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).

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 (ERAP). This sub-project was entitled Central Cross Island Road Upgrading (CCIRU). This sub- project is now to be funded through the ADB titled as the Central Cross Island Road Upgrading Project (CCIRUP). 2. The CCIRUP is approximately 20 km long, starting in the outskirts of Apia (Leufisa) at the Ifiifi Street intersection and running southwards to the South Coast Road (SCR) intersection at Siumu. It connects eight villages en-route. The existing sealed 2 lane 4 to 5 m wide road is narrow, steep, and winding. The Project aims to widen, improve grades, safety and climate change adapt the entire road length. This includes a 4.42 km urban road section and balance 15.27 km rural road section (19.69 km total length). The ROW width is planned to be a nominal 16.0 m for the entire length of the project. 3. This project procurement risk assessment (PRA) has been prepared following the Guide on Assessing Procurement Risks and Determining Project Procurement Classification, August 2015. From review of existing documents, (especially from ERAP), ADB’s procurement guidelines, interviews and discussions with LTA staff, the initial PRA was undertaken during the period 30 July 2018 to 14 August 2018, along with preparation of the draft Procurement Plan. The draft PRA was submitted to ADB for review on 12 December 2018. Following further discussions and drafts, the draft PRA and associated draft Procurement Plan has been refined and updated following the ADB Fact Finding Mission to Samoa in February 2019. The Strategic Procurement Planning Guidance Note on Procurement, June 2018 was used for guidance in improving the document. 4. The prime objective of the PRA is to identify and minimize the likelihood and impact of identified risks, including delay or bid failure, that may affect the successful implementation of the CCIRUP. The PRA has been structured around the following areas. (i) Overview/Operating Environment (ii) Market analysis of International and Local Contractors (iii) Risk Management, including Risk Register (iv) Executive Agency experience, including capacity and capability (v) Options analysis (vi) Procurement considerations 5. Prior work undertaken under Enhancing Road Access Project (ERAP): The Government of the Independent State of Samoa (the Recipient) has received financing in the form of a Grant (the “Grant”) from the International Development Association (IDA) (the “Bank”), including co- financing from the Government of Australia and administered by the Bank, towards the cost of the Enhanced Road Access Project. 6. The LTA as the IA selected Consulting Firms was successful in implementing several consultancy projects as well as works contracts as follows: 5

(i) Five consultancy services projects, including the Surveys and Investigations, Design and Documentation Services for the Central Cross Island Road Upgrading, these being the foundation works upon which the ADB funded CCIRUP is built. (ii) Works contracts, namely (i) Upgrading of Vaitele Street to a four-lane roadway between Vailoa and Vaitele, (ii) Reconstruction of Leone Bridge, and (iii) Construction of a New Access Road and Bridge Crossing of the Maliolio River- Savaii.

B. Introduction to the Executive Agency (EA) and Implementing Agency (IA) under the project 7. Ministry of Finance (MOF): The Ministry of Finance (MOF) is the EA for the CCIRUP. The MOF provides policy and strategic advice, as well as financial services to the Government in order to achieve sustainable, long-term economic outcomes and fiscal viability towards the advancement of the national vision to 'achieve quality of life for all Samoan citizens'. Its role is to promote accountability and transparency in service delivery to the community through establishment and implementation of sound financial management systems, standards, policies and procedures. The Procurement Division is tasked to provide assistance to the other Government Agencies in procurement activities through a professional staff consisting of an ACEO, a Senior Procurement Officer and two Procurement Officers. The World Bank supported Central Technical Support Services Unit (ACDMD) acting as a centralized project management unit (PMU) in MOF will have international advisors in procurement, financial management, and safeguards. This will provide the necessary EA oversight of the Land Transport Authority (LTA) as IA in the implementation of the project on procurement, financial management, and safeguards, and of the MNRE as IA on environmental safeguards and land acquisition matters. 8. Land Transport Authority (LTA): The LTA is the IA for the day-to-day project implementation in accordance with ADB’s relevant guidelines and in coordination with Transport Infrastructure Sector Coordination Division (TISCD) of MWTI. TISCD will lead the coordination and monitoring of the overall project and assist LTA as needed. A main responsibility of the LTA is management of the construction and maintenance of roads and bridges throughout Samoa. In addition, under the MWTI, LTA bears responsibility for rehabilitation of assets, and in contributing to developing reforms for the land transport with the assistance of foreign donor agencies supporting the government preparedness and response to exceptional natural disasters. The LTA is headed by a Chief Executive Officer. The CCIRUP comes under the purview of the Project Management Division of the LTA, with a supporting staff of experienced and qualified engineers, environmentalists, sociologists, safety officers, etc. In coordination with LTA/MWTI, MNRE will have also have an IA responsibility for implementing the land acquisition and affected assets compensation component.

C. Summary of public procurement at Country/Sector level in Samoa related to roles and thresholds for procurement 9. Samoa is in the process of developing a well-structured public procurement system with a number of strengths, few substantial risks and a number of moderate risks. 10. There is no specific Procurement Act. However, the Financial Management Act 2002, Part XII, provides a brief overview of the requirement to follow procurement procedures and the role and function of the Tenders Board (TB), whose major functions are to call for tenders, award contracts, and recommend to Cabinet regarding specific contracts, the power and functions of the TB, and to dispose of public assets. 6

11. The Act was amended in 2015 but with no change to Part XII. The MOF Treasury Instructions on Procurement and Contracting (TIPC) provide detailed instructions on the procurement process. 12. The two supporting guidelines cover (i) goods works and services and (ii) consulting services. Each guideline set out details for the procurement process, procurement methods, award inquiries and challenges, exclusion of suppliers, integrity in procurement and contract administration. 13. The TIPC and the two guidelines provide detailed information on the rules and processes for the procurement cycle. The supporting guidelines are expected to be posted on the updated Ministry of Finance website. Technically the legal framework does not currently allow the use of e-documents. Table 1: Government of Samoa-Purchasing Limits (SAT) and Procedures

THRESHOLDS CERTIFYING COUNTER AUTHORITY METHOD OF OFFICER SIGNATURE TO PROCUREMENT (SAT) INITIAL WHEN APPROVE TO BE USED PAYMENT INITIATING AWARD

PAYMENT

Above 500,000 CEO As per Cabinet Competitive Cabinet Approval Tender Decision

Above 200,000 CEO Minister of Tenders Board Competitive up to 500,000 Finance Approval Tender

Above 150,000 CEO Cabinet Tenders Board Competitive up to 200,000 Minister / Approval Tender Financial Secretary

Above 100,000 CEO N/A Tenders Board RFQ for Works, up to 150,000 Approval Tender for Goods & related Services & General Services RFP for Consulting Services RFQ/B (3 Written Above 50,000 up CEO N/A Tenders Board Quotes) for to 100,000 Approval Works, Tender for Goods & related Services & General Services RFP for Consulting 7

Services Above 5,000 up CEO/ACEO N/A CEO Approval RFQ/B (3 Written to 50,000 Principal Quotes) Officers Officer

Up to 5,000 CEO/ACEO N/A CEO Approval RFQ/A (3 Oral inclusive Principal Quotes) Officers Officer

D. GOS Procurement Thresholds applied in Samoa (February 2017) 14. The overall procurement-risk levels at the country level are mainly moderate with a few substantial. The ADB in Samoa tend to set thresholds by prior review as part of the risk assessment and procurement plan, before the project commences. In most cases, the procurement entity uses ADB guidelines for ADB funded projects. Given the substantial risks involved, prior review is required to protect ADB’s interests. 15. In the new context, ICB and NCB are replaced with Open Competitive Bidding (OCB) with international advertising and national advertising respectively, the selection being based upon several factors including complexity of the works, analysis for international contractor interest, and local contractor capacity and interest.

E. Goods Works and Services required for this project 16. The CCIRUP potentially involves a significant number of contracts as reflected in the Procurement Plan These include both works and consulting services. Procurement of goods are not anticipated. For consulting services, a quality and cost-based selection (QCBS) method for international consulting firms is recommended. This is proposed to be weighted as quality: cost ratio of 80:20 for request for proposal (RFP) evaluation purposes. For works contracts the main procurement method is proposed to be open competitive bidding (OCB) that includes a mix of international and national advertising. Eligible international contracting firms will also be able to submit bids for nationally advertised packages.

II. OVERVIEW / OPERATING ENVIRONMENT

A. Overarching Procurement hierarchy for projects of this type and value (Cabinet, Tender Board, Chief Executive Officer roles). 17. Cabinet. The Cabinet is the executive branch of the government of the Independent State of Samoa. 18. Per article 31(1) of the Constitution, executive power is vested in the Head of State. However, per article 26(1): "the Head of State in the performance of his functions shall act on the advice of Cabinet, the Prime Minister or the appropriate Minister, as the case may be". 8

19. Article 32(1) provides that the Cabinet "shall have the general direction and control of the executive government" of Samoa. 20. The Cabinet takes decisions to make payments to contractors/consultants/suppliers and holds the authority to approve awards for contracts of value above SAT 500,000. 21. Tenders Board. The Tenders Board is supported by a Procurement Division established within the Ministry of Finance and is under the overall direction of the Financial Secretary or the Chief Executive Officer of the Ministry of Finance. 22. The functions of the Procurement Division include but are not limited to the following: (i) providing policy advice and secretarial support particularly to ensure compliance with the Instructions; (ii) providing assistance and support to procuring agencies in improving their procurement systems and procedures; (iii) enabling the development and delivery of training programs for procuring entities; (iv) monitoring the application of the Government's procurement policies and principles and advising the Board on improvement measures; (v) improving transparency and decision making, through ensuring the provision of relevant and appropriate documents supporting contract award; (vi) establishing executing agency accountability and risk responsibility at the outset and generally promoting initiatives for improved quality assurance through risk assignment, technical diligence, internal audit and internal control 23. The Tenders Board has the authority to approve award of contracts with a value above SAT 50,000 and up to SAT 200,000. 24. Chief Executive Officer (CEO) of LTA. Responsible for the management and administrative functions of the following divisions under his/her purview. 25. Road use management; Legal; Programming and procurement; Corporate services; Road operations; Savaii operations; Traffic; Project management and ICT support. 26. The CEO can certify payments with a value above SAT 50,000 and up to SAT 200,000. Either the CEO or the ACEO certifies payments with a value up to SAT 50,000. In addition, the CEO has the authority to approve awards with a value up to SAT 50,000.

B. Past procurement history of LTA: capacity, experience, etc. and the level of reliance on external support from the prior World Bank project. 27. The overall risk rating for the organizational and staff capacity of LTA is assessed as “Moderate”. The respective procurement staff have adequate technical skills to undertake procurement of goods, works, non-consulting and consulting services. 28. Although experienced in World Bank funded procurement on the 3 works projects and 5 consultancy assignments listed earlier, they do not yet have ADB funded project experience, since the CCIRUP will be the first ADB funded project under their management. However, systems are similar and LTA will receive the necessary guidance under the CCIRUP arrangements. 9

29. There are established arrangements for handling the various stages of procurement from preparation of bid documents, bid invitation, bid evaluation, contract award, to construction supervision and contract performance monitoring under similar conditions to those which will pertain to the CCIRUP. Checking and control of procurement processes are also in place.

C. LTA capacity (summary of PRA questionnaire contained in the annex) and strengths and weaknesses. 30. Information Management. The overall risk rating for information management is assessed as “Low”. The LTA has been maintaining records of its respective procurement proceedings, along with all associated documentation, since 2009. The agency has maintained an effective referencing system, which provides unique identification of each procurement activity. 31. The resources of the LTA’s Project Management, Project Planning, and Information Technology Divisions are being used to administer LTA’s procurement record management functions. The LTA are also maintaining electronic records of procurement activities, but sufficient systems are not yet in place to support procurement through electronic means (e-procurement). 32. Procurement Practices. The overall risk rating for procurement practices is assessed as “Low”. LTA has recently undertaken a similar procurement of goods or works related to World Bank foreign assistance. A systematic process to identify procurement requirements is in place and LTA follows procurement planning processes. Invitations to bid for OCB - National and International are advertised in respective media and time limits for submission of bids are provided in the advertisements. Bids submitted after the prescribed time are rejected and returned without being opened. Bids/proposals are evaluated by the respective committees and contracts awarded to lowest evaluated responsive bidders after seeking MOF and/or foreign aid agency approval for the respective bids. 33. Effectiveness. The overall risk rating for effectiveness is assessed as “Moderate”. LTA has limited resources and capacity to monitor and report on the performance of contractors and consultants/firms hired for project development and implementation. Although the LTA diligently tracks its contractual payment obligations, there is still need for improvement in follow-up mechanisms and the timely release of payments. This is being mitigated by TISCD leading the coordination and monitoring of the overall project and assisting LTA as needed and the provision of the additional ADB dedicated procurement team member to address the needs of CCIRUP. LTA is implementing a complaint management system that address grievances related to procurement and contract administration. Effectiveness is also expected to improve with the assignment of a full time international senior engineer to the LTA from early 2019 to January 2024 under the World Bank Samoa Climate Resilient Transport Program (SCRTP) component 3. The roles and responsibilities of the engineer will not only relate to project management functions, but will also include a structured staff training program to build technical capacity within the LTA. 34. Accountability Measures. The overall risk rating for accountability measures is assessed as “Low”. Detailed provisions on conflict of interest leading to ineligibility are clearly mentioned in regulations, which are fully complied with during the entire procurement process, and the LTA has an accountability mechanism in place. This mechanism is simple and can be triggered through application to the head of the LTA. Once a complaint is received, the Tenders Board evaluates and redresses the complaint. Procurement decisions and disputes are handled by Public Relations and Safeguards personnel in the LTA. 10

35. Strengths. The law on Procurement is available. In addition, the guidelines for government procurement and contracting for consultancy services and for goods and works, published in 2004 and in June 2008 respectively by the MOF, are comprehensive and accepted by international development partners. 36. The MOF provides advice to the LTA and carries the mandate to review amendments to the legal/regulatory framework, monitor public procurement, to require LTA to keep procurement records, and to develop/support the implementation of initiatives for improvements to public procurement. 37. Processes for information management, effectiveness and accountability measures are simple and satisfactory and deficiencies are addressed by additional staff and resources. External audits are budgeted for and conducted according to government requirements. 38. All bids submitted after the time prescribed are rejected and returned without being opened. 39. At the national level, complaints management and dispute resolution mechanisms are in place and address grievances related to procurement and contract administration. The country has appropriate enabling laws and procedures to address complaints. 40. The LTA has been maintaining records of its respective procurement proceedings, along with all associated documentation, since 2009. 41. Weaknesses. Procedural delays within LTA for procurement document preparation, bid/proposal evaluation, and contract signing may adversely affect the planned procurement/project activities. 42. Necessary knowledge of the LTA staff is sufficient enough to carry out technical evaluation of technical bids for goods and civil works and also to respond to technical bid queries from the bidders, in coordination with TSICD. 43. There is no specialized procurement training program yet in place for staff involved in undertaking procurement in accordance with ADB guidelines, procedures and regulations, though this is planned under CCIRUP. 44. The complaint resolution may be made more transparent and unbiased while appointing a member of the committee as a third party outside of the line department.

D. Other external actors/issues that could affect LTA ability to deliver the project (e.g. if there was an upcoming restructuring of government departments to take place) 45. As mentioned above, the oversight from the Central Technical Support Services Unit (ACDMD) acting as a centralized PMU under the MOF; TISCD leading the coordination and monitoring of the overall project and assisting LTA as needed with the provision of the additional ADB dedicated procurement team member to address the needs of CCIRUP; and the assignment of a full time international senior engineer to the LTA from early 2019 to January 2024, provided for under the World Bank Samoa Climate Resilient Transport Program (SCRTP) component 3, can be expected to have a positive impact upon the ability of the LTA to deliver the project. Conversely, the LTA carries the risk of potential rapid turnover of personnel.

III. MARKET ANALYSIS

A. Interest of International Contractors in large value contracts 46. The LTA sought a market feedback and expressions of interest from potential international civil works contracting firms, through a Request for Expression of Interest (EOI), in the third week of November 2018. From the 6 contracting firms invited to submit an EOI and provide comments regarding proposed contract packaging, 5 responded. From these 3 firms expressed interest to participate in bidding and expressed a preference to participate in one bid for the entire project. The other two declined from the perspective of cost in setting up establishment in Samoa, and the anticipated competition in the bidding process.

B. Local Supply Market Analysis of Local Contractors, including Capacity, experience and financial strength of local contractors 47. The LTA undertook an open local market survey to assess the past experience in construction/reconstruction of roads and drainage works and financial capability of registered local contractors in the country. A further survey of the market was carried out by the Procurement Specialist following discussions with the Manager and the Contract Engineer of the LTA Project Management Division (PMD). A summary of the market survey analysis of national contractors is given in the table below. 48. The information in the table below illustrates the capacity, experience and financial strength of local firms. Average Annual Financial Name of Construction Capabilities Road and drainage work No. Contractor Turnover (USD) contracts (USD) millions millions (i) ERAP Road works Vailoa to Vaitele [USD 8.07 m], (ii) B4.063 Vaitele Street Extension to Vailoa [USD 2.33 OTT m] and (iii) New Island Route 1 Contractors 6.82 4.00 East Coast Lots 1 & 3 USD Company Ltd. [3.94 m], B4.03 Major Works Western Vaitele [USD 6.79 m] and B4.04 Major Works Western Vaitele [USD 4.39 m] Bluebird Reconstruction of Vasigno 2 Construction 2.74 Bridge [USD 3.83] – current Co. Ltd contract Construction of Access Road & Ah Liki 7.50 BAL as Bridge Crossing of Maliolio 3 Construction 3.12 a JV River [USD 3.13]–current Ltd. contract Lucky CIRR works package 2 Road & 4 1.80 Construction Drainage construction works 12

Ltd. [USD 1.61 m] Ulia Construction of Convent Street 5 Construction 2.63 2.30 [USD 1.54 m]; Cyclone Evan Ltd. Island Works [USD 1.09] Silva Construction of Aleipata Inland 6 2.18 5.00 Transport Ltd. Route Lot 2 [USD 1.42 m]; T & N Construction of South West 7 Toleafoa Co. 0.95 3.00 Coast Road [USD 1.05] Ltd. Salei'a Bridge and River rock 8 Apia Lua Ltd. 4.10 0.84 wall [USD 0.93 m] King Vaimosa-Uta Bridge 9 Construction 5.00 1.20 Replacement [USD 0.93 m] Ltd. 49. The formula for calculation of (i) Average Annual Construction Turnover, (ii) Financial Resources, and (iii) Contracts of Similar Size and Nature is given under User’s Guide to Procurement of Works, Small Contracts-June 2018 and is copied in the box below.

(i) Average Annual Construction Turnover The amount stated should normally not be less than two times the annualized value of the subject contract, expressed as 2 x V/T; where V is the Employer’s estimated cost (including contingencies), and T is the contract duration in years. For contract duration of up to 1 year, T of “1” should be used. The multiplier 2 may be reduced for very large contracts but should not be less than 1.5. (ii) Financial Resources The Employer is to specify the total requirement for the Subject Contract based on the following calculation: 3 (or 4) x Estimated Contract Value (Inclusive of Taxes and Duties) Completion Period in Months (iii) Contracts of Similar Size and Nature Usually 80% of the estimated value of the subject contract. In case of repetitive and contiguous works (e.g., transmission lines, water pipeline), the Employer has the option of specifying a value that is between 50% and 80% of the subject contract value. If the contract value is not in the specific currency, the exchange rate to be used to calculate the value of the contract shall be the selling rate of the Borrower’s national bank on the date of the contract signing.

50. From the table above, having handled two contracts with a value more than USD 6.50m, OTT is clearly exceptional with an average annual construction turnover (ACCT) of USD 6.82m. Having current contracts of value in excess of USD 3.00m, two other contractors, Bluebird and Ah Liki, have an ACCT of 2.74m and 3.12m respectively. Three more contractors: Lucky, Ulia, and Silva have an ACCT of 1.80m, 2.63m and 2.18m respectively and each has completed contracts with a value around USD 1.50 m. 51. OTT has the capacity to undertake a contract with a value USD 5.0m, satisfying the qualification criteria in the box above. [assumed a contract duration of 12 months, for (i) a AACT multiplier factor of 1.0, for (ii) a Financial Resources (FR) factor of 3, and for (iii) a percentage of 80% of Contracts of Similar and Nature]. 13

52. Bluebird, Ah Liki, Ulia, and Silva, each has the capacity to undertake a contract with a value up to USD 2.5m, satisfying the qualification criteria in the box above. [assuming a contract duration of 12 months, for (i) the AACT multiplier factor being reduced to 1.0, (ii) a FR factor of 3, and for (iii) a percentage of 50% of Contracts of Similar and Nature]. 53. Consequently, according to the above analysis, OTT is the only contractor qualified to undertake a contract with a value of USD 5.0m and four other contractors qualify to undertake a contract with a value of USD 2.5m. 54. This analysis is based upon the proposal of accepting the risk associated with reducing the ACCT multiplier factor from the normally accepted minimum value of 1.5, as shown in the box above, to 1.0. This is recommended, since one of the strongly stated objectives of the LTA is to strengthen the local contracting industry, who have a strong reputation with regard to similar road works. In addition, in the section of rural road under consideration for national contracting, the local traditional communities have expressed a strong wish that the works be carried out by national contractors, who would understand and respect local customs and culture. Without acceptance of the risk associated with this adjustment, there would negligible opportunity for local contractors to benefit from the project in a competitive manner, with only OTT being able to bid. 55. In summary, the survey has revealed that: (i) There is one registered contractor capable of implementing road and drainage works up to a value of USD 5.0 million. (ii) There are four other registered contractors capable of implementing road and drainage works up to a value of USD 2.5 million. (iii) There is 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.

C. Modalities that could be used to increase the possibility of local firms to win contracts (i) Offer smaller contracts for which local contractors qualify (ii) Allow local contractors to form Joint Ventures (iii) Include provision for multiple contracts when packaging contracts (iv) Lower the multiplication factor used the formula to calculate the average annual construction turnover (ACCT) – suggest a factor 1.0 as applied above in 3 b. (v) Use a percentage of 50% in the criteria for contracts of similar size and nature

IV. RISK MANAGEMENT 56. The Project Risk Register below includes associated risks identified and corresponding mitigatory measures with the consideration of likelihood of occurring risks and their degree of impact.

Risk Likelihood Impact Risk Proposed Mitigation Risk Owner Description (L) (1-5) (I) (1- Score 5) (L x I) Tendency for 2 3 6 The market survey ADB and the less reveals that there will be borrower competitiveness five potential among the experienced and bidders qualified local contractors competing. Possibility of 2 4 8 Lower the factor ADB and the not meeting the (assume 1) in borrower evaluation calculating the Average qualifying Annual Construction criteria Turnover. stipulated in the Lower the percentage bidding (assume 50%) used in documents. calculating the contract value of Contracts of Similar Size and Nature. Possibility of 3 4 12 Conduct a day program Supervision bidders not for bidders to educate Consultants being understanding them on understanding tasked to support the salient of the latest June 2018 LTA and TISCD in features of the ADB Guidelines and to the procurement bidding prepare bids using process documents – SDBs for Small this being the Contracts. first ADB project and latest June 2018 ADB Guidelines and SDBs for Small Contracts are being used. Possibility of 3 3 6 Conduct a day program ADB and the bidders for bidders to educate borrower submitting non- them on understanding realistic bids: of the latest June 2018 abnormally low, ADB Guidelines and to front-loaded. prepare bids using SDBs for Small Contracts.

V. OPTION ANALYSIS FOR WORKS 57. It is proposed to combine national and international civil works contracts under this project. Considerations for this include: (i) Aim to achieve full construction completion within a total three-year period, accounting also for prominent annual wet seasons that occur from November to March1. (ii) Low capacity of national firms to be able to deliver the entire road upgrade. Multiple contracts or lots would be required (range of 7 to 10), and likely take more than three years to complete. (iii) Technical complexities associated with the urban road area in particular (1st 4.4 km). International firms are more likely to deliver this to expectations, and in a timely manner. (iv) National firms are still able to partake in the project, being a positive opportunity for continual utilization, experience and capacity building of the local road building industry. (v) The tribal Siumu community in the south of the project are more likely to be receptive to national firms as opposed to international firms working within their area. (vi) As a contingency measure, it is possible that an international firm may be able to support and/or advise national firms in order to expedite work progress. 58. Bearing these factors in mind, and the fact that the southern end of the project will be easier to build due to lower traffic volumes, less adjacent land use development, and more favorable alignment and terrain conditions, it is considered best to target this area for national firm implementation. The matter is then how many contracts or lots should be targeted towards national firms for this area. 59. Based on previous project experience and current capabilities, national firms would be expected to be able to handle individual contracts or lots in the order of $2 to $3 million each, as indicated in the survey finding shown in Section 3 b. Local Supply Market Analysis of Local Contractors, including Capacity, experience and financial strength of local contractors. This roughly equates to two kilometers of road upgrade length each. Three road sections have been considered for such further analysis. Working backwards from the southern end and based on logical start/end points, these include: (i) KM 19+686 (end point) to KM 17+500: 2.2 km (ii) KM 17+500 to KM 15+500: 2.0 km (iii) KM 15+500 to KM 11+014: 4.5 km, but only 2.2 km of full-width upgrade after accounting for the two previously completed road sections totaling 2.3 km. 60. On this basis, the following possible contracting combinations is formulated, along with advantages and disadvantages of each.

A. Possible Contract Combinations (i) 1 international contract + 1 national contract (multiple) with 3 lots (ii) 1 international contract + 1 national contract (multiple) with 2 lots

1 Samoa’s wet season is an annual occurrence from November to March with peak rainfall occurring in January. December, February and March do however also experience high rainfall. 16

(iii) 1 international contract + 1 national contract 61. The advantages and disadvantages associated with each combination is shown in the following table:

Combination Advantages Disadvantages a) Greatest opportunity for local a) Smaller package for contractors to participate and international contractors gain more experience on road therefore less attractive, with works, thus strengthening the the possibility of poor bidding local contracting industry and response and less keeping the money in the local competition. economy. b) With a pool of only 5 identified b) Provides the greatest opportunity eligible local bidders, there for local contractors to form joint may be a danger of non- ventures to then bid for two or all responsive bids to one or three of the lots more of the 3 lots. c) Due to the potential of up to 4 contractors operating on a total of only 20km of narrow road, that must be kept open at all times, in winding and (i) hilly terrain, the following risks are identified: a. potential contractor delays and contractual claims related to access limitations as a result of other contractors’ activities; b. construction supervision, traffic management and monitoring may be rendered extremely difficult or unmanageable for LTA and the Supervising Consultant; and c. more nuisance to road users (obstructions, delays, road accidents) 17

Combination Advantages Disadvantages a) A larger package for international a) The risks identified in (i) contractors will make it more related to the number of attractive, with an expected higher contractors operating on the level of bidding response and road will still be present, but competition. are expected to be b) From an overall perspective of significantly reduced and managing the project, provides a manageable. reasonable opportunity for local contractors to participate and gain more experience on road works, thus strengthening the local contracting industry and keeping (ii) the money in the local economy. c) With 2 lots and 5 identified eligible local bidders, the risk of non- responsive bids to for national bids is reduced. d) Provides a reasonable opportunity for local contractors to form joint ventures to then bid for the two lots. e) This would then result in a total of either 2 or 3 contractors operating on the projects, mitigating the risks identified in Combination (i). a) The largest package for a) A single small national international contractors, which package is contrary to the would make it more attractive, request of the LTA to with a potentially higher level of optimize the opportunity for bidding response and competition local contractors to than combinations (i) & (ii). participate and gain more b) With only one national contract experience on road works, and 5 identified eligible local thus strengthening the local bidders, the risk of non- contracting industry and responsive bids for national bids is keeping the money in the minimized. local economy. (iii) c) The risks identified in (i) and (ii) b) This combination also related to the number of removes the potential for contractors operating on the road local contractors to will be minimized and construction potentially form joint supervision and monitoring more ventures, thus negating the manageable to both LTA and the possibility of the LTA Supervising Consultant. desired additional strengthening to the local contracting industry. c) There is potential for local communities (particularly on 18

Combination Advantages Disadvantages the Southern Siumu side) to object to the lack of liaison with local contractors who understand the cultural values and constraints.

62. Analysis of the above tabulated reveals that combination (ii) provides the best balance of what can otherwise be considered competing objectives. It accommodates national firms, and for more than one lot only, so maintains a robust element of national competition, yet still provides sufficient interest for international firms. 63. This combination (ii) would include: (i) One international contract (CW-1) consisting of two sections CW-1A (urban) and CW- 1B (rural) (ii) One national contract (CW-2) [multiple] consisting of two lots CW-2A (rural) and CW-2B (rural). 64. Note that while the two national lots under CW-2 may result in two separate contracts being awarded to national contractors (as opposed to a JV), it is not recommended or proposed to separately bid the two sections under CW-1 for international bidding. Rather, these are shown to demonstrate how CW staging is recommended to upgrade the road in a logical manner that minimizes disruption and the risk of construction traffic damaging already completed sections of work. Giving due consideration of potential for contractors conflicting with each other in performing the works, it is recommended to plan and stage construction so that road works effectively start from within the middle road section and progress outwards to the start and end points. Overlapping of each lot is anticipated. As such, combination (ii) is diagrammatically reflected as follows:

B. Civil Works Staging 65. Probable CW lots and staging:

66. Recommendations are given below under Section 6.

VI. RECOMMENDED PACKAGING OF WORKS AND CONSULTING SERVICES

A. Recommended Packaging for the Works: (i) Adopt the principle to provide appropriate opportunities to both international as well as local contractors to participate in the bidding. (ii) International advertising is recommended for CW-1 as the larger portion of work comprising 2 sections, with a budgeted value of USD 15 million. (iii) National advertising is recommended for 2 lots CW-2A (rural) and CW-2B (rural) with estimated contract values of USD 2.5 million each for the remaining works, encouraging local contractors to bid for either or both the lots individually or under joint venture arrangements.

B. Consulting Services for Construction Supervision 67. One contract is recommended for Project Implementation Consultants: construction supervision [procurement, financial and safeguard management] for 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

VII. PROCUREMENT SUMMARY A. Recommended packaging of Works and Consulting Services 68. Under procurement packages (contracts) for works: (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 under OCB procurement method and adopting 1S1E bidding procedure. Bidding documents prepared according to SBD – Large Works governed by Conditions of Contract - FIDIC MDB version June 2010 for international advertising, subject to prior review by ADB; 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), under OCB procurement method and adopting 1S1E bidding procedure. Bidding documents prepared according to SBD – Large Works governed by Conditions of Contract - FIDIC MDB version June 2010 for national advertising, subject to prior review by ADB. [1S1E = single-stage: one-envelope, OCB = open competitive bidding, SBD = Standard Bidding Document] 69. Under consulting services: (i) One contract for Project Implementation Consultants: construction supervision [procurement, financial and safeguard management] of all civil works contracts, 20

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. Prequalification will be required. (ii) Local consultancy firms do not have the expertise and experience required to deliver consultancy services for road feasibility studies, design and documentation, and contract management/construction supervision of similar size and complexity to that of the CCIRUP. They do however have adequate capacity and capability to support international consultancy firms. [CQS = consultants’ qualifications selection, FTP = full technical proposal, PMU = project management unit, Q = quarter, QCBS = quality- and cost-based selection]

B. Use of Abnormally Low bids provision and standstill periods 70. 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. 71. The procedure to deal with an abnormally low bid if, encountered is described under Instructions to Bidders “ITB 36. Abnormally Low Bids” of the bidding document for small works as well as for large works.

VIII. ASSOCIATED RISKS AND MITIGATORY MEASURES – PROCUREMENT OF LOCAL CONTRACTORS

Associated Risks Mitigatory Measures 1. Lack of competition/suitable companies. Market survey results show the likelihood of a sufficient number of bidders for both international and national contracts, based on current package sizes. 2. Failure to meet qualifying 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). 3. Lack of bidders understanding of bidding Both addressed by recommending to documents being the first ADB roads conduct a program for bidders to educate project, as well as bidders submitting them on understanding the ADB unrealistic bids (abnormally low, front Procurement Policy and to prepare bids loaded). using ADB’s Standard Bidding Documents.

IX. CONCLUSIONS 72. The overall assessment for project procurement risk is summarized as follows. It is recommended to retain risk level Category B, as also reflected in the Project Concept Paper, April 2018.

Characteristics Risk A. Organizational and Staff Capacity Moderate B. Information Management Low C. Procurement Practices Low D. Effectiveness Low E. Accountability Measures Low 73. The overall risk rating for project procurement risk assessment is “Low”. Whilst LTA staff have experience with World Bank procedures, which share similarities, they do not currently have experience in the procurement of works, goods, and services following ADB procurement procedures and guidelines. The LTA past experience in procurement related issues is summarized in Sections 2 b. and 2 c. above. Mitigation is provided by the institutional arrangements described earlier under which the TISCD will lead the coordination and monitoring of the overall project and assist LTA as needed. This is further strengthened by 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 further benefiting by the assignment of a full time international senior engineer to the LTA from early 2019 to January 2024 under the World Bank Samoa Climate Resilient Transport Program (SCRTP) component 3, also mentioned in 2 c. above. 74. LTA will require services of a highly-experienced international construction supervision and civil works contract management firm to assist them in implementing this ADB funded project.

Appendices: Appendix 1: Project Procurement Risk Assessment Questionnaire with responses and risks Appendix 2: Project Procurement Risk Analysis Appendix 3: National Contractor Capacity Survey 22

Appendix 1: Project Procurement Risk Assessment Questionnaire

QUESTION RESPONSE RISK A. ORGANIZATIONAL AND STAFF CAPACITY PROCUREMENT DEPARTMENT A.1 Does the agency or Government have Yes. Government has an Low a Procurement Committee that is established independent Bid independent from the head of the agency? Evaluation Committee. A.2 Does the agency have a procurement Yes. Dedicated procurement Low department/unit, including a permanent department is in place. office that performs the function of a Secretariat of the Procurement Committee? A.3 If yes, what type of procurement does it They are mostly procurement of Low undertake? goods and civil works. It needs the services of civil engineering firms to prepare designs, drawings, bill of quantities for procurement of civil works. A.4 How many years’ experience does the Manager-Project Management Low head of the procurement department/unit Division heads the procurement have in a direct procurement role? department. Experience of 3 years. A.5 How many staff in the procurement 5 personnel full time, supported Low department/unit are: by non-technical staff. i. full time ii. part time iii. seconded A.6 Do the procurement staff have a high Staff have a good level of Low level of English language proficiency English language proficiency, (verbal and written)? both verbal and written. A.7 Are the number and qualifications of the Yes. But there have been no Moderate staff sufficient to undertake the additional ADB financed/funded projects procurement that will be required under the implemented in the past. proposed project? A.8 Does the unit have adequate facilities, Yes. The facilities are sufficient Low such as PCs, internet connection, for additional procurement photocopy facilities, printers etc. to planned under the project, but undertake the procurement? inadequate space for the staff. Present office will be upgraded for more space, early next year. A.9 Does the agency have, or have ready Training is conducted under Moderate access to, a procurement training program? World Bank facilities. The entire staff took part. A.10 At what level does the department/unit Head of procurement unit Low report (to the head of agency, deputy etc.)? reports to the respective approval committee in accordance with the procurement thresholds. 23

QUESTION RESPONSE RISK A.11 Do the procurement positions in the Clear job descriptions are Low agency have job descriptions, which outline provided for each procurement specific roles, minimum technical position. requirements and career routes? A.12 Is there a procurement process Yes. There is no composite Low manual for goods and works? manual for goods and works. However, sufficient guidelines of MOF cover the subject of procurement process. A.13 If there is a manual, is it up to date LTA has a Project Manual which Moderate and does it cover foreign-assisted projects? provides processing details and templates. GoS Procurement and Consultant Guidelines detail the approval process. It does not cover foreign assisted projects. A.14 Is there a procurement process LTA has a Project Manual which Low manual for consulting services? provides processing details and templates. GoS Procurement and Consultant Guidelines detail the approval process. A.15 If there is a manual, is it up to date It does not cover foreign Moderate and does it cover foreign-assisted projects? assisted projects. PROJECT MANAGEMENT UNIT A.16 Is there a fully (or almost fully) staffed No. It is however proposed to Moderate PMU for this project currently in place? establish a fully staffed PMU (the ACDMD) in the MOF. It is confirmed that the ACDMD will also serve this ADB funded project. A.17 Are there standard documents in use, Yes, there are NCB bidding Low such as Standard Procurement documents published by MOF. Documents/Forms, and have they been They have not been used on approved for use on ADB funded projects? ADB funded projects. A.18 Does the agency follow the national Yes, LTA does follow. Low procurement law, procurement processes, guidelines? A.19 Do ToRs for consulting services follow Yes. TORs will be reviewed and Low a standard format such as background, approved by the ADB. tasks, inputs, objectives and outputs? A.20 Who drafts the procurement Staff of procurement division. Low specifications?

A.21 Who approves the procurement Technical specifications of civil Low specifications? works/goods/equipment will be reviewed and approved by ADB. A.22 Who in the agency has experience in Staff of procurement division. Moderate drafting bidding documents? Just not with ADB projects 24

QUESTION RESPONSE RISK A.23 Are records of the sale of bidding Yes Low documents immediately available? A.24 Who identifies the need for consulting Manager, Project Management Low services requirements? Division and ADB project team A.25 Who drafts the Terms of Reference Drafted by LTA and updated by Low (ToR) PMU, reviewed and approved by ADB during project implementation. A.26 Who prepares the request for Prepared by LTA and updated Low proposals (RFPs) by PMU, using ADB’s harmonized RFP document. B. INFORMATION MANAGEMENT B.1 Is there a referencing system for Yes. They are presented in hard Low procurement files? copies and electronic formats/files. B.2 Are there adequate resources allocated Resources of Project Low to record keeping infrastructure, which Management, Project Planning, includes the record keeping system, space, and Information Technology equipment and personnel to administer the divisions being used to procurement records management administer the procurement functions within the agency? records management functions of LTA. B.3 Does the agency adhere to a document Yes. Since 2009. Low retention policy (i.e. for what period are records kept)? B.4 Are copies of bids or proposals retained Yes. In hard copies and Low with the evaluation? electronic files. B.5 Are copies of the original Yes Low advertisements retained with the pre- contract papers? B.6 Is there a single contract file with a Yes, A single file for each Low copy of the contract and all subsequent contract is maintained. contractual correspondence? B.7 Are copies of invoices included with the Yes. MOF for International Low contract papers? contracts and LTA for local contracts. B.8 Is the agency’s record keeping function Yes. Records are scanned and Low supported by IT? stored in electronic formats. These functions are supported by IT division. C. PROCUREMENT PRACTICES

Goods and Works C.1 Has the agency undertaken Yes, with the World Bank Low procurement of goods or works related to assistance. ERAP and CRWCR foreign assistance recently (last 12 months projects. or last 36 months)? If yes, indicate the 25

QUESTION RESPONSE RISK names of the development partner/s and project/s. C.2 If the answer is yes, what were the Delays by the consulting Moderate major challenges faced by the agency? services, delays due to documents review and approval by LTA, and delays due to natural disasters and road reserve issues with land owners. C.3 Is there a systematic process to identify Yes. Low procurement requirements (for a period of one year or more)? C.4 Is there a minimum period for the 28 days for NCB and 42 days Low preparation of bids and if yes, how long? for ICB C.5 Are all queries from bidders replied to Yes Low in writing? C.6 Does the bidding document state the Yes Low date and time of bid opening? C.7 Are bids opened in public? Yes Low

C.8 Can late bids be accepted? No Low

C.9 Can bids (except late bids) be rejected No. All bids submitted by the Low at bid opening? specified time are not rejected. However, unsealed bids will be rejected. C.10 Are minutes of the bid opening taken? Yes Low

C.11 Are bidders provided a copy of the Yes Low minutes?

C.12 Are the minutes provided free of Yes Low charge?

C.13 Who undertakes the evaluation of bids A temporary Bid Evaluation Low (individual(s), permanent committee, ad- Committee establish for each hoc committee)? procurement transaction will undertake the evaluation of bids. Three committee members are taken from LTA, MOF, MWTI, and AGO (limited to a single member from each agency) C.14 What are the qualifications of the Adequately qualified with Low evaluators with respect to procurement and degrees. Have sufficient the goods and/or works under evaluation? technical experience and have the experience in taking part in the evaluation of the bid for related works and goods. 26

QUESTION RESPONSE RISK C.15 Is the decision of the evaluators final Yes. It is subjected to the Low or is the evaluation subject to additional approval of funding agencies approvals? and the local Tender Board, and the Cabinet, depending on different thresholds. C.16 Using the three ‘worst-case’ examples 1. West Coast Road. 9 months Moderate in the last year, how long from the issuance 2. Maliolio Bridge. 9 months of the invitation for bids can the contract be Delays were due to cyclone awarded? Gita, evaluation process, negotiations with selected bidders, and approvals by LTA. C.17 Are there processes in place for the Yes. The suppliers are Low collection and clearance of cargo through responsible for the clearance of ports of entry? cargo. C.18 Are there established goods receiving No However, it is stipulated in Moderate procedures? the RFQ for door to door services. C.19 Are all goods that are received Yes. Corporate and Human Low recorded as assets or inventory in a Resources divisions record in register? their register. C.20 Is the agency/procurement The LTA legal division and Low department familiar with letters of credit? Project Management Division are familiar with letters of credit. C.21 Does the procurement department The Procurement Management Low register and track warranty and latent Division track warranty period defects liability periods? for goods (according to domestic procedure, final payment will be made only after the warranty period). For Works too, PMD will track defects liability period. Consulting Services C.22 Has the agency undertaken foreign- Not directly. It is done through Moderate assisted procurement of consulting services hired International Consulting recently (last 12 months, or last 36 firms. No experience in months)? (If yes, please indicate the names recruiting consulting firms under of the development partner/s and the ADB financed projects. Project/s.) C.23 If the above answer is yes, what were - the major challenges? C.24 Are assignments and invitations for Yes. Low expressions of interest (EOIs) advertised? C.25 Is a consultants’ selection committee Yes. Committee composed of Low formed with appropriate individuals, and representatives (three) from what is its composition (if any)? LTA, MOF, MWTI, and AGO. (limited to a single representative from each agency) 27

QUESTION RESPONSE RISK C.26 What criteria are used to evaluate For the recruitment through Low EOIs? QCBS, EOIs are usually evaluated based on management capacity, technical capacity and geographical experience of the firms. For the recruitment through ICS, EOIs are evaluated based on general qualifications, experience specific to the assignment, and geographical/country experience. For the recruitment through CQS, more detailed criteria are specified depending on the assignment. C.27 Historically, what is the most common CQBS and CQS Low method used (QCBS, QBS, etc.) to select consultants? C.28 Do firms have to pay for the RFP No. Low document? C.29 Does the proposal evaluation criteria Yes. It is detailed in the RFP. Low follow a pre-determined structure and is it detailed in the RFP? C.30 Are pre-proposal visits and meetings Yes Low arranged? C.31 Are minutes prepared and circulated Yes Low after pre-proposal meetings? C.32 To whom are the minutes distributed? Generally distributed to those Low who participated at meetings. C.33 Are all queries from consultants Yes Low answered/addressed in writing? C.34 Are the technical and financial Yes. Financial proposals should Low proposals required to be in separate remain sealed until the technical envelopes and remain sealed until the proposal evaluation is technical evaluation is completed? completed. C.35 Are proposal securities required? No. Low

C.36 Are technical proposals opened in Yes Low public?

C.37 Are minutes of the technical opening Yes Low distributed? C.38. Do the financial proposals remain Yes Low sealed until technical evaluation is completed? The evaluation committee Low C.39 Who determines the final technical determines according to the ranking and how? RFP. 28

QUESTION RESPONSE RISK

C.40 Are the technical scores sent to all Technical scores are read out at Low firms? financial opening.

C.41 Are the financial proposal opened in Yes. Low public?

C.42 Are minutes of the financial opening Yes Low distributed? C.43 How is the financial evaluation Based on the criteria stipulate in Low completed? the RFP.

C.44 Are face to face contract negotiations Yes. Low held?

C.45 How long after financial evaluation is It depends, generally in 1-2 Moderate negotiation held with the selected firm? months. C.46 What is the usual basis for In accordance with RFP and Low negotiation? technical and financial proposals. C.47 Are minutes of negotiation taken and Yes Low signed?

C.48 How long after negotiation is the Generally within 2 weeks Low contract signed, on average? C.49 Is there an evaluation system for There is no established system. Low measuring the outputs of consultants? Payments C.50 Are advance payments made? Yes. According to the signed Low contract. C.51 What is the standard period for It varies depending on the type Low payment included in contracts? of contract (consultancy services, goods and works), generally 14 to 28 days. C.52 On average, how long is it between On average, one month or Low receiving a firm’s invoice and making varies considerably depending payment? on state of completion of contract obligations but can be delayed for up to two months C.53 When late payment is mad No Low Low

beneficiaries paid interest?

D. EFFECTIVENESS D.1 Is contractual performance No. LTA has limited capacity to Moderate systematically monitored and reported? monitor and report contractual performance. 29

QUESTION RESPONSE RISK D.2 Does the agency monitor and track its Generally yes. Low contractual payment obligations? D.3 Is a complaints resolution mechanism Grievance Resolution Low described in national procurement Mechanism has been documents? established and supports tracking and management of complaints. D.4 Is there a formal non-judicial Yes. Complaints are addressed Low mechanism for dealing with complaints? by the Tenders Board with authority to approve and/or reject complaints and recommendations, D.5 Are procurement decisions and Low disputes supported by written narratives Generally yes. It is handled by such as minutes of evaluation, minutes of Public Relations and Safeguard negotiation, notices of default/withheld personnel in the LTA. payment?

E. ACCOUNTABILITY MEASURES Guidelines for government E.1 Is there a standard statement of ethics procurement (Goods, Work, and and are those involved in procurement Low Consulting Services) required to formally commit to it? incorporates code of ethics E.2 Are those involved with procurement required to declare any potential conflict of Yes Low interest and remove themselves from the procurement process? E.3 Is the commencement of procurement Approval of CEO of the LTA for dependent on external approvals (formal or local funded projects and donor Low de-facto) that are outside of the budgeting agencies for foreign funded process? projects Procurement transactions are drafted by the PMD, approved by the CEO or donor agencies E.4 Who approves procurement depending on the size and value transactions, and do they have Low of the project. PMD and CEO procurement experience and qualifications? have certain level of procurement experience and qualification. E.5 Which of the following actions require approvals outside the procurement unit or the evaluation committee, as the case may be, and who grants the approval?

Approved by the CEO or donor a) Bidding document, invitation to pre- agencies depending on Low qualify or RFP threshold limits.

QUESTION RESPONSE RISK

Approved by the CEO or donor b) Advertisement of an invitation for bids, agencies depending on Low pre-qualification or call for EOIs threshold limits.

Approved by the CEO or donor c) Evaluation reports agencies depending on Low threshold for approvals Approved by the CEO or donor d) Notice of award agencies depending on Low

threshold for approvals Approved by the CEO or donor e) Invitation to consultants to negotiate agencies depending on Low threshold for approvals Approved by the CEO, Tenders

Board, Cabinet, donor agencies f) Contracts Low depending on threshold for

approvals. E.6 Is the same official responsible for: (i) These actions are delegated to authorizing procurement transactions, different procurement invitations, documents, divisions/persons/positions at evaluations and contracts; (ii) authorizing different stages. Low payments; (iii) recording procurement MOF is responsible for transactions and events; and (iv) the authorizing payments. custody of assets? Generally, yes. These E.7 Is there a written auditable trail of documents and correspondence procurement decisions attributable to Low related to a transaction kept and individuals and committees? made available to auditors. 31

Appendix 2: Project Procurement Risk Analysis

SL No. RISK IMPACT LIKELIHOOD STRATEGY A6, A7, A9, A16, Procurement Moderate LTA staff have Supervision and civil A17, A23, C1, Department no experience in works contract C2, C14, C22, and/or PMU the procurement management by an C23 have insufficient of works, goods, international consultancy qualified staff to and services firm. efficiently following ADB Procurement, financial, undertake the procurement and safeguard procurement procedures and management specialist requirements guidelines. LTA support services through necessary for will require either: (i) consultancy project services of firm, (ii) centralized PMU implementation. expert (ACDMD) under MOF, consultants/firm (iii) dedicated to LTA s to assist them PMU including individual in implementing international advisors. the project. A17-A18 The agency Low Unlikely Grant agreement to uses practices ensure that ADB inconsistent with documents are used for national OCB. procurement law or bidding documents unsuitable for ADB-funded procurement B2-B3 Record-keeping Low Unlikely is inadequate to enable internal or external audit of procurement processes. A23, C4- C12, Agency does Low Unlikely C24- C44, C47, not promote D5, E7 non- discriminatory participation, transparent tender processes (including advertisement, tender documentation, tender evaluation, complaints mechanism) 32

C15, E1- E6 The Agency has Low Unlikely . inadequate ethics and anticorruption measures in place. ADB = Asian Development Bank, LTA = Land Transport Authority, OCB = open competitive bidding, PMU = project management unit

Appendix 3: National Contractor Capacity Survey

CAPACITY OF NATIONAL CONTRACTORS Contract Title: Package1: Lot 1 Malua to Afega Km 11.9 to 18.5; and Lot 2 Afega to Saina Km 18.5 to 24.4 1 Contract number 1.1/CRWCR 2 Procurement Method NCB 3 Bidding Procedure One envelope competitive bidding 4 Single Contract/Multiple Contract Multiple Contract 5 Period of Construction 365 days 6 Engineer's Cost Estimate Lot 1 SAT 19,710,385.00 and Lot 2 SAT 16,946,002.00 OTT Constructors BAL Mc Connell Bidding Document Criteria Company Ulia-Silva- Construction Dowell Cons. Ltd. Toleafoa JV JV Ltd. Ltd.

7a Bidder's Price (SAT) Lot 1 18,612,587.57 19,512,290.91 19,593,848.42 25,416,070.49 7b Bidder's Price (SAT) Lot 2 x 17,402,416.10 19,250,680.61 23,416,979.31 Ulia–negative Silva–positive 8 Historical Finance Performance (Net worth should be positive) Positive Positive Positive Toleafoa- positive Bluebird Ulia 2.63 m Average Annual Construction Lot 1 - 6.14m 3.34m Ah Liki 9 6.8 m and Silva 3.18 Turnover (USD) Lot 2 - 5.30m 2.30m, Lucky m 1.68m; 183m Line of credit Ulia 2.0 m SAT 6.3m Lot 1 - 1.92m 10 Financial Capabilities (USD) and Silva 6.0 (USD 0.92m) Lot 2 - 1.65m 4.0 m for both m (not shown from Samoa lots evidence) Bank 7.50m numerous numerous works in numerous works in numerous Kiribati, works in Samoa by works in Tonga, 11 General Construction Experience last 3 years; 2014, 2015 and 2016 Samoa Ulia and Silva Samoa Samoa, etc. 34

2 contracts of 2 contracts of total 12.01m total value of exceeds the 65.2m 12 Similar Contract Experience (USD) Lot 1 - 2 contracts combined required value 2 contracts of Shown only 2 value 7.4m Lot 2 - 2 contracts 7.40m for Lot total value building combined value 6.4m 1 2.96 m contracts

(i) ERAP road works Valioa to Vaitele [USD 8.07m], (ii) B4.063 Vaitele Street extension to Valioa OTT Constructors Company Ltd. [USD 2.3m] and New Island Route East Coast Lots 1 & 3 [USD 3.94m] (i) Ulia-Construction of Convent road [USD 1.54m], (ii) Silva-Construction of Aleipata Inland Route Ulia-Silva-Toleafoa JV [USD1.42m, Toleafoa-]Construction of South West Coast Road [USD 1.06m] Shown 2 building contracts (i) New Nurse Hostel [SAT 2.30m] and Fiaga Diesel Power Plant [SAT BAL Construction JV Ltd. 16,0m] Mc Connell Dowell Cons. Ltd. (i) Kiribati-Road Rehab Program [USD 53.0m] and (ii) Airport re-construction [USD12.2m]

CAPACITY OF NATIONAL CONTRACTORS Contract Title: Construction of the New Access Road and Bridge Crossing of Mali'oli'o River Samafae'ulu, Savaii 1 Contract number 1.2.2 ERAP/NCB/_Works_03 2 Procurement Method NCB 3 Bidding Procedure One envelope competitive bidding Single Contract/Multiple 4 Contract Multiple Contract 5 Period of Construction 365 Days 6 Engineer's Cost Estimate SAT 7.64m China AH Liki Ulia Railway Apia Lua Bidding Document Criteria Construction Construction First Group Ltd. OTT-King Co. Ltd. Co. Ltd. (Fiji) Ltd. (JV) Ltd.

7,669,526.1 7 Bidder's Price (SAT) 7,531,458.10 4,538,086.35 7,264,470.70 2 8,388,218.08 OTT positive Historical Finance 2014 & 2016 8 (Net worth should be positive) positive not given positive positive Performance negative 2015 King:

positive Average Annual OTT: 5.56 m 9 Construction Turnover 6.50m 7.79m 6.48m 116.9m 10.26m King 12.51 (SAT) m Financial Capabilities 2.1m bank King: 3.0 m 10 2.10m 6.30m 1.20m 23.68m (SAT) credit bank credit Both Gereral Construction numerous numerous numerous 9 contracts 11 last 3 years; 2014, 2015 and 2016 numerous Experience work work work listed works Similar Contract 1 contract 2 contracts 12 1 contract 4,2m x x x Experience (SAT) [2.0m] 289m

AH Liki Construction Co. Ltd. (i) Leone Bridge; Piling, Rip-rap, Earth works [SAT 2.0m] Ulia Construction Co. Ltd. Cyclone Evan Island Works [SAT 3.0m] China Railway First (i) Vanua-Levu Roak Works Fiji [278m], (ii) Leone Bridge Works [11.0m] Group (Fiji) Ltd. Apia Lua Ltd. (ii) Salei'a Bridge and River rock wall [SAT 2.33m] OTT:(i) ERAP road works Vailoa to Vaitele [USD 8.07m], (ii) B4.063 Vaitele Street extension to Vailoa [USD 2.33m] OTT-King (JV) Ltd. and New Island Route East Coast Lots 1 & 3 [USD 3.94m] King: Vaimosa-Uta Bridge Replacement [SAT 2.23m] CAPACITY OF NATIONAL CONTRACTORS CAPACITY OF NATIONAL CONTRACTORS Contract Title: West Coast Road Package 1: Lot (2A), Lot (2B), Lot (2C) WCR Pk1 Lot(2A) Afega to Faleuea km 18.5 to km 20.28; Lot (2B) Faleula to Puipa' a km 20.80 to 1 Contract number km 22.10; Lot (2C) Puipa'a to Saina km 22.10 to 24.36 2 Procurement Method NCB 3 Bidding Procedure One envelope competitive bidding Single Contract/Multiple 4 Contract Multiple Contract 5 Period of Construction Each contract 365 days 6 Engineer's Cost Estimate Not available Bidding Document BAL Construction JV OTT Contractors Ulia-Silva-Toleafoa JV Criteria Ltd. Ltd. Lot (2A) 5,753,655.74 6,914,622.82 Lot (2B) 7,112,862.10 5,393,517.18 5,236,939.58 7 Bidder's Price (SAT) Lot (2C) 7,593,098.41 7,640,619.08 Ah Liki - negative positive Ulia - negative Historical Finance 8 (Net worth should be Bluebird - positive Silva - positive Performance positive) Lucky - positive Toleafoa - positive Average Annual Lot 2(A) 2.99m Ah Liki - 2.68m Ulia 2.63m 9 Construction Turnover Lot 2(B) 2.60m Bluebird - 2.74m 6.82m Silva 3.18m (USD) Lot 2(C) 3.73m Lucky - 1.80m Toleafoa 0.95m Lot 2(A) 0.93m JV combined 7.5m; Ulia 2.3m Financial Capabilities Line of credit from 10 Lot 2(B) 0.80m letter from Commercial Silva 5.0m (USD) bank 4.0m Lot 2(C) 1.17m Bank, Samoa Toleafoa 3.0m

Ah Liki - 12 contracts listed Ulia 24 contracts listed Bluebird - 6 contracts Silva 19 contracts listed 5 contracts listed listed Toleafoa 13 contracts Gereral Construction last 3 years; 2014, 2015 Lucky - 3 contracts listed 11 Experience and 2016 listed Lot 2(A) 6 contracts listed. Lot 2(A) - 2 contracts each Ah Liki - 1 contract Combination of any 2 contrcats exceeding of minimum value 1.40m listed two contracts Similar Contract minimum value of 12 Lot 2(B) - 2 contracts each Bluebird - 2 contracts qualifies. Average Experience (USD) 1.40m; Qualifies for Lot of minimum value 1.20m listed contract value of 6 2(A) and Lot 2(B) Lot 2(C) - 2 contracts of Lucky - 1 contracts contracts is USD minimum value 1.75m listed 4.51m.

Blue Bird: (i) JICA water project for urban untreatment water schemes, SamoaWA [USD 20.0m] and BAL Construction JV (ii) Taumeasina resort earth and civil works, PNG [USD 2.4m] Ltd. Lucky:CIRR works package 2 Road & Drainage construction works [USD 1.61m] Ah Liki: Construction of Fiaga Diesel Power Plant [USD 7.35m] (i) ERAP Road works Vailoa to Vaitele [USD 8.07m], (ii) B4.063 Vaitele Street Extension to Vailoa OTT Contractors Ltd. [2.33m] and (iii) New Island Route East Coast Lots 1 & 3 [USD3.94m] and 3 more contracts [USD 1.54m], [USD 6.79m] and [USD 4.39m] (i) Ulia - Construction of Convent Street [USD 1.54m]; (ii) Silva - construction of Aleipata Inland Ulia-Silva-Toleafoa JV Route Lot 2 [USD 1.42m]; (iii)Toleafoa - Construction of South West Coast Road [USD 1.05m]

Summary of Findings Average Annual Construction Financial No. Name of Contractor Road and drainage work contracts Turnover Capabilities (USD) (USD) millions millions (i) ERAP Road works Vailoa to Vaitele [USD 8.07m], (ii) B4.063 Vaitele Street Extension to Vailoa [USD 2.33m] and OTT Contractors 1 6.82 4.00 (iii) New Island Route East Coast Lots 1 & 3 USD [3.94m] Company Ltd. and 3 more contracts [USD 1.54m], [USD 6.79m] and [USD 4.39m] Bluebird Constructing 2 2.74 Reconstruction of Vasigno Bridge [USD 3.83m] Co. Ltd. Ah Liki Construction 7.50 BAL as Construction of New Access Road & Bridge Crossing of 3 3.12 Ltd. a JV Maliolio River [USD 3.13m] Lucky Construction CIRR works package 2 Road & Drainage construction works 4 1.80 Ltd. [USD 1.61m] Construction of Convent Street [USD 1.54 m]; Cyclone Evan 5 Ulia Construction Ltd. 2.63 2.30 Island Works [USD 1.09m] 6 Silva Transport Ltd. 2.18 5.00 Construction of Aleipata Inland Route Lot 2 [USD 1.42m]; T & N Toleafoa Co. 7 0.95 3.00 Construction of South West Coast Road [USD 1.05m] Ltd. 8 Apia Lua Ltd. 4.10 0.84 Salei'a Bridge and River rock wall [USD 0.93m]

9 King Construction Ltd. 5.00 1.20 Vaimosa-Uta Bridge Replacement [USD 0.93m]