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Project Procurement Risk Assessment Of Central Cross Island Road Upgrading Project (RRP SAM 51268) PROJECT PROCUREMENT RISK ASSESSMENT (of Samoa’s Land Transport Authority) EXECUTIVE SUMMARY 1. Introduction: The Central Cross Island Road on Upolu island, Samoa is approximately 20km long, and is a main economic artery connecting the Capital, Apia on the Northern coast with the South Coast Road at Siumu, rising to around 780m above sea level and connecting eight villages en-route. The existing road is sealed 2 lane 4 to 5 m wide, narrow, steep, and winding, raising safety issues for both vehicles and pedestrian traffic. It sustained severe damage following Tropical Cyclone Evan in December 2012. The Central Cross Island Road Upgrading Project (CCIRUP) will widen, improve grades, greatly improve safety and provide climate change adaptation for the entire road length, resulting in climate resilient, safe and improved access to economic opportunities and basic services. 2. Procurement Risk Assessment (PRA) Preparation: The PRA was prepared following the Guide on Assessing Procurement Risks and Determining Project Procurement Classification, August 2015, and the Strategic Procurement Planning Guidance Note on Procurement, June 2018, with the objective of identifying and mitigating procurement risks that may affect the successful implementation of the CCIRUP. 3. Institutional arrangements of the Government of Samoa (GOS) for the project are: (i) Executing Agency (EA): The Ministry of Finance (MOF) is the EA, which has a well- staffed Procurement Division providing assistance to the other Government Agencies, and a World Bank supported Aid Coordination and Debt Management Division (ACDMD) acting as a centralized project management unit (PMU); (ii) Implementing Agency (IA): The Land Transport Authority (LTA) under the Ministry of Works, Transport and Infrastructure (MWTI) is the IA for project implementation in coordination with the Transport Infrastructure Sector Coordination Division (TISCD) of MWTI; and (iii) Ministry of National Resources and Environment (MNRE): has IA responsibility for the land acquisition and affected assets component in coordination with LTA/MWTI. 4. Procurement Plan Basis: For works, open competitive bidding (OCB) has been adopted for international and national advertising, and eligible international firms will be able to bid for nationally advertised packages. For consulting services, the Quality and Cost Based Selection (QCBS) with an 80:20 quality: cost ratio has been adopted for prequalified international consulting firms to be invited to bid. 5. International contractors market analysis: 6 firms were approached, with 5 responses, 3 positive and 2 declining due to perceived Samoa set up costs, and expected competition. 6. National Contractor Considerations: Analysis was undertaken of the interest and capability of registered local contractors with past relevant experience. The analysis was undertaken with regard for the following specific key considerations: (i) LTA key objective is to provide opportunities to strengthen the local contracting industry, who have a strong existing reputation with regard to similar road works and are keen to participate and benefit from the project; and (ii) the local traditional community leaders in the of CCIRUP Siumu rural road section, under consideration for national contracting, have expressed a strong opinion that the works there should be carried out by national contractors, this being based on previous 2 negative experience with international contractors, who had failed to understand and respect local customs and culture 7. The findings were that one local contractor (OTT) has sufficient capacity to undertake a contract of USD 5m; while four other contractors would be able to undertake a contract with a value of USD 2.5m. However, the analysis is based upon recommending that the average annual construction turnover (AACT) is reduced to a factor of 1.0, whereas the User’s Guide to Procurement of Works, Small Contracts-June 2018 recommend that this should not be below 1.5; and lowering the percentage used in calculating the contract value of Contracts of Similar Size and Nature to 50%. The net result of this approach is also broadly in line with World Bank guidance on the topic of qualification requirements for local firms in fragile and small states in the Pacific. Without accepting these factors, there would be no opportunity for local contractors to benefit from the project in a competitive manner, whereas accepting these factors would also present an opportunity for local contractors to form Joint Ventures to meet the qualification and experience requirements for road and drainage contracts up to a value of about USD 5.0 million. 8. Options Analysis for Works: Taking into account issues related to weather patterns, civil works staging, and limitations of access to the work sites with multiple contractors, the analysis considered three combinations of international and national works contracts as follows: (i) 1 International Contract of approximately 11 km plus a National Contract (Multiple) of 3 lots of around 2 km each; (ii) 1 International Contract of approximately 15.5 km plus a National Contract (Multiple) of 2 lots of around 2 km each; and (iii) 1 International Contract of approximately 17.5 km plus a National Contract of around 2.3 km. 9. Procurement Summary: Works: To provide appropriate opportunities to both international and local contractors, option (ii) was adopted where bidding documents will be prepared according to SBD – Large Works governed by Conditions of Contract - FIDIC MDB version and, June 2010 for international advertising, subject to prior review by ADB under OCB procurement method and adopting 1S1E bidding procedure [1S1E = single-stage: one-envelope, OCB = open competitive bidding, SBD = Standard Bidding Document] (i) One procurement package (CW-1) consisting of one contract covering two work sections CW-1A (urban) and CW-1B (rural)] with an estimated value of US$ 15 million; and (ii) One procurement package consisting of two lots CW-2A and CW-2B (both rural) for which a single, or multiple contracts may be signed with an estimated value of USD 2.5 million each (USD 5 million in total), respectively. (iii) Application of Standstill provisions will be allowed for both procurement packages. The duration of standstill period will be fourteen (14) days from the date of notice of intention for award of contract, as per applicable ADB standard bidding documents. 10. Consulting Services: One contract for Project Implementation Consultants: construction supervision [procurement, financial and safeguard management] of all civil works contracts, proposed with an estimated value of US$ 3.81 million under QCBS selection method adopting 80:20 ratio and FTP type of proposal, subject to prior review by ADB. FTP = full technical proposal, QCBS = quality- and cost-based selection] 11. Risks and Mitigatory Measures for Local Contractors: Risks and mitigation measures related to local contractors included (i) lack of competition/suitable companies, mitigated by market survey results which show the likelihood of sufficient number of bidders for both international and national contracts, based on current package sizes; (ii) failure to meet qualifying 3 criteria, mitigated by recommended lowering of the AACT factor to 1.0 and lowering the percentage used in calculating the contract value of Contracts of Similar Size and Nature to 50% (subject to final approval of ADB); and (iii) lack of bidders understanding of bidding documents being the first ADB roads project, as well as bidders submitting unrealistic bids (abnormally low, front loaded) - both addressed by recommending to conduct a program for bidders to educate them on understanding the ADB Procurement Policy and to prepare bids using ADB’s Standard Bidding Documents. 12. Risk Level Conclusions: It is recommended to retain risk level Category B, as also reflected in the Project Concept Paper, April 2018. The overall project procurement risk assessment rating is “Low”. Although LTA staff do not currently have experience in the procurement of works, goods, and services following ADB procurement procedures, they do have experience with World Bank procedures, which share similarities with those of ADB. LTA will also be strengthened by (i) the institutional arrangements under which the TISCD will lead the coordination and monitoring and assist LTA as needed; (ii) the arrangements agreed at the ADB Fact Finding Mission, to finance four additional personnel (including an additional ADB dedicated procurement team member) to address the needs of CCIRUP, and (iii) the assignment of a World Bank funded full time international senior engineer to the LTA from early 2019 to January 2024 under the Samoa Climate Resilient Transport Program (SCRTP). 4 I. INTRODUCTION A. Project background and objectives including prior work undertaken under ERAP 1. Project Background and objectives: The Central Cross Island Road (CCIR) is one of the main economic arteries on Upolu island, Samoa. It sustained severe damage following Tropical Cyclone Evan in December 2012. As a result, the Samoan Government’s Land Transport Authority (LTA) repaired and somewhat improved (upgraded) five distinct road sections as emergency works. These were interspersed over its entire length and totaled 3.67 km. Following this, preliminary designs for upgrading of the remaining road sections were substantially completed as a sub-project under the World Bank funded Enhanced Road Access Project
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