer, and social organizer to implement STW program.

Part C: Water Supply and Sanitation

40. The IA, DWSS under MPPW will establish a project implementation unit (PIU) headed by a Deputy Director General (DDG). Water Supply and Sanitation Division Office (WSSDO) of DWSS in each district office will facilitate the selected communities in implementing the selected water supply and sanitation facilities. The Chief of WSSDO will be the Project Manager and the WSSDO will have eight full time staff (one engineer, two sub engineer, one account officer and three support staff) to facilitate the implementation of the Project. The communities take a lead role to ensure the sustainable operation and maintenance of rehabilitated/constructed water supply and sanitation facilities.

Part D: Roads

41. The ADB project directorate, established in 1987, and fully functional under previous ADB funded projects, will serve as the PIU for overall project coordination, monitoring, and implementation. The PIU will be supported by sufficient technical and administrative staff. One project office site will be established in the Koshi area, headed by full time Project Manager supported by adequate support staff to carry out bridge works. Division chiefs of respective Division Road Offices (DROs) will be designated as project managers for the road works in the far west. Project Managers will be responsible for day to day implementation and will report to the project director in the PIU.

Part E: Project Management with DWIDP Strengthening Program

42. It is envisaged that DWIDP strengthening will be carried out through MPPW. An arrangement would be placed so that execution of the program will be done by DWIDP, which will establish an institutional coordination with other relevant agencies such as Department of Hydrology and Meteorology (DHM), Department of Soil Conservation and Watershed Management and the concerned communities. Detailed capacity building of DWIDP is in Appendix17

IV. IMPLEMENTATION SCHEDULE

43. As the Project is for emergency assistance, it will be implemented to complete in 36 months. The Initial project activities will include i) establishment of PCO, PSC, PIU in each IAs and SPIU in respective project districts; ii) recruitment of consultants for each component; iii) verification of damaged infrastructure, survey, design and investigation for rehabilitation of flood damaged works; iv) identification and group formation of target farm families in Part A; and v) identification of returnees for installation of hand pumps in Part C. Restoration of the damaged agriculture, irrigation and gravity flow water supply infrastructures will commence by end June 2009 in order to avoid further damage and for commencement of their utilization as far as possible. Construction of Koshi Bridge at Chatara and rehabilitation of road works in the far west are scheduled to start by December 2009. Detailed project implementation schedule is in Appendix 3.

V. COST ESTIMATES AND FINANCING PLAN DURING IMPLEMENTATION

44. A detailed financing plan for the project, with estimated financing requirements of each year for the major project components will be prepared using the format in Appendix 4. These tables will be revised and updated annually or more often if necessary, based on actual progress in project implementation and will be attached to the trimester progress report to the ADB.PCO will also prepare contract award and disbursement projections for each component under the project on a quarterly basis in the format shown in Appendix 5. This should be submitted to ADB by 15 December each year.

VI. CONSULTANT RECRUITMENT

45. In view of the tight implementation schedule of the project, the IAs’ uneven institutional capacity, and the need for accelerated project implementation, consulting services will be required to support project implementation. The selection and engagement of all consulting services will be in accordance with ADB’s Guidelines on the Use of Consultants (2007), ADB’s Guidelines on the Use of Consultants, as amended from, time to time and other arrangements satisfactory to ADB for engaging national consultants. When recruiting for consulting services, it is necessary to post the notice both in the ADB's website and the paper. The instruction for posting in ADB is available in www.adb.org/businessopportunity/csrn. The TORs for recruitment of consultants is in Appendix-6.

(a) PCO Support Consultants

46. Project Management Team: At the outset of the Project, the PCO will recruit seven individual national consultants to advance project preparatory activities for a total of 98 person- months of national consultants on individual basis for services in project management, benefit monitoring and evaluation, procurement, financial management, social development, and resettlement and environment management. The team shall include (i) Team Leader/project Management Specialist (24 person-months); (ii) Procurement Specialist (14 person-months); (iii) Financial Management Specialist (12 person-months); (iv) (Benefit Monitoring and Evaluation Specialist (12 person-months); (v) Resettlement Specialist (12 person-months); (vi) Environment Management Specialist (12 person-months); and (vii) Social Development Specialist (12 person-months).

47. Institutional Strengthening Team: PCO in coordination with DWIDP will also recruit five individual consultants to review the institutional aspect of flood mitigation work and draw up 12 the strategies and actions needed to prevent and mitigate future floods. It shall include (i) 8 person-months of international consulting services which includes the services of a river morphologist for 6 months and an institutional development specialist for 2 months, and (ii) 32 person-months of national consultants which shall includes the services of an institutional development specialist, a river engineer and a river hydrologist.

(b) Design, Supervision and Implementation Support Consultants

48. Five consulting packages of national consulting services for implementation of the project activities will be procured. These include one consultant package each for agriculture, irrigation, water supply and sanitation and two packages for road component, one each for the east and the far west. In order to expedite project implementation for completion within 36 months and as agreed by ADB and the Government, ADB will select consulting firm on behalf of the Government using the consultants' qualifications selection method and the concerned IA will sign the contract agreements with the selected consulting firms.

49. Agriculture. Implementation of this component will require 110 person months of national consultants in two teams, one for Sunsari and the other for Kailali/Kanchanpur districts, comprising i) Team leader/Agronomist ii) Agriculture Engineer and Social Mobilizer/Trainer.The objectives of the consulting services are to assist the Implementing Agency (IA), the Department of Agriculture and its District Agriculture Development Offices in Sunsari, Kailali and Kanchanpur to (i) identify/verify target farm families and group them; (ii) prepare and implement agricultural programs as per potential, willingness and demands of the target farm families;(iii) develop farmers' skills in reclaiming land fertility while growing suitable crops;(iv) promote farmers' skills opportunities for non-farm income generating activities; (v) procure and deliver agricultural inputs to farmer groups; (vi) reconstruct damaged agriculture infrastructure with provision of their sustainable operation and management; and (viii) periodically monitor field programs to ensure that the implemented programs and rehabilitated infrastructure meet expected quality standard.

50. Irrigation. A total of 91 person-months of national consultant input will be required for implementation of this component. Fifty-nine person-months of the inputs for Sunsari district will comprise a Team Leader/Irrigation engineer, a Design/Supervision engineer, a Hydrologist and a Social Mobilizer/Trainer. The remaining 32 person-month inputs for Kailali and Kanchanpur districts will comprise a Team Leader/Irrigation engineer and a Design/Supervision engineer. The objectives of the consulting services are to assist the Implementing Agency, the Department of Irrigation and its concerned Irrigation Development Divisions covering Sunsari, and Kailali and Kanchanpur districts, and the BGFO for (i) verification of damaged structures identified for rehabilitation; (ii) review survey, design, cost estimates, bid documents already completed by DOI for rehabilitation works; (iii) preparation of detail survey, design and cost estimates; (iv) preparation of bid documents and procurement of contractors ; (v) monitoring contractor’s works to ensure quality and completion in time; (vi) identification/ verification of target groups for STW program; (vii) installation of STWs in participatory way and management assistance for operation and maintenance funds; and (viii) periodically monitoring field programs to ensure completion in time and meeting of project objectives

51. Water Supply and Sanitation. A total of 96 person-months of professional staff input of national consultant will be required for implementation of this component. The consultant team will comprise a Team Leader/Water Supply engineer, three Design/ Supervision engineers, two Social Mobilization experts, two Public Health experts, two Water quality/ environmental specialists, a Electromechanical engineer and three inspector of works. The objective of the 13 consultant’s services is to support the IA, DWSSS and its concerned division offices in Sunsari, Kailali and Kanchanpur districts with day-to-day project implementation, which will include (i) conducting awareness campaign to inform potential beneficiaries; (ii) implementation of health and hygiene program; (iii) assistance to communities to mobilize and establish water user and sanitation committees; (iv) assessment of quality, quantity and availability of current water sources; (v) survey, design and feasibility study of water supply subprojects; (vi) survey. design, specifications and cost estimate of tube well, overhead tank, pipelines ,electromechanical components etc.; (vii) preparation of bid documents and assistance in procurement of works; (viii) supervision of works and assistance to WSSDO to administer the contracts to ensure quality of works , cost and schedule control, measurement, and approval of contractor’s work etc.;(ix) providing orientation and training to WUCS ; and commissioning the whole subproject and get certified by WSSDO.

52. Road (Package-I Far West). A total of 109 person-months of professional staff input of national consultant will be required for implementation of this component. The consultant's team will comprise Team Leader/Highway Engineer, Team Leader/ Resident Engineer, Structure Engineer, Geotechnical/Material Engineer, Hydrologist, a Geologist, a Contract specialist, Environmental specialists, Resettlement officer, CAD engineer, Quantity engineer and Assistant Resident engineers. The objectives of the consulting services are to assist DOR (i) review and update ADB/IA’s damage assessments; (ii) carry out survey, soil investigations and designs for reconstruction and rehabilitation works; (iii) prepare necessary bidding and other tender documents and assist in bid evaluation and award contracts (iv) monitor and supervise the road rehabilitation and other construction works to ensure specified quality and quantity, schedule and achievement of project objectives; and (v) review projects’ environmental and resettlement impacts, conduct ISA and prepare resettlement check-list, and take necessary action as per Government and ADB guidelines.

53. Road (Koshi Bridge). ADB agreed with the Government’s request to start the design of the proposed Koshi bridge at Chatara immediately using funds from the ongoing Road Connectivity Sector I (RCSI) Project in order to avoid possible delay in design of the Koshi Bridge due to the procurement of the design consultants and to complete the bridge within the limited 36 months project period. The RCSI project consultant ND LEA Inc., Canada has started the design of the bridge.

54. Supervision Koshi Bridge. A total of 95 person-months of professional staff input of national consultant will be required for construction supervision of this component. The consultant's team will comprise a Team Leader/ Resident Engineer, a Structure engineer, a Geotechnical/Material Engineer, an Environmental specialist, a Resettlement Officer and an Assistant Resident Engineer. The objectives of the consulting services is to (i) monitor and supervise the bridge construction works to ensure specified quality and quantity, schedule and achievement of project objectives; (ii) make measurements ,certify work volume and payment certificates ; (iii) ensure compliance with the environmental and social impact mitigation requirements, including environmental management plan and land acquisition and resettlement action plan, monitoring the process of resettlement of people affected by the works; and (iv) undertake project monitoring and evaluation in the format acceptable by the Employer and the ADB and assist in preparing a consolidated Project Completion Report in format to be provided by the ADB.

VII. PROCUREMENT

55. Procurement of works, goods, and services will be carried out in accordance with ADB’s Guidelines for Procurement (2007, as amended from time to time). Generally, national procurement will be the preferred mode for all civil works because of the relatively short implementation period, small size of contract packages, wide geographic spread of the project sites, and need for local awareness and community participation. All small and widely dispersed civil works of up to $30,000 will be undertaken mainly by community, following the community participation guidelines. Shopping will be used for works exceeding $30,000 but no more than $100,000. Procurement of civil works contracts with estimated values of $1.00 million or less will be procured in accordance with national competitive bidding(NCB)procedures and generally be in accordance with the Government’s Public Procurement Regulations 2007 (PPR), Public Procurement Act 2007, and ADB’s Procurement Guidelines (2007, as amended from time to time). Civil works contracts with estimated values greater than $1 million will be procured in accordance with international competitive bidding procedures. Supply contracts for equipment or materials exceeding $ 500,000 will be procured following international competitive bidding(ICB), and those not exceeding $500,000 but more than $100,000 will be procured following NCB. Shopping will be used for procuring readily available off-the-shelf goods valued up to $100,000. Detailed procurement plan up to 18 months with indicative procurement packages are in Appendix-7.

56. The threshold for NCB is between $100,000 and $1million for work contracts and between $100,000 and $500,000 for supply of goods. ADB will review and approve all contracts with estimated values exceeding $100,000. NCB for civil works will follow the single- stage, one-envelope procedure with post-qualification and bidding period of 21 days. To encourage the participation of communities and local residents, especially women , and provide them with employment opportunities , woks requiring unskilled labor with an estimated cost of $ 30,000 or less will undertaken by community in line with past practices for projects of similar nature , through user groups in accordance with community participation by procurement procedure acceptable to ADB.

57. The procurement will be done by using ADB's Standard Bidding Document for all ICB. Use of standard bidding documents issued by Public Procurement Monitoring Office(PPMO) for NCB will be permissible . However the provisions in the documents must not conflict with the basic principles underlying ,ADB’s Procurement Guidelines.. After review and approval by ADB of the first draft bidding document, the same will be used for all subsequent NCB .Other procurement procedure features will be: • Invitations to bid shall be advertised in at least one widely circulated national daily news paper for estimated value of works up to $1million and in ADB website and national daily news paper for estimated value of works exceeding $1million. • Public bid opening and recording of bids. • Bracketing and lottery systems are not acceptable to ADB, nor are publishing the detailed estimated values of the contracts. • The use of multiple-delivery places for bids and bid opening is unacceptable. • Bids should not be invited on the basis of a percentage premium or discount over the estimated cost. • Bids should not be rejected only on the basis of a comparison with the PIU's estimate. • Extension of bid validity may be sought only under exceptional circumstances. 15

• Factors, evaluation methodology, and evaluation criteria must be explicitly stated in bidding documents and applied consistently, and the contract award must be to the bidder who submitted the lowest evaluated substantially responsive bid. • All the IAs will strictly adhere to the PPR’s specified time limits for evaluating and awarding contracts • Price negotiations with bidders before signing contract is not acceptable, except when all bids received are substantially higher than the estimate and ADB gives prior approval to negotiate with the bidder who submitted the lowest evaluated substantially responsive bid for a price reduction, before resorting to rebidding. • Contractors from all member countries are entitled to apply for bid for contracts under NCB. However, foreign bidders must adhere to local procedures acceptable to ADB, including paying in local currency, if required by the bidding documents. Under NCB, the delivered cost of materials including duties and other taxes may be used when comparing bids. ADB’s domestic preference policy does not apply to NCB.

58. Contract variations will be subject to prior ADB approval on the ground of strong technical and economic reasons to maximize social and economic benefits.

59. Advance Action: Given the urgency of the Project, ADB approved advance action for the procurement of goods, services, and works and the recruitment of consultants, provided the advance actions take place on or after 12 January 2009, the starting date for the project fact- finding. ADB has advised the Government that approval of such advance action does not commit ADB to finance any part of the Project.

60. Retroactive Financing: The Project provides for retroactive financing of immediate rehabilitation of key infrastructure and facilities and for consulting services. ADB management has agreed to provide retroactive financing for a maximum 30% of the total Grant amount for eligible expenditures incurred not earlier than 12 January 2009 (date of project fact-finding). Retroactive financing will be approved under the following conditions: (i) procurement is undertaken in accordance with Government's procedures, (ii) contracts and recurrent costs are certified by the EA, and (iii) the certification is acceptable to ADB. ADB has advised the Government that provision of retroactive financing does not commit ADB to finance any part of the Project.

VIII. DISBURSEMENT PROCEDURES

61. All disbursements will be in accordance with ADB's Loan Disbursement Handbook (2007, as amended from time to time). An imprest account for the project will be established in Nepal Rastra Bank. The ceiling for the imprest account is $3 million, which should not exceed estimated eligible expenditure for 6 months to be financed through the imprest account or 10 percent of the grant amount which is lower. The statement of expenditures (SOE) procedure will be used to reimburse expenditures and reimburse/liquidate advances under the imprest account. The ceiling for payment under SOE procedure is $100,000. The EA will be responsible for managing and administering the account and SOE in accordance with ADB's Loan Disbursement Handbook.

(a) Procedures for Establishing Imprest Fund

62. An imprest account will be established, managed, replenished, and liquidated in accordance with ADB's Disbursement Handbook, (2007 as amended from time to time), and 16 detailed arrangements between the Government and ADB. Accordingly, the recipient is required to open, for the exclusive use of the Project, a separate bank account for depositing advances. The imprest account must be maintained in current account only and opened in the recipient’s name. For this Project, an account will be established with Nepal Rastra Bank.

(b) Basic Requirements for Initial Advance in the Imprest Fund

63. The recipient should submit to ADB: (a) signed withdrawal application for imprest account together with the statement of estimated expenditures (b) a letter of authority of the person(s) who will sign the withdrawal applications on behalf of the recipient, together with the authenticated specimen signatures of each authorized person; and (c) the evidence that an account has been opened in the recipient’s name.

64. ADB makes an advance disbursement form the grant account for deposit to the Project imprest account to be used exclusively for ADB’s share of the eligible expenditures. For all payments out of the imprest account, the Bank shall be furnished periodically with a withdrawal application for liquidation/replenishment supported by: (i) a statement of expenditures together with a certificate that goods and services have been procured and paid for in accordance with the Banks’ Loan and Project Agreement and Guidelines for Procurement and Disbursement; and (ii) a statement of account prepared by the bank which maintains the imprest account. SOE procedure shall be used to replenish/liquidate the imprest fund. Under this procedure, the PCO is required to submit to ADB Withdrawal Application together with a SOE duly certified by persons authorized to sign Withdrawal Applications. All relevant supporting documents (invoices, receipts, etc.) will be retained at concerned PIU offices and will be available for examination by Bank’s field mission.

65. The concerned SPIUs are required to submit monthly statements of expenditures to the concerned PIUs within fifteen days of the following months The PIU's will be responsible for collecting the supporting documents, consolidating the accounts, prepare withdrawal application and send them to PCO. In accordance with ADB’s Loan Disbursement Handbook, PCO will submit Withdrawal Application to ADB together with a SOE duly certified by persons authorized to sign Withdrawal Applications for reimbursement. ADB project funding will periodically be disbursed from the ADB account into a sub-account of the project account. ADB project funding will periodically be disbursed from the ADB account into a sub-account of the project account. A Sample withdrawal application is in Appendix-8.

IX. PROJECT MONITORING AND EVALUATION

66. The PCO, assisted by the Benefit Monitoring and Evaluation Specialist will establish the project performance monitoring and evaluation system within 3 months of grant effectiveness. The Design and Monitoring Framework of the Project will be used as the benchmark for monitoring outcome, outputs against the performance targets and indicators. Baseline indicators and targets for each sector and subproject will be developed within 3 months of grant effectiveness prior to implementation for monitoring purposes. The data will be disaggregated by gender, caste, and ethnicity. The findings will be included in the Project’s quarterly progress reports for project monitoring and identification of the project problems and shall be incorporated in the project completion report. The performance indicators will be based on the project design and monitoring framework in order to determine if the development objectives have been attained. IA's, assisted by individual consultants appointed by PCO from among NVC's 17

Technical Auditors, will carryout project technical auditing of procurement, design, contract administration and quality inspection in cooperation with NVC. The technical audit reports will be submitted to ADB and to NVC through PCO.

67. ADB will conduct regular reviews throughout project implementation. Beside regular reviews ADB will carry out third party independent review of procurement process yearly under EFDRP through audit firm or similar agency for efficient and effective project implementation. Given the relatively short implementation period and emergency nature of the Project, no midterm review will be conducted unless ADB and the Government deem it necessary.

X. REPORTING REQUIREMENTS

(a) Monthly Progress Report

68. PCO in coordination of all IAs will prepare a brief monthly project progress reports for submission to ADB. The suggested format and the content of the progress report is similar to that of trimester report, but written in summary form provided in Appendix 9.

(b) Trimester Progress Report

69. Each IA will prepare and submit trimester project progress reports to the PCO in order to enable the PCO to prepare trimester progress reports. The Team Leader/Project Management Specialist of the project management team of consultant supporting the PCO will be responsible for the production and submission of all consultant reports, including monthly, trimester and annual reports to the PCO. The PCO, assisted by the project management Specialist will prepare a detailed Trimester progress reports on project implementation to be submitted to ADB 15 days after the end of each trimester. The reports will include basic data, utilization of funds, implementation progress (against established targets), and achievement of immediate development objectives, compliance with covenants, environmental and social safeguard compliance and major issues and problems. The reports will also have provision for problem updates on procurement of works, goods and consulting services and status of internal/third party monitoring. The suggested format and the contents of the progress reports are provided in Appendix-9.

70. Project completion report, providing a detailed evaluation of the project design, costs, performance of contractors and consultants, social and economic impacts, and other details, will prepared by PCO. The Government, acting through MPPW, will submit the project completion report within three months of the Project’s physical completion in a format acceptable to ADB. Draft format of the project completion report is in Appendix-10.

XI. AUDITING REQUIREMENTS

71. The EA will maintain separate records and accounts adequate to identify the goods and services financed by the grant proceeds, financing received, expenditures incurred, and use of local funds. The account will be maintained in accordance with sound accounting principles. Consolidated project accounts and related financial statements will be audited annually by the Auditor General. The audited reports and related financial statements in English should provide an audit opinion on the financial operations of the imprest accounts and SOEs and be submitted to ADB not later than 9 months after the end of the Government's fiscal year. The main auditing 18 requirements are contained in the Sample Audit Letter (Appendix-11). It is important to submit audited project accounts and audit reports to the ADB on a timely basis. In line with ADB policy on submission of audited accounts, sanctions are mandatory (i) for statements submitted to ADB more than 6 months past due date, when imprest funds will not be reimbursed; and (ii) for statements submitted to ADB more than 12 months past due date, when the loan/grant may be suspended. ADB will also closely with the Office of the Auditor General to address audit observations and any necessary remedial action.

XII. SAFEGUARD REQUIREMENTS

(a) Environmental Criteria for Subprojects Selection

72. The Project will include subprojects falling under B and C category1 as per ADB Environmental Assessment Guidelines (2003). In addition, all sub projects must comply with the environmental requirements specified in the ADB ‘s Safeguard Policy Statement (2009) and Environment Assessment Guidelines.

73. In order to ensure environmentally sustainable rehabilitation work, all subprojects will be subjected to an environmental assessment screening by employing the environmental checklist of ADB and by taking into account the GON classification under Environmental Protection Act, 1997, (EPA, 1997) and Environmental Protection Rules, 1997 (amendment 1999, and 2007, (EPR, 1997) to determine the need for the type of Environmental Assessment, whether it be EIA, SEIA, IEE, or SIEE. Following Government and ADB norms, only those subprojects will be carried out which do not require EIA. If the screening indicates further analysis required, an IEE will be conducted to identify and implement environmental mitigation measures and monitoring, and IEE reports with EMMP will be sent to ADB for its review and finally approved from concerned Ministry as per the rules of GON. Recommended mitigation measures will be incorporated into the subproject design and work assignment (such as the bill of quantities, specifications, and contract document). The 'Summary IEE' prepared for the project has been endorsed by the Government and is given in Appendix-12.

(b) Involuntary Resettlement Framework

74. A resettlement framework prepared for the project, provides the policy and procedures to screen, assess, and plan for land acquisition and resettlement aspects of project components in compliance with ADB’s Involuntary Resettlement Policy (1995) and is given in in Appendix-.13 The resettlement framework includes an entitlement matrix covering all potential losses, and provides compensation at replacement cost and rehabilitation support for affected people. The resettlement framework has been endorsed by the Government.

1 The subprojects located in the environmentally sensitive areas or ecologically critical areas will be classified as A Category project. The Environmentally sensitive areas are generally defined as those requiring special management attentions to protect important scenic values, fish and wildlife resources, historical and cultural values, and other natural systems or processes. Those areas include national forests, mangrove, wetland, steep slope areas, buffer zone, and areas that cover endangered species. The Environment Conservation Rules 1997 considers the following factor while declaring an area as ecologically critical: ancient monument, archeological site, forest sanctuary, national park, game reserves, wild animal habitat, mangroves, forests areas, bio diversity of the relevant areas and human habitat.

75. The Government will ensure that all IAs will implement the gender action plan prepared for the Project. The Gender Equality and Social Inclusion Plan is given in Appendix-.14 Within 3 months of grant effectiveness, gender and social inclusion guidelines will be approved by the Government to ensure that the benefits accrue equitably to women and marginalized groups.

XIII. MAJOR GRANT COVENANTS

76. A list of the major Grant covenants which have been agreed among the Government, the Executing Agency and the ADB are given in Appendix-15. These covenants are considered essential to ensure successful implementation of the Project. The status of compliance with these covenants should be submitted to ADB together with the Trimester Progress Report.

XIV. KEY PERSONS INVOLVED IN THE PROJECT

I. ASIAN DEVELOPMENT BANK NAME Headquarter Vice President X. Zhao, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Deputy Director F. Roche, SARD Counsel

Address Asian Development Bank P.O.Box 789 0980 Manila, Philippines

Telephone (632) 632 4444 Facsimile (632) 636 2444

Nepal Resident Mission Country Director B. Hitchcock Team Members K.R.Panday, Senior Project Implementation Officer G. Gewali, Senior Project Implementation Officer L. Sharma, Project Officer K.Karki, Transport Officer N.Chand, Procurement Officer N. Sapkota, Social and Environmental Officer, S. Gyawali, Assistant Project Analyst, SARD

Address Srikunj Kamaladi Ward No. 31, Block 2/597 Kathmandu Metropolis P.O. Box 5017 KDPO

E-mail [email protected] Telephone 977-1-227 779 Facsimile 977-1-225 063

II. GOVERNMENT Executing Agency – Ministry of Physical Planning and Works(MPPW) Secretary Purna Kadaria Project Coordinator Ramesh R. Bista Address Shingdurbar Kathmandu, Nepal Email [email protected] Telephone 977-1- 4211782/4211931 Facsimile 977-1- 4211720

Implementing Agency – Department of Agriculture (DOA) Director General Vijay Mallik Project Director Bishnu P. Aryal Address Harihar Bhawan Lalitpur, Nepal Email [email protected] Telephone 977-1- 5524224/5010003 Facsimile 977-1- 5524093

Implementing Agency – Department of Irrigation(DOI) Director General Madhu Sudan Paudel Project Director Anil K. Pokharel Address Jawalakhel Lalitpur, Nepal Email [email protected] Telephone 977-1- 5535382 Facsimile 977-1- 5537169

Implementing Agency – Department of Water Supply and Sewerage (DWSS) Director General Rajkumar Malla Project Director Bishwa M. Gyawali Address DWSS Building,Panipokhari Kathmandu, Nepal Email [email protected] Telephone 977-1- 4413744/4418253 Facsimile 977-1- 4419802

Implementing Agency – Department of Roads (DOR) Director General Tulsi Sitaula Project Director Dinkar Sharma Address Babarmahal Kathmandu, Nepal Email [email protected] Telephone 977-1- 4262693 Facsimile 977-1- 4257409/4262993

XV. ANTICORRUPTION

77. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government and Executing Agency. A copy of ADB's Anticorruption Policy is in Appendix-16. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the grant regulations and the same will be included in the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency, Implementing Agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project. Allegations of corrupt, fraudulent, collusive or coercive practices may be reported to the Integrity Division of the Office of the General Auditor or ADB. The following site provides procedures on how to report fraud or corruption: http://www.adb.org/integrity/howto.asp.

78. The Project incorporates following specific anticorruption measures.

i. Integrity Training for Project Staff: Dissemination on ADB's anticorruption policy will be held for the project staff during inception and review missions.

ii. Procurement Process Workshop for Project Staff: In order to familiarize the project staff on the procurement process to implement EFDRP, a half day workshop will be conducted during the inception mission and once a year throughout the project period.

iii. Independent and Random Spot Checks of Procurement Process: Random and independent spot checks of the procurement process will be undertaken by ADB and the Project Coordination Office (PCO). ADB will spot check the information on the qualification of the bidders/suppliers and authenticity of the Bank Guarantees on a case by case basis. PCO will conduct random spot checks and report to ADB and the Government. In addition, ADB in coordination with the EA will work with national audit and anti-corruption institutions in Nepal to institute processes of spot checking in the context of ADB's efforts to build capacity in these institutions.

iv. Independent Procurement Committee at NRM: To ensure fair, efficient, and transparent procurement process, a procurement committee comprising (i) Head, Portfolio Management Unit;(ii) Project Officer; (iii) Procurement Officer; and (iv) Project Analyst will be formed for the contract value exceeding NRs50 million.

v. Procurement Checklist: An internal Procurement Checklist will be developed and used during Project Implementation.

vi. Audit Observations: Through EA, NRM will work closely with the Office of the Auditor General to address audit observations and any necessary remedial action.

vii. Identification of Secure Places: As bid submission at multiple places is against the international practice and Nepal's Public Procurement Act, more secured place other than the procuring entity should be identified by EAs/IAs in order to minimize cases 22

of intimidation, coercion, and collusion. This provision will be included in the bidding document. viii. Investigation on Bid Submission: NRM in coordination with PCO will investigate the possibility of intimidation and/or coercion when there are cases of high level of withdrawals and/or modifications of the bids. ix. Identification of Capacity Building: As identified and recommended during procurement capacity assessment carried out for EFDRP, capacity building in procurement will be integrated into the work program and budget formulation every year for the implementing agencies. Comprehensive procurement training programs to be included as part of the work program. x. Works to User Groups: Works to user groups following community procurement will be awarded based on nature of works and not merely based on value of work volume. xi. Assessment on Degree of Oversight: Assessment on the degree of oversight (prior/post review) of the procurement documents should be spelled out in the procurement plan prepared by each implementing agency. xii. Establishing a mechanism of Transparency: Apart from advertising bids in local newspaper, an arrangement with EA/IAs to post all bids, recruitment announcements and contract awards on the internet and physically in the project areas through advertisement in local newspaper and posting in notice boards of each implementing agencies in center as well as in field levels. In addition, an arrangement will be made to keep a complaint box in project offices, both at central and field levels, for any possible anonymous tip offs. xiii. Third Party Review: NRM will carry out third party independent review of procurement process yearly under EFDRP through audit firm or similar agency for efficient and effective project implementation. xiv. Inclusion of Problem Updates on Procurement and other Issues: During the inception mission, a monthly and trimester report formatting will be agreed upon, which will also include a provision for problem updates on procurement of works, goods and consulting services or any other aspects project implementation. 23

Appendix 1

DETAILED COST ESTIMATES

Table A1.1: Detailed Cost Estimates by Component Category a ($ million)

% of Foreign Local Total Total Item Exchange Currency Costb Base Cost A. Investment Costs 1. Agriculture 1.70 2.16 3.86 12.5 2. Irrigation 4.34 4.43 8.77 28.4 3. Water Supply and Sanitation 2.31 2.25 4.56 14.8 4. Roads 5.53 6.57 12.10 39.3 5. Project Management 0.50 1.03 1.53 5.0 Total Base Cost 14.38 16.44 30.82 100.0 Physical Contingencies 0.61 0.57 1.18 Total 14.99 17.01 32.00 a In January 2009 prices. b Includes taxes and duties, estimated at $3.19 million, financed by the Government. Source: Asian Development Bank estimates. 24

Appendix 2 PROJECT ORGANIZATION STRUCTURE

MLD NPC MOF MOA MPPW MOWR MOH (EA)

PSC

DOA DOR PCO DWSS DOI DWIDP (IA) (IA) (IA) (IA)I

PIU PIU NPMCC PIU PIU Agriculture Roads Water Supply and Sanitation Irrigation

Sunsari Kailali Kanchanpur Chatara Kanchanpur Baitadi Doti Sunsari Kailali Kanchanpur Sunsari Sunsari Sunsari Kailali Mahakali DADO DADO DADO Bridge Division Division Division Division Division Division Morang Morang Ground Kanchanpur Irrigation SPIU SPIU SPIU SPIU SPIU Irrigation SPIU SPIU SPIU SPIU SPIU Irrigation Irrigation Water SPIU Project SPIU Division Field SPIU SPIU Office SPIU

LDOs

LPCC

EA = executing agency, DADO = district agriculture development office, DOA = Department of Agriculture, DOI = Department of Irrigation, DOR = Department of Roads, ,DWIDP = Department of Water Induced Disaster Prevention, DWSS = Department of Water Supply and Sewerage, IA = implementing agency, LDO = local development officer, LPCC = local project coordination committee, MOA = Ministry of Agriculture and Cooperatives, MOF = Ministry of Finance, MOH = Ministry of Home, MLD = M inistry of Local Development, MPPW = Ministry of Physical Planning and Works, MOWR = Ministry of Water Resources, NPC = National Planning Commission, NPMCC = National Project Management Coordination Committee, PIU= project implementation unit, PSC = project steering committee, SPIU = subproject implementation units. Source: Asian Development Bank

Appendix 3

IMPLEMENTATION PLAN

Appendix 4

DETAILED COST ESTIMATES

Table A1.1: Detailed Cost Estimates during Implementation ($ million)

During Approval Actual (to date) Actual (On Project Completion)

Component Foreign Local Total Foreign Local Total Foreign Local Total Exchange Currency Exchange Currency Exchange Currency

1. Agriculture 1.70 2.16 3.86 2. Irrigation 4.34 4.43 8.77 3. Water Supply and Sanitation 2.31 2.25 4.56 4. Roads 5.53 6.57 12.10 5. Project Manageme nt 0.50 1.03 1.53

Total Base Costs 14.38 16.44 30.82 Physical Contingen cies 0.61 0.57 1.18 Total Project Costs 14.99 17.01 32.00 a In January 2009 prices. b Includes taxes and duties, estimated at $3.19 million, financed by the Government.

Source: Asian Development Bank estimates

Appendix 5

CONTRACTED AWARDS AND DISBURSEMENT PROJECTIONS

To : Country Director, NRM Date: From : Project Director Subject : Flood Damage Rehabilitation Project

FOLLOWING QUARTERLY PROJECTIONS (IN MILLION DOLLARES) HAVE BEEN MADE IN ______200___

AAA CONTRACT AWARDS: QUARTERLY I ______QUARTERLY II ______QUARTERLY III ______QUARTERLY IV ______

BBB DISBURSEMENT QUARTERLY I ------QUARTERLY II ______QUARTERLY III ______QUARTERLY IV ______

TOTAL FOR THE YEAR ______

Appendix 6 Project Component: Agriculture (Part A)

Outline Terms of Reference for Design and Supervision Consulting Services

A. Background

1. The 2008 floods severely damaged standing crops and farmland in Sunsari, Kailali and Kanchanpur districts. The outcome of damage assessment shows that the floods swept away standing crops and damaged 25,870 ha farmland in different magnitude, which seriously affected livelihood of about 32,500 farm families, requiring medium and long-term measures to revive agriculture and restore their livelihood. Rehabilitation of damaged agriculture infrastructures such as agriculture products collection and market centres, micro-irrigation systems, fish ponds, and agriculture service centres is also needed to revive agriculture.

2. The proposed agriculture component will be implemented in 22 most flood-affected village development committees of the project districts – four in Sunsari, 10 in Kailali and seven in Kanchanpur.2 This component will consists of (i) revival of agriculture and land fertility; (ii) restoration of livelihood of affected farm families; and (iii) rehabilitation of agriculture infrastructure. The terms of reference are prepared in line with the scope of the agriculture component of the Project.

B. Objectives and Scope of Services

3. The objectives of the consulting services are to assist the Implementing Agency (IA), the Department of Agriculture and its District Agriculture Development Offices in Sunsari, Kailali and Kanchanpur.

(i) Identify/verify target farm families and group them; (ii) Prepare agricultural programs as per potential, willingness and demands of the target farm families; (iii) Develop farmers' skills in reclaiming land fertility while growing suitable crops; (iv) Promote farmers' skills opportunities for non-farm income generating activities; (v) Procure agricultural inputs and deliver them to farmer groups; (vi) Implement suitable agricultural programs with full participation of farm families; (vii) Reconstruct damaged agriculture infrastructure with provision of their sustainable operation and management; and (viii) Periodically monitor field programs, make sure that implemented programs and rehabilitated infrastructure meet expected quality standard and achieve project objectives within the stipulated timeframe of 24 months.

2 The village development committees are Shreepur, Haripur, Paschim Kusaha, and Laukahi in Sunsari; Hasuliya, Dansingpur, Lalbojhi, Ratanpur, Pawera, Khailad, Basauti, Gadariya, Narayanpur, and Fulbari in Kailali; and Shankarpur, Laxmipur, Chadani, Krishnapur, Dekhatbhuli, Raikawar-Bichawa, and Shreepur in Kanchanpur. 29

C. Reporting

4. The consultant will prepare the following reports:

(i) All original drawing, work sheets, field notes, computer programs, reports and other documents relating to the study shall become the property of the Department of Agriculture (DOA). The consultant will prepare and submit following reports both in hard copies and electronic format: (6 copies to DOA and 2 copies to ADB both); (ii) Within one months of commencement, a short Inception Report which includes the consultants detailed work program (including methodology and details of special investigations proposed), review of the flood assessment program components and contract packaging for the works;. (iii) Monthly reports to detail the physical and financial progress of the works; and (iv) A project completion report in accordance with ADB requirements.

D. Implementing Arrangements

5. The DOA under the Ministry of Agriculture and Cooperatives will be the implementing agency (IA) for this component. DOA will coordinate and monitor this component, and implement field programs through its district agriculture development offices (DADO). DADO chiefs will be responsible for planning and implementation, who will be supported by one each agronomist, horticulturist and fisheries specialist, an account officer, and three junior technicians. There will be a project coordination unit (PCU) at the centre headed by a deputy director general and supported by a senior agriculture officer, an account officer and an administrative staff. PCU will be responsible for consolidation of physical and financial information received from the field, prepare physical progress reports to the Government and ADB, and submit withdrawal application to ADB for reimbursement of eligible expenditure in accordance with the ADB's Loan Disbursement Handbook.

E. Consulting Services

6. The consulting services will be carried out by a national consulting firm. The firm will have extensive experience in planning, implementation and monitoring of agricultural and livelihood programs. Consulting firm having experience in agriculture-based livelihood restoration programs will be preferred. A total of 110 person-months of national consultant inputs are estimated to assist for implementation of this component. Half of the inputs will be for Sunsari district and the remaining half will be for Kailali and Kanchanpur districts. The breakdown of estimated consultant inputs is given in Table SADA.1.

F. Task Assignment for Consultants

7. The responsibilities of consultant’s key personnel will include, but not necessary be limited to the following: Consultant’s Key personnel will undertake the following (not limited to) tasks:

Table A6.1: Consulting Services by Type and Project District

Description of No. of Consultant Sunsari Kailali and Total Expertise (person-months) Kanchanpu (person- (person-months) months)

Team Leaders/ 2 20 20 40 Agronomi sts Agriculture 2 15 15 30 Engineers Social 2 20 20 40 Mobilizers /Trainers

Total 6 55 55 110

(i) Team Leaders/Agronomists (National)

• Act as a team leader of the three member consultant team; • Assess potential crops to grow in highly silted and less silted farmlands in consultation with affected farm families; • Recommend farmers to grow suitable crops by applying required level of composts, seeds, irrigation; frequency of interculture; application of pesticides; and harvesting practices and timeframe according to type of lands; • Provide onsite training to farmers on practices to reclaim productivity of farmland while growing crops; • Assist in identifying required farm equipment and their application cereals, vegetable and fruits cultivation; • Monitors performance of crops, and provides onsite services to overcome problems; • Prepare periodic progress reports, including issues and possible solutions • Assesses outputs of the component in terms of generating income and restoration of livelihood of the beneficiary farm families; • Assist in procurement and distribution of fingerlings; monitor raising of distributed fingerlings; and assess return from fish farming; • Assist PIU in preparing annual work program and budget; and • Assist PIU in coordinating project activities with PCO, and maintain close working relationship with the team leader of PCO.

(ii) Agricultural Engineers (National)

• Verify damaged agricultural infrastructures and estimated costs for their rehabilitation; • Verify damaged fish ponds and estimated costs for their rehabilitation; • Design rehabilitation works jointly with target people; • Prepare rehabilitation plan and assists target people in implementation of rehabilitation plan; • Supervise rehabilitation work making sure that they meet expected quality standard and completed within the project period; 31

• Assist preparation of operation and maintenance (O&M) plan by beneficiary farmers, and provide required skills to them for sustainable O&M; • Prepare periodic progress reports, including issues and possible solutions; and Assess outputs from the rehabilitated agriculture infrastructure, including from the rehabilitated fish ponds to participating farm families.

(iii) Social Mobilizers/Trainers (National)

• Verify target families and organize them into groups; • Provide orientation on objective of the component, approaches for implementation, and roles of DADO staff and consultants; • Identify their need and potential in growing crops in different types of lands; • Help in accessing services from government and private sector; • Promote group savings, and utilization of funds for non-agricultural income generation activities; and • Monitor progress of this component, and prepares progress reports outlining social and economic effect on the beneficiary groups.

Project Component: Irrigation (Part B)

Outline Terms of Reference for Design and Supervision Consulting Services

A. Background

1. The 2008 floods severely damaged major infrastructures in 27 surface irrigation systems from Sunsari, Kailali and Kanchanpur districts. The total cost of the damaged irrigation infrastructures is estimated at $12.7 million, which has ceased irrigation facility on 11,542 ha farmland, and seriously affected livelihood of 75,788 people from 8,931 farm families. The total loss of agricultural income in the absence of irrigation is estimated at about $16.6 million. To restore livelihood of the affected people, revival of agriculture in the affected area through rehabilitation of damaged irrigation systems has become necessary. As rehabilitation of surface irrigation systems will take 1–2 working season depending on their size and magnitude of damage, 700 shallow tubewells (STWs) need to be installed and start quickly reviving agriculture in feasible areas in Sunsari, as magnitude of infrastructure damage has been much higher there compared with Kailali and Kanchanpur. STWs will supplement surface irrigation once rehabilitation of irrigation schemes is completed.

2. The proposed irrigation component will be implemented mainly in 28 village development committees affected from the damaged irrigation infrastructures – five in Sunsari, 12 in Kailali and 11 in Kanchanpur.3 This component will consist of (i) rehabilitation of damaged infrastructure of surface irrigation systems; and (ii) installation of STWs and management and delivery of operation and maintenance funds, for revival of agriculture and restoration of livelihood of affected farm families. The terms of reference are prepared in line with the scope of the irrigation component of the Project.

B. Objectives and Scope of Services

3. The objectives of the consulting services are to assist the Implementing Agency, the Department of Irrigation and its concerned Irrigation Development Divisions covering Sunsari, and Kailali and Kanchanpur districts, and the Biratnagar Groundwater Field Office.

(i) Verify key irrigation infrastructures identified for rehabilitation; (ii) Prepare detail survey, design and cost estimates of the structures identified for rehabilitation, and control quality of design; (iii) Prepare bid documents and procure contractors to undertake rehabilitation work; (iii) Monitor contractors works with focus on quality and timeliness for completion; (iv) Identify/verify target groups to participate in STW program; (v) Orient them on STW program, organize into groups, install STWs in participatory way and help manage operation and maintenance funds. (vi) Periodically monitor field programs, making sure that their implementation is completed on time and meet the project objectives.

3 The village development committees are Shreepur, Haripur, Paschim Kusaha, Laukahi, and Basantapur in Sunsari; Hasuliya, Dansingpur, Lalbojhi, Ratanpur, Pawera, Khailad, Basauti, Narayanpur, Fulbari, Joshipur, Munuwa, and Thapapur in Kailali; and Shankarpur, Laxmipur, Chadani, Krishnapur, Dekhatbhuli, Raikawar- Bichawa, Shreepur, Bishalpur, Suda, Pipladi, and Daiji in Kanchanpur. 33

C. Reporting

4. The consultant will prepare the following reports:

(i) All original drawing, work sheets, field notes, computer programs, reports and other documents relating to the study shall become the property of the Department of Irrigation (DOI). The consultant will prepare and submit following reports both in hard copies and electronic format: (6 copies to DOI and 2 copies to ADB) (ii) Within one months of commencement, a short Inception Report which includes the consultants detailed work program (including methodology and details of special investigations proposed), review of the flood assessment program components and contract packaging for the works. (iii) Monthly reports to detail the physical and financial progress of the works. (iv) A project completion report in accordance with ADB requirements.

D. Implementation Arrangements

5. The DOI under the Ministry of Water Resources will be the implementing agency of this component. DOI will rehabilitate surface irrigation through its respective irrigation development divisions (IDDs) and STWs through Biratnagar groundwater field office (GFO). Chiefs of respective IDDs and GFO will be responsible for planning and implementation. DOI will assign two design engineers, two civil engineers, an account officer, and four sub-engineers to rehabilitate the surface irrigation projects. DOI will assign one each hydro-geologist, civil engineer, account officer, sub-engineer, and association organizer to implement STW program. At the center, there will be a project coordination unit (PCU) headed by the deputy director general and coordinated by a senior divisional engineer and supported by one each civil engineer, account officer and administrative staff. PCU will be responsible for consolidation of physical and financial information received from the field, prepare physical progress reports to the Government and ADB, and submit withdrawal applications to ADB for reimbursement of eligible expenditure in accordance with the ADB's Loan Disbursement Handbook.

E. Consulting Services

6. The consulting services will be carried out by a national consulting firm. The firm will have extensive experience in planning, implementation, supervision, and monitoring of surface and groundwater irrigation program, preferably in rehabilitating irrigation infrastructures and restoration of people's livelihood. A total of 91 person-months of national consultant inputs are estimated for implementation of this component. Fifty-nine person-months of the inputs will be for Sunsari and the remaining 32 person-months will be for Kailali and Kanchanpur.

Table A6.2: Consulting Services by Type and Project District

Description of No. of Consultant Sunsari Kailali and Total Expertise (person-months) Kanchanpur (person-months) (person-months) Team 2 20 20 40 Leaders/C ivil Engineers Design Engineers 2 12 12 24 Hydrogeologist 1 12 - 12 Social 1 15 - 15 mobilizer/Trainer

Total 6 59 32 91

F. Task Assignment for Consultants

7. The responsibilities of consultants will include, but not necessarily be limited to the following:

(i) Team Leaders/Civil Engineers (National)

• Lead consultant team to undertake their respective responsibilities; • Verify surface irrigation infrastructures identified for rehabilitation; • Assist in preparing and finalizing detail design and cost estimates; • Assist in procuring contractors for rehabilitation works; • Supervise work of contractors, provide solutions if there are issues during implementation; • Monitor quality and progress of rehabilitation works to make sure that they meet quality standard and completed on time; • Prepare periodic progress reports to submit to the IA; and • Assesses outputs of the component in terms of reviving agriculture and restoring of livelihood of the beneficiary farm families; • Assist PIU in preparing annual work program and budget; and • Assist PIU in coordinating project activities with PCO, and maintain close working relationship with the team leader of PCO.

(ii) Design Engineers (National)

• Verify surface irrigation infrastructures identified for rehabilitation; • Assist in finalizing detail design and cost estimates; • Assist in procuring contractors for rehabilitation works; • Assist implementation of rehabilitation works in line with the original design; • Monitor quality and progress of rehabilitation works to make sure that they meet expected standard and completed on time; • Prepare periodic progress reports, including issues and possible solutions; and • Assesses outputs of the component in terms of reviving agriculture and restoring of livelihood of the beneficiary farm families.

(iii) Hydrogeologist (National)

• Identify proper locations and groups for installation of STWs • Suggest type and capacity of electric motors/pumpset for installation of STWs; • Undertake geological tests to make sure that STWs discharge expect amount of water; • Help farmer groups to find trusted STW suppliers, drillers and cost for STWs and associated service providers; • Check quality of STWs procured from farmers; • Monitor quality of STW installation; • Train farmer groups on operation and maintenance of STW; and • Prepare progress reports highlighting physical progress, revival of agriculture and restoration of livelihood of beneficiary farmer groups.

(iv) Social Mobilizer/Trainer (National)

• Verify target families and organize them into groups; • Provide orientation on objective of the component, approaches for implementation, and roles of groundwater field office staff and consultants; • Identify their need and potential in growing crops in different types of lands; • Encourage farmer groups to participate in the STW procurement and installation process; • Assist farmer groups to get agriculture extension services under the Project and the regular program of the Government; • Sensitize farmer groups so that the most affected, poor and disadvantaged families are benefited; and • Monitor progress of this component, and prepares periodic reports outlining social and economic effects on the beneficiary groups.

Project Component: Water Supply and Sanitation (Part C)

Outline Terms of Reference for Design and Supervision Consulting Services

A. Project Background and Objective

79. The 2008 flood damaged 28 gravity flow water supply systems in Kailali and Kanchanpur. Intakes (both stream, spring nearby the river), transmission pipeline of various sizes and length, and river crossings are the major structures of the gravity flow water facilities have been washed away due to the floods. Currently, about 94,000 peoples are fetching water from the nearest available river, irrigation system and hand pumps. In Sunsari district, 3,900 shallow tube wells, serving about 22,000 populations, were under water and most of them were covered by sand. Flood affected displaced people currently resident in the four areas: (i) residents of formal camps; (ii) residents of spontaneous settlements; (iii) displaced in host families; and (iv) displaced returned to earlier resident. Returnees to their earlier resident and residents of spontaneous settlements are the most vulnerable in terms of access to drinking water and sanitation facilities.

80. The overall objective of water supply and sanitation subproject of the Emergency Flood Rehabilitation project to reduce pollution of groundwater and surface water in the vicinity, improve hygiene condition in the flood affected areas concerned, and to provide access to drinking water.

81. The Project includes rehabilitation of gravity flow subprojects in farwestern districts and construction of 4 overhead water supply subprojects and installation of shallow tube wells in Sunsari Districts. Four VDCs in flood affected area of sunsari will have to be served by subprojects consisting of deep tube wells, pumping system, over head tanks, and handpumps etc. Such subprojects will require the services of experienced experts in tube well design, pump design, over head tank design, procurement of materials and contractors and construction supervision of tube wells and over head tanks and installation of pumping system. For Sunsari district, this component is designed to complement the Government return package4 for returnees to meet needs for drinking water and sanitation facilities. Social mobilization and health and hygiene education awareness program is the integral part of the component. The gravity flow water supply system and small overhead water supply systems will be designed to give the disadvantaged and poor adequate access to drinking water and sanitation, and will be operated and maintained by the respective communities.

B. Purpose of Assignment

82. It is intended to hire a competent national consulting team comprising of water supply engineer, design/supervision engineer, social mobilization expert, public health expert, electromechanical engineer, water quality/environmental specialist, inspector (engineers), community mobilzers, and health motivators. The duration of the assignment shall be 24 months.

4 Return package designed to support initial return of displaced people together with additional inputs from Government and other humanitarian agencies. Each household is to be provided with the return package of NRs50,000 in installments basis. 37

C. Scope of Works

(i) Preparation and Design Stage

83. Establish office at 3 districts with a design engineer for the first 3 months after the commencement of work, supervision engineers and a junior engineer for the entire period of consultant involvement for the supervision and facilitation of project implementation.

84. The Consultant, in collaboration with WSSDO and community members, conducts awareness campaign to inform all potential beneficiaries about the steps in the process like who will be the subproject participants and what are the expectations of the community.

85. The Consultant will assist WSSDO to implement health and hygiene awareness program using already established and implemented approach of the DWSS.

86. Help communities to mobilize and establish water user and sanitation committee in formation/reformation, and legally register as per the Water Resources Act 1992. Through community mobiliser encourage/motivate gender, caste and ethnicity to participate in all the activities of the subproject implementation including decision making process of the subproject.

87. Assess the current water sources based on the quality, quantity and availability of water. The water source must be undisputed and safe from any environmental contaminations. Conduct water quality survey, collect the sample for laboratory test and make laboratory test for physical, chemical and biological parameters. Existing facility of regional laboratory of DWSS may be used for the test.

88. Detail engineering survey of the proposed water supply subprojects will be conducted after approval of the layout plan from (WUSC) and Head of Subproject Implementation Unit, Divisional Chief of WSSDO. Conduct feasibility study including socio-economic, engineering, environmental and sanitation study of subproject for rehabilitation, discuss it with beneficiaries (users) and WUSC and submit to WSSDO for the approval.

89. Detail engineering design of tube well, overhead tank, pipelines, electro-mechanical component (pumps, transformer, three phase electricity line etc), pump house, operator quarter etc will be done. Also working drawing of the above items, cost estimate and technical specification will be prepared.

90. Tender documents for deep tube-well drilling, procurement and installation of pumps and electrical lines, over head tank construction, procurement and laying of pipes, construction of pump house and office cum operator will be prepared.

(ii) Procurement Stage

91. The consultant will assist the WSSDO in the procurement of sanitation materials, pipes, pumps and related accessories and recruitment of contractors for wells drilling, over head tank construction, pipe laying and construction of the structures.

(iii) Implementation Supervision

92. The consultant will assist the WSSDO to administer the contracts and ensure that the works are constructed in accordance with time frame and specifications as described below: 38

• preparation of effective construction schedule and advise construction contractor and communities to follow work activities as stipulated in the schedule; • assist WUSC for organizing and managing local labour for the construction done through the communities; • supervision of all construction works related to deep tube well boring, overhead reservoir construction, pipe laying in subproject etc; • ensuring quality of deep boring and other construction works as per technical specifications, drawings, condition of contract etc; • developing and maintaining detailed record of work activities accomplished by the construction contractor; • assessment of the skill of the staff (Volunteers Maintenance Works, Operators etc) of the local authorities and , in consultation with WUSC, prepare and conduct a training program to transfer the skills to technical staff and WUSC representatives, in the interpretation of engineering drawings and operation and maintenance of the subprojects; • preparation and review of bills submitted and claimed for payment by the contractor and forward to the PIU Chief with recommendations; and • providing orientation and necessary training to WUSCs for the fixation and revision of tariff; and • commissioning the whole sub-project and get certified from the WSSDO

D. Coordination with PIU and SPIU

93. The Project Director will administer the activities of the consulting services in order to accomplish the works in each district on time. The consultant is required to mobilize the survey team and social mobiliser simultaneously in all districts. The team leader will be responsible for maintaining coordination with all the stakeholders involved in all subproject. Design/supervision engineer with the support of the inspector will be responsible for construction supervision and inspector will be stationed at each district during the construction period of the works. Field staff of the consultant will perform the tasks under the guidance of the team leader.

E. Team Composition

94. The Consultant's team will consist of expertise in different fields of study. The proposed team of experts with minimum qualification and person-months required for accomplishment of tasks as recommended below:

Table A6.3: Consulting Services

Description of Expertise No. of Consultant Total (person-months)

Team Leader 1 14

Design/Supervision Engineer 3 27

Social Mobilization Expert 2 5

Public Health Expert 2 5

Water Quality Environment Specialist 2 5 39

Electromechanical Engineer 1 3

Inspector of Works 3 36

Social Mobilizer 18 216

Community Health Mobilizer 18 108

Total 50 419

(i) Team Leader (National, 14 person-months)

17. Educational background. A minimum qualification of Bachelors Degree in civil engineering with at least 10 years of practical experience in design and supervision of construction project and at least 5 years of experience in water supply and sanitation projects with the community based approach. Preference shall be given for the candidates with Masters Degree related to civil engineering. It is mandatory that the proposed Team Leader should be registered with the Nepal Engineering Council in accordance with the Nepal Engineering Council Act, 2005.

18. The consultant shall undertake the following task: • provide project implementation support to the PIU required for the implementation of the water supply and sanitation subprojects • ensuring the overall coordination of consultant's inputs and subproject implementation completion on time • supervising consulting team member and monitoring their performance • hold monthly progress meetings and develop project physical and financial progress monitoring systems based on the existing • assist PIU in preparing annual work program and budget • assist PIU in coordinating project activities with PCO, and maintain a close working relationship with the team leader of PCO to foster coordination.

(ii) Design/Supervision Engineer (National, 27 person-months)

19. Educational background. At list a Bachelor's degree in civil engineering having at least 3 years, preferably up to 6 years of practical experience in water supply and sanitation. The candidate having experience in design, construction supervision or other civil engineering related fields, preferably in water supply and sanitation will be given preference.

20. The consultant shall undertake the following task:

• identify and survey the correct location of the intake site and other civil structures and system damaged of identified gravity flow water supply schemes for rehabilitation • conduct the rate analysis and prepare unit costs based on the district rates and DWSS approved design criteria • prepare detail engineering design of tube well, overhead tank, pipelines, electromechanical component (pumps, transformer, three phase electricity line etc), pump house, operator quarter, and headworks of the damaged gravity flow 40

schemes. Also working drawing of the above items, cost estimate and technical specification will be prepared. • preparation of effective construction schedule and advise construction contractor and communities to follow work activities as stipulated in the schedule; • assist WSSDO to prepare tender documents for deep tube-well drilling, procurement and installation of pumps and electrical lines, over head tank construction, procurement and laying of pipes, construction of pump house and rehabilitation of head works • assist the WSSDO in the procurement of sanitation materials, pipes, pumps and related accessories; • assist recruitment of contractors for wells drilling, over head tank construction, pipe laying, rehabilitations of head works, and construction of the structures.

(iii) Social Mobilization Expert (National, 5 person-months)

21. Educational background. At least a Bachelor's degree in any discipline from a recognized university, preference will be given to the candidates having Master's degree in sociology or anthropology. The candidate having a minimum of 3 years, preferably up to 5 years of practical experience in social mobilization activities in Water Supply and Sanitation sector.

22. The consultant shall undertake the following task:

• prepare technical inputs in developing questionnaires, checklists and other tools for the preparation of social profile • train and supervise community mobilizer for the WUSC mobilization • coordinate and facilitate activities for the preparation of socioeconomic profile • guide to the community mobilization in the awareness campaign • coordinate with technical members of the consulting specially for the exchange of information on social dimensions • develop training proposals and training schedule of each training program to train community mobilizers and WUSC • provide inputs to progress reports preparation

(iv) Public Health Expert (National, 5 person-months)

23. Educational background. At least a Bachelor's degree in Public Health or a Bachelor's Degree in any discipline with at least 3 months' training in Public Health. Preference will be provided to the candidate having Master's or Higher degree in public health. S/he should have a minimum of 3 years, preferably up 5 years practical experience of Health and hygiene education in Nepal. Preference will be given to the candidate having 3 or more years of experience in conducting health and hygiene education program related to WSS projects.

24. The consultant shall undertake the following task:

• Based on the existing guidelines of DWSS prepare district specific health and hygiene awareness program • Prepare a simple checklist which could be used by community health mobilizers in the field to record HHE activities carried out in project areas and focus group discussion 41

• Assist WSSDO in implementing HHE awareness component using community health motivators • Provide training, guidance and supervision to the community health mobilizers • Review the effectiveness of HHE awareness program and suggest to • Give inputs regarding HHE to annual progress report and prepare report covering all activities carried out for public awareness on HHE

(v) Water Quality/Environmental Specialist (National, 5 person-months)

25. Educational background. At least a Bachelor's degree in engineering, preference will be given to the candidates having Master's degree in Environment or related field. S/he should have a minimum of 2 years, preferably up 3 years practical experience in water quality testing and assurance.

26. The consultant shall undertake the following task:

• assess the current water sources based on the quality, quantity and availability of water. • conduct water quality survey, collect the sample for laboratory test and make laboratory test for physical, chemical and biological parameters and • certify that the water is safe from any environmental contaminations.

(vi) Electromechanical Engineer (for Over Head Tank schemes) (National, 3 person-months)

27. Educational Background. Bachelor's degree in Electrical Engineering with 5 years of relevant experience. Preference will be given to the candidate having 3 or more years of experience in related to WSS projects.

28. The consultant shall undertake the following task:

• Design electromechanical system required for the 4 Overhead Tank • Provide operation and maintenance orientation to the Water User and Sanitation Committee (vii) Inspector of Works (Engineers) (National, 36 person-months)

29. Educational Background. Bachelor's degree in Civil Engineering with 5 years of relevant experience. Preference will be given to the candidate having 3 or more years of experience in related to WSS projects.

30. The consultant shall undertake the following task:

• Inspect the work of the contractor and communities • ensuring quality of deep boring and other construction works as per technical specifications, drawings, condition of contract etc; • developing and maintaining detailed record of work activities accomplished by the construction contractor • preparation and review of bills submitted and claimed for payment by the contractor and forward to the PIU Chief with recommendations

(viii) Support Staff

31. The support staff shall undertake the following task:

(a) Social Mobilizers (National, 216 person-months)

• assist WUSC for organizing and managing local labour for the construction done through the communities • mobilize WUSC and establish water user and sanitation committee in formation/reformation, and legally register as per the Water Resources Act 1992. • Through community mobiliser encourage/motivate gender, caste and ethnicity to participate in all the activities of the subproject implementation including decision making process of the subproject.

(b) Community Health Mobilizes (National, 108 person-months)

• under guidance of public health expert support WSSDO to implement health and hygiene awareness program using already established and implemented approach of the DWSS • monitor the construction of household latrines for the returnees in flood effected areas • record the HHE activities carried out in the participating districts • motivate and mobilize WUSC members and user for adopting positive health and sanitation behaviors

F. Submission of Reports

32. Detailed Engineering Design Report. Three copies of draft report of detailed engineering design of 4 over head tank water supply schems shall be submitted within 3 month after commencement of the works.Copies of final detailed engineering design report shall be submitted by incorporating the comments and suggestion issued from Water Supply and Sanitation divisional office within one month from the receipt of the comment.

Engineering design report shall consist of following reports: Volume I : Main Report Volume II : Design and Cost Estimate Volume III : Construction Drawing Volume IV : Bid Document

33. Progress Report. The consultants shall prepare and submit four copies of trimester and annual progress report of construction activities along with required construction drawings in addition the consultants shall prepare the project completion report and submit 4 copies to PMU, including a copy each to Sunsari Divisional Office of Water Supply and Sewerage and concerned water user and sanitation committees.

Project Component: Road (Part D) (Package-1: FAR WEST) Terms of Reference for Design and Supervision Consulting Services

A. Background

1. Incessant rains and floods caused widespread damage to the Strategic Road Network (SRN) in the far west Nepal including embankment failures, damage to approaches and bridge protection works, landslides, rockslides and debris flow in the East-West Highway, Mahakali Highway, Silgadi-Sanfe Roads. Department of Roads has managed to open the roads in the far west and mobilized funds for immediate measures to be carried out within current fiscal year 2065/66. However major landslides are yet to be removed and rehabilitation of damaged east- west highway section between Karnali and Gaddachoki including re-gravelling of feeder roads and bridge protection and river training works in Kailali and Kanchanpur districts, landslide stabilization works in Mahakali Highway and Silgadi Sanfe Road needs to be carried out.

2. The proposed road component of the Project is situated in far western region of the country. The project consists (i) rehabilitation of damaged road section between Karnali and Gaddachowki (about 500m in total); (ii) re-gravelling of damaged feeder roads in Kailali and Kanchanpur districts (about 50 km); (iii) land slide stabilization and construction of retaining structures in Mahakali highway and Silgadi Sanfe road (5 to 6 major landslides); and (iv) bridge maintenance and protection works in Kailai and Kanchanpur districts ( 4-5 bridges). The terms of reference are prepared for the project scope proposed under the roads component in the far west.

B. Objectives

3. The objectives of the consulting services are to assist the Implementing Agency (IA) Department of Roads to:

(i) Review and update ADB/IA’s damage assessments. (ii) Carry out necessary survey, soil investigations and designs appropriate for reconstruction and rehabilitation works. (iii) Prepare necessary bidding and other tender documents and assist in bid evaluation and timely award of civil works contracts for speedy repair/rehabilitation works. (iv) Monitor and supervise the road rehabilitation and other construction works ensuring specified quality and quantity and achievement of project objectives with overall construction period of 15 months. (v) Review projects’ environmental and resettlement impacts, conduct ISA and prepare resettlement check-list, and take necessary action as per Government and ADB guidelines.

C. Scope of Service

4. The project activities are (i) rehabilitation of damaged road sections between Karnali and Gaddachowki (500m); (ii) re-gravelling of about 50 km of damaged feeder roads in Kailali and Kanchanpur districts; (iii) land slide stabilization and construction of retaining structures along Mahakali Hiighway and Silgadi-Sanfe Roads(5-6 major landslides); and (iv) bridge maintenance and protection work in Kailali and Kanchanpur districts.

5. It is envisaged that road rehabilitation, landslide stabilization, and bridge repair and protection work in the far west will be carried out by National contractors in 5 Packages. There will be one package (one landslide stabilization works) under Baitadi Division, one package (2 to 3 landslide stabilization works) under Doti Division and three packages (road rehabilitation, landslide stabilization and bridge protection works) under Mahendranagar Division.

6. The projects shall be in compliance with the Government’s environmental requirements including Environment Protection Act 1997, and Environment Protection Rule, 1997 (amendment 2007); and ADB’s Safeguard Policy Statement (2009) and Environment Assessment guidelines (2003) as wellas Environmental guidelines for Selected Infrastructure Development Projects and the agreed Environmental Assessment Framework. Government environment clearance should be obtained prior to the award of contract for the project.

7. The projects will generally not involve any land acquisition or involuntary resettlement. If either of these is, in fact, required in course of the Project, it will be conducted in accordance with the Government’s applicable laws and regulations, ADB’s Policy on Involuntary Resettlement (1995), ADB’s Handbook on Resettlement: A Guide to Good Practice (1998), and the agreed resettlement frameworks.

Detailed Technical Design:

8. The consultants will carry out detailed design and drawings of all structures, pavements, landslide stabilization and protection works, environmental and social safeguards, and related components of the project. The Consultant’s responsibilities will include, but not limited to the following:

9. The consultants will undertake the following tasks to:

(i) Prepare Inventory of road sections selected for detailed engineering, including geometric features, and type and condition of drainage structures. (ii) Carry out detailed topographic surveys, including horizontal, vertical alignments and cross-sections. Establish horizontal control points, bench marks, and reference points as required to prepare detailed engineering designs and to enable construction quantities to be calculated with reasonable accuracy. (iii) Produce designed alignments to match as closely as possible the existing carriageway, design any necessary retaining or support structure. (iv) Review available data relating to traffic, axle loads, existing pavement strength and determine the strength of the existing pavement structures through field and laboratory testing methods. (v) Based on the survey of the selected landslide areas identify, design and quantify any necessary additional, replacement or amendments to existing structures, check stream beds and cross drainage channels above and below the road for possible erosion effects, design and quantify any necessary protective works 45

where necessary to eliminate scour and erosion or to provide support for narrow road cross sections. (vi) Carry out detailed geological surveys in the landslide areas and assess and identify appropriate landslide stabilization and slope protection measures adjacent to the road and design cost-effective remedial works. (vii) Investigate, test and define sources and available quantities of construction materials and prepare material sources map with indicative properties and quantities. (viii) Undertake necessary survey and prepare necessary RPs based on detailed design as per the resettlement framework including entitlement matrix and compensation plan. Assist DoR during the consultation, assist government in translation of the summary of RP in Nepali language for disclosure to affected persons as per requirement, coordinate with various agencies for timely land acquisition and disbursement of compensation to affected persons. (ix) Undertake environmental screening of sub-projects and prepare IEE report per Government and ADB requirements. (X) Prepare contract packages and detailed project implementation schedules showing anticipated progress of works and expenditures for each contract package. (xi) Produce complete detail drawings and tender documentation suitable for procurement under ICB and NCB methods with single-stage one-envelope bidding procedure in accordance with ADB’s Guidelines for Procurement. This procedure will have the following features: a. The envelope will contain both the technical qualifications of the bidder and the financial bid based on item of works, quantity, unit rate and amount. b. Post-qualification criteria will be established and agreed upon by the Government and the ADB. c. Specify contract clauses to prevent engagement of children in construction and define contract’s responsibility in HIV/AIDS control. d. Produce a comprehensive Engineer’s Estimate for the cost of works in each contract packages e. Assist the IA with the evaluation of tenders and recommend award of contract to the Project Directorate.

Construction Supervision

10. The consultant’s responsibilities will include, but not necessary be limited to the following:

(vii) Supervise the Contractor’s work in all matters concerning safety and care of civil works including provision of necessary lights, guardrails, fencing and security. (viii) Prepare and issue regular progress and other reports. (ix) Approve and/or issue working drawings and issuing instructions to the contractor as required in accordance with the contract specifications and Contractor’s qualify management plan. (x) Make measurements and keep measurement records. (xi) Maintain records, correspondence and diaries. (xii) Certify work volume and interim certificates for progress payments. (xiii) Assist the Employer’s Representative with the maintenance of consolidated project accounts, and with preparation of financial statements and withdrawal applications for submission to the ADB. (xiv) Certify completion of part or all of the works. (xv) Inspect the works at appropriate intervals during the defects liability period and certifying the Defects Liability Certificate for issuance by the Employer’s Representative. (xvi) Advise the Employer’s Representative on all matters relating to the execution of the works, and assist the Representative with processing the contractor’s possible claims and disputes. (xvii) Ensure compliance with the environmental and social impact mitigation requirements of civil works contracts, including environmental management plan and land acquisition and resettlement action plan, monitoring the process of resettlement of people affected by the works, and provide information to ADB on those processes in the monthly progress reports. (xviii) At the completion of the works, undertake project monitoring and evaluation in the format acceptable by the Employer and the ADB and assist in preparing a consolidated Project Completion Report in format to be provided by the ADB. (xix) Check and certify as-built drawings for the works prepared by the contractors. (xx) Provide the Employer with complete records, and inception, monthly and completion reports. (xxi) Comply with the employer’s auditor General’s requirements. (xxii) Administration of the civil works contracts as the Engineer's Representative / Project Manager as defined in the contract documents.

Environmental , Social Safeguards and Anti-corruption

11. The consultants will undertake the following tasks to:

(i) Ensure and monitor that the government’s and ADB’s safeguard policies on environment, resettlement, road safety, and health and sanitation are adequately complied at construction sites, and (ii) Monitor and report to ADB through the IA on any incidence of fraudulent practice and corruption by any concerned parties in implementing the project in accordance with ADB’s Anti-corruption Policy, and facilitate/assist in conducting regular period audits and performance audits instituted by the Government and ADB. D. Reporting

12. The consultant will prepare the following reports:

(i) All original drawing, work sheets, field notes, computer programs, reports and other documents relating to the study shall become the property of the DoR. The consultant will prepare and submit following reports both in hard copies and electronic format: (6 copies to DoR and 2 copies to ADB both ) (ii) Within one months of commencement, a short Inception Report which includes the consultants detailed work program (including methodology and details of special investigations proposed), review of the flood assessment program components and contract packaging for the works. (iii) Monthly reports to detail the physical and financial progress of the works and (iv) A project completion report in accordance with ADB requirements.

E. Implementing Arrangements

13. The Project Executing Agency will be MPPW and Project Implementing Agency will be Department of Roads (D0R). Project directorate within DoR will be responsible for overall coordination, monitoring and implementation of the Project. For the civil works in Far Western Region, the respective Division Roads Office will act as employer's representative at site for implementation.

14. The Project Director (Project Directorate) will also be responsible for the submission of progress and other reports and disbursement requests to the EA and the Bank. The Project Director will make payments to the contractors and also process withdrawals under reimbursement procedures in accordance with the ADB’s Loan Disbursement Handbook.

F. Consulting Services, Staffing Input

15. The consulting services shall be carried out by National consultants. The firm shall have extensive experience in the study, design and construction supervision of road, land slide stabilization works and bridge protection and river training works. The consultant should also have experience in the fields of hydrology, material study, contract management, construction supervision, resettlement and environmental management. It is anticipated that the consultant organization will be as set out in Staffing Input, although in preparing their proposals the consultants may propose alternative arrangement which in their opinion, will provide supervision services of an equivalent or better quality.

16. The total minimum key staffing inputs has been estimated at about 109 person-months (29 person-months for the design phase and 80 person-months for the construction supervision phase). It is expected that the consultants will propose their required person-months to carry out the task as per the Terms of Reference. The consultant’s should include in their proposal the cost of all facilities and services required by them for the execution of their services including vehicles, miscellaneous transportation, offices ,equipment and accommodation etc. The breakdown of estimated staff input is given below.

G. Key Staff 17. Staffing input has been estimated as follow:

Table A6.4: Consulting Services

Description of Staff No. Design Phase Supervision Total (Person Phase (person Months) Months) Team Leader/Highway Engineer 1 6 0 6 Team Leader/ Resident Engineer 1 0 15 15 Structure engineer 1 2 1 3 Geotechnical Engineer/Material Engineer 1 3 15 18 Hydrologist 1 2 0 2 Geologist 1 2 0 2 Contract Specialist 1 3 0 3 Environment Specialist 1 3 2 5 Resettlement Officer 1 2 2 4 CAD Engineer 1 3 0 3 Quantity Engineer 1 3 0 3 Assistant Resident Engineer 3 0 45 45 Total 29 80 109

The responsibilities of consultant’s key personnel will include, but not necessary be limited to the following:

(A) Design Phase

(i) Team Leader/Highway Engineer (National)

- Ensure overall coordination and assist the entire team of consultants in performing their responsibilities and inputs to complete the design works on time. - Supervise consulting team member and monitor their performance to ensure quality of design works. - Assess flood damages and with inputs from other national experts manage survey and design works, preparation of standard contract documents, adequate contract packaging and ensure timely tender evaluation and contract awards. - Ensure that proposed measures are environmentally sound and socially acceptable to meet the Government’s guidelines and ADB’s safeguard policies on environment, social assessment and resettlement - Develop a monitoring and evaluation plan covering project activities and in particular the construction supervision and quality control for the rehabilitation works - Assist PIU in preparing annual work program and budget - Assist PIU in coordinating project activities with PCO, and maintain a close working relationship with the team leader of PCO to foster coordination between two agencies. - Prepare reports as required in section D.

95. The Team Leader/ Highway engineer will preferably have Master's degree in Civil Engineering/ Highway engineering with 15 years experience in civil engineering. Experience as Team Leader in at least 3 assignments of comparable size for design of road works will be of an added advantage.

(ii) Structure Engineer (National)

- Conduct detailed field inventory to assess damage to structures and select type structure to be replaced/rehabilitated/ constructed. - Guide detailed engineering survey of proposed works - Carry out detailed engineering design of structures. - Prepare drawing, BOQ of structures and assist to prepare tender documents.

96. The Structure engineer will preferably have masters' degree in structural engineering and experience in design of roads. General experience of more than 10 years in civil engineering and in design of landslide stabilization works, retaining structures, bridge protection/river training works in 3 similar size projects will have an added advantage.

(ii) Geotechnical/Material Engineer (National)

- Assist in detailed field inventory to assess damage to infrastructures and in preparation of specification for restoration/rehabilitation works. - suggest structure engineer to carry out design of suitable structure for landslide stabilization works - Investigate, test and define sources and available quantities of construction materials and prepare material sources map with indicative properties and quantities. - Establish Inspection and Test Plan (ITP) for all construction works.

97. Geotechnical engineer/Material Engineer will preferably have masters' degree in Geotechnical engineering or equivalent degree. General experience of more than 10 years and specific experience in design of landslide stabilization works in 3 similar size projects will have an added advantage.

(iv) Geologist

- Carry out geological studies including geological investigations of the landslide areas. - Provide input to the design team with respect to geological condition of the landslide areas.

98. Geologist will preferably have masters' degree in Geology or equivalent degree. General experience of more than 10 years and specific experience in investigation of landslide stabilization works of 3 similar works will have an added advantage.

(v) Hydrologist (National)

- Review preliminary findings damage assessment of affected roads and bridges from hydrological view point. - Assess flood level; recommend restoration works of embankment and structure. - Prepare hydrological reports and provide necessary hydrological data to the design team. 50

Hydrologist will preferably have masters' degree in Hydrology or equivalent degree. General experience of more than 5 years and specific experience in hydrological investigation related to landslides/river training works in 3 similar size projects will have an added advantage.

(vi) Contract Specialist (National)

- Assist Team Leader in preparing tender documents, bid invitation, tender evaluation and contract awards. - Assist in preparing various reports of the projects

99. Contract Specialist will preferably have masters' degree in Contract management or equivalent degree. General experience of more than 10 years and specific experience in preparation of contract documents and contract management will have added advantage.

(vii) Environmental Specialist (National)

- Review the Environment Assessment and Review Procedure (ERAP) prepared for the project. In particular, review the screening and planning procedures that will be applied to the project. - Ensure that the Government’s and ADB’s safeguard policies on environment are followed. - Review project's environmental impacts, conduct rapid environment assessment and prepare screening check-list, and take necessary action as per Government and ADB Environment Assessment Guidelines. - Prepare IEE of each project as required by Government and ADB environment policies and guidelines. - Prepare Environment Management Plan (EMP) for the project. - Assist the Team Leader in preparing bid documents, BOQ and other contractual obligations clearly identifying environmental responsibilities as explained in the IEE. - Prepare EMP compliance reporting system in trimester basis.

100. Environment Specialist will preferably have masters' degree in Environment Science or equivalent degree. General experience of more than 5 years and specific experience as Environment specialist in 3 similar works will be of added advantage.

(viii) Resettlement Officer (National)

- Review the Resettlement Framework (RF) prepared for the project. In particular, review the screening and planning procedures that will be applied to the project. - Ensure that the Government’s and ADB’s safeguard policies on resettlement and indigenous peoples are followed. - Review project's resettlement impacts, conduct ISA and prepare resettlement checklist, and take necessary action as per Government and ADB Guidelines. - Provide support to engineering team during project preparation and detailed design to minimize resettlement impact. - Prepare social analysis for the selected subprojects involving resettlement, if any. - Conduct necessary field surveys, consult with affected people and other relevant stakeholders, and prepare resettlement plan (RP) for the subprojects involving resettlement based on the detailed design in line with the Project's resettlement framework. 51

- Develop an implementation mechanism for efficient and effective implementation of RPs. Coordinate with relevant authorities for land acquisition, compensation and relocation of affected people. - Identify and document any social management obligations for inclusion in the tender documentation. - and prepare RAP for the subprojects involving resettlement. - Identify and document any social management obligations for inclusion in the tender documentation.

101. Resettlement specialist will preferably have masters' degree in sociology or equivalent degree. General experience of more than 5 years and specific experience as social and resettlement expert in 3 similar size works will be of an added advantage.

(ix) CAD Engineer (National)

- In consultation with the design team prepare detailed engineering design and drawings using approved software.

102. CAD engineer will preferably have bachelor's degree engineering/architecture or an equivalent degree. General experience of more than 5 years and specific experience in CAD in 2 similar size projects will be of an added advantage.

(x) Quantity Engineer (National)

- Conduct detailed field inventory to assess damage to infrastructures. - Prepare detailed quantity estimates based design drawings and applicable district rates, - Prepare BOQ and assist in preparation of tender documents, bid invitation and tender evaluation. - Check quantity of BOQ and contractor’s bills prepared by the supervising staff. - Finalize IPC for recommending to the Project Director - Survey and summarize monthly progress quantities. - Assist Resident Engineer in preparing Progress Report.

103. Quantity Engineer will preferably have bachelor's degree in civil engineering/architecture or an equivalent degree. General experience of more than 5 years and specific experience in quantity surveying in 3 similar size projects will be of an added advantage.

(B) Construction Supervision Phase

(i) Team Leader/Resident Engineer (National)

- Monitor construction works conforming to design and specification. - Monitor financial progress and conduct progress review meeting. - Issue instruction, directions and orders to the contractors on behalf of the Engineer. - Develop and implement Quality Assurance Plan. - Monitor social and environmental impact, mitigation measures and assure safety of the project. - Check and control quantities of items of works of road as per BOQ and certify contractors’ bills. 52

- Review variation of works if any and recommend to the Employer. - Supervise, instruct and monitor performance of Consultant's field supervision tem members - Assist the client and the contractors in contract interpretation and settlement of disputes. - Assist PIU in preparing annual work program and budget - Assist PIU in coordinating project activities with PCO, and maintain a close working relationship with the team leader of PCO to foster coordination between two agencies. - Assist the IA in performing their responsibilities, including financial management in accordance to ADB guidelines - Liaise with the ADB in consultation with IA on issues pertaining to project planning, implementation, financial management and monitoring and coordinate Project activities with relevant stakeholders.

104. The Team Leader/ Resident engineer will preferably have Master's degree in Civil Engineering/ Highway engineering with 15 years experience in civil engineering with experience as Resident Engineer in at least 3 assignments of comparable size for construction supervision of road works.

(ii) Geotechnical / Materials Engineer (National)

- Monitor, inspect, test, approve and maintain record of quality of construction materials conforming to specification. - Supervise, instruct and monitor performance of consultants Laboratory Technicians and Laboratory Assistants.

105. The Geotechnical/Material engineer will preferably have Master's degree in Civil Engineering/ Highway Engineering/Geotechnical Engineering with 10 years general experience. Specific experience as Geotechnical/ material Engineer in at 3 assignments of comparable size for construction supervision of road works will be of added advantage.

(iii) Assistant Resident Engineers (National)

- Monitor works conforming to design, specification and conditions of contract - Monitor and supervise progress of construction works. - Check and control quality of all civil works of contractors. - Check quantity of BOQ and contractor’s bills prepared by the supervising staff. - Check IPC prepared by the contractor - Survey and summarize monthly progress quantities. - Maintain record of measurement of works executed and recommend contractors’ bills for certification to Team Leader. - Supervise, instruct and monitor performance of Consultant’s field supervision team members. - Assess and justify variations and claims and assist Team Leader in amendments of contract if necessary. - Assist Resident Engineer in preparing Progress Report. 106. The Assistant Resident Engineer will preferably have Bachelors' degree in Civil Engineering or equivalent with 5 years general experience. Specific experience as ARE Engineer in at 3 assignments of comparable size for construction supervision of road works will be of an added advantage. 53

(iv) Environmental Specialist (National)

- Monitor social, environmental, health and safety mitigation measures identified in the EMP. - Prepare environmental compliance monitoring report. - Ensure conformity with the environmental and social impact mitigation measures for the subprojects.

107. The Environment Specialist will preferably have Masters’ degree in Civil Engineering/ Environment Science or equivalent degree with 5 years general experience. Specific experience as Environment Specialist in at least 3 assignments of comparable size during construction supervision of road works will be of added advantage.

(v) Resettlement Officer (National)

- Monitor that the Government’s and ADB’s safeguard policies on resettlement and indigenous peoples are followed. - Monitor project's resettlement impacts, and prepare monitoring reports on compliance of social and resettlement plan implementation.

108. Resettlement specialist will preferably have masters' degree in sociology or equivalent degree. General experience of more than 5 years and specific experience as social and resettlement expert in 3 similar works during construction phase will be of an added advantage.

(vi) Structure Engineer (National)

- Monitor and supervise construction of bridge protection and landslide stabilization structures. - Monitor construction conforming to design and specification. - Conduct field design adjustment if necessary.

109. The Structure engineer will preferably have masters' degree in structural engineering and experience in design/supervision of roads. General experience of more than 10 years in civil engineering and in design/supervision of landslide stabilization works, retaining structures, bridge protection/river training works or similar works will be of an added advantage.

Project Component: Road (Part D) (Package-2 : Koshi Bridge)

Outline Terms of Reference For Supervision Consulting Services

A. Background

1. A breach in the eastern embankment of Saptakoshi River and subsequent floods caused extensive damage at various locations of the east west highway in August 2008. The flood washed away the highway embankment including box culverts, pipe culvers, Slab culverts and one bridge that resulted in isolating eastern part of Koshi River from the rest of the country. In order to avoid similar isolation and to provide immediate relief to the flood victims in future by providing alternate access to the east, construction of a new Bridge in the Koshi River was felt necessary. The design of the bridge is being prepared by the international consultants of the ongoing ADB funded Road Connectivity Sector I Project. DOR now intends to engage national consulting firm to supervise the construction of the bridge.

B. Objectives

3. The objectives of the consulting services are to assist the Implementing Agency (IA) Department of Roads to:

(i) Supervise the construction of new bridge on Koshi River at Chatara as per the design, drawing and specifications so as to achieve the project objectives within the project period of 30 months. (ii) Ensure environmental safeguards and observe full compliance to the provision of EMP given in the IEE Report duly approved by the Government (iii) Review projects’ environmental and resettlement impacts, conduct ISA and prepare resettlement check-list, and take necessary action as per Government and ADB guidelines.

C. Scope of Service

4. The bridge construction will be undertaken by a reputed International Contractor through a single International Contract (ICB) contract package.

5. The projects shall be in compliance with the Government’s environmental requirements and ADB’s Safeguard Policy Statement, 2009 and Environment Assessment Guidelines (2003), and the provision of Initial Environmental Examination (IEE) report approved by the Government

6. Any land acquisition or involuntary resettlement required will be conducted in accordance with the Government’s applicable laws and regulations, ADB’s Policy on Involuntary Resettlement (1995), ADB’s Handbook on Resettlement: A Guide to Good Practice (1998), and the agreed resettlement frameworks.

7. Full time construction supervision and contract administration for the construction of bridge over Saptakoshi near Chatara.The consultant’s responsibilities will include, but not necessary be limited to the following:

(i) Approve contractor’s quality management plan, works program, method statements, material sources, manpower and equipment deployment etc. (ii) Ensure at all times the contractor works in strict compliance with the contractor’s quality management plan, work plan, and contract specification, including instruction issued as per contract and non-compliance notifications. (iii) Provide all necessary setting out data to the civil works contactors and ensuring correctness of the setting out at field. (iv) Review the Contractor’s organizational arrangements, key personnel and work plan, materials and their sources. (v) Monitor progress of works against baseline work plan and advise on measures to be taken to improve progress and quality. (vi) Carryout necessary adjustments in the design/drawing required during construction due to the site requirement. (vii) Review the proposed variation orders, determination of rates of works and advise the Employer on any alternatives. (viii) Supervise the Contractor’s work in all matters concerning safety and care of civil works including provision of necessary lights, guardrails, fencing and security. (ix) Prepare and issue regular progress and other reports. (x) Approve and/or issue working drawings and issuing instructions to the contractor as required in accordance with the contract specifications and Contractor’s qualify management plan. (xi) Make measurements and keep measurement records. (xii) Maintain records, correspondence and diaries. (xiii) Certify work volume and interim certificates for progress payments. (xiv) Assist the Employer’s Representative with the maintenance of consolidated project accounts, and with preparation of financial statements and withdrawal applications for submission to the ADB. (xv) Certify completion of part or all of the works. (xvi) Inspect the works at appropriate intervals during the defects liability period and certifying the Defects Liability Certificate for issuance by the Employer’s Representative. (xvii) Advise the Employer’s Representative on all matters relating to the execution of the works, and assist the Representative with processing the contractor’s possible claims and disputes. (xviii) Ensure compliance with the environmental and social impact mitigation requirements of civil works contracts, including environmental management plan and land acquisition and resettlement action plan, monitoring the process of resettlement of people affected by the works, and provide information to ADB on those processes in the monthly progress reports. (xix) At the completion of the works, undertake project monitoring and evaluation in the format acceptable by the Employer and the ADB and assist in preparing a consolidated Project Completion Report in format to be provided by the ADB. (xx) Check and certify as-built drawings for the works prepared by the contractors. (xxi) Provide the Employer with complete records, and inception, monthly and completion reports. (xxii) Comply with the employer’s Auditor General’s requirements. 56

(xxiii) Administration of the civil works contracts as the Engineer's Representative / Project Manager as defined in the contract documents.

D. Environmental and Social Safeguards and Anti-corruption:

8. The consultants will undertake the following tasks to: (i) Ensure and monitor that the government’s and ADB’s safeguard policies on environment, resettlement, road safety, and health and sanitation are adequately complied at construction sites, and (ii) Monitor and report to ADB through the IA on any incidence of fraudulent practice and corruption by any concerned parties in implementing the project in accordance with ADB’s Anti-corruption Policy, and facilitate/assist in conducting regular period audits and performance audits instituted by the Government and ADB.

E. Reporting

9. The consultant will prepare the following reports:

All documents relating to the bridge construction shall become the property of the DoR. The consultant will prepare and submit following reports both in hard copies and electronic format: (6 copies to DoR and 2 copies to ADB both )

(i) Within one months of commencement, a short Inception Report which includes the consultants detailed work program with performance indicators to be monitored by the consultant during construction (including methodology). (ii) Monthly reports to detail the physical and financial progress of the works to be submitted within 7 days of the end of each month, to include (a) schedules of contract payments and variation orders; (b) graphical representations of progress against program based on the approved contract schedules, charts of physical progress on major items; (c) monitoring quality assurance/quality control; (d) contractual claims; (e) details of obstructions/ problems with recommendations for overcoming them; and (f) progress photographs (iii) A project completion report within 3 months of substantial completion of the civil works in accordance with ADB requirements. (iv) Maintenance Manual detailing routine and periodic maintenance tasks that will be required to maintain the completed Project, to be submitted 3 months before the end of defects liability period of the contract.

F. Implementing Arrangements

10. The Project Executing Agency will be MPPW and Project Implementing Agency will be Department of Roads (D0R). Project Directorate within DoR will be responsible for overall coordination, monitoring and implementation of the Project. A Site Project Office will be established and the Project Office will be headed by a full time Project Manager (PM) with necessary Project Staff to supervise the work.

11. The Project Director (Project Directorate) will also be responsible for the submission of progress and other reports and disbursement requests to the Bank. The Project Director will make payments to the contractors and also process withdrawals under reimbursement procedures in accordance with the ADB’s Loan Disbursement Handbook.

F. Consulting Services, Staffing Input

12. The consulting services shall be carried out by National consultants. The firm shall have extensive experience in construction supervision of road and bridges, bridge protection works and river training works. The consultant should also have experience in the fields of bridge design, hydrology, material study, contract management, construction supervision, resettlement and environmental management. It is anticipated that the consultant organization will be as set out in Staffing Input. However, in preparing their proposals the consultants may propose additional arrangement which in their opinion will be required for satisfactory completion of the services as per the scope of work.

13. Total staffing inputs has been estimated at about 95 person-months. It is expected that the consultants will propose their required person-months to carry out the task as per the Terms of Reference. The breakdown of estimated staff input is given below.

G. Key Staff

14. Consultant estimated inputs are given in Table.1.

Table A6 .5: Consultant Inputs Description of Staff No. (Person Months) Team Leader/ Resident 30 Engineer 1

Structure Engineer 1 3

Geotechnical/Material 30 Engineer 1

Environmental Specialist 1 1

Resettlement Officer 1 1

AssistantResident 30 Engineer 1 Total 95

15. The responsibilities of consultant’s key personnel will include, but not necessary be limited to the following:

(i) Team Leader/Resident Engineer • Monitor construction works conforming to design and specification. • Monitor financial progress and conduct progress review meeting. • Issue instruction, directions and orders to the contractors on behalf of the Engineer. • Develop and implement Quality Assurance Plan. • Monitor social and environmental impact, mitigation measures and assure safety of the project. • Check and control quantities of items of works as per BOQ and certify IPCs. 58

• Review variation of works if any and recommend to the Employer. • Supervise, instruct and monitor performance of Consultant's field supervision tem members • Assist the client and the contractors in contract interpretation and settlement of disputes. • Assist PIU in preparing annual work program and budget • Assist PIU in coordinating project activities with PCO, and maintain a close working relationship with the team leader of PCO to foster coordination between two agencies. • Assist the IA in performing their responsibilities, including financial management in accordance to ADB guidelines • Liaise with the ADB in consultation with IA on issues pertaining to project planning, implementation, financial management and monitoring. • Prepare project reports

The Team Leader/ Resident engineer will be a civil engineering gaduate with preferably a Master's degree in Structure Engineering/ Bridge Engineering/ Construction Management and 15 years experience in road and bridge construction .Specific experience as Team Leader/Resident Engineer in at least 3 assignments of comparable size for construction supervision of bridge works will be of an added advantage.

(ii) Geotechnical/Materials Engineer • Monitor, inspect, test, approve and maintain record of quality of construction materials conforming to specification. • Supervise, instruct and monitor performance of consultants Laboratory Technicians and Laboratory Assistants.

The Geotechnical/Material engineer will be a civil engineering graduate with preferably have Master's degree in Geotechnical Engineering with 10 years general experience in construction of road and bridge works. Specific experience as Geotechnical/ material Engineer in at least 3 assignments of comparable size for construction supervision of bridge works will be of added advantage.

(iii) Assistant Resident Engineer • Monitor works conforming to design, specification and conditions of contract • Monitor and supervise progress of construction works. • Check and control quality of all civil works of contractors. • Check quantity of BOQ and contractor’s bills prepared by the supervising staff. • Check IPC prepared by the contractor and summarize monthly progress quantities. • Maintain record of measurement of works executed and recommend contractors’ bills for certification to Team Leader. • Supervise, instruct and monitor performance of Consultant’s field supervision team members. • Assess and justify variations and claims and assist Team Leader in amendments of contract if necessary. • Assist Resident Engineer in preparing Project Reports.

The Assistant Resident Engineer will have Bachelors' degree in Civil Engineering or equivalent with preferably 10 years general experience. Specific experience as ARE Engineer in at 3 assignments of comparable size for construction supervision of bridge works will be of an added advantage

(vi) Structure Engineer • Monitor and supervise construction of bridge and bridge protection • Monitor construction conforming to design and specification. • Conduct field design adjustment if necessary.

The Structure engineer will have Bachelors' degree in Civil Engineering with preferably Masters' degree in structural engineering/bridge engineering and General experience of 10 years as a structure engineer in road/bridge projects. Specific experience as Structure Engineer/Bridge Engineer in at least 3 assignments of comparable size for construction supervision of bridge works will be of an added advantage

(iv) Environmental Specialist • Monitor social, environmental, health and safety mitigation measures identified in the EMP of IEE Report. • Ensure conformity with the environment and social impact mitigation requirement. • Prepare environmental compliance monitoring report.

The Environment Specialist will have Bachelors' degree in Civil Engineering/Environmental Engineering with preferably Masters’ degree in Environmental Engineering/ Environment Science or equivalent degree with 8 years general experience. Specific experience as Environment Specialist in at 3 assignments of comparable size for construction supervision of road/bridge works will be of added advantage.

(v) Resettlement Officer • Monitor that the Government’s and ADB’s safeguard policies on resettlement and indigenous peoples are followed. • Monitor project's resettlement impacts, and prepare report on compliance of social and resettlement plans.

Resettlement specialist will preferably have masters' degree in sociology or equivalent degree. General experience of more than 8 years and specific experience as social and resettlement expert in 3 similar road /bridge works for construction phase will be of an added advantage.

H. Consultants Facilities

16. It should be noted that the consultant will need to provide all the administrative, technical professional and support staff needed to carry out their services. The Consultants will also be responsible for providing all other necessary facilities and logistical support for its staff, including accommodation, vehicles, miscellaneous transportation, equipments, communications, utilities, office and office supplies and other miscellaneous costs for carrying out the services as per the requirement of this TOR.

Project Component: Project Coordination Office (Part E)

Outline Terms of Reference For Individual Consultants

A. Project Management Team

(i) Team Leader/Project Management Specialist (National, 24 person-months)

1. The Team Leader of proven managerial capability will be a qualified engineer with a post-graduate degree and at least 15 years experience of project management in infrastructure projects (including 2 years as team leader).

2. The Team Leader will make intermittent inputs over the project implementation period, working in collaboration with the PCO, and will be responsible for the overall coordination of all four sectors. The Team Leader will manage and maintain close relationship with government project staff and concerned agencies. The Team Leader will be responsible for the production and submission of all consultant reports, including monthly, trimester and annual reports to the PCO. Specifically, the Team Leader will take the lead in completing the following main tasks or overseeing their completion by the consultant team and individual consultants:

(i) Establish a comprehensive management support system at PCO through the individual consultants. (ii) When necessary, provide assistance to PIUs in the conduct and preparation of detail survey, design and estimates including environmental and social action plan, and resettlement plan for the Project components. (iii) Assist EA and IAs in defining annual budget ceilings for individual sector based on agreed criteria, and review and consolidate (and provide technical advice) annual project work programs and budgets following the approved instructions, formats and guidelines. (iv) Review annual procurement plans based on work programs of PIUs, and guide them with standard procedures and formats for the procurement of goods and services under the Project in accordance with applicable acts, regulations and guidelines (v) Consolidate and prepare trimester and annual monitoring reports substantiated by field visits. Project monitoring reports will summarize project status, key issues and problems, mitigation measures and findings of surveys and studies as well as field visits carried out under the Project. Assist in the conduct of midterm evaluation, and preparation of final completion report. Also assist, provide guidance, and support the formulation and conduct of the targeted benchmark, midterm and final impact evaluation surveys and reports to assess outcome and impact. (vi) Assist in establishing and maintaining a financial management system, consolidating submissions of financial statements from PIUs and submitting project financial reports, disbursement claims, and audit reports to ADB. (vii) Undertake periodic visits of project sites to review and supervise the execution of key project activities, discuss emerging problems and likely solutions with respective PIUs and other stakeholders, and provide technical and advisory support as necessary. 61

(viii) Monitor, check and verify compliance with safeguard policies and mitigation measures and prepare verification reports. (ix) Assist PIUs to establish and monitor effective quality control mechanisms. (x) Assist in ensuring inclusion of poor, gender, indigenous people, dalit and other minority related concerns during implementation of project activities. (xi) Participate in regular review missions and provide necessary support to the PCO and the Mission. (xii) Guide, supervise and coordinate activities of other individual consultants under PCO consultants. (xiii) Any other jobs assigned by the PCO.

B. Procurement Specialist (National, 14 person-months)

3. The Procurement Specialist will assist in building capacity of each implementing agencies (IAs). The specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO, in the procurement matters of the project. The specialist will work in close cooperation with the Team Leader, and provide necessary and relevant supports to the Team Leader in discharging the procurement related functions. The specialist will be mainly responsible to

4. The specialist will be mainly responsible to: (i) Study the project documents, GoN's Public Procurement Act and Regulations, Local Body Financial Administration Rules, guidelines and directives prepared by Public Procurement Monitoring Office, and current practices. (ii) Review the ADB procurement procedure as applied for EFDRP and suggest various monitoring forms. (iii) Review the role and functions of project implementation units (PIUs), subproject implementation units, district development committees, and other related staff in relation to establishing a good procurement management system in the project. (iv) Assist in preparing standard bidding documents in conformity with GoN and ADB's procurement guidelines for the award of contracts for goods and works. (v) Assist in preparing bid evaluation reports for the award of contracts for goods and works. (vi) Provide support and advice to IA staff in preparing procurement plans, and monitor the implementation of the procurement plans. (vii) Assist PCO in preparing yearly and overall procurement plan of the project and contract roaster for procurement of goods, works and services of PCO. (viii) Update and prepare a user friendly manual with brief description of each step to be followed in the procurement process. (ix) Evaluate progress of IAs on procurement efficiency and effectiveness. (x) Support IAs in evaluating performance of consulting firms (xi) Any other jobs assigned by the PCO related to the procurement.

C. Financial Management Specialist (National, 12 person months)

5. The Financial Management Specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO, and will assist in all financial matters relating to the capacity building components and implementation of the project. The specialist will be mainly responsible for preparing a financial management and accounting manual and train relevant staff accordingly. The specialist is expected to understand the projects, its components as well as financing thoroughly before preparing the manual. The 62 specialist will work in close cooperation with the Team Leader, and provide necessary and relevant supports to the Team Leader in discharging the financial management related functions.

6. The consultant will be mainly responsible to: (i) Study the project documents, Bank's policies, GoN's financial procedures rules, and current practices. (ii) Specify various reporting requirements and design various monitoring forms that will be used by the project in collecting financial information. (iii) Specify financial reporting and disbursement arrangements of the project. (iv) Specify internal control system and monitoring system with clear written standards and procedures, clear responsibilities including levels of authority, and timely and accurate financial reporting. (v) Assist in preparing consolidated project accounts and submitting the audited financial statements to ADB within the stipulated time frame. (vi) Specify various reporting forms that will be used by the cost centers and at central level by the PCO. (vii) Specify the role and functions of each cost center and of accounts staff in the PCO and PIUs, and provide support to PCO and PIUs in establishing a good financial management system in the project. (viii) Prepare a financial management manual and train the staff and stakeholders of the EFDRP on the financial management system. The Manual will be used as the training tool to train the accounts staff who will be involved in the execution of the project. (ix) Design and suggest simplified and more informative financial reporting formats to be used by the IAs for the purpose of preparing SOE and withdrawal applications (WAs). (x) Assist PCO in collecting and compiling WAs, financial statements and review it for finalizing the costs to be claimed for replenishment/reimbursement. (xi) Assist PCO to maintain data base record of project replenishment/reimbursement status. (xii) Develop absorbing capacity of the IAs and suggest prompt and easy financial reporting system. (xiii) Any other jobs assigned by the PCO related to the financial management.

D. Benefit, Monitoring and Evaluation (National, 12 person-months)

7. The BME Specialist will have a post-graduate qualification in development economics or social science, with relevant background and experience in economics and impact evaluation of disaster recovery program in Nepal. The specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO and design a system for reporting on project targets for impacts and goals. In doing so, the BME specialist will develop the capacity of IA staff to carry out assessment of project impacts and ensure that the PCO MIS provides support to this task on an ongoing basis. The specialist will work in close cooperation with the Team Leader, and provide necessary and relevant support to the Team Leader in discharging the monitoring related functions.

8. The BME Specialist will have to undertake following duties:

(i) Develop detailed methodologies, data collection instruments, and analytical procedures for monitoring and evaluation of overall economic and social impacts 63

of project investments. The methodologies will build upon and improve, where applicable, those already developed in MPPW and will be adjusted and refined as required during project implementation; (ii) Assist with the establishment of benchmark data, and plan and supervise the collection and any additional benchmark data required through district situation analysis; (iii) Train IA district office and field staff in data collection procedures, as required during project implementation; (iv) Plan and supervise the regular collection of data to monitor and evaluate the effects on poverty reduction and the economic benefits of rehabilitated infrastructure, and the effects of livelihoods of the flood affected people; (v) Plan and supervise the regular collection of data to monitor and evaluate the level of direct employment generated under the project, and the targeting of this employment at the poor, including the disadvantaged and women; (vi) Plan and manage the conduct of surveys and studies, including use of participatory rapid appraisal (PRA) techniques, to assess the impact of project investments on poverty reduction in the project area; (vii) Design and manage including preparation of terms of references in conducting special studies of the economic and social impacts as may be required’; (viii) Carry out the analysis of the BME data collected; (ix) Prepare a reporting schedule that facilitates the assessment of the project’s development objectives progressively and implementation of the approved schedule to reports progress and any issues of concern; and (x) Any other jobs assigned by the PCO related to the social development.

E. Resettlement Specialist (National, 12 person-months)

9. The Resettlement Specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO, in building capacity of all IAs in resettlement policies and procedures. The specialist must become fully familiar with legal, administrative, financial and technical aspects of land acquisition and compensation to be adopted under the project. The specialist will work in close cooperation with the Team Leader, and provide necessary and relevant supports to the Team Leader in discharging the resettlement related functions.

10. The specialist will be mainly responsible to:

(i) Review the Resettlement Framework (RF) prepared for the project. In particular, review the screening and planning procedures that will be applied to EFDRP subprojects. (ii) Review the guidelines and procedures prepared for the planning and implementation of resettlement tasks; resettlement scoping, cadastral mapping, loss assessment survey, affected household surveys, public consultation, review and approval of Resettlement Plans and their implementation; and managing resettlement consulting services; and support and facilitate their adoption and practice; (iii) Develop an implementation mechanism for efficient and effective land acquisition and resettlement for subprojects; (iv) Review the ADB's resettlement policy, with respect to resettlement aspects for subprojects. (v) Conduct training workshops for staff involved in resettlement. 64

(vi) Work with staff of IAs to ensure that the requirements for resettlement and compensation works on sub-projects are minimized. (vii) Provide advice and support in preparing Resettlement Plans (RPs) for subprojects. (viii) Support and advice staff to reach agreement with Project Affected Persons (PAPs) over entitlements and voluntary donation of land. (ix) Monitor the implementation of resettlement plans, including fair and just treatment of affected persons, adherence to ADB policy, compliance with PAP’s constitutional and legal rights, completed transfer of land titles and compensation paid in full; all before construction works are started. (x) Work with social development consultant to identify additional counseling and support to resettled persons. (xi) Regularly monitor to ensure that the PAP’s livelihoods have not been significantly reduced and that those due for income restoration measures have received their entitlement. (xii) Facilitate and support the staff of IAs to undertake and report on regular resettlement monitoring of ongoing sub-projects, to check compliance with project guidelines and implementation of mitigation measures defined in the Resettlement Plans. (xiii) Provide simple guidance on the tasks and responsibilities involved in the RPs and ensure that the staffs understand their responsibilities in actually meeting resettlement targets and implementation of RP recommendations of the subproject. (xiv) Where appropriate, highlight to concerned agencies: (a) situations of significant deviation from subproject resettlement requirements; and (b) proposed remedial actions, for consideration by the PCO. (xv) Undertake additional tasks, as required by the PCO.

F. Environmental Management Specialist (National, 12 person months)

11. The Specialist will work within legal, administrative framework of GoN and ADB. The Specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO, and will be responsible for the technical aspects of environmental measures to be adopted under the project including projects requiring IEE. He/she must have relevant experience in conducting IEE and undertaking environmental monitoring of similar nature projects. The Specialist is also expected to be experienced in both ADB and any other GoN environmental policies and procedures. The Specialist will work in close cooperation with the Team Leader, and provide necessary and relevant supports to the Team Leader in discharging the environment related functions.

12. The Specialist will be mainly responsible to:

(i) Review the Environmental Assessment and Review Procedures (EARP) prepared for EFDRP and assist the concerned IA to apply in line with the EARP. (ii) Develop an institutional mechanism for speedy and efficient delivery of all aspects of environmental management in the project cycle of subprojects including IEE process. (iii) Liaise closely with the environment section of each IA and communicate closely for technical support and monitoring mechanisms. (iv) Provide training to staffs for capacity building in IEE process. 65

(v) Develop standard IEE formats for subprojects. These standard formats should be endorsed by each IA. Simplifying and speeding up the IEE procedures without compromising the quality will be the major objective of the formats. (vi) Provide simple guidance on the tasks and responsibilities involved in the IEE process and ensure that the staffs understand their responsibilities in actually meeting environmental targets and implementation of EMP recommendations of the subproject. (vii) Support the staff in undertaking environmental appraisal of sub-projects that are required by national legislation and ADB procedures. This will comprise: (a) environmental screening of all sub-projects; (b) initial environmental examinations if necessary; and (c) the processing the completion of all approvals by the appropriate authorities. (viii) Develop standard IEE monitoring checklist and reporting format applicable to all the components of the Project. (ix) Facilitate and support the staff to undertake and report on regular environmental monitoring of ongoing sub-projects, check compliance with project EMP and implementation of mitigation measures defined in the IEEs. Reporting mechanisms should be actually verifiable at any time during the project period. (x) Where appropriate, highlight to concerned agencies: (a) situations of significant deviation from project environmental requirements; (b) proposed remedial actions; and (c) proposed modifications to existing procedures or to project standards, for consideration by the PCO. (xi) Support the staff in managing independent environmental monitoring at project level. (xii) Prepare and organize environmental awareness raising and training activities. (xiii) Develop sustainable local mechanisms for the maintenance and repair of the environmental engineering mitigation measures such as bio-engineering measures, local level erosion control measures, various measures adopted for minimizing air, water and noise pollution etc. (xiv) Undertake additional tasks as required by the PCO.

G. Social Development Specialist (National, 12 person months)

13. The Social Development Specialist will make intermittent inputs over the project implementation period, working in collaboration with the PCO, and assist in building capacity of all IAs in social development matters relating to the capacity building components and implementation of the project. The specialist must become fully familiar with legal, administrative, financial and technical aspects of social development to be adopted in the Project. He/She is also expected to be experienced in both ADB and any other GoN social development, monitoring and evaluation policies and procedures. The specialist will work in close cooperation with the Team Leader, and provide necessary and relevant supports to the Team Leader in discharging the social development related functions.

14. The specialist will be mainly responsible to: (i) Provide inputs in overall project plans and in sector specific approaches and in monitoring mechanism broadly from poverty, gender and social inclusion perspective ensuring inclusion of poor, gender, indigenous people, dalits, and other minority related concerns. (ii) Develop reporting requirements and design monitoring forms that will be used by the project in collecting social development information 66

(iii) Assist in integrating gender, social inclusion and poverty related indicators and variables in all socio-economic surveys of the project and to analyse the results (iv) Develop gender and social inclusion action plan for overall project activities including result indicators (with gender, caste/ethnic disaggregated data) for each sector specific components, and incorporate those into project implementation plan and in monitoring formats (v) Identify and/or develop relevant training materials and orientation briefs on social development aspects on each sector and as required by the project, and provide continuous backstopping support to PIUs through regular consultations and trainings. (vi) Any other jobs assigned by the PCO related to the social development.

H. Institutional Strengthening Team

(a) River Hydrologist/Team Leader (National, 12 person-months)

15. The specialist should have Bachelor in Hydrology and Meteorology or in Civil Engineering with training in hydrology and Masters in Hydrology and have more than 10 years of professional experience in the field of hydrological analysis and investigations,

16. The consultant will be mainly responsible to

(i) Carry out hydrological analysis in terms of spatial and temporal variation of the water resources focusing on historical perspectives, (ii) Carry out hydro-meteorological analysis for flood control purpose with reference to climatology, estimation of design storm, rainfall-runoff process and runoff hydrographs, (iii) Carry out peak runoff estimation using Empirical methods as well as frequency approach such as Gumbell distribution, Log-Persion distribution etc, (iv) Carry out hydrological analysis for flood plain delineation and flood plain management activities, (v) Carry out software programming such as stochastic analysis and its application on understanding the river flow, design and development of flood forecasting system (FFS) and early warning system (EWS). (vi) Carry out planning, designing, establishing and operationalizing of the networks of hydro-meteorological information among the government agencies. (vii) Carry out collection of necessary data, their analysis to support or develop with operationalization of hydro-meteorological monitoring networks and flood forecasting models. (viii) Carry out inventory of GLOF in the study basin and their conditions for flood occurrence, (ix) Carry out impacts of climate change considering global warming, occurrence of recurrent floods and droughts, and its adaptation measures in Nepalese context, (x) Carry out detailed analysis of flood flows and determination of design flood discharge for various return periods, (xi) Prepare suitable plan and design of river protection works/flood mitigation measures to protect the affected area of the proposed project, 67

(xii) Carry out other necessary data collection and analysis together with recommendations as deemed necessary as per the need of the site, situation and objective.

(b) River Engineer (National, 10 person-months)

17. The specialist should have background of bachelor in Civil Engineering or equivalent with Masters in water resources engineering/ river engineering/hydraulic engineering or related subjects, and have more than 10 years of professional experience in the field of river training or water resources development and management,

18. The consultant will be mainly responsible to (i) Carry out detailed investigation to identify the river and watershed problems in general and erosion and sedimentation in particular, (ii) Assess the representative bed and bank materials of the river reach and analyze accordingly to investigate the vulnerable sites, (iii) Carry out river morphological assessment of particular river system with emphasis on sediment transportation, design of stable channels, (iv) Investigate the river behavior in the particular reach focusing on meandering pattern, bed and suspended load transport, plan form of the river, braining characteristics, and sedimentation tendency, (v) Assist in planning, designing, establishing and operationalizing of the networks of hydro-meteorological information among the government agencies. (vi) Carry out design flood estimation of major and minor river training and flood control measures and structures, which should be based on proposed flood mitigation planning and design, (vii) Assess the suitability of existing watershed management and river training measures to cope with future flood control planning and design, (viii) Carry out steady flood flow analysis with computer models like HEC RAS, Geo- HEC RAS, Mike Basin etc, to determine the design parameters of the proposed structures, (ix) Carry out planning and design of all river training and flood control measures both structural and non-structural measures using modern techniques and tools such as Arc view GIS, computer simulation etc, (x) Assess the cost and benefit of the proposed flood control and river training measures focusing on reclaimed land for comprehensive development, impacts of flood control in economic activities of the area and perform economic analysis of the project, (xi) Carry out other necessary data collection and analysis together with recommendations as deemed necessary as per the need of the site, situation and objective.

19. The specialist should have qualification of Master degree in Engineering Geology/ River Morphology/ Geology with special subjects in water resources, and have more than 10 years of professional experience in the field of geological and morphological investigation,

20. The consultant will be mainly responsible to

(i) Carry out engineering geological study of the project area emphasizing on watershed geology and soil properties, erosion and landslide characteristics, and sediment transport patterns of major and minor rivers of the studied basins, (ii) Carry out survey works to collect data on sediment flow, its deposition and the pattern with the flood flows, the river behaviour, the geology of the terrain crossed by the river (Koshi) and the hydrologic interation. (iii) Carry out morphological investigation of the river basin including sediment properties, flow regimes, bed and suspended load transportation, seismic activities, (iv) Investigate the river behavior in the particular reach focusing on meandering pattern, bed and suspended load transport, plan form of the river, braining characteristics, and sedimentation tendency, (v) Assist in planning, designing, establishing and operationalizing of the networks of hydro-meteorological information among the government agencies. (vi) Carry out flood plain delineation of the studied basin or river stretch including flood zoning, (vii) Carry out flood plain studies, assess the braiding and meandering and identify the potentially and critically disaster risk/ vulnerable spots and submit the recommendations for various risk reduction measures. (viii) Carry out other necessary data collection and analysis together with recommendations as deemed necessary as per the need of the site, situation and objective.

(d) Institutional Management Specialist (National, 12 person-months)

21. The specialist should have qualification of Master degree in Business Administration and have more than 10 years of professional experience in the field of institutional development and participatory development and management,

22. The consultant will be mainly responsible to

(i) Assess the legal frameworks, the status of policies, guiding documents, the strategies and vision etc and develop the necessary documents. (ii) Recommend and carry out sample training for staff skill enhancement, workshops and awareness interaction programs with stakeholders such as DHM, DSCWP, CBOs, effected people groups and local leaders. (iii) Assess the existence and functionality of community based organization (CBO), water users group (WUG) and other Non-governmental Organizations (NGO) within the river basin area, (iv) Depending upon the functionality of the CBOs, WUGs and NGOs in the studied areas, suggest the requirement of training needs and other empowerment measures, (v) Carry out socio-economic base line information within the study area encompassing all the issues as stated in the Scope of works such as size of land holdings, type of houses, literacy rates, main occupation of the populace, major crops grown, employment generation, and women participation in flood control activities, 69

(vi) Carry out participatory rural appraisal (PRA) and rapid rural assessment (RRA) to assess the historical flood events, time line of flood plain development, flood damages and its impacts on socio-economy of the area, (vii) Carry out base line on settlement patterns and migration situation, no of schools, water taps, public places in the villages directly affected by flood damages, and social power structures, (viii) Develop the training and institutional development packages in various sub-basin areas focusing of community flood forecasting systems, flood and water induced disaster awareness, flood proofing, and evacuation techniques, (ix) Prepare suitable Institutional Development Plan considering future development and improvement works, (x) Carry out other necessary data collection and analysis together with recommendations as deemed necessary as per the need of the site, situation and objective.

(e) Institutional Development Specialist (International, 2 person-months)

23. The specialist should have qualification of Master degree in Business Administration and have more than 10 years of professional experience in the field of institutional development and participatory development and management,

24. The consultant will be mainly responsible to

(i) Prepare suitable Institutional Development Plan considering future development and improvement works, (ii) Assess the strength and weaknesses of the DWIDP by carrying out SWOT analysis. (iii) Carry out analysis of its organizational structure, its organizational outreach, the human resources and the absorptive capacity on the background of the service delivery to be effectively discharged to the people and come up with recommendations. (iv) Assess its role, responsibilities and authorities on the background of the principle of organization dynamics and effective service delivery and provide necessary recommendations.

Appendix 7

PROCUREMENT PLAN

Basic Data (Agriculture) Project Name Emergency Flood Damage Rehabilitation Project Project Number 43001 Grant Amount $3.87 million Executing Agency Ministry of Physical Planning and Works Implementing Agency Department of Agriculture Date of First Procurement Plan (grant approval date) Period covered by this Procurement Plan 18 months from date of grant effectiveness

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 ICB for Works > $1,000,000 ICB for Goods > $500,000 NCB for Works $100,000 NCB for Goods $100,000 Shopping for Works

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 NCB for Goods Prior Shopping for Works Post Shopping for Goods Post Community Participation Post Force Account Post Recruitment of Consulting Firms Consultants Qualifications’ Selection Prior Single Source Selection Prior Recruitment of Individual Consultants Individual Consultants Selection Prior NCB = national competitive bidding.

3. Consulting Services Contracts Estimated to Cost More than $100,000

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

Advertisement International General Contract value Procurement Date or National Description ($) Method (quarter/year) Assignment Comments Consulting 385,000 CQS/ICS Q1 2009 National CQS = consultants’ qualifications selection, ICS = individual consultants selection, Q = quarter.

4. Goods and Works Contracts Estimated to Cost Less than $1 Million

4. The following table groups smaller value works for which procurement activity is either ongoing or expected to commence within the next 18 months.

Value of General Contracts Number of Comments Description ($) Contracts Procurement Method Civil Works 213,000 Multiple Shopping/ Community/Force Account Agricultural 3,046,000 Multiple NCB/Shopping Inputs NCB = national competitive bidding.

B. Project Procurement Plan

1. Indicative List of Packages Required under the Project

5. The following tables provide an indicative list of all procurement (goods, works, and consulting services) over the life of the Project.

Estimated Estimated Domestic General Value Number of Procurement Preference Description ($ million) Contracts Method Applicable Comments Goods 3.046 Multiple NCB/Shopping No Works 0.213 Multiple Shopping/Community/ No Force Account

General Estimated Estimated Description Value Number of Type of ($) Contracts Recruitment Method Proposal Comments Consulting 385,000 Multiple (i) CQS (1) Biodata Proposal only Services Technical for CQS Proposal (ii) ICS (3) CV evaluation CQS = consultants’ qualifications selection, ICS = individual consultants selection, NCB = national competitive bidding.

Basic Data (Irrigation)

Project Name Emergency Flood Damage Rehabilitation Project Project Number 43001 Grant Amount $9.18 million Executing Agency Ministry of Physical Planning and Works Implementing Agency Department of Irrigation Date of First Procurement Plan (grant approval date) Period Covered by this Procurement Plan 18 months from date of grant effectiveness

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

1. Project Procurement Thresholds

6. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold ICB for Works > $1,000,000 ICB for Goods > $500,000 NCB for Works $100,000 NCB for Goods $100,000 Shopping for Works

2. ADB Prior or Post Review

7. 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 NCB Works Prior NCB Goods Prior Shopping for Works Post Shopping for Goods Post Community Participation Post Force Account Post Recruitment of Consulting Firms Consultants Qualifications Selection Prior Single Source Selection Prior Recruitment of Individual Consultants Individual Consultants Selection Prior NCB = national competitive bidding

3. Consulting Services Contracts Estimated to Cost More than $100,000

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

Advertisement International General Contract value Procurement Date or National Description ($) method (quarter/year) Assignment Comments Consulting 307,000 CQS/ICS Q1 2009 National CQS = consultants’ qualifications selection, ICS = individual consultants selection, Q = quarter.

4. Goods and Works Contracts Estimated to Cost Less than $1 Million

9. The following table groups smaller value works for which procurement activity is either ongoing or expected to commence within the next 18 months.

Value of General Contracts Number of Procurement Description ($ million) Contracts Method Comments Civil Works 7.918 Multiple NCB (16)/ Shopping (13)/ Community/Force Account Materials, 0.795 Multiple NCB/Shopping Equipment, and Vehicles NCB = national competitive bidding.

B. Project Procurement Plan

1. Indicative List of Packages Required under the Project

10. The following tables provide an indicative list of all procurement (goods, works, and consulting services) over the life of the Project.

Estimated Estimated Domestic General Value Number of Procurement Preference Comments Description ($ million) Contracts Method Applicable Goods 0.795 Multiple NCB/Shopping No Works 7.918 Multiple NCB (16)/ No Shopping (13)/ Community/Force Account

General Estimated Estimated Description Value Number of Recruitment Type of ($) Contracts Method Proposal Comments Consulting 307,000 Multiple (i) CQS (1) Biodata Proposal only Services Technical for CQS (ii) ICS(3) Proposal CV evaluation CQS = consultants’ qualifications selection, ICS = individual consultants selection, NCB = national competitive bidding. Appendix-7, Page 5 of 10 74

Basic Data (Water Supply and Sanitation) Project Name Emergency Flood Damage Rehabilitation Project Project Number 43001 Grant Amount $4.76 million Executing Agency Ministry of Physical Planning and Works Implementing Agency Department of Water Supply and Sewerage Date of First Procurement Plan (grant approval date) Period Covered by this Procurement Plan 18 months from date of grant effectiveness

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

1. Project Procurement Thresholds

11. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold ICB for Works > $1,000,000 ICB for Goods > $500,000 NCB for Works $100,000 NCB for Goods $100,000 Shopping for Works

2. ADB Prior or Post Review

12. 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 NCB Works Prior NCB Goods Prior Shopping for Works Post Shopping for Goods Post Community participation Post Recruitment of Consulting Firms Consultants Qualifications Selection Prior Single Source Selection Prior Recruitment of Individual Consultants Individual Consultants Selection Prior NCB = national competitive bidding.

3. Consulting Services Contracts Estimated to Cost More than $100,000

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

Advertisement International General Contract value Procurement Date or National Description ($) method (quarter/year) Assignment Comments Consulting 428,000 CQS/ICS Q1 2009 National CQS = consultants’ qualifications selection, ICS = individual consultants selection, Q = quarter.

4. Goods and Works Contracts Estimated to Cost Less than $1 Million

14. The following table groups smaller value works for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Value of Contracts Number of Procurement Description ($ million) Contracts Method Comments Civil Works 2.76 Multiple NCB/Shopping/ Community Materials, 1.48 Multiple NCB/Shopping Equipment, and Vehicles NCB = national competitive bidding.

B. Project Procurement Plan

1. Indicative List of Packages Required under the Project

15. The following tables provide an indicative list of all procurement (goods, works, and consulting services) over the life of the Project.

Estimated Estimated Domestic General Value Number of Procurement Preference Description ($ million) Contracts Method Applicable Comments Goods 1.48 Multiple NCB/Shopping No Works 2.76 Multiple NCB (25)/ No Shopping(26)/ Community

General Estimated Estimated Description Value Number of Recruitment Type of ($) Contracts Method Proposal Comments Consulting 428,000 Multiple (i) CQS (1) Biodata Proposal only Services Technical for CQS Proposal (ii) ICS (3) CV evaluation CQS = consultants’ qualifications selection, ICS = individual consultants selection, NCB = national competitive bidding. Appendix-7, Page 7 of 10 76

Basic Data (Roads)

Project Name Emergency Flood Damage Rehabilitation Project Project Number 43001 Grant Amount $12.66 million Executing Agency Ministry of Physical Planning and Works Implementing Agency Department of Roads Date of First Procurement Plan (grant approval date) Period Covered by this Procurement Plan 18 months from date of grant effectiveness

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

1. Project Procurement Thresholds

16. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold ICB for Works > $1,000,000 ICB for Goods > $500,000 NCB for Works $100,000 NCB for Goods $100,000 Shopping for Works

2. ADB Prior or Post Review

17. 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 Works ICB Works Prior NCB Works Prior

Consultants Qualification Selection (CQS) Prior Single Source Selection Prior Recruitment of Individual Consultants Individual Consultants Selection (ICS) Prior ICB = international competitive bidding, NCB = national competitive bidding.

3. Works Contracts Estimated to Cost More than $1 Million

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

Contract Prequalification of Advertisement General Value Procurement Bidders Date Description ($ million) Method (Yes/No) (quarter/year) Comments Civil Works 7.40 ICB No Q1 2009 ICB = international competitive bidding, Q = quarter.

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

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

Advertisement International General Contract value Procurement Date or National Description ($ million) Method (quarter/year) Assignment Comments Consulting 0.902 CQS/ICS Q1 2009 National CQS = consultants’ qualifications selection, ICS = individual consultants selection, Q = quarter.

5. Works Contracts Estimated to Cost Less than $1 Million

20. The following table groups smaller value works for which procurement activity is either ongoing or expected to commence within the next 18 months.

Value of General Contracts Number of Description ($ million) Contracts Procurement Method Comments Civil Works 4.21 5 NCB (5) NCB = national competitive bidding.

B. Project Procurement Plan

1. Indicative List of Packages Required under the Project

21. The following tables provide an indicative list of all procurement (works and consulting services) over the life of the Project.

Estimated Estimated Domestic General Value Number of Procurement Preference Description ($ million) Contracts Method Applicable Comments Works 11.61 6 ICB (1)/ For ICB only NCB (5)

General Estimated Estimated Description Value Number of Recruitment Type of ($ million) Contracts Method Proposal Comments Consulting 0.902 Multiple (i) CQS (2) Biodata Proposal only Services Technical for CQS Proposal (ii) ICS (3) CV evaluation CQS = consultants’ qualifications selection, ICB = international competitive bidding, ICS = individual consultants selection, NCB = national competitive bidding.

Basic Data (Project Management) Project Name Emergency Flood Damage Rehabilitation 78

Project Project Number 43001 Grant Amount $1.53 million Executing Agency Ministry of Physical Planning and Works Date of First Procurement Plan (grant approval date) Period Covered by this Procurement Plan 18 months from date of grant effectiveness

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

1. Project Procurement Thresholds

22. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold ICB for Works > $1,000,000 ICB for Goods > $500,000 NCB for Works $100,000 NCB for Goods $100,000 Shopping for Works

2. ADB Prior or Post Review

23. 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 NCB Goods Prior Shopping for Goods Post Recruitment of Individual Consultants Individual Consultants Selection Prior Single Source Selection Prior NCB = national competitive bidding.

3. Consulting Services Contracts Estimated to Cost More than $100,000

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

Contract Advertisement International or General Value Procurement Date National Description ($) Method (quarter/year) Assignment Comments Consulting 729,000 SSS/ICS Q3 2009 National/International ICS = individual consultants selection. 4. Goods Contracts Estimated to Cost Less than $1 Million

25. The following table groups smaller value works for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Value of Contracts Number of Procurement Description ($) Contracts Method Comments Vehicles and 198,000 Multiple NCB/Shopping Equipment NCB = national competitive bidding.

B. Project Procurement Plan

1. Indicative List of Packages Required under the Project

26. The following tables provide an indicative list of all procurement (goods and consulting services) over the life of the Project.

Estimated Estimated Domestic General Value Number of Procurement Preference Description ($) Contracts Method Applicable Comments Goods 198,000 Multiple NCB/Shopping No

General Estimated Estimated Description Value Number of Recruitment Type of ($) Contracts Method Proposal Comments Consulting 729,000 13 (i) SSS- BTP Services UNOCHA No proposal Only CV (ii) ICS (12) evaluation CQS = consultants’ qualifications selection, ICS = individual consultants selection, NCB = national competitive bidding.

Appendix 8 81

Appendix 9

Pro Forma Project Progress Report

A. Introduction and Basic Data Provide the following: • ADB loan number, project title, borrower, executing agency(ies), implementing agency(ies); • total estimated project cost and financing plan; • status of project financing including availability of counterpart funds and cofinancing; • dates of approval, signing, and effectiveness of ADB loan; • original and revised (if applicable) ADB loan closing date and elapsed loan period based on original and revised (if applicable) loan closing dates; and • date of last ADB review mission.

B. Utilization of Funds (ADB Loan and Counterpart Funds) Provide the following: • cumulative contract awards financed by the ADB loan, cofinancing, and counterpart funds (commitment of funds to date), and comparison with time-bound projections (targets); • cumulative disbursements from the ADB loan, cofinancing, and counterpart funds (expenditure to date), and comparison with time-bound projections (targets); and • reestimated costs to completion, need for reallocation within ADB loan categories, and whether an overall project cost overrun is likely.

C. Project Purpose Provide the following: • status of project scope/implementation arrangements compared with those in the report and recommendation of the President (RRP), and whether major changes have occurred or will need to be made; • an assessment of the likelihood that the immediate development objectives (project purpose) will be met in part or in full, and whether remedial measures are required based on the current project scope and implementation arrangements; • an assessment of changes to the key assumptions and risks that affect attainment of the development objectives; and • other project developments, including monitoring and reporting on environmental and social requirements that might adversely affect the project's viability or accomplishment of immediate objectives.

D. Implementation Progress Provide the following: • assessment of project implementation arrangements such as establishment, staffing, and funding of the PMO or PIU; • information relating to other aspects of the EA’s internal operations that may impact on the implementation arrangements or project progress; • progress or achievements in implementation since the last progress report;

• assessment of the progress of each project component, such as, • recruitment of consultants and their performance; 82

• procurement of goods and works (from preparation of detailed designs and bidding documents to contract awards); and • the performance of suppliers, manufacturers, and contractors for goods and works contracts; • assessment of progress in implementing the overall project to date in comparison with the original implementation schedule—quantifiable and monitorable target, (include simple charts such as bar or milestone to illustrate progress, a chart showing actual versus planned expenditure, S-curve graph showing the relationship between physical and financial performance, and actual progress in comparison with the original schedules and budgets, the reference framework or guidelines in calculating the project progress including examples are shown in Appendix 2); and • an assessment of the validity of key assumptions and risks in achieving the quantifiable implementation targets.

E. Compliance with Covenants Provide the following: • the borrower's compliance with policy loan covenants such as sector reform initiatives and EA reforms, and the reasons for any noncompliance or delay in compliance; • the borrower’s and EA’s compliance with financial loan covenants including the EA’s financial management, and the provision of audited project accounts or audited agency financial statements; and • the borrower’s and EA’s compliance with project-specific loan covenants associated with implementation, environment, and social dimensions.

F. Major Project Issues and Problems Summarize the major problems and issues affecting or likely to affect implementation progress, compliance with covenants, and achievement of immediate development objectives. Recommend actions to overcome these problems and issues (e.g., changes in scope, changes in implementation arrangements, and reallocation of loan proceeds). 83

Appendix 10

PROJECT COMPLETION REPORT (Suggested Topics for Project Completion Report to be Prepared by EA)

I. PROJECT DESCRIPTION (i) Objectives (ii) Components (or subprojects for sector and multiprojects) (iii) Implementation methods (iv) Description and justification of changes in components (or subproject appraisal criteria) or implementation methods II. PROJECT IMPLEMENTATION

(i) Compare original and actual implementation schedules. Indicate delays, length and causes of delays, and remedial action taken.

(ii) Compare cost estimates made during appraisal and actual costs (foreign and local). Local currency costs incurred, appropriate exchange rates for their conversion into US dollars, and the foreign exchange costs financed by cofinanciers must be compiled correctly with reference to audited project accounts. Indicate factors that contributed to any significant overruns or underruns.

(iii) State problems or difficulties in recruiting consultants, with reference to ADB procedures. Assess the consultant's work and the working relationship between the executing agency (EA) and the consultant. Use of a logical framework is strongly recommended.

(iv) State problems or difficulties encountered in procuring goods and services (including civil works) with reference to ADB procedures. Assess the supplier's or contractor's performance under the contract.

(v) Give the extent of compliance of the borrower and EA with loan covenants, with reasons for noncompliance or delays in compliance and the remedial actions taken.

(vi) State reasons for any delays in loan utilization. Evaluate the appropriateness of the disbursement methods used. Justify the reallocation of loan proceeds.

(vii) State problems or difficulties with subproject appraisal. Evaluate the EA's performance and capacity to appraise subprojects.

III. INITIAL OPERATIONS

(i) Describe initial operations of the project and transitional problems encountered from project completion to initial operations. 84

(ii) Describe measures taken to ensure continued smooth operation of the project relative to management, staffing, funding, and maintenance of project facilities.

(iii) Analyze the prospects of the project benefits being realized.

IV. EVALUATION OF THE ASIAN DEVELOPMENT BANK'S PERFORMANCE

(i) Assess ADB's performance in supervising project implementation. Include comments on the adequacy of the consultants' terms of reference and appropriateness of specifications in tender documents. Evaluate the effectiveness and timeliness of assistance extended by ADB to solve implementation problems.

(ii) Comment on problems encountered with ADB's procedures. Note the measures taken to resolve these problems and suggest changes in procedures and requirements. 85

Appendix 11

SAMPLE AUDIT LETTER

Date

Secretary Ministry of Finance

Dear Sir:

Subject: Flood Damage Rehabilitation Project

This letter is to ensure your timely compliance with the loan covenants and the quality of financial information as required by ADB. ADB’s Financial Reporting and Auditing of Projects Financed by ADB (the Booklet) is enclosed to guide you.

ADB, by its Charter, is required to ensure that the proceeds of any loan made, guaranteed, or participated in by ADB are used for the purposes for which the loan was approved. ADB requires accurate and timely financial information from its borrowers to be assured that expenditure was for the purposes stated in the loan agreement.

For this particular loan, the requirements are stipulated in Section 2.09 of the Project Agreement. Copies of the Loan/Project Agreements are enclosed for onward transmission by your office Ministry of physical Planning and Works (MPPW), together with a copy of this letter. The following are the main requirements: ADB requires the PIU's to maintain separate project accounts and records exclusively for the Project to ensure that the loan funds were used only for the objectives set out in the Loan or Project Agreements. The project accounts comprise the following: • Audited Project Accounts • Auditor’s Opinion

The accounts and records for the project are to be consistently maintained by using sound accounting principles. Please stipulate that your external auditor is to express an opinion on whether the financial report has been prepared using international or local generally accepted accounting standards and whether they have been applied consistently.

• ADB prefers project accounts to use international accounting standards prescribed by the International Accounting Standards Committee. Please advise your external auditor to comment on the impact of any deviations, by ______from international accounting standards.

Please ensure that your external auditor specifies in the Auditor’s Report the appropriate auditing standards they used, and direct them to expand the scope of the paragraph in the Auditor’s Report by disclosing the key audit procedures followed. Your external auditor is also to state whether the same audit procedures were followed for all supplementary financial statements submitted.

• ADB wishes that auditors conform to the international auditing standards issued by the International Federation of Accountants. In cases where other auditing standards are 86

use, request that your external auditor to indicate in the Auditor’s Report the extent of any differences and their impact on the audit.

The external auditor’s opinion is also required on whether • The proceeds of the ADB’s loan have been utilized only for the project as stated in the Project Agreement; • The financial information contains data specifically agreed upon between PIUs, MPPW and ADB to be included in the financial statements; • The financial information complies with relevant regulations and statutory requirements; and • Compliance has been met with all the financial covenants contained in the Loan or Project Agreements.

The Auditor’s Report is to clearly state the reasons for any opinions that are qualified, adverse, or disclaimers.

Actions on deficiencies disclosed by the external auditor in its report are to be resolved by MPPW within a reasonable time. The external auditor is to comment in the subsequent Auditor’s Report on the adequacy of the corrective measures taken by MPPW.

Compliance with these ADB requirements will be monitored by review missions and during normal project supervision, and followed up regularly with all concerned, including the external auditor.

Yours sincerely,

Barry J. Hitchcock Country Director,NRM

Appendix 13

INVOLUNTARY RESETTLEMENT FRAMEWORK

I. Introduction

1. The Project involves rehabilitation and improvement of the infrastructure such as roads, irrigation, water supply and other small agricultural infrastructure. While most rehabilitation works are expected to be limited within their existing corridor of impacts, some of them may require additional land and/or involve resettlement impacts. The improvement of roads, additional structures for protection of roads/bridges, realignment of roads and irrigation canals, and construction of overhead water supply reservoirs might need additional land and cause resettlement impacts.

2. This Resettlement Framework (RF) is prepared to provide policy and procedures to screen, assess, and plan for land acquisition and resettlement aspects of the project components in compliance with ADB’s Involuntary Resettlement Policy as well as applicable national laws. The RF includes (i) review of applicable policy and legal framework; (ii) review of resettlement policies and entitlement matrix; (iii) procedures for preparation of resettlement plans (RPs); (iv) consultation and disclosure arrangement; and (v) implementation and monitoring of RPs.

II. Applicable Legal and Policy Framework

3. The Interim Constitution of Nepal (2007) guarantees the fundamental rights of a citizen. Article 19(1) establishes the right to property for every citizen of Nepal, whereby every citizen is entitled to earn, use, sell and exercise their right to property under existing laws. Article 19(2) states that except for social welfare, the state will not acquire or exercise authority over individual property. Article 19(3) states that when the state acquires or establishes its right over private property, the state will compensate for loss of property and the basis and procedure for such compensation will be specified under relevant laws.

4. The Land Acquisition Act (1977) specifies procedures of land acquisition and compensation. The Act empowers the Government to acquire any land, on the payment of compensation, for public purposes or for the operation of any development project initiated by government institutions. There is a provision of Compensation Determination Committee (CDC) chaired by Chief District Officer (CDO)) to determine compensation rates for affected properties.

5. The Land Reform Act (1964) is also relevant. This Act establishes the tiller's right on the land which he is tilling. The land reform act additionally specifies the compensation entitlements of registered tenants on land sold by the owner or acquired for the development purposes. As per the Act, when state acquires land under tenancy, the tenant and the landlord will each be entitled to 50 percent of the total compensation amount.

6. The Public Roads Act, 2031 (1974) empowers the government to acquire any land on a temporary basis for storage facilities, construction camps and so on during construction and upgrading of roads. Any buildings and other structures such as houses, sheds, schools, and temples are to be avoided wherever possible. The government is required to pay compensation for any damages caused to buildings, standing crops and trees. Compensation rates are negotiated between the government and the landowners.

7. Land acquisition must also comply with the provisions set out in the Guthi Corporation Act 1976. The Section 42 of the Act states that Guthi (religious/trust) land acquired for a development must be replaced with other land.

8. The ADB's Policy on Involuntary Resettlement states that involuntary resettlement should be avoided where feasible. Where unavoidable, it should be minimized by exploring all viable options. Affected people/persons (APs) should be compensated and assisted, so that their economic and social future would be generally as favorable with the project as it would have been in the absence of the project. APs should be informed fully and consulted on resettlement and compensation options. The absence of formal legal title to land by some APs should not be a bar to compensation; particular attention should be paid to households headed by women and other vulnerable groups, such as indigenous peoples and ethnic minorities, and appropriate assistance provided to help them improve their status. As far as possible, involuntary resettlement should be conceived in the presentation of project costs and benefits. 9. Based on a comparison of the Government legislation and ADB Policy on Involuntary Resettlement, the measures to bridge the identified gaps are presented in Attachment 1.

III. Definition, Objectives, Policies and Entitlement for the Project

10. The following are the definition of related terminology used in this framework:

i) AP: All persons who as of the cut-off-date stand to lose for the Project all or part of their land or other assets, irrespective of legal or ownership title. ii) Cut-off Date: The date of census survey to count the APs and their affected land and assets. iii) Legalizable: Those who do not have formal legal rights to land when APs are recorded, but could claim rights to such land under the law of Nepal. iv) Nontitled: Those who have no recognizable rights or claims to the land that they are occupying. v) Poverty Line: Nepal’s national poverty line (currently about NRs 10,000 for most districts), which is based on a food consumption basket of 2,124 calories and an allowance for nonfood items of about two thirds of the cost of the basket, will be adopted by the Project to count APs under the poverty line. The determination of poor households or persons under the Project will be based on the census and socio-economic survey and confirmed by community meeting that affected person/household falls below the poverty line. vi) Squatters: People living on or farming land not owned by themselves and without any legal title or tenancy agreement. The land may belong to the Government or to individuals. vii) Titled: APs who have formal legal rights to land, including any customary of traditional rights recognized under the laws of Nepal. viii) Vulnerable Group: Distinct group of people or persons who are considered to be more vulnerable to impoverishment risks than others. The poor, women-headed, Dalits and IPs households who fall below poverty line will be counted as vulnerable APs. ix) Women-headed household: Household headed by women, the woman may be divorced, widowed or abandoned or her husband can be working away from the District for long periods of time, but where the woman takes the decisions about the use of and access to household resources. 11. The Project's resettlement objectives are to (i) avoid land acquisition and involuntary resettlement wherever feasible; and (ii) minimize it where it is unavoidable, and ensure that APs receive assistance, so that they would be at least as well off as they would have been in the absence of the project. The key resettlement principles for the Project are as following: i) Involuntary land acquisition and resettlement impact will be avoided or minimized through careful planning and design of the project; 89

ii) For any unavoidable involuntary land acquisition and resettlement, APs will be provided compensation at replacement cost and/or assistance so that they will be as well-off as without the project; iii) APs will be fully informed and consulted during project design and implementation, particularly on land acquisition and compensation options; iv) The absence of formal legal title to land will not be a bar to compensation for house, structures and trees/crops, and particular attention will be paid to vulnerable groups and appropriate assistance provided to help them improve their socio-economic status; v) Land compensation and resettlement assistance will be completed before award of civil works contracts, while other rehabilitation activities will continue during project construction; and vi) Land acquisition and resettlement will be conceived part of the project and the costs related to resettlement will be included in and financed out of the project cost.

12. While finalizing the subproject, the EA will define the category/type of subproject to be constructed and declare its right of way to a minimum possible width. The detail design studies will select the least agriculturally productive land and will avoid settlement areas while selecting the infrastructure's alignment.

13. The date of the census will be the “cut-off-date” for the entitlement, and owners (including non-titled) of affected assets till such a date will be eligible to be categorized as APs. The entitlement policy/matrix is in Table SAF.1. 90

Table A13.1: Entitlement Policy/Matrix

Type of Loss Application Definition of Entitled Policy/Entitlement Persons Entire or part of land • Titleholder • Land with equivalent size and category, or cash compensation at replacement cost 1. Acquisition of to be acquired from • Tenants • In case of vulnerable group, preference will be in replacing land for land. private, tenancy, or owner of the land as • Any transfer costs, registration fees or charges Guthi land recorded at cut off • Tenant will receive the 50% value of the land

date Non-titled persons will receive compensation/ allowance for one year crop, and provided with • replacement land if ailani or Gov. land is available in the village. Temporary land taken • Titleholder 2. Temporary loss of by the project • Tenants • Compensation at replacement cost for net loss of income, damaged assets, crops and trees etc. land • An agreement between contractors and APs before entering the site.

Structures, buildings • Owner • Compensation at replacement cost without depreciation or deduction for salvaged material. 3. Loss of residential, including cattle shed, • Tenants • transportation allowance for residential and commercial structures to cover actual transact cost. commercial, and other walls, toilets etc. • Non-titled • Rental stipend equivalent of three months rent for tenants who have to relocate from rented structure affected by the building. project. Community facilities The users of the facility or • Reconstruction by the project leaving such facilities in a better condition than they were before. or 4. Loss of community (e.g. irrigation, water.) community or group • Cash compensation at full replacement cost without depreciation for salvaged material. structures / resources affected by the project.

Affected fruit/nut trees Owner of the affected Cash compensation based on annual value of the produce according to the Department of Agriculture fruit/nut trees norms. RPs to confirm that the DOA norms and techniques are sufficient and updated regularly. Affected timber and Owner of the affected Cash compensation based on calculation of the production and calculated according to the District 5. Loss of trees and fodder trees timber and fodder trees norms as decided by the Department of Forestry. crops Affected crops Owner of the affected • Cash compensation based on the locally market prices for the produce of one year and crops calculated as per the norms of District Agriculture Development Office. Sharecropper of the • 50% cash compensation of the lost crop for the sharecropper. affected crops 6. Loss of economic Economic opportunity Persons in the vicinity who • Preferential involvement in project construction works. opportunity lost as result of loss of may be adversely • Skills training support for economic restoration livelihood base. affected, although they do • Priority in poverty reduction/social development program not lose assets as such 7. Loss of time and All expenses incurred The entire project affected Project facilitates transportation in official process travel expenses in traveling to fill persons eligible for Payment in the same day as other compensation. application and compensation. making claims and time lost.

Definition of Entitled Policy/Entitlement Persons 8. Additional Assistance 8.1 Preferential All APs • Construction contracts include provision that APs will have priority in wage labor/employment on treatment in project construction during implementation. employment in project • APs shall be given priority after construction for work as maintenance worker, mandated in local activities body agreement.

8.2 Skill training and One member of each PAF • Skill training and income generation support financed by project income generation belonging to vulnerable • RP to include a need assessment and skill training program for APs. support group/below poverty line 8.3 Priority in poverty All APs • Participation of APs with priority in life skills, income generation, and other entrepreneurship reduction/social facilitated by the Project.

development programs

IV. Procedures for Sub-Project Planning and Participation of APS

13. This section provides detailed procedures to be followed in screening, social assessment, and preparation of resettlement plans for sub-projects. It will be ensured that APs are informed, consulted and participated in the entire sub-project cycle.

a. Screening and Categorization of Resettlement Impacts

14. The IAs assisted by resettlement specialist will identify APs, their population, and their characteristics through collection of relevant information. The sub-project design team will make a walkover survey of each sub-project and arrange public meetings in selected settlements including village leaders to provide information about the project and collect their views on resettlement impact. The screening will identify the potential for loss of land, asset/structures, livelihoods, and their impacts. Resettlement screening will also enable the categorization of subprojects based on their level of social impacts. The level of impacts will be determined by the type, location, scale, nature, magnitude of potential impacts on APs. The sub-project will fall to one of the following categories:

i) Category A: sub-projects expected to have significant impacts that require a full resettlement plan; ii) Category B: sub-projects expected to have not-significant (or limited) impacts that require a short resettlement plan; and iii) Category C: sub-projects not expected to have involuntary resettlement impacts and therefore do not require a resettlement plan.

15. The impacts will be considered significant if means 200 or more people experience major impacts, which are defined as (i) physically displaced from housing, or (ii) losing 10% or more of their productive assets.

16. Once finalized, findings of the screening together with a categorization form will be included in sub-project design report to be submitted to ADB. The categorization form is in Attachment 2.

b. Social Impact Assessment and Preparation of Resettlement Plans

17. The IAs assisted by resettlement specialist and design consultants will undertake an social impact assessment (SIA) as part of the detailed design of the sub-project. The SIA will gather relevant information about APs, including (i) population record of affected people, (ii) an inventory of affected assets (land, homes/structures, trees, crops, community services, and income sources) based on the cadastral map, (iii) landownership, usage and productivity assessments, and (iv) data on the existing economic and social condition of APs, including an assessment of impoverishment risks and a survey of least 10% of affected people and 20% of seriously affected people, together with local-level impact data. The census survey will enumerate of all APs based on site investigation sufficient to identify titled, legalizable and non- titled APs. The census will also serve as a cut-off date to prevent later influx of outsiders to the project area. The information will be gathered in participation of affected community, local NGOs and APs.

18. The SIA will identify potential impacts and measures to avoid/minimize/mitigate involuntary resettlement risks. Vulnerability assessment of APs will be part of SIA and a list of vulnerable APs prepared and finalized in consultation with local community. The SIA will also assess options for any relocation, opportunities for income restoration/economic rehabilitation, and any need of social preparation phase for vulnerable groups. Based on this information, the eligibility criteria and entitlement for compensation/assistance will be established in consultation with local stakeholders. Based on the SIA (upon completion of detailed engineering design and detailed measurement survey), the project will prepare appropriate resettlement plans- i.e. full RP for category A and short RP for category B subprojects. The indicative terms of reference for the SIA and preparation of RPs are in Attachment 3.

19. The content of full RP includes a statement of involuntary resettlement objective and strategy, with (i) organization responsibilities, (ii) community participation and disclosure arrangements; (iii) finding of the socio-economic survey and social and gender analysis; (iv) legal framework, including eligibility criteria and entitlement matrix; (v) mechanisms for grievance redress; (vi) identification of alternative sites and selection; (vii) inventory, valuation of, and compensation for, lost assets; (vii) land acquisition and transfer; (viii) access to training, and employment opportunities; (x) shelter, infrastructure and social services; (xi) environmental protection and management; (xii) monitoring and evaluation; (xiii) a detailed cost estimate with budget provisions; and (xiv) an implementation schedule, showing how activities will be scheduled with time-bound actions in coordination with the civil works. The RP will establish an eligibility cut-off date.

20. A short RP covers the same issue as that of a full resettlement plan, as relevant, but in less detail. However, the short resettlement plan will ensure that adequate compensation, rehabilitation, and relocation arrangements are planned and budgeted in case of involuntary land acquisition and resettlement.

21. After finalizing the technical drawings of the sub-project and the draft RP, the IA will organize a consultation meeting with APs and local stakeholders to share the draft RP and inform them about how the concerns raised by them during the screening and walk-through survey have or have not been addressed in the project design. In order to ensure that the subproject design have incorporated concerns raised locally and measures to minimize adverse impacts and enhance project benefits, the RP will be finalized only after the final consultation with affected persons. Accordingly, the documents listed below will also form part of the RP: (i) Major output of the initial assessment/screening and SIA; and (ii) Proceedings of consultation workshop/meetings;

22. The draft RP prepared by design consultant will be reviewed by IA assisted by resettlement specialist. IA will submit it to EA and ADB for review and approval. No section under the civil works contract shall be handed over to the contractor unless the RP has been approved by EA and ADB and required land compensation has been completed.

V. Information Dissemination, Consultation and Disclosure

23. The RPs to be developed in each sub-project will identify stakeholders and include specific measures for consultation, participation and information disclosure in full compliance with ADB’s policies on Involuntary Resettlement and Public Communication. The primary stakeholders include APs, beneficiaries and stakeholders directly involved in the resettlement planning and implementation. The secondary stakeholder include other individuals or groups 94 with interest in the project, such as local or national government, policy makers, advocacy groups, elected officials and NGOs.

24. The information dissemination and consultation with the APs will be the starting point for all activities concerning resettlement. Participation of APs as well as other stakeholders will be facilitated throughout the subproject cycle. NGOs and CBOs will also be used to facilitate this process. Various mechanisms of participation will be adopted in the process, including: • Information dissemination/campaign through NGOs/consultants/VDCs • Public meetings and focus group discussion • Formation of consultative groups at VDC level • Interviews/survey and frequent interaction with APs • Inclusion of APs representatives in compensation determination committees

25. Public consultation and information dissemination/campaign will be carried out to disseminate information about the Project to APs and local communities. The APs would be provided with relevant information and consulted during SIA and preparation of resettlement plans. Further, the following information will be made known to the community concerned prior to the SIA and preparation of RP:

• Project details • Agencies involved in project implementation and their responsibilities • Project drawings and list of potential APs • Summary of Resettlement Framework in Nepali language • Eligibility Criteria and Entitlement for involuntary land acquisition • List of vulnerable APs and support/assistance to them • Likely construction schedule • Grievance redress mechanism

26. The information dissemination will be through pamphlets, public consultation meetings, and/or direct discussion with the affected families and institutions. APs participation should also be ensured during SIA, resettlement planning, implementation and monitoring. Details of all public meetings with dates, names of the participants, location and information provided place of announcement, major issues raised and how these have been addressed will be documented in the subproject RPs.

27. The IAs shall make available the following documents to APs and disclose to the public:

i) A draft RP, before finalization, ii) A final RP, after finalization; and iii) The revised RP, following any change in scope in the subproject.

28. Copies of the RPs will be placed at VDC offices accessible to the public. A summary of relevant information from the documents specified above (losses, valuations, entitlements, assistance, grievance procedures, timing of payments and displacement schedule etc.) will be made available to APs as leaflets in local languages. IAs shall also post the above documents on IA/EA’s website. During implementation, IAs will prepare resettlement monitoring reports, make them available to affected APs and post them on IA/EA’s website, and submit these to ADB for review and posting on ADB website. 95

VI. Grievance Redress Mechanism

29. Complaints and grievance procedures will be outlined in each RP and grievance redress mechanism will be developed in close consultation with community leaders and local officials. A Grievance Redress Committees will be established for each subproject for hearing the complaints of APs and for their appropriate resolution. Other than disputes relating to legal rights, it will review all grievances relating to land acquisition. Grievances will be redressed within two to four weeks from the date of lodging the complaints. A Grievance Redress Committee (GRC) will comprise:

i) Head of DDC/local leader/CDO (Chairperson), ii) Representative of the local bodies; iii) Representatives of the APs (including VG member) iv) Representatives of civil society organizations; v) Representative of Project. vi) Social staff to attend as observers and to give support to APs.

30. The key functions of the GRC are to (i) provide support for APs to lodge their any complains; (i) record the complains, categories and prioritize them; (iii) settle the grievances in consultation with APs and IA staff; (v) report to the aggrieved parties about the decision/solution; and (vi) forward the unresolved cases to higher authorities.

C. Compensation, Relocation and Income Generation

31. APs will be compensated at replacement cost for their losses. In line with the Land Acquisition Act 1977, the Compensation Determination Committees are formed at each district to decide compensation rates. It composes CDO, LRO, a representative of DDC, and the project manager. Two representatives of APs will be also invited in the committee meeting as observers. The design survey team will assess the compensation rates for the lost assets and recommend it to the CDC for final valuation and compensation distribution. APs losing houses will be assisted in relocation by providing additional transportation and displacement allowances along with compensation. Vulnerable APs will get additional assistance/allowances as stated in the policy/entitlement matrix.

32. APs losing their major income sources and are at risk of impoverishment will be assisted through income restoration programs. Special attention will be given to poor and vulnerable group. APs will be given priority for employment in sub-project construction. The contract documents will include provisions regarding preferential employment of APs. It is expected that the unskilled APs selected for the construction work will be developed in to skilled workers through such employment and that such knowledge will be useful for APs income generation even after the project completion. APs will also be given priority to become maintenance workers after completion of the sub-project construction.

33. In addition to sub-project employment, APs will be provided with further income restoration measures and access to other development initiatives to restore APs livelihoods. Based on the existing skills and preferences by the APs, multiple options of income generating and life skill training will be explored and the RP will include a comprehensive package of income restoration program for APs. 96

D. Monitoring And Evaluation

34. The IAs will be responsible for monitoring of the resettlement planning and implementation throughout the sub-project cycle. The IAs will submit quarterly monitoring reports on implementation of resettlement plan to ADB. Such reports will be posted on websites of ADB and EAs.

35. IAs will organize periodic progress review meetings involving APs representatives. Special attention will be given to securing the participation of women. Such meetings will provide households with the opportunity to discuss both the positive and negative aspects of their resettlement, compensation and reestablishment. An inclusive problem-solving approach will be followed, using local experiences and realities as the basis for solutions. IAs' social staff will facilitate such workshops.

36. The satisfactory implementation of RP including completion of land compensation is a condition for contract award and commencement of civil works. A verification report in this regard will be prepared by IA assisted by resettlement specialist and submitted to ADB along with proposal to award the contract(s).

37. The RP implementation will be monitored and evaluated externally once in a year through an independently appointed agency/consultant, which will provide report to both EAs and to ADB. The coordinating EA will hire such agency with ADB concurrence. The RPs will include appropriate monitoring indicators for external monitoring.

E. Implementation Arrangements

38. EA has overall coordination responsibility and IA has planning and implementation responsibilities. The design consultants will be engaged to assist in preparing RPs. The design consultants will involve affected persons, including vulnerable group, in the RP preparation and implementation process. The consultants will also liaise with IAs and the contractor to assist the affected persons, especially women and other vulnerable persons to obtain jobs in construction during the construction period. IAs will make provision in the civil works contracts for preferential employment of qualified affected persons.

39. IAs will ensure that the Project’s Resettlement Framework and ADB’s Policy on Involuntary Resettlement are followed in preparation of subproject RPs with appropriate entitlements and mitigation measures.

40. Subproject RPs will include a time-bound action plan to complete the resettlement activities tailored to sub-project construction schedule. The IAs will ensure that funds are delivered on time to the CDC for timely implementation of resettlement plan. Civil works contracts will not be awarded unless required compensation payment has been completed. However, social preparation initiatives including income restoration measures and deed transfer may continue and be completed even after civil works has begun.

41. Based on the capacity assessment, additional inputs of a resettlement specialist (XX person months) are identified and earmarked for EAs and IAs to effectively plan and implement resettlement aspects. Further, RP will identify any resource required (e.g. NGOs) for its implementation at each sub-project. 97

42. The IA staff will be trained on resettlement planning and implementation. While filed level technical activities will be carried out by the consultants, the IA staff will have to supervise their activities, ensure quality, and coordinate with stakeholders.

F. Resettlement Cost Estimate and Financing for the RP

43. The RPs will provide cost estimates, budgets, and cash flows for meeting the objectives of the RP, according to the established schedules. Associated cost of land acquisition and resettlement, if any, will be itemized and included in the overall project cost under the budget for resettlement plan implementation. The costs required for RP implementation (including any land compensation) will be financed out of sub-project grant provided to the district. These costs include (i) compensation for acquired assets; (ii) costs for rehabilitation of APs; and (iii) administrative costs for RP implementation and capacity building of the project agencies. 98

Attachment 1

Measures to Bridge the Gap between the ADB Policy and Government Legislation

Issue Existing Provisions in Additional Measures in Resettlement Framework Government to Achieve ADB Policy Requirements Legislation A. Social Assessment and Identification of Affected Persons (APs) 1. Land and The Government In addition to the survey of land and assets, a other assets on Officer conducts census survey of affected households and the acquired preliminary survey of socioeconomic surveys covering 10% of APs and land land/assets, and 20% of seriously affected people to assess the identifies their owners. losses and impact on their livelihoods with the

Consultation with APs help of resettlement survey team. APs will be is not mandatory. consulted during the surveys. 2. Livelihood Do not count loss of Recognizes the loss of income and employment and income income and through census and socioeconomic survey employment 3. Squatters/ Do not consider Recognizes squatters’ entitlement to their illegal squatters or illegal structures/houses. Census and socioeconomic occupants occupants as APs survey, which will serve as cut-off date for entitlement, will include non-titleholders as APs

for their asset loss. B. Valuation of Affected Land and Assets

5. Land Compensation rates Current market rate is assessed during census fixed by survey. APs are consulted in assessing current

Compensation price of land. Determination CDC will make final decision on rates in the Committee (CDC), presence of representatives of APs and civil consisting of (i) CDO, society, who will attend CDC meeting as (ii) representative from observers. DDC, (iii) Chief of Land Revenue Office, and (iv) Project Manager.

6. Trees and Rates from the District The resettlement survey team will recommend the crops Forest Office and replacement cost of trees and crops in Agriculture consultation with local people and district offices.

Development Office CDC will make final decision on the rates in the are used to evaluate presence of representatives of affected person the cost of affected and civil society. trees and standing crops.

7. Houses and CDC determines The resettlement survey team in consultation with other structure compensation rates local people and district offices recommends based on their current compensation rates at replacement cost without

value minus the depreciation or deduction for salvaged building depreciation or material. CDC will make final decision on rates in deduction of salvaged the presence of representatives of APs as material. observer. 100

Issue Existing Provisions in Additional Measures in Resettlement Framework Government to Achieve ADB Policy Requirements Legislation C. Delivery of Compensation/Entitlements

8. Loss of land, Cash compensation Compensation at replacement cost. Allowed to structures, determined by the take salvaged materials CDC to the legal Tree, crops and Registration cost is reimbursed for deed transfer. owners perennials Movement/transportation allowances If somebody lose 100

% of land, then land Additional allowances for vulnerable people. for land compensation

9. Livelihood No provision for loss Preferential employment in labor groups. and income of income or Life skill training and saving credit program. Opportunities employment

10. Non-title No provision for loss Compensation for the lost assets (other than land) holder of assets of non- at replacement cost. (squatters and titleholder Movement/transportation allowances. encroachers)

Allowed to take salvaged materials free of cost.

Identification of alternate resettlement site (if government land is available near to project site)

11. Social No assessment Options for relocation of APs are considered for dislocation resettlement Renovation and extension of community facilities in host areas are provided Assistance is provided to vulnerable groups.

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Attachment 2

INVOLUNTARY RESETTLEMENT CATEGORIZATION

A. Project Data

Sub-project Title:

B. Screening Questions for Resettlement Categorization

Probable Involuntary Resettlement Effects Yes No Not Possible Remarks Known Will the project include any physical construction work? Does the project include upgrading or rehabilitation of existing physical facilities? Are any project effects likely lead to loss of housing, other assets, resource use or incomes/livelihoods? Is land acquisition likely to be necessary? Is the site for land acquisition known? Is the ownership status and current usage of the land known? Will easements be utilized within an existing Right of Way? Are there any non-titled people who live or earn their livelihood at the site or within the Right of Way? Will there be loss of housing? Will there be loss of agricultural plots? Will there be losses of crops, trees, and fixed assets? Will there be loss of businesses or enterprises? Will there be loss of incomes and livelihoods?

Will people lose access to facilities, services, or natural resources? Will any social or economic activities be affected by land use- related changes?

If involuntary resettlement impacts are expected:

• Are local laws and regulations compatible with ADB’s Involuntary Resettlement policy?

• Will coordination between government agencies be required to deal with land acquisition?

• Are there sufficient skilled staff in the Implementing Agency for resettlement planning and implementation? 102

• Are training and capacity-building interventions required prior to resettlement planning and implementation?

Information on Affected Persons: Any estimate of the likely number of households that will be affected by the subproject? [ ] No [ ] Yes If yes, approximately how many? ______(

D. Decision on Categorization

After reviewing the answer above, it is determined that the sub-project is:

Categorized as an A project, a full Resettlement Plan is required

Categorized as a B project, a short Resettlement Plan is required

Categorized as a C project, no RP

Resettlement Specialist, IA Date:

Approved by:

Project Director, IA Date: 103

Appendix 14

GENDER EQUALITY AND SOCIAL INCLUSION ACTION PLAN (GESI)

Activity/Measure Indicators/Targets Responsibility

Project Management

Social Development One Social Development Specialist hired in PCO and one in PCO/IAs/review Specialists provisioned each sectoral IA. missions in PCO, IAs and review missions to ensure Rapid gender analysis of project areas focusing on project effective gender and components conducted in the beginning of project social inclusion in implementation; the analysis collected gender, caste and project planning, ethnicity disaggregated data including other relevant gender implementation and related data (Example: Female Headed Households) monitoring Socio-economic surveys included gender and poverty indicators and gender, caste and ethnicity disaggregated data included in monitoring and reporting at all levels

PCO and IAs better PCO and IAs received orientation on GESI action plan, its Social sensitive to needs of integration in planning, implementation and monitoring Development poor women and Specialists disadvantaged groups

Project Components: Each project component included following activities and measures for effective gender mainstreaming and social inclusion.

Community Mobilization Community mobilization activities integrated in Water and IAs integrated in each Sanitation, Agriculture and Irrigation components project components Local NGOs contracted and required number of social mobilizers hired in each Project VDCs giving equal opportunity to local women and disadvantaged groups

Employment Skilled and unskilled poor men and women affected by flood PCO/IAs opportunities generated employed in construction works of damaged infrastructures for both men and women Women receive equal wages as that of men for work of equal value

Women and members of disadvantaged groups involved in operation and maintenance of infrastructures

Decision making Women and disadvantaged caste/ethnic groups are IAs/NGOs process made proportionately represented in community level consultations participatory and and meetings for demand collection and concerns inclusive User committees and farmer's groups are made inclusive of all by gender, caste, ethnicity, religious minority of the existing population of project areas. Underrepresented dalit and ethnic groups are given due attention for their participation.

104

Equal benefits ensured Project activities of all components benefited poor, vulnerable PCO/IAs for all affected people and those highly affected people by the flood. Special attention through relevant support is given to landless, Kamaiya (freed bonded labors), packages marginalized and endangered ethnic groups and female headed households

Activity expansion in Water & Sanitation component benefited excluded and disadvantaged population of the project areas

Agriculture support packages and irrigation support extended by ensuring equal benefits to vulnerable and the poorest among the affected.

NOTE: As the above GESI Action Plan provides basic gender and social inclusion measures, it is recommended that the project develop detail action plan with specific targets based on the socio-economic survey and rapid gender analysis.

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Appendix 15

MAJOR GRANT COVENANTS

Responsible Covenant Agency Status

Project steering committee. • Within one (1) month of the Effective Date, GON MPPW shall have established the PSC chaired by the Secretary MPPW and comprising representatives from MOF, Ministry of Home Affairs, Ministry of Water Resources, Ministry of Local Development, Ministry of Agriculture and Cooperatives, NPC, DOA, DOI, DWSS, DOR and DWIDP.

National Project Management Coordination Committee • Immediately after the Effective Date, MPPW shall establish the NPMCC comprising representatives from each PIU. The Project MPPW Coordinator shall chair the NPMCC meetings. The NPMCC shall meet every month during

Project implementation.

Project Coordination Office • Within one (1) month of the Effective Date, MPPW shall have established the PCO, responsible for coordination between the IAs, MPPW

concerned line ministries, and the NPC. The

PCO shall be headed at all times during

Project implementation by a full-time Project

Coordinator, supported by a full-time Deputy Project Coordinator. The PCO shall be responsible for: (a) preparing the overall Project implementation plan and consolidated annual work plan; (b) assisting PIUs in preparing estimates for annual budget and contract packaging; (c) conducting socioeconomic studies; (d) monitoring Project management activities; (e) organizing monitoring and evaluation of Project activities; (f) maintaining proper accounting for all Project expenditures; (g) managing and replenishing the imprest account; (h) preparing necessary progress reports and submitting these to the PSC and ADB; and (i) 106

preparing the Project completion report and submitting it to ADB.

District Level MPPW/IA • Within one (1) month of the Effective Date, each Project District shall establish a district level Project Coordination Committee under the Chief District Officer of such district to coordinate various Project activities within such district. Financial and procedural matters • Cabinet shall approve simplified and fast- tracked procurement procedures for goods, services, and civil works, in line with the provisions on emergency projects in the Recipient's Public Procurement Act and Regulations of 2007, and acceptable to ADB.

• MPPW shall ensure to take all appropriate and necessary measures to apply delegated financial powers while implementing the GON Project, in particular those included in the Recipient's Financial Procedures Rules of 2007.

• The Recipient shall ensure to allocate and release, on a timely basis, adequate counterpart funds for each fiscal year during Project implementation.

Selection criteria, construction, and O&M • Within two (2) months of Grant Effectiveness, the MPPW shall have finalized selection criteria, acceptable to ADB, for (a) all subprojects and activities under Part A of the Project; and (b) the location of shallow tube wells under Part B (ii) of the Project. The Recipient shall ensure that all subprojects and activities under Part A as well as the location of shallow tube wells under Part B (ii) shall be MPPW/MOF in line with such selection criteria.

• MPPW shall take all appropriate and necessary measures to ensure that river survey works for the bridge to be constructed under Part D (ii) shall be finalized by 15 April 2009 and the contract be awarded by 31 October 2009. 107

• MPPW shall ensure that all facilities rehabilitated or constructed under the Project are properly operated and shall be maintained by the responsible IA. Within twelve (12) months of the Effective Date, each IA shall have prepared a maintenance plan, with funding requirements and other relevant provisions, to ensure year-round effective maintenance of rehabilitated and constructed facilities. PCO shall prepare a consolidated maintenance plan and MPPW shall submit a copy of such maintenance plan to ADB. This shall serve as basis for joined evaluation

• The Recipient shall ensure to make available on a timely basis the funds needed to implement the maintenance plan.

Disaster management and risk reduction • The Recipient shall take all necessary strategies and actions to prevent and mitigate future floods. To that end, within one (1) year of the Effective Date, the Cabinet shall have approved a flood preparedness action plan, submitted by the Ministry of Water Resources. The PSC and ADB shall jointly monitor the action plan on a quarterly basis. MPPW/DWIDP

• Within one (1) year of the Effective Date, the DWIDP shall have provided training to staff of all relevant agencies on flood awareness and preparedness.

Anti-corruption measures • The Recipient shall ensure to implement the following in relation to the Project: (a) strict financial management with full adherence to provisions on monitoring and reporting as set out in the Grant Agreement and the Project administration memorandum; (b) strict compliance with the Recipient's Public GON Procurement Act and Regulations of 2007, as well as with the Recipient's Local Body Financial Administration Regulations, 2007; (c) allow third party monitoring of all subprojects; and (d) random independent spot checks of Project implementation by the ADB and the PCO. 108

Environmental issues • MPPW shall ensure that all subprojects and activities under the Project shall be implemented in accordance with the Recipient's environmental laws and regulations, ADB's Safeguard Policy Statement,2009, and the summary IEE for the Project. In the event of a discrepancy between the Recipient's laws and regulations on the one hand, and ADB's policy on the other, ADB's policy shall prevail. All mitigation measures set out in the environmental assessment and review procedures for the MPPW/ Project, as set out in supplementary appendix IAs H of the RRP, shall be fully complied with throughout Project implementation. For subprojects that require an IEE, such IEE shall be included in the subproject proposal. MPPW shall ensure that any environmental clearance required shall be obtained prior to commencing any civil works. MPPW shall ensure that all IAs submit semiannual reports on the implementation of the mitigation measures set out in the summary IEE.

Resettlement issues • MPPW shall ensure that to the extent possible no subproject shall require land acquisition or involuntary resettlement as defined in ADB's Involuntary Resettlement Policy of 1995. In the event land acquisition or involuntary resettlement is unavoidable for any subproject, MPPW shall prepare a resettlement plan in accordance with the Recipient's applicable laws and regulations, ADB's Involuntary Resettlement Policy of 1995, ADB's Handbook on Resettlement of MPPW/IAs 1998, and the Resettlement Framework for the Project, as set out in Supplementary Appendix F of the RRP. In the event of a discrepancy between the Recipient's laws and regulations on the one hand, and ADB's policy on the other, ADB's policy shall prevail. The resettlement plan shall be submitted to ADB for its review and approval before any land acquisition is initiated. MPPW shall ensure that all compensation for land acquisition and resettlement shall be completed prior to the 109

award of civil works contract for the concerned subproject. MPPW shall ensure that all IAs submit semiannual reports on the implementation of the resettlement plan.

Social issues • MPPW shall ensure that all IAs shall actively seek beneficiary participation in the design and implementation of all rehabilitation works carried out under the Project.

• MPPW shall ensure that all IAs shall implement the Gender Action Plan set out in Supplementary Appendix J to the RRP. Within three (3) months of the Effective Date, MPPW shall have approved gender and social inclusion guidelines, aimed at ensuring that Project benefits accrue equitably to women and socially marginalized groups. MPPW shall ensure that all surveys and assessments to be conducted under the Project shall include gender, caste, and ethnicity disaggregated data.

• MPPW shall take all necessary and appropriate actions to ensure that women are equitably represented in user committees in MPPW/IAs the areas of agriculture, irrigation, and water and sanitation under the Project.

• MPPW shall ensure that subprojects will not negatively affect vulnerable population groups, in particular indigenous people. In the event any issues related to indigenous people arise in the course of Project implementation, the Recipient shall ensure to address those issues in accordance with the applicable laws and policies of the Recipient and ADB's Policy on Indigenous Peoples of 1998. In the case of any discrepancy between the Recipient's legislation and ADB's policy, ADB's policy shall prevail.

• MPPW shall ensure that all civil works contractors comply with all applicable labor laws, including those on occupational health and safety, do not employ child labor, as defined in national legislation, for construction 110

and maintenance activities, and provide appropriate facilities in construction campsites, including separate facilities for female laborers. MPPW shall take all appropriate and necessary measures to employ poor and vulnerable groups under the Project, particularly women and landless farmers and require contractors to use local unskilled labor. MPPW shall require contractors not to differentiate wages between men and women for work of equal value. Specific clauses to cover these items shall be included in bidding documents, and compliance shall be strictly monitored throughout Project implementation.

Project Performance Management System (PPMS) • Within three (3) months of the Effective Date, the PCO shall have established a PPMS, including baseline indicators and targets for MPPW each sector. All data, including those on services provided under the Project, shall be disaggregated by gender, caste, and ethnicity.

Imprest; Statement of Expenditures • Except as ADB may otherwise agree, the Recipient shall establish immediately after the Effective Date, an imprest account at Nepal Rastra Bank. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Recipient and ADB. The currency of the imprest account shall be the dollar. The initial MPPW amount to be deposited into the imprest account shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first six months of Project implementation, or (ii) the equivalent of ten percent (10%) of the Grant amount.

111

Retroactive Financing • Withdrawals from the Grant Account may be made for reimbursement of reasonable expenditures incurred and paid after the emergency occurred but not earlier than the date of the breach of the Koshi River embankment on 18 August 2008, subject to a maximum amount equivalent to thirty percent (30%) of the Grant amount; provided that the MPPW expenditures have been incurred in compliance with the following conditions: (a) procurement was undertaken in accordance with the Recipient's procedures, acceptable to ADB; (b) expenditures were verified by MPPW; and (c) the certification is acceptable to ADB.

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Appendix 16

ADB’S ANTICORRUPTION POLICY

2 July 1998

113

ABBREVIATIONS

ADB Asian Development Bank

BPMSD Budget, Personnel and Management Systems Department

COSO Central Operations Services Office

DMC developing member country

GDP gross domestic product

IMF International Monetary Fund

MDB multilateral development bank

NGO nongovernment organization

OAS Organization of American States

OECD Organisation for Economic Co-operation and Development

OGA Office of the General Auditor

OGC Office of the General Counsel

SPD Strategy and Policy Department

TA technical assistance

NOTE

Since the document was prepared, the Offfice of the General Auditor has become the Office of the Auditor General.

In this report, “$” refers to US dollars.

This document has been edited for publication. 114

I. INTRODUCTION

1. The problem of corruption, here defined as the misuse of public or private office for personal gain, has been one of the most enduring dilemmas confronting governments throughout history. Although differences may exist in the nature and scope of corrupt behavior, and the extent to which anticorruption measures are enforced, the phenomenon can be found at all times and within virtually every political system. It can also be found within the private sector. Indeed, the linkage between public and private sector corruption is an area of particular concern for both developed and developing countries in the Asia and Pacific region.

2. Historically, concern about corruption has tended to run in cycles, in which revelations of official abuses prompted anticorruption campaigns and administrative countermeasures that subsequently faded from view until the next round of scandals provided further impetus for reform. The desire to reduce or eliminate corruption was at the core of many enduring innovations for good governance. The major public administration reforms of the late nineteenth and early twentieth centuries— such as the introduction of a meritocratic civil service system, and professional management of government ministries and departments, or the creation of more formalized budget, procurement, and audit processes and agencies—had their roots in the desire to avoid earlier abuses of graft and political patronage.

3. Recently, the effort to combat corruption has moved to the center of the debate about good governance and economic growth. The impetus behind this move has come from many sources. On the donor side, the end of the Cold War has reduced the willingness of countries providing aid to overlook financial improprieties in light of broader geopolitical interests. Donor fatigue has placed increasing pressure upon foreign assistance agencies to demonstrate that they are delivering maximum value for the money. Many multinational corporations have come to believe their interests are better served by open and transparent competition. At the extremes, the negative example of a handful of “kleptocratic” regimes has underscored the danger of political and social collapse if widespread corruption is allowed to fester unchecked.

4. On the recipient side, in countries throughout the Asia and Pacific region, the citizenry has served notice that it is no longer willing to tolerate gross abuses of the public trust for private gain. The liberalization of the press in many parts of the world has enabled journalists to write more freely about official indiscretions. Improvements in education and increased information flow between countries have made their public more aware of anticorruption efforts in other countries and less willing to tolerate systematic abuses at home. The rise of new global nongovernment organizations (NGOs) dedicated to fighting corruption has helped bring and keep the issue in the spotlight in both the developed and the developing world.

5. Many of these dynamics are likely to exist for at least the next decade or more, resulting in a fundamental change in the context within which multilateral development banks (MDBs) operate. Pressure for more active measures against graft and corruption is no longer likely to be isolated and sporadic. Like questions relating to the environment or women in development, influential and well- connected constituencies both within and outside of the MDB community will press hard to ensure that issues of corruption and good governance remain an important and ongoing element of the development debate. 115

6. In response to these pressures, many international organizations are adopting more robust anticorruption measures:

(i) At a Summit of the Americas in May 1994, the Organization of American States (OAS) pledged to outlaw cross-border bribery and the “illicit enrichment” of officials in the hemisphere. In March 1996, 21 member states of OAS signed the Caracas Convention, which calls for energetic collective action in four principal areas: preventative measures and international cooperation, transnational bribery, illicit enrichment, and extradition. The Caracas Convention is now in force between the countries that have ratified it: Bolivia, Costa Rica, Ecuador, Mexico, Paraguay, Peru, and Venezuela.

(ii) The Organisation for Economic Co-operation and Development (OECD) Ministerial Council approved a resolution encouraging its member states to end the tax deductibility of foreign bribes and commissions for their multinational corporations in May 1996. A year later, it approved a full set of recommendations for criminalizing transnational bribery, enacting stricter accounting requirements and external and internal audit controls, tighter public procurement, and enhanced international controls. In December 1997, OECD ratified a convention making the bribery of foreign officials a criminal offense, on a par with the bribery of local government officials in the country where the corporation is based.

(iii) The International Chamber of Commerce recently approved revised rules of conduct that prohibit bribes and recommended that its member associations around the globe, and their member corporations, adopt and apply these tighter rules.

(iv) In December 1996, the United Nations General Assembly passed the Declaration Against Corruption and Bribery in International Commercial Transactions.

7. One of the most forceful proponents of a tough stance on anticorruption issues is the World Bank’s President, James Wolfensohn. At the annual meetings of the World Bank and the International Monetary Fund (IMF) in October 1996, Wolfensohn characterized corruption as a “cancer ” on the global economy and emphasized that it was time to “put teeth” into the World Bank’s efforts to address it. The Managing Director of IMF, Michel Camdessus, was equally blunt, noting that IMF officials will henceforth regard it as their duty to press for anticorruption reforms in countries seeking to borrow money. In the wake of the annual meetings, a working group was established under the Development Economics Vice Presidency of the World Bank to develop an integrated anticorruption strategy. The final report, along with accompanying staff guidelines, was endorsed by the World Bank’s Board of Executive Directors on 2 September 1997.

8. The World Bank’s approach envisions a balanced strategy to combat corruption resting upon four pillars: (i) preventing fraud and corruption in World Bank-financed projects; (ii) helping countries that request World Bank support in their efforts to reduce corruption; (iii) taking corruption more explicitly into account in country assistance strategies, policy dialogue, analytical work, and the choice and design of projects; and (iv) adding voice and support to international efforts to reduce 1 corruption.

1 See World Bank. 1997. Helping Countries Combat Corruption: The Role of the World Bank, Washington DC. 116

9. In August, IMF took the unprecedented step of suspending the second tranche of an Enhanced Structural Adjustment Facility when one of its member countries failed to demonstrate that it was pursuing adequate measures to reduce the problem of corruption. The World Bank has strongly supported IMF’s move and warned that its own lending will be “substantially reduced” failing decisive action on the part of that government.2 At the annual meetings of the World Bank and IMF in Hong Kong, China in September 1997, the commitment of both institutions to combat corruption was strongly reaffirmed.

10. The 1997 summit of the Group of Seven industrial nations in Denver, United States, placed particular emphasis upon the role of the MDBs in combating corruption. The communique from the preliminary meeting of finance ministers and central bankers in April maintained, “in view of the corrosive effects of bribery and corruption generally on the achievement of sustainable economic development, growth, and stability, we welcome the increased attention to these problems on behalf of international financial institutions and the OECD.” In June, the final summit statement urged IMF and the MDBs to strengthen their activities to help countries fight corruption, including measures to ensure the rule of law, improve the efficiency and accountability of the public sector, and increase institutional capacity and efficiency. The international financial institutions were also encouraged to promote good governance in their respective areas of competence and to collaborate fully with the World Bank’s effort to establish procurement guidelines that meet the highest standards for transparency and rigor.

11. Many of the developing member countries (DMCs) of the Asian Development Bank (ADB) have played an integral role in the growing anticorruption movement. In East Asia, several countries that have enjoyed high growth rates in the past have expressed concern that perceptions of corruption can hamper their ability to attract future investment. In 1995, the People’s Republic of China passed legislation requiring leading Communist Party cadre levels above the country level to declare their income. Thailand’s Prime Minister pledged in January 1997 to clean up the Customs Department, which was creating numerous “hidden costs” for foreigners seeking to do business in Thailand. That same month, the President of the Philippines characterized “the nightmare of corruption in public service” as one of the country’s most persistent afflictions and ordered all government departments to submit monthly progress reports on their fight against corruption within their offices.

12. On the South Asian subcontinent, the problem of corruption has become one of the most pressing issues confronting government leaders today. In Pakistan, the Prime Minister has made the effort to clean up government one of the key goals of his new administration. India’s President 3 recently characterized corruption as one of the greatest challenges now confronting his country.

2 Cited in Oxford Analytica. 1997. Asia Pacific Daily Brief, 14 August. Other problems cited by IMF include the failure to prosecute the perpetrators of a multimillion dollar financial fraud; irregularities surrounding the award of contracts for two power projects; and the use of extrabudgetary funds to purchase a presidential jet and build an international airport in the president’s hometown. 3 K.R. Narayanan. 1997. “Next an India for All, Tolerant and Uncorrupt,” editorial, International Herald Tribune, 13 August. 117

II. ADB’S RESPONSE

13. As a major multilateral development institution and one of the leading sources of development funding in Asia, ADB welcomes this emphasis on combating corruption as part of its broader work on issues of governance and capacity building. ADB’s Board paper, Governance: Sound Development Management, recognizes the importance of accountability for public officials, and transparency and predictability in government operations–critical principles in the fight against corruption.4 The policy’s emphasis upon strengthening the essential prerequisites for effective public administration is designed to ensure that the fundamental building blocks for transparent, predictable, and accountable administration are in place. These building blocks include an appropriate legal framework and effective enforcement mechanisms; a professional, competent, motivated, and meritocratic civil service; transparent procurement practices; effective internal control systems; and a well-functioning independent audit office. Participation, the fourth major principle in the ADB’s governance policy, is also of relevance. The experience of Hong Kong, China, and Singapore demonstrates that public support is a critical asset in the long-term struggle against official malfeasance.

14. At the broadest level, ADB’s stance on anticorruption issues is intended to reduce the burden that widespread, systemic corruption exacts upon the governments and economies of the region. More specifically, ADB’s approach is centered upon three objectives:

(i) supporting competitive markets and efficient, effective, accountable, and transparent public administration as part of ADB’s broader work on good governance and capacity building;

(ii) supporting promising anticorruption efforts on a case-by-case basis and improving the quality of our dialogue with the DMCs on a range of governance issues, including corruption; and

(iii) ensuring that ADB projects and staff adhere to the highest ethical standards.

15. The third and fourth sections will set the stage for the discussion of these objectives by addressing the definitional questions that have surrounded the topic and the costs that corruption imposes upon development. The remainder of the paper will consider the nature of ADB’s response. The fifth section outlines ADB’s position on anticorruption issues and describes the current ADB programs with significant anticorruption components. It also highlights the implications of the ADB’s anticorruption policy for current ADB operations. The last section concludes by highlighting specific next steps for ADB to take in implementing this policy.

4 R151-95: Governance: Sound Development Management, 17 August. 118

III. DEFINITIONS OF CORRUPTION

16. The term “corruption” is used as a shorthand reference for a large range of illicit or illegal activities. Although there is no universal or comprehensive definition as to what constitutes corrupt behavior, the most prominent definitions share a common emphasis upon the abuse of public power or position for personal advantage. The Oxford Unabridged Dictionary defines corruption as “perversion or destruction of integrity in the discharge of public duties by bribery or favor.” The Merriam Webster’s Collegiate Dictionary defines it as “inducement to wrong by improper or unlawful means (as bribery).” The succinct definition utilized by the World Bank is “the abuse of public office for private gain.” This definition is similar to that employed by Transparency International (TI), the leading NGO in the global anticorruption effort:

“Corruption involves behavior on the part of officials in the public sector, whether politicians or civil servants, in which they improperly and unlawfully enrich themselves, 5 or those close to them, by the misuse of the public power entrusted to them.”

17. These definitions are useful but, in the ADB’s judgment, they do not give adequate attention to the problem of corruption in the private sector or to the role of the private sector in fostering corruption in the public sector. As a shorthand definition, ADB defines corruption as “the abuse of public or private office for personal gain.” A more comprehensive definition is as follows:

Corruption involves behavior on the part of officials in the public and private sectors, in which they improperly and unlawfully enrich themselves and/or those close to them, or induce others to do so, by misusing the position in which they are placed.

18. A list of illicit behavior typically referred to as “corruption” is presented in Box 1. This catalogue is not exhaustive and is intended to illustrate the areas of greatest interest and concern to ADB. Some types of corruption are internal, in that they interfere with the ability of a government agency to recruit or manage its staff, make efficient use of its resources, or conduct impartial in-house investigations. Others are external, in that they involve efforts to manipulate or extort money from clients or suppliers, or to benefit from inside information. Still others involve unwarranted interference in market operations, such as the use of state power to artificially restrict competition and generate monopoly rents.

19. More narrow definitions of corruption are often necessary to address particular types of illicit behavior. In the area of procurement fraud, for example, the World Bank defines corrupt practice as “the offering, giving, receiving, or soliciting of any thing of value to influence the action of a public official in the procurement process or in contract execution.” Fraudulent practice is defined as “a misrepresentation of facts in or to influence a procurement process or the execution of a contract to the detriment of the Borrower, and includes collusive practices among bidders ... designed to

5 See World Bank 1997, p. 8. See also Transparency International. 1996. The TI Sourcebook, edited by Jeremy Pope. Berlin: TI, p.1. The World Bank definition includes the activities of private agents who subvert public policies and processes for competitive advantage. 119

establish bid prices at artificial, noncompetitive levels and to deprive the Borrower of the benefits of 6 free and open competition.”

20. It is often useful to differentiate between grand corruption, which typically involves senior officials, major decisions or contracts, and the exchange of large sums of money; and petty corruption, which involves low-level officials, the provision of routine services and goods, and small sums of money. It is also useful to differentiate between systemic corruption, which permeates an entire government or ministry; and individual corruption, which is more isolated and sporadic. Finally, it is useful to distinguish between syndicated corruption in which elaborate systems are devised for receiving and disseminating bribes, and nonsyndicated corruption, in which individual officials may seek or compete for bribes in an ad hoc and uncoordinated fashion.

Box 1. An illustrative list of corrupt behaviors

ƒ The design or selection of uneconomical projects because of opportunities for financial kickbacks and political patronage. ƒ Procurement fraud, including collusion, overcharging, or the selection of contractors, suppliers, and consultants on criteria other than the lowest evaluated substantially responsive bidder. ƒ Illicit payments of "speed money" to government officials to facilitate the timely delivery of goods and services to which the public is rightfully entitled, such as permits and licenses. ƒ Illicit payments to government officials to facilitate access to goods, services, and/or information to which the public is not entitled, or to deny the public access to goods and services to which it is legally entitled. ƒ Illicit payments to prevent the application of rules and regulations in a fair and consistent manner, particularly in areas concerning public safety, law enforcement, or revenue collection. ƒ Payments to government officials to foster or sustain monopolistic or oligopolistic access to markets in the absence of a compelling economic rationale for such restrictions. ƒ The misappropriation of confidential information for personal gain, such as using knowledge about public transportation routings to invest in real estate that is likely to appreciate. ƒ The deliberate disclosure of false or misleading information on the financial status of corporations that would prevent potential investors from accurately valuing their worth, such as the failure to disclose large contingent liabilities or the undervaluing of assets in enterprises slated for privatization. ƒ The theft or embezzlement of public property and monies. ƒ The sale of official posts, positions, or promotions; nepotism; or other actions that undermine the creation of a professional, meritocratic civil service. ƒ Extortion and the abuse of public office, such as using the threat of a tax audit or legal sanctions to extract personal favors. ƒ Obstruction of justice and interference in the duties of agencies tasked with detecting, investigating, and prosecuting illicit behavior.

6 In the movement to harmonize ADB procurement standards with those of the World Bank on the topic of corruption, these definitions may also be adopted by ADB. See the last section of this paper. 120

IV. THE COSTS OF CORRUPTION

21. Corruption has not always been perceived as having a negative impact upon development. In earlier decades, arguments were advanced that it could have beneficial effects. In countries where public sector wages are often low and in some cases may not even be enough to live on, some maintained that it was natural for civil servants to augment their salaries by other means. It was alleged that corruption could advance economic efficiency by helping restore artificial and administratively determined prices to market-clearing levels. Others maintained that corruption played a useful redistributive role, transferring resources from wealthy individuals and corporations to those of more modest means, or that it could serve as a tool of national integration by allowing ruling elites to entice or co-opt fractious political, ethnic, or religious groups. Finally, some scholars have argued that corruption is a natural stage of development. They note that it was generally widespread in many advanced countries until recently, when it was reduced (but not eliminated) through the gradual imposition of public sector reforms over the last century.

22. Robert Klitgaard, one of the most astute students of the problem of corruption in development, notes that these arguments have several common features.7 First, they often refer to the benefits stemming from specific illicit acts and do not consider the systemic impact of corruption. Although a given incident or transaction may have positive results, it may also generate negative externalities that degrade the performance of the system as a whole and compromise the economy’s long-term dynamic efficiency.

23. Second, many of the alleged benefits from corruption, such as streamlining government transactions or enhancing civil service pay, only appear as such against the background of a public sector that is failing to perform effectively. The experience of economies such as Singapore indicates that patient and persistent efforts toward improved public sector management, by streamlining customs procedures or by paying wages that are competitive with the private sector, for example, are likely to result in greater benefits over time than tolerating relatively high levels of corruption to compensate for these deficiencies.

24. Third, corruption encourages people to avoid both good regulations and bad. There is no guarantee that an importer who bribes a customs official to expedite the clearance of badly needed medication one week will not bribe the official to expedite the clearance of illegal narcotics the next.

25. The task of evaluating the practical impact of corruption upon a country’s development is a complicated one that is now being subject to increasing scholarly attention. Although there are instances when illicit acts can improve the economic rates of return, the bulk of the evidence indicates that corrupt actions typically generate far more costs than benefits. A study of corruption in one African country, for example, concluded that corruption intensified ethnic conflict, ruined the efficiency of municipal government and federal agencies, crippled the merit system of hiring and promotion, and generated an “atmosphere of distrust which pervades all levels of administration.” A study of an

7 Robert Klitgaard. 1988. Controlling Corruption. Berkeley and Los Angeles: University of California Press, p. 32. 121

Asian country found that in none of the cases under consideration was the money raised through corruption “directly and productively invested.”8 An extensive study of corruption in another Asian country concluded:

Graft and corruption has strongly affected development efforts negatively, belying the so-called “revisionist hypothesis” prevalent in the West which considers corruption as either a necessary step in the development process or a means of speeding it up. Instead [our research] found that corruption leads to the favoring of inefficient producers, the unfair and inequitable distribution of scarce public resources, and the leakage of revenue from government coffers to private hands. Less directly, but no less perniciously, corruption leads to loss of confidence in 9 government.

26. Upon closer inspection, many of corruption’s alleged distributive, efficiency, and political benefits turn out to be illusory. Rather than enhancing a more equitable distribution of income, corruption distorts the allocation of social resources away from those who are legally entitled to them and toward the rich, the powerful, and the politically well connected. Rather than compensating civil servants for poor pay, corruption undermines the merit system and compromises service professionalism and esprit de corps. At times, it can even foster additional inefficiencies within the public sector.10 Instead of cementing political loyalties, corruption more often breeds public cynicism and resentment toward the political process and those associated with it.

27. Many studies of the cost of corruption in individual cases paint a disturbing picture of resources lost, squandered, or devoted to suboptimal uses:

(i) Some estimates calculate that as much as $30 billion in aid for Africa has ended up in foreign bank accounts. This amount is twice the annual gross domestic product (GDP) 11 of Ghana, Kenya, and Uganda combined.

(ii) Over the last 20 years, one East Asian country is estimated to have lost $48 billion due 12 to corruption, surpassing its entire foreign debt of $40.6 billion.

(iii) An internal report of another Asian government found that over the past decade, state assets have fallen by more than $50 billion, primarily because corrupt officials have deliberately undervalued them in trading off big property stakes to private interests or to 13 international investors in return for payoffs.

8 The African citation is from Herbert Werlin. 1979. “The Consequences of Corruption: The Ghanaian Experience,” in Monday U. Ekpo, ed. Bureaucratic Corruption in Sub-Saharan Africa: Toward a Search for Causes and Consequences. Washington DC: University Press of America, p. 253. The second citation is from Kang Sintaek. 1978. “Conclusions and Recommendations,” in a paper prepared for the Fourth Working Meeting on Bureaucratic Behavior and Development, Hong Kong, China, August, cited in Klitgaard. 1988. p. 37. 9 Ledivina V. Carino and Josie H. de Leon. 1983. Final Report for the Study of Graft and Corruption, Red Tape and Inefficiency in Government, cited in Klitgaard. 1988. p. 38. 10 In one African country, for example, each imported container shipment is inspected three times by custom officers because of the opportunity for graft and speed payments, rather than conducting a spot check based upon the previous history of the importer, as is the practice in many other countries. 11 Michelle Celarier. 1996. “The Search for the Smoking Gun,” Euromoney (September): 49. 12 Philippine Government estimate, cited from Reuter Newswire. 1997. “Philippines Corruption a ‘Nightmare’ -Ramos,” 11 January. See also Philippine Star. 1997. “Commission on Audit: P1.2 B Lost to Graft Each Year,” 12 June. 13 Internal report, cited from Business Week. 1993. “The Destructive Costs of Greasing Palms,” 6 December, p.133. 122

(iv) In one South Asian country, recent government reports indicate that $50 million daily is misappropriated due to mismanagement and corruption. The Prime Minister stated publicly recently that the majority of bureaucrats and the administrative machinery from 14 top to bottom are corrupt.

(v) In one North American city, businesses were able to cut $330 million from an annual waste disposal bill of $1.5 billion by ridding the garbage industry of Mafia domination. 15 A particular problem was the permeation of regulatory bodies by organized crime.

(vi) Studies of the impact of corruption upon government procurement policies in several Asian countries reveal that these governments have paid from 20% to 100% more for 16 goods and services than they would have otherwise.

(vii) Corruption can cost many governments as much as 50% of their tax revenues. When customs officials in a Latin American country were allowed to receive a percentage of 17 what they collected, there was a 60% increase in customs revenues within 1 year.

(viii) Some estimates of the role of corruption in a European country concluded that it has inflated this country’s total outstanding government debt by as much as 15% or $200 billion. In one city, anticorruption initiatives have reduced the cost of infrastructure outlays by 35-40%, allowing the city to significantly increase its outlays for the mainte- 18 nance of schools, roads, street lamps, and social services.

28. Although almost impossible to value accurately, the indirect costs of corruption can often dwarf its direct costs. Scarce resources are squandered on uneconomical projects because of their potential to generate lucrative payoffs, and priority sectors such as education or health suffer disproportionately. Legitimate entrepreneurial activity is hindered or suppressed. Public safety is endangered by substandard products and construction. Capital is redirected toward more transparent and predictable investment sites. Individuals who would not otherwise engage in illicit behavior decide they have no alternative, and intellectual energy is diverted from more productive pursuits to figuring out ways to “get around the system.” In extreme cases, the legitimacy of the public sector itself is called into question, and governments may be confronted with political instability or collapse.

29. Although corruption is costly, its impact upon development is not uniform. Some countries can tolerate relatively high levels of bribery and graft and continue to maintain respectable rates of economic growth, whereas others cannot. Several factors influence the extent to which corruption serves as a brake upon the process of development. At the most basic level, a state’s natural resource base and the sources of its comparative advantage play a critical role in its ability to attract investment.19 A second factor is the form in which corruption is practiced. In some countries, corruption is highly routinized. Payoffs are generally known in advance and concentrated at the top

14 The News. 1997. 28 March. 15 The Financial Times. 1997. 6 June. 16 Thinapan Nakata. 1978. “Corruption in the Thai Bureaucracy. Who Gets What, How and Why in Its Public Expenditures.” Thai Journal of Public Administration 18 (January): 120–128; Clive Gray. 1979. “Civil Service Compensation in Indonesia. Bulletin of Indonesian Economic Studies 15 (March): 85–113; and Robert Wade. 1982. “The System of Administrative and Political Corruption: Canal Irrigation in India.” Journal of Development Studies 18 (April): 287–328. Cited in Klitgaard. 1988. pp. 39–40. 17 Business Week. 1993. “The Destructive Costs of Greasing Palms.” 6 December, pp. 134–135. 18 Business Week. 1993. “The Destructive Costs of Greasing Palms.” 6 December, p. 135. 19 States with rare or valuable natural resources can generally attract more investment than those seeking to compete as a source of low wage, labor-intensive manufacturing. Ironically, such resource-rich countries also often enjoy lower growth rates than their poorer counterparts. See Philip R. Lane and Aaron Tornell. 1996. “Power, Growth and the Voracity Effect.” Journal of Economic Growth, 1 (June): 213–241. 123

in a “one-stop” fashion. Such an approach may reduce transaction costs and add a measure of predictability to investment decisions, making the country inherently more attractive than others where many different officials can demand unspecified and unanticipated payments. Finally, the extent to which money remains in the country and is invested in productive economic activity, or flows abroad into foreign bank accounts, will also have an impact upon a nation’s ability to tolerate relatively high levels of corruption and still enjoy decent rates of economic growth.

30. In spite of these caveats, the most recent and innovative empirical research demonstrates that- -even correcting for variables such as bureaucratic efficiency—countries that tolerate relatively high levels of corruption are unlikely to perform as well economically as they would have otherwise. In a study of over 70 countries during the late 1970s and early 1980s, IMF economist Paolo Mauro found that corruption “is strongly negatively associated with the investment rate, regardless of the amount of red tape.” Mauro’s model indicates that a one standard deviation improvement in the “corruption index” will translate into an increase of 2.9% of GDP in the investment rate and a 1.3% increase in the 20 annual per capita rate of GDP growth.

31. This analysis is supported by other recent studies. Using data from 39 industrial and developing countries that controlled for income, education, and policy distortion, two World Bank researchers found that countries that were perceived to have relatively low levels of corruption were always able to attract significantly more investment than those perceived to be more prone to corrupt or illicit activity. This result held true for both countries where corruption was highly syndicated and predictable, and countries where it was not.21 Another recent study, which utilized econometric analysis to examine the impact of corruption upon foreign direct investment in East Asia, found that perceptions of corruption had a strong and negative impact upon the flow of foreign investment. According to the 22 study’s findings, East Asia is no different from any other region in this regard.

20 Paolo Mauro. 1995. “Corruption and Growth.” Quarterly Journal of Economics. (August): 681–711. The citations are from pages 695 and 683, respectively. It should be noted that many of these cross-country econometric studies are based on levels of perceived (versus actual) corruption, and that such studies can have problems in desegregating corruption’s effects from those of other variables related to the quality of governance. 21 The analysis was conducted by Jose Eduardo Campos and Sanjay Pradhan in conjunction with the 1997 World Development Report. Washington DC: World Bank, pp. 102–109. 22 Shang-Jin Wei. 1997. “How Taxing is Corruption on International Investors.” Working Paper 6030, National Bureau of Economic Research, Cambridge, MA. 124

V. ADB’S POSITION ON ANTICORRUPTION ISSUES

32. In light of the discussion above, ADB affirms that corrupt and illicit behavior is a serious brake upon the development process. ADB rejects the argument that corruption’s beneficial effects outweigh its negative consequences, or that it is inappropriate for international financial institutions to address such issues. ADB notes that experience drawn from the Asia and Pacific region and elsewhere demonstrates that significant progress can be made in the struggle against corruption if the proper legal, institutional, and policy reforms are in place. ADB welcomes the growing focus upon anticorruption issues as part of its broader effort to advance the principles of transparency, predictability, accountability, and participation under its governance policy.

33. At the broadest level, ADB’s stance on anticorruption issues is intended to reduce the burden that widespread, systemic corruption exacts upon the economies of the region and the development of ADB’s DMCs. In keeping with Article 36(2) of the Charter, ADB initiatives regarding corruption will be grounded solely upon economic considerations and concerns of sound development management. They will not involve interference in the political affairs of a DMC or be influenced by its political character.

34. More specifically, ADB’s approach is centered upon three basic objectives:

(i) supporting competitive markets and efficient, effective, accountable, and transparent public administration as part of ADB’s broader work on good governance and capacity building;

(ii) supporting promising anticorruption efforts on a case-by-case basis and improving the quality of our dialogue with the DMCs on a range of governance issues, including corruption; and

(iii) ensuring that ADB projects and staff adhere to the highest financial and ethical standards.

Objective no. 1: Supporting competitive markets and efficient, effective, accountable, and transparent public administration

35. As a matter of policy, the major thrust of the Bank’s anticorruption effort will address this problem as a part of its broader work on governance and capacity building. ADB’s approach seeks to be proactive and to place a premium upon continuous efforts to upgrade the efficiency of markets and the quality of the public sector as a whole. This focus upon prevention over prosecution reflects the belief that most priority governance initiatives have significant positive externalities in the struggle against corruption. Long-term success is more likely to come through patient and persistent economic, legal, and institutional reforms rather than short-term and largely reactive efforts to 23 punish wrongdoers.

23 The detection and prosecution of illicit activities has been an important part of successful anticorruption efforts. However, the most effective approaches have combined efforts toward prosecution with an even stronger emphasis upon prevention. ADB’s own experience and comparative advantage fall strongly on the side of prevention. 125

36. There are two priority areas where ADB will concentrate its broader governance effort: policy dialogue directed toward economic liberalization and public administration reform. Regarding the former, ADB can use its dialogue with the DMCs to advance policy recommendations that will help eliminate market distortions and reduce opportunities for rent seeking on the part of firms or officials. The liberalization of licensing regimes, the opening up of access to foreign exchange markets, the reduction of administered prices, the expansion of credit opportunities for small farmers and businesspeople, the removal of subsidies and soft loans to favored companies, and the introduction of a clear distinction between production and regulatory functions are all ways in which policy changes can level the playing field and reduce opportunities for corrupt or illicit behavior. ADB is already pursuing many of these initiatives in its dialogue with the DMCs (Box 2).

Box 2. Examples of ADB loans and grants supporting market liberalization and policy reforms

Loan 1444 and TA 2587: Kyrgyz Road Rehabilitation Project and Institutional Strengthening of the Road Sector: In June 1996, the Board approved a loan for $50 million to the Kyrgyz Republic for road rehabilitation. A component of this project and its associated technical assistance (TA) were designed to open the transport sector to competition, so that customers are free to choose between competing alternatives on the basis of price and quality of service, and there is no government discrimination (through regulations, price controls, discriminatory licensing practices, or other interventions) between government-owned and private operators of transport services.

Loan 1506: Gujarat Public Sector Resource Management Program: In December 1996, the Board approved a loan of $250 million and an additional TA grant to the Indian state of Gujarat to improve the quality of its public sector management, to support the disinvestment of selected state enterprises, and to improve its infrastructure. A critical objective of the Bank’s policy dialogue was to reverse the impact of past policies and regulations that discriminated against private sector participation in infrastructure, including a lack of transparency of the decision-making system; the absence of regulations governing entry, evaluation of bids, and tenders; problems related to pricing and regulatory issues in monopolistic conditions; and weak- ness of the legal system, dispute resolution, and arbitration. The goal was to reduce the involvement of the public sector in the direct provision of certain goods and services, while reorienting and strengthening its regulatory role in ensuring a level playing field for public-private sector operations.

37. There are several ways in which the ADB’s work in enterprise reform and financial markets development, along with its private sector operations, is contributing to increased competitiveness, transparency, and accountability. ADB is supporting a range of policy-based reforms in many countries that are intended to amend banking regulations to allow greater competition and to reduce directed lending while strengthening the capacity of regulatory agencies. This is also true in the area of capital markets, where ADB is seeking to enhance disclosure practices and improve market surveillance. Through its private sector operations, ADB invests in catalytic projects such as ratings agencies, which provide transparency in the capital market by publishing independent judgments on the investment quality of debt instruments, thus helping investors make informed investment decisions. ADB is also becoming increasingly involved in strengthening corporate governance in the private companies and investment funds where it has an equity interest. In the wake of the financial crisis that has affected many countries in the Asian and Pacific region, these efforts are being rapidly expanded. ADB is also considering providing support for new initiatives in areas such as money laundering. 126

38. Particular care must be taken in dealing with issues of privatization. There are often powerful financial and economic rationales for the state divesting from activities where it has little comparative advantage. Preliminary research also indicates that, when done properly, privatization can also help lower the level of corruption.24 However, in many countries the privatization process has often been fraught with allegations of bribery, theft, and embezzlement. To avoid this problem, it is critical that transparent, unbiased, and fully contestable procedures be utilized in the sale of state assets. When the sale involves a natural monopoly, it is also important that capable, independent regulatory agencies be established to provide adequate oversight prior to privatization. Issues of best practice involving corporate governance will also be an important component of ADB loans and TA grants addressing issues of privatization, corporatization, and public enterprise management.

39. Many basic public administration reforms during the late nineteenth and early twentieth centuries came about in response to official malfeasance. By focusing as a first priority upon comprehensive public sector reform, ADB can help its DMCs effect changes that will make corrupt behavior more difficult to engage in and more readily detected once it occurs. A breakdown of broader reform initiatives with significant anticorruption components is presented in Appendix 1.

40. Turning first to the executive branch, there are several priority areas where efforts to upgrade the quality of a country’s public administration will pay significant dividends in the struggle against corruption. Efforts to strengthen information systems, particularly those relating to financial management, should enhance transparency and accountability, and strengthen the capacity of governments to monitor their expenditures. Measures to strengthen internal audit functions and to ensure adequate control over disbursements can play the dual role of helping monitor and improve performance while making theft and embezzlement more easily detected. Procurement reform, which ADB is already pursuing in a number of DMCs, can reduce costs while simultaneously making it more difficult to perpetrate fraud and abuse.

41. Another area where significant progress can be made is civil service reform. As ADB’s Board paper, Governance: Sound Development Management notes, the cumulative effect of poor salaries, low morale and productivity, uncertain prospects for career development, and insufficient linkage of merit to promotion can foster pervasive corruption among public officials.

42. ADB can support a number of initiatives to redress these problems. Measures to strengthen establishment management and control for civil service positions will help ensure that there are no “ghost employees” on the payroll. Efforts to decompress pay scales and improve employment conditions throughout the civil service will lower the incentive for illicit behavior. Initiatives to reduce the number of exemptions and special allowances will make remuneration more transparent. Measures to improve procedures for recruitment and promotion should help avoid abuses of patronage, nepotism, and favoritism, and help to foster the creation of an independent, meritocratic civil service. Efforts to draft and enforce a code of ethics will clarify what is expected of civil servants and ensure adherence to appropriate norms of behavior.

24 Daniel Kaufmann and Paul Siegelbaum. 1996. “Privatization and Corruption in Transition Economies.” Journal of Interna- tional Affairs 50 (2): 419–458. 127

43. Finally, one can improve the efficiency and effectiveness of the public sector while simultaneously reducing opportunities for corruption by narrowing its scope for intervention. Within ministries, agencies, and departments, one of the best approaches is the re-engineering of business processes. As procedures are simplified and streamlined, the need for “speed money” payments to expedite services disappears. At a broader level, deregulation, commercialization, and privatization can, under appropriate circumstances, achieve similar objectives. As the sphere of state activity decreases, then as a general rule the opportunity for soliciting bribes will also go down.

44. Several “good governance” initiatives relating to the legislative and judicial branches can also help in the fight against corruption. One important means to enhance accountability is to strengthen the parliament’s oversight function and improve the capacity of parliamentary institutions, such as supreme audit agencies, to function effectively. Measures for legal and judicial reform, such as efforts to reduce judicial backlogs through alternate dispute resolution techniques, or to improve courtroom management to ensure cases can be tried in a timely fashion, or to enhance the independence and professionalism of the judiciary, will all have positive externalities in the struggle against corruption. The same is true for efforts to reduce critical skill gaps in areas such as accounting and audit.

45. These initiatives are noncontroversial and widely recognized to be the building blocks of solid public sector management. ADB is already pursuing a number of such initiatives within its existing portfolio of loans and TA grants (Box 3). They will serve as the core of the ADB’s anticorruption effort as part of its broader program for strengthening governance and capacity building.

Box 3. Examples of ADB loans and grants for good governance with anticorruption components

RETA 5688: Regional Long-Term Audit Training Program for Members of the Asian Organization of Supreme Audit Institutions: This initiative for $1.0 million was approved by the Board in June 1996. It envisions a 5-year program to strengthen regional training programs for supreme audit institutions and to upgrade the training and technical audit skills of individual audit institutions.

TA 2186: Strengthening the Legal Framework for Customs Administration in the People’s Republic of China: This TA program for $646,000 was approved by the Board in October 1994. Its objectives were to assist the Customs General Administration (CGA) in (i) proposing new effective legislation and regulations relating to border control of international property rights, antidumping countervailing duties, anticommercial fraud measures, and external auditing; (ii) establishing a legal information system for customs legislation and regulations; and (iii) training for CGA staff in implementing these measures.

TA 2616: Public Administration Reform in Sri Lanka: In July 1996, the President approved a grant of $275,000 to the Government of Sri Lanka to help reverse a lengthy decline in the quality and capability of the public sector. Two of the goals of this initiative were to rationalize public sector cadres and to enhance the accountability of government employees by introducing results-based management systems and procedures.

Loan 1513: Support for the Public Sector Reform Program in the Republic of the Marshall Islands: In January 1997, the Board approved a loan of $12 million to support the implementation of a public sector reform program intended to stabilize the Government’s financial situation, improve the efficiency of its public sector, and enhance its ability to provide an enabling environment for private sector growth. Third tranche conditions in the loan place a premium upon making procedures for issuing business and foreign investment licenses more transparent and predictable. They also provide for the establishment of the Office of the Ombudsman to ensure the fair and independent arbitration of disputes between the Government and public at large. 128

Objective no. 2: Supporting promising anticorruption efforts on a case-by-case basis and improving the quality of dialogue on governance issues

46. ADB may also be called upon to assist its DMCs in pursuing explicit anticorruption programs. Such assistance could include efforts to develop a national anticorruption strategy; improve the ability of the courts to try corruption cases; respond to requests from legislators and government officials for legal or TA in drafting anticorruption statutes or professional codes of conduct; strengthen the legal mechanisms for review of administrative action, e.g., the creation of an ombudsman or provision for judicial review; or improve the capacity of anticorruption agencies to detect or prosecute illicit behavior.

47. ADB will give careful consideration to any request from a DMC for assistance in developing an anticorruption effort. Since these activities are likely to be politically delicate and require detailed knowledge of the particular circumstances surrounding each case, ADB will provide staff with flexibility and discretion in pursuing such initiatives on a case-by-case basis. ADB assistance should be guided by three principles: ( i ) the assistance must be requested by the DMC government; (ii) the request must be consistent with ADB’s broader country operational strategy and ongoing efforts in the field of governance and capacity building; and (iii) the request should fall in an area where ADB has or can provide relevant expertise.

48. In a similar fashion, ADB will consider supporting regional anticorruption efforts; workshops, seminars, conferences, and training activities; research and publications dealing with anticorruption issues; and possible collaboration with local and international NGOs whose mission or work program advances such initiatives.

49. Staff should exercise caution in addressing several sets of initiatives that will typically remain beyond ADB’s scope of involvement. They include efforts to influence the domestic debate within its DMCs regarding a particular anticorruption strategy or set of anticorruption initiatives; anticorruption programs that are highly politicized and targeted at a particular individual or political party; and initiatives that are largely cosmetic in nature and designed to foster the illusion of progress without the substance. ADB should not provide assistance to any anticorruption measure unless there is an understanding with its DMC over the nature and scope of these initiatives and their importance within that country’s overall development strategy.

50. ADB has several mechanisms for engaging in dialogue with its DMCs on issues of governance (including corruption), ranging from the country operational strategy and the country assistance program discussions, to country portfolio review missions, to project appraisal, implementation, and review missions. ADB staff charged with country strategy and program formulation, including the drafting of the country strategy and program documents, as well as staff responsible for loan or TA projects, should address corruption in the context of broader governance and capacity-building issues. They should be knowledgeable about issues of corruption and its impact within their particular geographic and/or sectoral sphere of operations. They will use these mechanisms to discuss and recommend ways in which ADB can help advance the principles of sound development management, including measures that would help combat corruption, in any country where corruption affects ADB projects and the country’s general prospects for economic growth. 129

51. The country portfolio review missions and project review missions provide a useful venue for discussing the policies and practices that impede the efficient implementation of ADB projects. Under most circumstances, staff who suspect that corruption may have occurred or be occurring within a given ADB project should follow the procedures outlined in paragraph 64 and report the matter to the Office of the General Auditor (OGA), who will determine the optimal course of action. In rare cases where rapid follow-up actions may be needed, staff can address such issues explicitly with the relevant company, executing agency, or appropriate investigative agencies after clearance from their director and the Office of the General Counsel (OGC). Any discussion with a given firm or government agency should, however, be limited to a specific ADB operation or set of operations.

52. Consistent with the ADB’s Media Guidelines, the President, vice-presidents, and heads of offices or departments can speak to the press about issues of corruption as they deem necessary in the conduct of ADB operations. Other ADB staff are free to discuss issues of corruption in general terms, provided they follow the procedures prescribed in the Media Guidelines. However, they should not speak to the press about either specific examples of corruption among ADB suppliers or in DMCs, or the general level of corruption within a company or nation without previously receiving clearance from the vice-president concerned or, in his or her absence, ADB’s chief information officer.

Objective no. 3: Ensuring ADB projects and staff adhere to the highest ethical standards

53. If ADB efforts to reduce illicit behavior between its DMCs and suppliers and contractors are to be credible, it is essential that ADB staff be beyond reproach, and the ADB’s internal regulations and procedures support the highest ethical standards. Toward this end, the third pillar of the ADB’s anticorruption policy calls for more robust internal measures to enhance the integrity of ADB operations. These measures will take place along five dimensions: ( i ) maintaining the integrity of ADB lending and TA operations; (ii) strengthening the ADB’s procurement policy; (iii) updating the ADB’s Code of Conduct and creating independent internal reporting mechanisms to address allegations of corruption among ADB staff or within ADB operations; (iv) improving the quality of oversight and management of ADB loans and TA grants; and (v) ensuring that all ADB staff are familiar with the anticorruption policy and act in a manner consistent with both the letter and the spirit of this policy.

1. Maintaining the integrity of ADB lending and TA operations

54. If there is credible evidence of corruption in an ADB-financed loan or TA grant, ADB will address the issue in consultation with the relevant country during project review or country portfolio review missions. Breaches of specific loan regulations or covenants could result in a decision by Management to blacklist the firm involved, suspend disbursements, or cancel the loan.

55. In keeping with the evolving practice of IMF and the World Bank, Management and staff will consider issues of corruption more explicitly in the formulation of the country strategy and program. Cases may occur in which corruption has reached such proportions that it poses a significant impedi- ment to the probity of ADB operations or the attainment of a country’s fundamental development objectives. Under such circumstances, Management could elect to lower or suspend ADB lending and TA operations to that country after consultation with the country and the Board. 130

56. Conversely, situations may also exist where a given country has made significant progress in improving the efficiency, effectiveness, and integrity of its public and private sectors. Under such circumstances, Management may elect to accelerate the lending program or provide additional TA resources to ensure sustainability of the reforms.

57. In light of the complex and highly differentiated nature of corruption, it is important that ADB Management and staff be granted some degree of flexibility in dealing with individual cases within the parameters laid out in this policy. While acknowledging the need for fairness and consistency in its operations, and strongly affirming the importance of a “zero tolerance” policy when credible evidence of corruption exists among ADB staff or projects, ADB notes that different types of corruption will require different responses. There is a need for careful judgment based on accurate information and the specifics of the situation. ADB’s anticorruption effort will place particular emphasis upon the implementation of practical and cost-effective prevention control measures, in a fashion consistent with the Charter principle of “economy and efficiency.”

2. Procurement reform

58. An Anticorruption Task Force chaired by the Central Operations Services Office (COSO) was recently convened to examine ADB procurement policy. The Task Force considered various anticorruption measures adopted by the World Bank in July 1996, in which it is required that borrowers, bidders, suppliers, and contractors “observe the highest standard of ethics” during the procurement and execution of contracts.25 In implementing this approach, the World Bank will

(i) reject a proposal for an award if it determines that the bidder recommended for the award has engaged in corrupt or fraudulent practices in competing for the contract in question;

(ii) cancel the portion of the loan allocated to a contract for goods or works if it at any time determines that corrupt or fraudulent practices were engaged in by representatives of the borrower or a beneficiary of the loan during the procurement or the execution of that contract, without the borrower having taken timely and appropriate action satisfactory to the World Bank to remedy the situation;

(iii) declare a firm ineligible, either indefinitely or for a stated period, to be awarded a World Bank-financed contract if it at any time determines that the firm has engaged in corrupt or fraudulent practices in competing for, or in executing, a World Bank-financed contract; and

(iv) have the right to require that in contracts financed by a World Bank loan a provision be included requiring suppliers and contractors to permit the World Bank to inspect their accounts and records relating to the performance of the contract and to have them audited by auditors appointed by the World Bank.

25 R96-112/1 Proposed Amendments in the Bank’s Loan Documents for the Purpose of Making Them More Effective in the Fight Against Fraud and Corruption, International Bank for Reconstruction and Development, 23 July 1996. 131

59. Similar provisions were introduced in the World Bank’s Guidelines for Selection and Employment of Consultants. On 2 September 1997, the World Bank’s Board agreed to an amendment to procurement guidelines to accommodate a “no bribery pledge” in the bid form, which can be inserted into World Bank-financed projects at the request of the borrower and will obligate firms to observe local laws with respect to the bribing of government officials.

60. The Task Force considered these and other measures, which were discussed with Management. In line with the recommendation of the Group of Seven industrial nations, and having taken into account the advantages of harmonizing practice among the MDBs with regard to procurement and the engagement of consultants, ADB will introduce anticorruption provisions effectively identical to those adopted by the World Bank for the rejection of proposals, loan cancellation, declaration of ineligibility, and inspection rights, as set forth in the previous page. ADB will also introduce an optional “no bribery pledge” in the bid form that will be similar to that of the World Bank. Following the adoption of the anticorruption policy paper by the Board, changes to this effect will be incorporated in the ADB’s Guidelines for Procurement and the Guidelines on the Use of Consultants by the Asian Development Bank and its Borrowers and submitted to the Board for approval. The text for these changes is provided in Appendix 2. The guidelines will further be supplemented by provisions in the ADB’s Loan Regulations allowing ADB to cancel loans where there is evidence of corruption or fraud in connection with the award of a contract being financed by ADB.26 The text of these changes is provided in Appendix 3.

61. In addition to introducing these new measures, existing ADB guidelines will be applied more rigorously and systematically to ensure greater fairness and transparency in the procurement process. Particular attention will be devoted to eliminating delays and requests for extensions in the prequalification, bid evaluation, contract award, advance payment, project start-up, and progress payment phases. Greater effort will also be devoted to scrutinizing the number and scope of change orders, including the introduction of random audits, with the aim of ensuring the appropriateness of such requests. When the contract is to be financed wholly or partly by ADB, the contract documents shall include an undertaking by the contractor that no fees, gratuities, rebates, gifts, commissions or other payments, other than those shown in the bid, will be given or received in connection with the procurement process or in the contract execution.

62. With regard to the ADB’s private sector operations, procurement issues are most relevant in the financing of infrastructure projects. In a fashion consistent with the Working Paper, Review of Private Sector Operations, sponsors for infrastructure projects must have been selected by the host government in a transparent manner, preferably through competitive bidding. If it is a negotiated project, the engineering, procurement, and construction contract for the project must be competitively bid.

3. Updating code of conduct and creating independent internal reporting mechanisms

63. OGC, in consultation with the Budget, Personnel and Management Systems Department (BPMSD), drafted amendments of Section 4 of Administrative Order No. 2.02 to extend its scope to cover matters concerning business affiliations and private activities, financial interests, investments and trading activities, and the disclosure of financial and business interests. The purpose of these

26 OGC 1986. Ordinary Operations Loan Regulations. ADB, Manila. OGC. 1982. Special Operations Loan Regulations. ADB, Manila. 132

amendments was to prevent the occurrence of a conflict, or the appearance of such a conflict, among staff members between their personal interests and their duties and responsibilities as staff members. On 28 May 1998, Management endorsed these changes, and Section 4 has now become a comprehensive Code of Conduct applicable to all staff members of ADB.

64. Additional measures are necessary to ensure that the ADB’s internal policies and procedures for addressing issues of corrupt or illicit behavior are consistent with those of the other MDBs and evolving best practice. Currently, there are no publicized independent channels whereby incidents of corruption can be reported for investigation. Under this policy, OGA will serve as the initial point of contact for allegations of fraud and corruption in ADB projects or among staff. In consultation with the Strategy and Policy Department (SPD), OGC, BPMSD, COSO, and other relevant departments, OGA will consider appropriate measures to be adopted under this policy to ensure that all ADB staff and projects adhere to the highest standards of ethical conduct.

65. In the event that ADB staff or external parties are not satisfied by OGA’s preliminary finding on a particular case, they can bring it to the attention of Management, who can determine if the case should be resubmitted to OGA for further review, sent to an independent investigator or audit firm for examination, or dismissed if no further action is warranted. A subset of potential cases could also qualify for consideration by the Inspection Committee, provided that they met the criteria for inspection outlined in Establishment of an Inspection Function and the Inspection Procedures 27 approved by the Inspection Committee on 9 October 1996.

4. Improving the quality of oversight

66. ADB will undertake a number of measures to enhance the quality of project monitoring and audit. These measures will improve the overall quality and effectiveness of ADB-financed projects, thereby ensuring the integrity of ADB operations and making corrupt or illicit behavior more difficult to perpetrate and more readily detected should it occur.

67. The capacity of OGA will be strengthened to enable it to address anticorruption issues effectively. Specialized training in forensic accounting and other investigative techniques will be provided, and be extended to select financial analysts and project implementation officers. Additional staff with specific skills in these areas will be recruited. Ongoing OGA efforts to streamline internal work procedures to free up greater resources for audits of high-risk and high-impact areas will continue. OGA will devote more time to conducting audits of project procurement-related activities, which will help prevent and detect corruption or other forms of fraud. In collaboration with supreme audit institutions in the ADB’s DMCs, OGA will also begin a series of random audits of ADB projects to monitor financial compliance and physical progress. OGA will strengthen its exchange of information with supreme audit institutions in ADB DMCs, and—working in collaboration with other ADB departments—it will play an active role in assessing the need to upgrade the audit capability of such institutions. OGA will also consider ways in which project audit reports can be made more accessible and user-friendly to operations staff. The effectiveness of these measures will be evaluated after the first year and additional steps will be considered as needed.

27 Doc. R225-95, Establishment of an Inspection Function. 10 November. Since many areas where corruption is most likely to occur (such as procurement or the selection of consultants) fall beyond ADB Inspection Committee’s mandate, staff anticipate that relatively few cases of alleged corruption are likely to be brought before the Committee. 133

68. In the context of the recommendations of the Task Force on Improving Project Quality, more resources are already being made available to improve the frequency, duration, and quality of project administration missions.28 Care will be taken to broaden the technical expertise of these missions and to ensure that staff with relevant qualifications participate, particularly in the financial, managerial, and policy areas. Although it may not be possible to upgrade the quality of supervision for all projects across the board, additional resources will be directed toward upgrading the supervision of projects that are particularly at risk and to initiating a program of random audits to monitor project 29 implementation.

69. The relevant sections in the Project Administration Instructions and the Loan Disbursement Handbook will be revised to require that qualified accountant(s) be recruited by the executing or implementing agency and that robust internal control systems and accounting systems be in place for a project before loan disbursement can be made. Consideration will be given to designing and utilizing appropriate efficiency indicators to monitor financial and physical progress on a quarterly basis, and any variances between targeted efficiency performance and actual performance must be justified. The quality of the ADB’s management information systems will be enhanced to provide managers with more timely information for monitoring project processing, loan administration, and the status of mission budget utilization.

70. When there is compelling evidence that corrupt or illicit activities have hampered the effectiveness of ADB projects or lowered their rate of return, this problem should be explicitly noted in ADB documentation, including project supervisory reports, project completion reports, project evaluation reports, performance audit reports, and other relevant documents so that appropriate remedial action can be considered. Managers and staff should avoid using opaque or euphemistic 30 language that may obscure the nature of the problem.

5. Advancing staff awareness

71. These measures will be ineffective if ADB staff are unfamiliar with the provisions of ADB’s Anticorruption Policy and Code of Conduct or fail to exercise due diligence in the performance of their duties. While it is not the intention of this policy to turn ADB staff into “police officers,” or to make the objective of reducing corruption paramount over other development goals, all departments and staff have a compelling obligation to ensure the integrity of ADB operations within their respective areas of responsibility. ADB staff will be required to familiarize themselves with the content of this policy and staff guidelines, and be prepared to respond appropriately as required.

72. The integrity of ADB staff is one of the institution’s greatest assets, and staff violations of the ADB’s Code of Conduct or other relevant guidelines will be dealt with severely. Any allegation of corrupt or illicit behavior by ADB staff should be turned over to OGA, w h o — i n conjunction with the relevant ADB departments—will determine the credibility of the accusations and the need for further investigation. Credible claims will be investigated promptly, thoroughly, and confidentially by OGA and BPMSD who can draw upon additional expertise within or outside of ADB as needed. In

28 ADB. 1995. Report of the Task Force on Improving Project Quality. Manila, pp. 22–26. 29 Guidelines will be issued for implementation of the proposed Anticorruption Policy. Prior to this, staff will examine the ways in which ADB operations can be streamlined and cost-effective measures for strengthening project monitoring and supervision can be introduced. 30 For an excellent example of how the topic of corruption can be dealt with candidly yet diplomatically in Bank documents, see Post-Evaluation Office. 1997. Special Study on Issues Pertaining to the Engagement of Consultants in Bank Loan Projects and Their Effect on Project Performance. ADB, Manila. 134

accordance with the disciplinary procedures outlined in Administrative Order No. 2.04, staff found guilty of such behavior will be subject to a number of sanctions, including reassignment, demotion, 31 suspension without pay, restitution and/or forfeiture of pay, termination, and summary dismissal. These sanctions will apply equally to situations in which staff improperly and unlawfully enrich themselves and/or those close to them, and circumstances in which they induce others to do so.

73. To advance staff awareness, SPD, OGC, OGA, and BPMSD will collaborate in producing a series of internal training workshops and seminars to inform staff about ADB’s policy and to address the issues and options involved in assisting the efforts of DMC governments, suppliers, and contractors to combat corruption.

31 Section 5 of Administrative Order No. 2.04 provides for appeals procedures to the Appeals Committee and ultimately to the Administrative Tribunal. 135

VI. CONCLUSIONS AND RECOMMENDATIONS

74. This paper recommends a number of concrete measures for establishing ADB’s anticorruption policy. These measures can be broken down along three lines: revisions of ADB policy and staff guidelines, new programming and project management initiatives, and internal administrative changes.

75. The following policy recommendations are submitted for consideration and approval by the Board:

(i) Adopt the approach and recommendations contained within this document as a policy paper and as a Management directive in the form of staff instructions.

(ii) Approve the revisions to the ADB’s guidelines for procurement and on the use of consultants and the proposed amendment to ADB’s ordinary and special operations loan regulations as set forth in Appendixes 2 and 3.

(iii) Consider additional changes in the Project Administration Instructions and Loan Disbursement Handbook to strengthen financial controls and improve reporting requirements.

76. The paper recommends the following changes in ADB programming and project management:

(i) Continue to expand ADB’s assistance on issues of governance and capacity building, with particular attention to promoting market liberalization and public administration reform.

(ii) Give increased emphasis to strengthening key institutions for advancing transparency and accountability in the DMCs (such as supreme audit agencies, procurement agencies, regulatory agencies, ombudsman offices, etc.) as part of ADB’s broader emphasis upon governance and capacity building.

(iii) Where appropriate, support regional initiatives and research on advancing accountability and transparency in the Asia and Pacific region through TA grants.

(iv) Upgrade the quality of supervision during project implementation and strengthen project review missions, with particular emphasis upon those projects most at risk.

(v) Develop a series of training seminars, workshops, etc., on the ADB’s anticorruption policy and how staff can best advance integrity within ADB operations and in collaborative work with the DMCs.

(vi) Publish a simplified brochure and other information materials describing the ADB’s anticorruption policy for public dissemination.

77. Finally, the paper recommends the following administrative changes in ADB operations at the department/office level:

(i) Enforce current procurement guidelines more rigorously to avoid unnecessary delays, extensions, and excessive change orders.

(ii) Designate OGA as the initial point of contact for alleged incidents of corruption among 136

ADB projects and staff, and instruct OGA to work out appropriate procedures for performing this function in consultation with relevant ADB departments.

(iii) In consultation with BPMSD, consider increasing OGA’s staff complement to enable it to better fulfill its responsibilities under this policy.

(iv) In consultation with BPMSD and COSO, consider cost-effective ways to strengthen project monitoring and supervision, and any additional resources that may be necessary to perform these tasks.

(v) Direct OGA and BPMSD to collaborate in providing training in forensic accounting and other investigative techniques to select OGA staff, financial analysts, and project implementation officers.

(vi) Direct OGC and BPMSD to conduct a series of seminars and/or other informational activities to inform ADB staff about the revisions to Administrative Order No. 2.02; Section 4 regarding the staff Code of Conduct, which were endorsed by Management on 28 May 1998.

78. To monitor and coordinate the ADB’s efforts with respect to anticorruption initiatives and programming, the departments and offices concerned will be requested to provide SPD, OGA, and OGC (in respect of legal frameworks and legal issues of relevance to other areas of action) with periodic appraisals on ways in which they are implementing the policy ’s provisions.

79. After Board approval of the ADB’s operational policy on anticorruption issues, a Board paper will be circulated in due course analyzing the ADB’s experience with the Anticorruption Policy, proposing modifications to the operational approach as necessary, and indicating more specific budgetary and other resource implications. 137

VII. APPENDIXES

1 Breakdown of Governance and Capacity-Building Initiatives with Anticorruption Elements

2 Proposed Revisions to ADB’s Guidelines for Procurement Related to Anticorruption

3 Proposed Amendment to Ordinary and Special Operations Loan Regulations 138

Appendix 1

Breakdown of Governance and Capacity-Building Initiatives with Strong Anticorruption Elements

Target Entity Type of Intervention Example

Executive Branch Civil Service Commission • Revise pay and benefits to ensure TA 2616 to Sri Lanka for Public comparability with alternative employment Administration Reform opportunities • Strengthen measures for establishment monitoring and control • Develop and widely publicize civil service code of ethics

Ministry of Finance/ Ministry • Strengthen management control and TA 2538 Improved Budget Management of Development information systems in Micronesia

• Strengthen expenditure monitoring and Loan 1506 for India Gujarat Public Sector control Resource Management Program

• Support strengthening procurement guidelines TA 2701 Institutional Strengthening of the National Office for Procurement Evaluation in Viet Nam

Various executive branch • Streamline and reengineer business processes TA 2186 Strengthening the Lega ministries, agencies, and to reduce opportunities for the payment of Framework for Customs Administration in departments speed money the People’s Republic of China

• Institute measures to make the agency/citizen TA 2459 Technical Assistance to Nepal interface more transparent and user-friendly, for Efficiency Enhancement of Customs through name tags, document requirements, Operations posted fee schedules, etc.

Legislative Branch • Enhance capacity and independence of RETA 5688 Regional Long-Term Audit Supreme Audit Agency Supreme Audit Agency Training Program for Members of the Asian Organization of Supreme Audit Institutions

TA 2463 for Institutional Strengthening of the Office of the Auditor General in Fiji Islands

Parliamentary research • Strengthen capacity of Parliament to USAID/CRS Efforts to Strengthen institutions serve independent watchdog function Parliamentary Capacity in Economies in Transition

Ombudsman Office, etc. • Strengthen access of citizens for independent TA 2599 Civil Service Reform redress of grievances Implementation for Marshall Islands UNDP Project on Policy Coordination and Governance in the South Pacific Judicial Branch Reducing judicial backlog • Develop mechanisms for alternative dispute TA 2521 for Alternative Dispute resolution Resolution in India

Strengthening primary • Support continuing education for judges and TA 2727 Restructuring and Capacity institutions: the judiciary and lawyers Building in Mongolia’s Ministry of Justice Ministry of Justice • Introduce updated court management and Strengthening secondary information systems institutions: law schools and local legal research

Civil Society • Provide feedback loops between business and Business-government councils government on general good governance issues 139

Appendix 2

Proposed Revisions to ADB’s Guidelines for Procurement Related to 38 Anticorruption

In keeping with evolving best practice among multilateral development banks, Sections 2.14, 2.15, and 2.16 of ADB’s Guidelines for Procurement will be modified as follows:

Fraud and Corruption

2.14 It is the ADB’s policy to require that borrowers (including beneficiaries of ADB loans) as well as bidders/suppliers/contractors under ADB-financed contracts observe the highest standard of ethics during the procurement and execution of such contracts. In pursuance of this policy, ADB:

(a) defines, for the purposes of this provision, the terms set forth below as follows:

(i) “corrupt practice” means behavior on the part of officials in the public or private sectors by which they improperly and unlawfully enrich themselves and/or those close to them, or induce others to do so, by misusing the position in which they are placed, and it includes the offering, giving, receiving, or soliciting of any thing of value to influence the action of any such official in the procurement process or in contract execution; and

(ii) “fraudulent practice” means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the borrower, and includes collusive practices among bidders (prior to or after bid submission) designed to establish bid prices at artificial, noncompetitive levels and to deprive the borrower of the benefits of free and open competition;

(b) will reject a proposal for award if it determines that the bidder recommended for award has engaged in corrupt or fraudulent practices in competing for the contracts in question;

(c) will cancel the portion of the loan allocated to a contract for goods or works if it at any time determines that corrupt or fraudulent practices were engaged in by representatives of the borrower or of a beneficiary of the loan during the procurement or the execution of that contract, without the borrower having taken timely and appropriate action satisfactory to ADB to remedy the situation;

(d) will declare a firm ineligible, either indefinitely or for a stated period, to be awarded an ADB-financed contract if it at any time determines that the firm has engaged in corrupt or fraudulent practices in competing for, or in executing, an ADB-financed contract; and

(e) will have the right to require that, in contracts financed by an ADB loan, a provision be included requiring suppliers and contractors to permit ADB to inspect their accounts and records relating to the performance of the contract and to have them audited by auditors appointed by ADB.

38 Similar provisions will be inserted into ADB’s Guidelines on the Use of Consultants by the Asian Development Bank and its Borrowers. 140

2.15 With the specific agreement of ADB, a borrower may introduce, into bid forms for large contracts financed by ADB, an undertaking of the bidder to observe, in competing for and executing a contract, the country’s laws against fraud and corruption (including bribery), as listed in the bidding documents. A footnote should also be inserted into documents where such a pledge has been inserted, noting that it has been placed there at the request of the borrower.

2.16 When the contract is to be financed wholly or partly by ADB the contract documents shall include an undertaking by the contractor that no fees, gratuities, rebates, gifts, commissions or other payments, other than those shown in the bid, have been given or received in connection with the procurement process or in the contract execution. 141

Appendix 3

Proposed Amendment to the Ordinary and Special Operations Loan Regulations

Section 8.03 of the Ordinary Operations Loan Regulations and the Special Operations Loan Regulations will be amended to read as follows. The relevant revisions have been underlined.

Section 8.03. Cancellation by ADB. If (i) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty (30) days, or (ii) at any time ADB determines, after consultation with the Borrower, that any amount of the Loan will not be required for the purposes of the Project, or (iii) at any time ADB determines, with respect to any contract to be financed out of the proceeds of the L oan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement/consultant selection or the execution of such contract, without the Borrower having taken timely and appropriate action satisfactory to ADB to remedy the situation, or (iv) at any time ADB determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement, or (v) by the date specified in the Loan Agreement as the closing date for withdrawals an amount of the Loan shall remain unwithdrawn from the Loan Account, ADB may by notice to the Borrower and the Guarantor, if any, terminate the right of the Borrower to make withdrawals with respect to such amount or contract. Upon giving of such notice, the amount of the Loan or the relevant portion thereof shall be canceled.