Trust Fund Project Administration Manual Project Number: 49113 Grant Numbers: GXXXX October 2016 Mongolia: Managing Soil Pollution in Ger Areas through Improved On-site Sanitation Project (Financed by the Japan Fund for Poverty Reduction)
ABBREVIATIONS PROJECT AT A GLANCE CONTENTS I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLANS 3 A. Project Readiness Activities 3 B. Overall Project Implementation Plan 4 III. PROJECT MANAGEMENT ARRANGEMENTS 6 A. Project Implementation Organizations Roles and Responsibilities 6 B. Key Persons Involved in Implementation 8 C. Project Organization Structure 9 D. Grant Management 10 IV. COSTS AND FINANCING 11 A. Cost Estimates and Financing Plan 11 B. Allocation and Withdrawal of Grant Proceeds 11 C. Detailed Cost Estimates by Financier 13 D. Detailed Cost Estimates by Outputs 14 E. Detailed Cost Estimates by Expenditure Categories 15 F. Detailed Cost Estimates by Year 16 G. Estimated Disbursement Schedule by Year 17 H. Contract and Disbursement S-curve 17 I. Funds Flow Diagram 18 V. FINANCIAL MANAGEMENT 19 A. Financial Management Assessment 19 B. Disbursement 20 1. Disbursement Arrangements for ADB 20 2. Disbursement Arrangements for Counterpart Fund 22 C. Accounting 22 D. Auditing and Public Disclosure 22 VI. PROCUREMENT AND CONSULTING SERVICES 24 A. Advance Contracting and Retroactive Financing 24 B. Procurement of Goods, Works, and Consulting Services 24 C. Procurement Plan 25 D. Consultant's Terms of Reference 31 VII. SAFEGUARDS 53 VIII. GENDER AND SOCIAL DIMENSIONS 55 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 59 A. Project Design and Monitoring Framework 59 B. Monitoring 61 C. Evaluation 62 D. Reporting 63 E. Stakeholder Communication Strategy 64
X. ANTICORRUPTION POLICY 65 XI. ACCOUNTABILITY MECHANISM 65 XII. RECORD OF PAM CHANGES 65 APPENDICES 1. Environmental Safety Guidelines for Project Implementation 2. Determination of Overall Grant Implementation Rating 3. Japan Fund for Poverty Reduction Guidance Note on Visibility of Japan 4. Japan Fund for Poverty Reduction Guidance Note on Coordination with the Embassy of Japan 5. Stakeholder Communication Strategy
Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the Japan Fund for Poverty Reduction (JFPR)-funded project on time, within budget, and in accordance with the government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Ministry of Environment and Tourism (MET) (the executing agency) is wholly responsible for the implementation of the project, as agreed jointly between the grant recipient and ADB, and in accordance with the government and ADB s policies and procedures. ADB staff is responsible to support implementation including compliance by MET of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. The MET and ADB shall agree to the PAM and ensure consistency with the Grant Agreement. In the event of any discrepancy or contradiction between the PAM and the Grant Agreement, the provisions of the Grant Agreement shall prevail. After ADB Board approval of the project's grant assistance report changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including ADB s Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.
ADB CSO DEIA DENR DLMIWPC ABBREVIATIONS Asian Development Bank civil society organization detailed environment impact assessment Department of Environment and Natural Resources Management Department of Land Management and Integrated Water Policy Coordination design and monitoring framework environmental impact assessment Embassy of Japan environmental management plan general environmental impact assessment Government of Japan DMF EIA EOJ EMP GEIA GOJ GOM Government of Mongolia GRM grievance redress mechanism M&E monitoring and evaluation MET Ministry of Environment and Tourism O&M operation and maintenance PMU project management unit PPMS project performance monitoring system PSC project steering committee SGAP social and gender action plan SPS safeguard policy statement UMG Ulaanbaatar Municipal Government WASH Water, sanitation and hygiene
Project Classification Information Status: Complete PROJECT AT A GLANCE 1. Basic Data Project Number: 49113-001 Project Name Managing Soil Pollution in Ger Areas Department EARD/EAER through Improved On-site Sanitation Project /Division Country Mongolia Executing Agency Ministry of Environment and Borrower Government of Mongolia Tourism 2. Sector Subsector(s) ADB Financing ($ million) Water and other urban Urban sanitation 0.00 infrastructure and services Agriculture, natural resources and rural development Land-based natural resources management 0.00 Total 0.00 3. Strategic Agenda Subcomponents Climate Change Information Inclusive economic growth (IEG) Pillar 2: Access to economic opportunities, including jobs, made more inclusive Climate Change impact on the Project Environmentally Natural resources conservation sustainable growth (ESG) Urban environmental improvement Low 4. Drivers of Change Components Gender Equity and Mainstreaming Governance and capacity Civil society participation Effective gender mainstreaming development (GCD) Institutional systems and political economy (EGM) Knowledge solutions (KNS) Application and use of new knowledge solutions in key operational areas Knowledge sharing activities Pilot-testing innovation and learning Partnerships (PAR) Civil society organizations Implementation 5. Poverty and SDG Targeting Location Impact Project directly targets Yes poverty and SDGs Geographic targeting (TI-G) Yes.. 6. Risk Categorization: Low 7. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: C 8. Financing Modality and Sources Amount ($ million) ADB 0.00 Cofinancing 2.80 Japan Fund for Poverty Reduction - Grant 2.80 Counterpart 0.00 None 0.00 Total 2.80 9. Effective Development Cooperation Use of country procurement systems Use of country public financial management systems No Yes Source: Asian Development Bank This document must only be generated in eops. 19102016083824441587 Generated Date: 20-Oct-2016 16:49:17 PM
I. PROJECT DESCRIPTION 1. Around one-quarter of Mongolia s population resides on the outskirts of Ulaanbaatar, the national capital, within peri-urban communities termed ger areas characterized by limited or no access to urban infrastructure, inadequate disposal of human fecal waste, sanitation-related diseases, and increasing risks of soil and water contamination. The grant will support local livelihoods through improved household sanitation and strengthening the lifecycle for on-site (de-centralized) fecal waste management, including the collection, transport and composting of waste, in collaboration with communities, the private sector, and civil society organizations (CSOs). The project will serve as a model to scale up on-site sanitation in Mongolia and which complements infrastructure development in core urban areas. 2. Impact and outcome. The expected project impact is improved public health conditions and reduced soil pollution in ger areas. The expected project outcome is that a model for on-site sanitation and the prevention of soil pollution from human waste in ger areas is demonstrated. 3. Description of outputs. The project will have three outputs: (i) planning for on-site sanitation strengthened, (ii) on-site sanitation lifecycle piloted, and (iii) sustainability for on-site sanitation improved. Activities under outputs 1 and 2 will be piloted in three khoroos of two districts of Ulaanbaatar. 1 4. Output 1: Planning for on-site sanitation strengthened. This output will develop mechanisms for planning of the on-site sanitation lifecycle, to be piloted in output 2, comprising procedures and costs for waste containment at households, collection and transport of the waste, treatment, composting, sale of the compost, and monitoring. Procedures will build upon tested approaches in Mongolia and elsewhere, and focus on addressing the remaining gaps in the lifecycle, especially arrangements between communities and small and medium sized enterprises (SMEs) for waste collection, transport, and composting. This will include: (i) roles and responsibilities for stakeholders in each stage of the on-site sanitation lifecycle, tailored to the conditions of the project districts; (ii) the procedures, costs, and financial incentives for waste collection (between contractors and communities), including fees and rates affordable for households; 2 (iii) the development of pilot agreements between SMEs for waste collection and composting; (iv) strengthening the capacity of SMEs for the marketing and sale of the composted products; and (v) the establishment of two monitoring programs in selected project sites, one for soil quality and one for the occurrence and incidence of sanitation-related diseases, to provide baseline data for the target areas. These will be the first long-term monitoring programs for soil quality pollution from human waste and sanitation in Ulaanbaatar. 5. Output 2: On-site sanitation lifecycle piloted. This output will: (i) implement a community outreach program to facilitate and support beneficiary selection, training, and installation and operation and maintenance (O&M) of on-site sanitation units; (ii) establish three community management groups (one per khoroo) to mobilize household participation; 3 (iii) 1 2 3 27th Khoroo (Bayanzurkh District) and 12th and 13th khoroos (Chingeltei District). Khoroos were selected based on socio-economic status, severity of sanitation and/or soil pollution issues, and absence of urban development plans. Preliminary payment mechanisms, approximate number of participating households, and cost estimates for toilet installation and fecal waste collection were developed during the design phase, based on project surveys of household affordability and willingness-to-pay and actual costs from other donor projects and surveys. The groups will represent the participating households, establish contracts with waste contractors for waste collection, and coordinate the payment of household waste collection fees. Participating households will be identified based on poverty status, severity of sanitation and/or soil pollution issues, and community feedback obtained during the first stages of the community outreach program.
2 install around 1,500 on-site sanitation units (one per household), utilizing one of at least two technologies, ecological sanitation toilets, and holding tanks (simple storage tanks). 4 Unit designs and materials will be based on simple, tested technology, site conditions, and costeffective local materials. The ecological sanitation toilets will pilot the principle of resource recovery (from waste to composting) embodied by the ecological sanitation approach. Holding tanks will be applied for households in areas with shallow aquifers and/or adjacent to surface water, where the risks of soil and water contamination are highest; (iv) implement pilot agreements between the waste contractors and communities, including procedures for waste collection, fees, 5 O&M of the completed toilet units, and an O&M manual; and (v) strengthen the management capacity of SMEs for composting to market and sell composted products, while applying the technical composting procedures already developed and tested in Mongolia. 6 Each step in the lifecycle will be accompanied by a strong participatory approach and extended project support for local skill development, employment, and project ownership. 6. Output 3: This output will strengthen the replication and scaling up of on-site sanitation in Mongolia beyond the project. The project will: (i) establish the first national working group for on-site sanitation, 7 which will guide planning for sanitation in ger areas and support an integrated approach with urban development plans; (ii) implement training programs and technical support for households, contractors, and line ministries for on-site sanitation; (iii) disseminate the results of the project to line ministries, private sector, and civil society, to promote on-site sanitation for other ger areas; and (iv) prepare the first national road map for sanitation planning for ger areas. This will consolidate the lessons learned from project outputs 1 3 and provide a model for on-site sanitation in Mongolia. It will include a five-year scale-up strategy and investment plan, which identifies other ger areas of high priority for on-site sanitation and the management of soil pollution, specific follow-up actions, roles and responsibilities, costs, financing mechanisms, and work schedules. 4 5 6 7 Technologies preventing or reducing soil pollution was identified through a review of on-site sanitation in cold countries, including designs tested and adapted to Mongolian conditions. Selection criteria included the need for simple and replicable designs, dry (non-flushing) systems, design life, improved hygiene, and costs of installation and maintenance. In the event that new technologies are developed in Mongolia or elsewhere which are suitable to local conditions and compatible with the project social and safeguard objectives, these may also be piloted. The estimated cost of waste collection is $5.3 per household per collection. The project will subsidize 100% of the cost of toilet installation (based on lessons learned from previous projects, in which lack of initial project support caused delays) for all recipient households and, for poor (including female-headed) households, 50% of the waste collection fee, for up to 12 collections (3 years). To strengthen ownership, households will be required to pay the waste collection fees prior to toilet installation. Waste collection will be quarterly, based on mean household size, container dimensions, and cost. The community outreach program will support households to continue planning for waste collection fees after the 3-year project subsidy has ended. Project support will include training and limited provision of specialist equipment to contractors for waste collection and/or composting. Equipment will initially be leased to contractors and then handed over at project completion. The group will include representatives from relevant line ministries and other stakeholders.
3 II. IMPLEMENTATION PLANS A. Project Readiness Activities Indicative Activities 2016 2017 Responsible Sep Oct Nov Dec Jan Feb Agency(s) Grant negotiations ADB, MOF, MET Establish project implementation arrangements MET, MOF ADB approval ADB Grant signing ADB, MOF Government legal opinion provided MOF Grant effectiveness ADB ADB = Asian Development Bank, MET = Ministry of Environment and Tourism, MOF = Ministry of Finance.
4 B. Overall Project Implementation Plan Activities A. Design and Monitoring Framework Output 1: Planning for on-site sanitation strengthened 1.1 Identify key stakeholders in each project khoroo for on-site sanitation lifecycle 1.2 Prepare consultation program to design each stage of the lifecycle Fecal waste collection 1.3 Review existing collection systems in each project sub-district 1.4 Conduct CNA with contractors - existing costs, equipment, and training needs Design and implement training program for contractors - on-site sanitation, 1.5 procedures, costs, transport methods, safeguards Composting and sale of treated waste 1.6 Review existing procedures and business management capacity of stakeholders Conduct CNA with contractors - existing costs, equipment, and training needs Design and implement training program for composting agences - procedures, costs, 1.7 business management, marketing, customers, sales 1.8 Support composting agencies to develop business and marketing plans Links between communities, waste contractors, composting agencies 1.9 Plan and facilitate meetings between waste contractors and communities 1.10 Develop pilot agreement on fees, procedures, and other terms and conditions 1.11 Plan and facilitate meetings between waste contractors and composting agencies 1.12 Develop pilot agreement on fees, procedures, and other terms and conditions Monitoring of soil quality and sanitation 1.13 Implement health and sanitation monitoring system (prepared in design phase) 1.14 Implement soil and water quality monitoring program (prepared in design phase) Output 2: On-site sanitation lifecycle piloted 2.1 Prepare and implement community outreach program Train khoroo officers in roles, responsibilities, environmental guidelines and EMP, 2.2 SGAP, and eco-toilet installation 2.3 Establish community management groups 2.4 Community consultations (PMU/khoroo teams) to select participating households 2.5 Identify specific eco-toilet design for each household and required materials 2.6 Finalize pilot agreement between communities and waste contractors (1.9-1.10) 2.7 Finalize pilot agreement between waste contractors and compost agencies (1.11-1.12) 2.8 Prepare O&M manual and costs for participating households and khoroo agencies 2.9 Establish community bank accounts (1 per community management group) 2.10 Participating households pay waste collection fees up-front, into the account 2.11 Provide subsidy for collection fees to poor and women-headed households 2.12 Contract companies to build and install the eco-toilet units 2.13 Install eco-toilets in participating households 2.14 Waste collection contractor collects fecal waste from households 2.15 Waste collection contractor delivers it to composting agencies 2.16 Composting agency produces products from the fecal waste compost 2.17 Ongoing community consultations and training by PMU and khoroo teams 2.18 Monitoring (community acceptance, O&M of units) by PMU and khoroo teams Output 3: Sustainability for on-site sanitation improved 3.1 Establish national working group for on-site sanitation 3.2 Develop group charter, vision, objectives, and meeting and reporting schedule 3.3 Implement 1st group meeting - assign roles, responsibilities, identify key outputs 3.4 Prepare and implement training program for khoroo health clinics 3.5 Prepare and implement training program for government, private sector, civil society 3.6 Identify next steps within the project sub-districts after project completion 3.7 Identify new target khoroos, districts, and other areas for scale-up after project 2017 2018 2019 2020 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
5 Activities 3.8 Prepare 5-year scale-up strategy and investment plan Prepare Action Plan for sanitation lifecycle for ger areas, incorporating results of 3.9 output 1-3: actions, costs, work schedule, funding sources 3.10 Stakeholder workshops to review and revise Action Plan 3.11 Inclusion of Action Plan in schedules, budgets of government and other stakeholders 3.12 Prepare and disseminate project knowledge products B. Management Activities Establish project office space Establish project steering committee and PMU (consultant recruitment) Assign district and khoroo government and community counterparts Train executing and implementing agencies in ADB project management requirements Review (update if necessary) and implement procurement plan Review (update if necessary) project stakeholder communication strategy Implement SGAP and EMP Monitor project progress - including DMF, EMP, SGAP Submit semi-annual progress reports (including for safeguards) Submit audited annual financial statements Inception, midterm, final, and annual review missions Prepare and disseminate project materials and knowledge products Project completion report 2017 2018 2019 2020 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 DMF = design and monitoring framework, O&M = operations and maintenance, PMU = project management unit, SGAP = social and gender action plan
6 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations Roles and Responsibilities Executing agency: MET DLMIWPC Assumes overall accountability and responsibility for project planning, management, and implementation Ensures timely and effective execution of the grant agreement Co-signs approval for withdrawal application from project imprest account (with MOF) Reviews PMU progress reports Submits progress reports to ADB and MOF Facilitates auditing of project accounts Chairs the PSC Overall coordination and guidance of PMU Facilitate project stakeholder activities e.g., meetings and trainings with khoroo government, communities, tour operators Address any environment assessments if required Help establish and contribute to the national working group on sanitation under output 3 Provides timely policy and coordination support Oversight body: PSC Comprises around five members: Director General of DLMIWPC (Chair), MOF (1), MOHS (1), UMG (1), GASI (1), CSO (1) Reviews and assesses project implementation progress and plans Provides advice on policy matters related to the project, especially advocacy and facilitation for integrated approach for sanitation between ger and urban areas Meets at least semi-annually MOF Signs grant agreement and project approval on behalf of GOM Co-signs withdrawal applications from project imprest account together with MET PMU: based at MET office in Ulaanbaatar Reviews project progress and/or audit reports as needed Comprising a project manager, implementation specialist, accountant, procurement officer, and other specialists Coordinate and implement project activities, including consultant recruitment, procurement, financial management, disbursement, contract administration, monitoring, and reporting Administration of the grant imprest account Maintain on behalf of the executing agency the imprest account; and prepare and submit withdrawal applications and supporting documents, quarterly and annual reports, annual audit reports, and financial statements Monitors project progress against the DMF, PAM, and SGAP Ensures compliance with the project safeguard requirements in the environmental safety guidelines and SGAP, including periodic site inspections Prepares semi-annual project progress reports to MET Input relevant project documents in the ODA MIS system
7 ADB Oversees project administration and timely execution of the grant agreement by the executing agency Disburses grant proceeds Reviews and, as needed, approves procurement, consultant recruitment, progress reports, and audit reports Reviews project compliance and targets against the DMF, environmental safety guidelines, SGAP, PAM, and community funds screening criteria Monitors project progress and conducts review missions Disclose monitoring reports on ADB public website Observer to the project steering committee Coordination with EOJ in Mongolia, JICA, and ADB s OCO Japan team Invite EOJ in Mongolia, JICA, and OCO Japan team to project events and missions (for OCO, inform up to 4 months ahead) Inform on project progress and provide key reports and materials Inform and/or discuss potential changes in scope Respond to inquiries and/or information requests Support donor visibility for dissemination of outcomes and lessons Other participating agencies UMG Department for UMG-level support and coordination Environment, Green Coordination of the participating khoroo sub-districts Development and Participation in the PSC Tourism Preparation and/or enforcement of relevant policies and regulations for soil and water protection MET EFPD Provides oversight support to the executing agencies for project financial management Facilitates independent financial auditing of the project MET Department of Environment and Natural Responsible for national environmental planning, conducting GEIAs, and assessment of DEIAs Resources For this project, will assess the need for GEIA for project activities Khoroo government officers sanitation, solid Each project khoroo will be represented by at least one counterpart officer waste, environment Participate in project planning and training Facilitate coordination between khoroo, community, and project Support households to implement the EMP during installation of toilet facilities Report project progress to the khoroo governments GASI environment, Inspect project facilities and issue completion certificates health and safety inspectors Conduct intermittent inspections and soil and/or water testing in project areas CSOs and other donors Project will collaborate and coordinate with existing donor efforts for sanitation CSO(s) will be a member(s) of the project steering committee Civil works contractors To be identified during project implementation Ensure that bidding documents respond to the requirements of
8 the environmental safety guidelines and SGAP as relevant for construction works EOJ in Mongolia Represents the Government of Japan and JFPR fund Observer to the steering committee May choose to attend project events, meetings, and field sites Guidance and feedback on Japanese visibility in project activities ADB = Asian Development Bank, CSO = civil society organization, DEIA = detailed environmental impact assessment, DMF = design and monitoring framework, DLMIWPC = Department of Land Management and Integrated Water Policy Coordination, EFPD = Economic, Financial and Planning Division, EMP = environmental management plan, EOJ = Embassy of Japan, GASI = General Agency for Specialized Inspection, GEIA = general environmental impact assessment, GOM = Government of Mongolia, JFPR = Japan Fund for Poverty Reduction, JICA = Japan International Cooperation Agency, MET = Ministry of Environment and Tourism, MIS = management information system, MOF = Ministry of Finance, MOHS = Ministry of Health and Sports, OCO = Office of Cofinancing Operations, ODA = official development assistance, PAM = project administration manual, PMU = project management unit, PSC = project steering committee, SGAP = social and gender action plan, UMG = Ulaanbaatar Municipal Government. B. Key Persons Involved in Implementation Executing Agency Department of Land Management and Integrated Water Policy Coordination (DLMIWPC) of the Ministry of Environment and Tourism (MET) Ministry of Finance Development Financing and Debt Management Department (MOF) Project management unit: Working on behalf of the executing agency Asian Development Bank Project Officer Mr. G. Nyamdavaa Director General Telephone: +976 51 264447 Fax No.: +976 51 266171 E-mail: munkherdem@mne.gov.mn Address: Government Building 2, United Nations Street 5/2, Ulaanbaatar-15160, Mongolia Mr. Gantulga Badamkhatan Director General Address: Government Building 2, S.Danzan Street, Ulaanbaatar 15160, Mongolia [to be recruited] Project Manager Telephone: +976 51 267283 Fax No.: +976 51 266171 E-mail: [to be added] Address: c/o Government Building 2, United Nations Street 5/2, Ulaanbaatar-15160, Mongolia Mr. Qingfeng Zhang Director, Environment, Natural Resources, and Agriculture Division (EAER), East Asia Department (EARD) Telephone No.: +63 2 632 6161 Fax No.: +63 2 636 2534 E-mail:qingfengzhang@adb.org Mr. Mark Bezuijen Environmental Specialist, EAER, EARD Telephone No.: +63 2 632 1519 Fax No.: +63 2 636 2444 E-mail: mbezuijen@adb.org
C. Project Organization Structure Asian Development Bank Grant agreement Ministry of Finance (MOF) Ministry of Environment and Tourism (MET) Department of Land Management and Integrated Water Policy Coordination (Director General) (executing agency) Ulaanbaatar Municipal Government Project Steering Committee (PSC) 1. Chairman (Director General, MET DLMIWPC) 2. Member (MOF) 3. Member (Director, ENRM Division of UMG DEGDT) 4. Member (MOHS) 5. Member (CSO) project management unit (project manager) Division of Environment and Natural Resource Management Observers: Embassy of Japan in Mongolia Asian Development Bank communities civil society organizations khoroo governments Legend: Coordination Reporting Cooperation/Information exchange Structures established for this project DEGDT = Department for Environment, Green Development and Tourism, DLMIWPC = Department of Land Management and Integrated Water Policy Coordination, ENRM = Environment and Natural Resource Management Division, MOHS = Ministry of Health and Sports, UMG = Ulaanbaatar Municipal Government. 9
10 D. Grant Management 7. The project will be implemented over 4 years, from 2017 to 2020. The project field activities are located within two districts of Ulaanbaatar, Bayanzurkh and Chingeltei. 8. The Ministry of Environment and Tourism (MET), acting through the Department of Land Management and Integrated Water Policy Coordination (DLMIWPC), will be the executing agency. 9. Project implementation will be led by a project management unit (PMU) on behalf of the executing agency. The PMU will comprise a team of 11 full-time and part-time consultants recruited for the project, comprising a project manager, field coordinator, accountant, procurement specialist, and technical specialists (Section VI.D). The PMU will lead the coordination, planning, and implementation of the project targets and requirements for administration, monitoring, and reporting. The PMU team will be based at MET s offices in Ulaanbaatar. 10. A project steering committee (PSC) chaired by the executing agency will be established and provide oversight and policy guidance for the project and meet at least semiannually. The PSC will meet at least semiannually. The committee will include representatives from the Ulaanbaatar Municipal Government (UMG) and CSOs. The PSC will be established after project effectiveness. ADB and the Embassy of Japan in Mongolia (EOJ) will be invited to participate as observers. 11. The executing agency and PMU team will work closely with other stakeholders, including: (i) the Environment and Natural Resources Department of the UMG, which will coordinate UMG involvement in the project. The department was involved in project design and selection of the project districts and sub-districts. During implementation, the department will: (a) facilitate the involvement of the khoroo (sub-district) agencies that will work with the PMU team to implement the project field activities; and (b) coordinate with relevant government agencies for the project components involving soil and groundwater monitoring, inspection of the completed toilet facilities, and community and agency training; and (ii) CSOs involved in water, sanitation, and hygiene in Ulaanbaatar. The project will build upon existing technical experience and lessons learned for improved sanitation from previous programs.
11 IV. COSTS AND FINANCING A. Cost Estimates and Financing Plan 12. The project will be funded by a $2.8 million grant from a trust fund of the Government of Japan, to be administered by ADB. Financial conditions for the grant are set forth in the draft grant agreement 8 and this project administration manual (PAM). 13. The project cost estimates were prepared by the executing agency, a project design team funded by ADB (comprising international and national financial and technical consultants), and ADB project team. For any proposed revisions to the project budget during project implementation, the Government of Mongolia (GOM) will submit a request for project cost reallocation to ADB for review and endorsement. If the revision is endorsed, the PMU will revise the cost estimates under the guidance of ADB project officer. B. Allocation and Withdrawal of Grant Proceeds 14. The grant covers three categories: civil works, goods and services; training, consulting services, and project management; and, contingencies. Taxes and duties are included in the base cost and were determined on the basis that (i) the amount is within the reasonable threshold identified during the country partnership strategy (CPS) preparation process, (ii) the amount does not represent an excessive share of the project investment plan, (iii) the taxes and duties apply only to the grant-financed expenditures, and (iv) the financing of taxes and duties is relevant to the success of the project. There is no land acquisition or resettlement under the project. The central and local governments will provide in-kind counterpart support in the form of office space for the PMU and salaries and travel costs of counterpart staff. These costs will be included in the annual budgets of the relevant government agencies. There are no parallel or joint-financing arrangements. 15. The following table summarizes the allocation and withdrawal of grant proceeds and is from the project grant agreement. Number ALLOCATION AND WITHDRAWAL OF GRANT PROCEEDS (Managing Soil Pollution in Ger Areas through Improved On-site Sanitation Project) Item Total Amount Allocated for ADB Financing ($) Percentage and Basis for Withdrawal from the Grant Account 1 Works and Goods* 1,266,220 100% of total expenditure 2 Consulting Services, Training, Project Management* 1,126,015 100% of total expenditure 3 Unallocated (Contingencies) 407,765 100% of total expenditure Total 2,800,000 * No withdrawals shall be made from the grant account until the executing agency has certified to ADB that a project manager, accountant, and procurement specialist meeting the requirements set out in the PAM has been engaged. Note: In this table, contingencies are presented as a single line item (unallocated), while in the procurement plan (Section VI.C), contingencies are included in each individual package. ADB = Asian Development Bank. 8 Grant Agreement (accessible from the list of linked documents in Appendix 2 of the grant assistance report).
12 16. The following table describes the specific cost items under each cost category. See Section VI.C (procurement plan) for details of the packages for works, goods, and consulting services, and Section VI.D for the terms of reference for consultant services and major procurement packages. The procurement plan does not include all of the costs listed below, including operating costs and vehicle rental and taxi costs for the project management unit. Category Description Works: (i) build and install toilet units. Goods: (i) equipment for waste contractor(s) to pilot household toilet Works and Goods waste collection system; (ii) equipment for compost firm(s) to pilot composting system; (iii) office equipment (computers, printers, copiers); (iv) office furniture and cabinets; and, (v) PMU vehicle rental and taxis. Consulting services: (i) soil pollution monitoring program; (ii) community outreach program; (iii) health and sanitation monitoring program; (iv) supervise and inspect toilet construction; and (iv) 6 individual consultants (1 international compost specialist and 5 national consultants social, gender, and community specialist, soil and water pollution specialist, health and sanitation specialist, finance and business specialist, and sanitation technology engineer). Consulting Training: (i) training for households on O&M of toilets; (ii) training for Services, Training, government officials on on-site sanitation; (iii) training program by khoroo and Project health clinics; (iv) knowledge products on improved sanitation. Management Project Management: (i) finalize designs for toilet units; (ii) project subsidy to poor and female-headed households; (iii) national working group for on-site sanitation (establishment and operation); (iv) scale-up strategy and investment plan; (v) PMU office operations; (vi) stakeholder communication strategy; (vii) translation services; (viii) 5 administrative staff positions project manager; accountant; procurement specialist; implementation and field coordinator; and, M&E specialist; and (ix) financial audit services. This category refers to the physical and price contingencies for the individual project costs. Price contingencies were computed on all costs except international and national consultants, based on cost escalation Unallocated factors of 7.0% for 2017 2020 for local currency costs; 1.4% for 2017, and 1.5% for 2018 2020 on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. M&E = monitoring and evaluation; O&M = operation and maintenance; PMU = project management unit.
C. Detailed Cost Estimates by Financier Item A. Base Costs b Amount % Amount % Amount % 1 Works 1,024,200 100.0 1,024,200 36.6 2 Goods and services 2a Vehicles 0 0.0 0 0.0 2b Equipment 212,100 100.0 212,100 7.6 2c Other Goods and Services 29,920 100.0 29,920 1.1 Subtotal Goods and Services 242,020 242,020 3 Training 39,000 100.0 39,000 1.4 4a Consulting Services 4a Local 599,000 100.0 599,000 21.4 4b International 77,940 100.0 77,940 2.8 Subtotal Consulting Services 676,940 676,940 5 Project management 5a PMU consultants 307,500 100.0 307,500 11.0 5b Other project management 102,575 100.0 102,575 3.7 Subtotal Project Management 410,075 410,075 Subtotal A 2,392,235 100.0 0 0 2,392,235 85.4 B. Contingencies c a ADB Government Physical 57,615 100.0 57,615 2.1 Price 350,150 100.0 350,150 12.5 Subtotal B 407,765 100.0 407,765 14.6 Total Project Cost (A+B) 2,800,000 100.0 0 0 2,800,000 100.0 Includes (i) taxes and duties of $136,000 to be financed by the Japan Fund for Poverty Reduction and administered by the Asian Development Bank. The amount of taxes and duties is determined on the basis that (a) the amount will be within the reasonable threshold identified during the country partnership strategy preparation process, (b) the amount will not represent an excessive share of the project investment plan, (c) the taxes and duties apply only to the grant-financed expenditures, and (d) the financing of taxes and duties is relevant to the success of the project; (ii) costs associated with implementing relevant safeguards and social and gender action plans; and (iii) estimated cost for annual auditing ($40,381). b In 2016 prices as of 15 April 2016. Price contingencies computed on all costs except international and national consultants, based on cost escalation factors of 7.0% for 2017 2020 c for local currency costs; 1.4% for 2017, and 1.5% for 2018 2020 on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. Source: Asian Development Bank estimates. Total a 13
14 D. Detailed Cost Estimates by Outputs Item 1. Planning for on-site sanitation strengthened 2. On-site sanitation lifecycle piloted 3. Sustainability for on-site sanitation improved Project management Total a A. Base Costs b 1 Works 1,024,200 1,024,200 2 Goods and services 2a Vehicles 2b Equipment 181,500 30,600 212,100 2c Other Goods and Services 8,800 21,120 29,920 Subtotal Goods and Services 181,500 8,800 51,720 242,020 3 Training 5,000 34,000 39,000 4 Consulting Services 4a Local 195,000 383,000 21,000 599,000 4b International 77,940 77,940 Subtotal Consulting Services 195,000 460,940 21,000 676,940 5 Project management 5a PMU consultants 307,500 307,500 5b Other project management 8,800 25,575 26,400 41,800 102,575 Subtotal Project Management 8,800 25,575 26,400 349,300 410,075 Subtotal A 203,800 1,697,215 90,200 401,020 2,392,235 B. Contingencies c Physical 54,805 400 2,410 57,615 Price 30,160 259,481 19,243 41,266 350,150 Subtotal B 30,160 314,286 19,643 43,676 407,765 C. Total (A+B) 233,960 2,011,501 109,843 444,696 2,800,000 a Includes (i) taxes and duties of $136,000 to be financed by the Japan Fund for Poverty Reduction and administered by the Asian Development Bank. The amount of taxes and duties is determined on the basis that (a) the amount will be within the reasonable threshold identified during the country partnership strategy preparation process, (b) the amount will not represent an excessive share of the project investment plan, (c) the taxes and duties apply only to the grant-financed expenditures, and (d) the financing of taxes and duties is relevant to the success of the project; (ii) costs associated with implementing relevant safeguards and social and gender action plans; and (iii) estimated cost for annual auditing ($40,381). b c In 2016 prices as of 15 April 2016. Price contingencies computed on all costs except international and national consultants, based on cost escalation factors of 7.0% for 2017 2020 for local currency costs; 1.4% for 2017, and 1.5% for 2018 2020 on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. Source: Asian Development Bank estimates.
15 E. Detailed Cost Estimates by Expenditure Categories Item A. Base Costs b Local Currency Foreign Currency Total a 1 Works 1,024,200 1,024,200 2 Goods and services 2a Vehicles 2b Equipment 212,100 212,100 2c Other Goods and Services 29,920 29,920 Subtotal Goods and Services 242,020 242,020 3 Training 39,000 39,000 4 Consulting Services 4a Local 599,000 599,000 4b International 77,940 77,940 Subtotal Consulting Services 599,000 77,940 676,940 5 Project management 5a PMU consultants 307,500 307,500 5b Other project management 102,575 102,575 Subtotal Project Management 410,075 410,075 Subtotal A 2,314,295 77,940 2,392,235 B. Contingencies c 1 Physical 57,615 57,615 2 Price 350,150 350,150 Subtotal B 407,765 407,765 C. Total Project Cost (A+B) 2,722,060 77,940 2,800,000 a Includes (i) taxes and duties of $136,000 to be financed by the Japan Fund for Poverty Reduction and administered by the Asian Development Bank. The amount of taxes and duties is determined on the basis that (a) the amount will be within the reasonable threshold identified during the country partnership strategy preparation process, (b) the amount will not represent an excessive share of the project investment plan, (c) the taxes and duties apply only to the grant-financed expenditures, and (d) the financing of taxes and duties is relevant to the success of the project; (ii) costs associated with implementing relevant safeguards and social and gender action plans; and (iii) estimated cost for annual auditing ($40,381). b In 2016 prices as of 15 April 2016. c Price contingencies computed on all costs except international and national consultants, based on cost escalation factors of 7.0% for 2017 2020 for local currency costs; 1.4% for 2017, and 1.5% for 2018 2020 on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. Source: Asian Development Bank estimates.
16 F. Detailed Cost Estimates by Year Item A. Base Costs b 2017 2018 2019 2020 Total a 1 Works 68,280 443,820 443,820 68,280 1,024,200 2 Goods and services 2a Vehicles 2b Equipment 212,100 212,100 2c Other Goods and Services 5,280 5,280 14,080 5,280 29,920 Subtotal Goods and Services 217,380 5,280 14,080 5,280 242,020 3 Training 5,000 6,000 14,000 14,000 39,000 4 Consulting Services 4a Local 124,000 174,000 171,000 130,000 599,000 4b International 77,940 77,940 Subtotal Consulting Services 201,940 174,000 171,000 130,000 676,940 5 Project management 5a PMU consultants 75,000 78,000 78,000 76,500 307,500 5b Other project management 33,935 24,805 24,805 19,030 102,575 Subtotal Project Management 108,935 102,805 102,805 95,530 410,075 Subtotal A 601,535 731,905 745,705 313,090 2,392,235 B. Contingencies c 1 Physical 13,044 20,414 20,814 3,344 57,615 2 Price 17,713 90,612 156,429 85,396 350,150 Subtotal B 30,757 111,025 177,243 88,740 407,765 C. Total Project Cost (A+B) 632,292 842,931 922,948 401,830 2,800,000 a Includes (i) taxes and duties of $136,000 to be financed by the Japan Fund for Poverty Reduction and administered by the Asian Development Bank. The amount of taxes and duties is determined on the basis that (a) the amount will be within the reasonable threshold identified during the country partnership strategy preparation process, (b) the amount will not represent an excessive share of the project investment plan, (c) the taxes and duties apply only to the grant-financed expenditures, and (d) the financing of taxes and duties is relevant to the success of the project; (ii) costs associated with implementing relevant safeguards and social and gender action plans; and (iii) estimated cost for annual auditing ($40,381). b c In 2016 prices as of 15 April 2016. Price contingencies computed on all costs except international and national consultants, based on cost escalation factors of 7.0% for 2017 2020 for local currency costs; 1.4% for 2017, and 1.5% for 2018 2020 on foreign exchange costs; and 10.0% for national consultant fee rates in the final 2 years of project implementation. Source: Asian Development Bank estimates.
17 G. Estimated Disbursement Schedule by Year Fiscal Year (FY) Amount ($) 2017 632,291 2018 842,931 2019 922,948 2020 401,830 Total 2,800,000 H. Contract and Disbursement S-curve 17. The projected contract awards and disbursements under the grant and the corresponding S-curves are presented below. Schedule of Disbursement and Contract Awards Years Contract Awards ($ million) Disbursement ($ million) Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total 2017 391,663 665,456 1,573,618 90,776 2,721,512 32,678 103,697 387,048 108,869 632,292 2018 42,290 0 0 0 42,290 198,102 219,102 219,102 206,624 842,931 2019 0 36,198 0 0 36,198 214,116 248,487 237,216 223,129 922,948 2020 0 0 0 0 0 84,009 111,234 111,234 95,352 401,830 Total 2,800,000 2,800,000 S-curve 9 4,000,001 Contract Awards and Disbursement ($) 3,500,001 3,000,001 2,500,001 2,000,001 1,500,001 1,000,001 500,001 1 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 Contract Award Disbursement 9 The steep S-curve reflects the need for completion of consultant recruitment within the first year of the project.
18 I. Funds Flow Diagram Ministry of Finance (MOF) Establishment of imprest account and co-signing of withdrawal applications Ministry of Environment and Tourism (MET) Department of Land Management and Integrated Water Policy Coordination (executing agency) Asian Development Bank Imprest Account Commercial Bank Project Management Unit USD sub-account MNT sub-account Output 1 (Planning for on-site sanitation strengthened) Output 2 (On-site sanitation lifecycle piloted) Output 3 (Sustainability for on-site sanitation improved) Project Management Contractors and agencies Communities Legend: Coordination Reporting MNT = Mongolian togrog, USD = US dollars. The project management unit will administer the imprest account on behalf of the executing agency. See paragraph 21 for details.
19 A. Financial Management Assessment V. FINANCIAL MANAGEMENT 18. Financial management assessment (FMA) of the executing agency (MET s DLMIWPC) was conducted in April 2016 in accordance with ADB s Financial Management Assessment Guidelines and Financial Due Diligence A Methodology Note. Assessment of overall premitigation financial management risk is based on the definitions provided in ADB s Financial Management Technical Guidance Note Financial Management Assessment (May 2015). Staff of MET s DLMIWPC and Economic, Financial and Planning Division (EFPD) participated in the FMA. The FMA considered the capacity of the executing agency, including funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. The FMA was conducted within the overall framework of ADB s country partnership strategy (CPS) for Mongolia, 2012 2016, 10 which summarizes key issues for public financial management. The full results of the FMA are available as Supplementary Document 7 (SD 7) for the project. 11 19. The overall pre-mitigation financial management risk of the executing agency is concluded to be medium (defined as likely to occur, will have low impact if occurs ). 12 This conclusion is based on: (i) MET s DLMIWPC has low in-house financial capacity, as it comprises technical staff which are not qualified in accounting or financial management, and the EFPD will have a supporting (but not full time) role in the project; hence even with the inclusion of a qualified accountant in the PMU team, it is possible that some errors or deficiencies in project financial management may occur; and (ii) given the small size and budget of the project, it is likely that such errors will be quickly identified and corrected, with limited impact to project operations and viability. A ranking of medium risk requires the preparation of a financial management action plan, which is presented in the following table. A key condition is that no withdrawals shall be made from the grant account until the executing agency has certified to ADB that a project manager, accountant, and procurement specialist meeting the requirements set out in the terms of reference for each position (Section VI.D) have been recruited. Table 3: Financial Management Action Plan Risk Action Responsibility Timing EFPD provide limited Confirm inclusion of project in EFPD EFPD, executing 3 months before internal support to executing agency due to existing workloads work plan; clarify EFPD support including internal auditing of project agency grant effectiveness (~Q4 2016) Executing agency (DLMIWPC) lacks in-house qualified financial and procurement staff Executing agency (DLMIWPC) lacks experience in ADB financial management procedures Excel often used by executing agencies for ADB Recruit a full-time project accountant and a procurement specialist before any withdrawals from the grant account Training on ADB requirements and procedures, including accounting, auditing, and disbursement Establish a secure project accounting system: procure and use financial executing agency ADB executing agency, project Within 3 months of grant effectiveness (~Q1 2017) Within 3 months of grant effectiveness (~Q1 2017) Within 3 months of grant 10 11 12 ADB. 2012. Country Partnership Strategy: Mongolia, 2012 2016, Manila; which includes World Bank. 2009. Mongolia: Consolidating the Gains, Managing Booms and Busts, and Moving to Better Service Delivery A Public Expenditure and Financial Management Review. Washington, D.C. Financial Management Assessment (accessible from: http://www.adb.org/documents/?id=49113-001-3). ADB. 2015. Financial Management Technical Guidance Note. Financial Management Assessment. Manila.