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The World BankLK Water Supply and Sanitation Improvement Project (P147827)

REPORT NO.: RES33110

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

LK WATER SUPPLY AND SANITATION IMPROVEMENT PROJECT

APPROVED ON JUNE 24, 2015

TO

DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA

WATER GLOBAL PRACTICE

SOUTH ASIA REGION

Regional Vice President: Ethel Sennhauser Country Director: Idah Z. Pswarayi-Riddihough

Senior Global Practice Director: Guang Zhe ChenPractice Manager/Manager: Takuya Kamata

Task Team Leader: Pratibha Mistry

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ABBREVIATIONS AND ACRONYMS

CBOs Community Based OrganizationsERD External Resources DepartmentERR Economic Rate of ReturnNPV Net Present ValuePDO Project Development Objective


BASIC DATA

Product Information

Project ID Financing Instrument

P147827 Investment Project Financing

Original EA Category Current EA Category

Partial Assessment (B) Partial Assessment (B)

Approval Date Current Closing Date

24-Jun-2015 31-Dec-2020

Organizations

Borrower Responsible AgencyERD, Ministry of Policy Planning, Economic Affairs, Child, Youth and Cultural Affairs,Ministry of City Planning and Water Supply

National Water Supply and Drainage Board

Project Development Objective (PDO)

Original PDOThe development objectives of the project are to increase access to piped water services and improved sanitation in selected Districts; and to strengthen the capacity of associated institutions.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing

Ln/Cr/Tf Approval Signing Effectiveness ClosingNet

Commitment Disbursed Undisbursed

IDA-56850 24-Jun-2015 06-Nov-2015 07-Dec-2015 31-Dec-2020 165.00 66.00 99.78

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?No


I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

1. Project status: Three years of implementation of the project have been completed, and 40% of funds disbursed. Despite early delays, implementation progress has been substantial. The recently completed Mid-Term Review found that for water supply: (i) four out of six urban water supply systems are under construction; (ii) out of 211 rural sub-projects three are completed and 48 are under construction; (iii) out of 30 identified estate water sub-projects, 9 are under construction. For sanitation: 4,799 toilets have been built and two out of the seven planned septage treatment plants are under construction. Progress on preparation and procurement of remining systems is on track. Institutional development and capacity building strategies have been developed and the collection of baseline data and development of a monitoring and evaluation system is progressing. Further technical assistance activities are being procured. The achievement of beneficiary targets is lagging, and is expected to improve substantially as the construction of infrastructure is completed and assets become operational.

2. Rationale for Restructuring. The Mid-Term Review found that the results framework is unlikely to be achieved by project closing. This is due to project cost overruns in water supply systems because of (i) higher than estimated bid prices; (ii) additional taxes; (iii) selection of a greater number of sub-projects where provision of water supply is more challenging and expensive than is typical for rural areas in the country. Sanitation targets have been reduced since there has been a lower than estimated demand for sanitation in the project at the current level of subsidy provided by the project. There is also an overall lag in achieving results due to the one-year delay in the start of the project and the subsequent lag in implementation progress. The PDO is still relevant and the Results Framework represents an appropriate means to assess project performance. The Government of Sri Lanka has requested immediate restructuring to reduce the project targets in line with the current project status. In addition, subsequent restructuring of the project is proposed to: (i) include additional indicators for institutional sanitation, and; (ii) increase the amount of the sanitation subsidy; (iii) reallocate funds from Category 2 to Category 1.

II. DESCRIPTION OF PROPOSED CHANGES

3. The PDO indicator targets in the Results Framework are proposed to be changed as shown in Table 1 below. The table shows the original targets at approval and the changes proposed for this restructuring. The urban water supply systems were delayed and four of the six planned systems are currently under construction. It is expected that some water connections to the beneficiaries are likely to be completed after the end of the project period, resulting in a 7% reduction in urban beneficiaries during the life of the project. The number of rural beneficiaries has increased slightly due to the increase in the number of rural systems covered, and an increase in the number of schools and hospitals covered. The demand for household sanitation has been lower than anticipated due to increased levels of subsidies being provided by other projects. During preparation the number of Community Based Organizations (CBOs) to be targeted was not defined. Recent data collection by the project identified 121 CBOs that are not functioning or partially functioning, and these have been targeted for project support. The Project Operations Manual will be revised to reflect the changes in the Results Framework.


TABLE 1 ORIGINAL AND PROPOSED PDO TARGETS

Indicator UnitsCurrent

AchievementMay 2018

PAD Target Proposed Revised Target % change

Indicator 1: Direct project beneficiaries of which female (percentage) Number 7,200

(52%)740,600

(50%)693,800(50%)

-6.3

Indicator 2: People provided with access to Improved Water Sources (Urban), of which female

Number 0 105,200 98,100(51,000)

-6.7

Indicator 3: People provided with access to Improved Water Sources (Rural + Estates), of which female

Number 7,200 (3,700) 424,100 427,600

(222,300)+0.8

Indicator 4: People provided with access to Improved Sanitation (Rural + Estates) of which female

Number 14,600(7,300) 172,000

146,400(73,200) -14.8

Indicator 5: Rural M&E system established, populated and used in decision making

% of schemes in database 20 100 100

Indicator 6: Fully functioning CBOs Number 12 No target defined 121

4. The economic analysis for the project with the restructuring is expected to yield a positive Net Present Value (NPV) and Economic Rate of Return (ERR) that is higher than the opportunity cost of capital at 10 percent. One of the main assumptions in the analysis undertaken at appraisal was the number of beneficiaries affected, which is used in the monetization of benefits (time savings due to improved services, savings due to avoided cost of healthcare, and increase in productivity due to reduced illness). The original analysis calculated the economic benefits and costs with a conservative estimate of approximately 530,000 people, and even with a 10 percent escalation in costs and 10 percent reduction in benefits, resulted in an ERR of almost 19 percent over a 30-year economic life of the project. Thus, while the restructuring reduces the number of beneficiaries to 693,803 it remains greater than the original assumption. Secondly, the calculation of benefits in the original analysis was also an underestimate since local economic development due to project investments and increased system efficiencies due to technical assistance were not included because they are difficult to quantify. Intangible benefits like increased convenience due to improved services, improved safety for women due to presence of toilets within household and positive gender impacts due to easing of the responsibility for water collection were also excluded from the calculations. Hence, despite the restructuring, the ERR and NPV are expected to be at least the same if not greater.

III. SUMMARY OF CHANGES

Changed Not Changed

Change in Results Framework ✔

Change in Implementing Agency ✔

Change in DDO Status ✔


Change in Project's Development Objectives ✔

Change in Components and Cost ✔

Change in Loan Closing Date(s) ✔

Cancellations Proposed ✔

Reallocation between Disbursement Categories ✔

Change in Disbursements Arrangements ✔

Change in Disbursement Estimates ✔

Change in Overall Risk Rating ✔

Change in Safeguard Policies Triggered ✔

Change of EA category ✔

Change in Legal Covenants ✔

Change in Institutional Arrangements ✔

Change in Financial Management ✔

Change in Procurement ✔

Change in Implementation Schedule ✔

Other Change(s) ✔

Change in Economic and Financial Analysis ✔

Change in Technical Analysis ✔

Change in Social Analysis ✔

Change in Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_RESULTS_TABLE

RESULTS FRAMEWORK

Project Development Objective Indicators PDO_IND_TABLE

Direct project beneficiariesUnit of Measure: NumberIndicator Type: Custom

Baseline Actual (Current) End Target Action

Value 0.00 5798.00 693800.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020


Female beneficiariesUnit of Measure: PercentageIndicator Type: Custom Supplement


Value 0.00 50.46 50.00 No Change

Number of people in urban areas provided with access to Improved Water Sources under the projectUnit of Measure: NumberIndicator Type: Custom


Value 0.00 0.00 98100.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People in urban areas provided with access to improved water source - FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 0.00 51000.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Number of people in rural areas provided with access to Improved Water Sources under the projectUnit of Measure: NumberIndicator Type: Custom


Value 0.00 5798.00 427600.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People in rural areas provided with access to improved water sources - FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 2920.00 222300.00 Revised


Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People provided with access to improved sanitation servicesUnit of Measure: NumberIndicator Type: Corporate


Value 0.00 8898.00 146400.00 Revised

Date 24-Jun-2015 17-Nov-2017 30-Jun-2021

People in rural and estates areas provided with access to improved sanitation facilities - FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 4490.00 73200.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Rural M&E system established, populated and used in decision makingUnit of Measure: PercentageIndicator Type: Custom



Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Fully functioning CBOsUnit of Measure: NumberIndicator Type: Custom


Value 0.00 12.00 121.00 Revised

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Intermediate IndicatorsIO_IND_TABLE

New piped household water connections that are resulting from the project intervention (Urban)Unit of Measure: NumberIndicator Type: Custom



Value 0.00 0.00 26300.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

New piped household water connections that are resulting from the project intervention (Rural)Unit of Measure: NumberIndicator Type: Custom


Value 0.00 342.00 64400.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

New piped household water connections resulting from project intervention (Estates)Unit of Measure: NumberIndicator Type: Custom


Value 0.00 0.00 15800.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Piped household water connections that are benefiting from rehabilitation works undertaken by the projectUnit of Measure: NumberIndicator Type: Custom


Value 0.00 1150.00 25800.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People provided with access to Improved Sanitation (Rural)Unit of Measure: NumberIndicator Type: Custom


Value 0.00 7263.00 142900.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People provided with access to Improved Sanitation - Rural FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown



Value 0.00 3658.00 71450.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People provided with access to Improved Sanitation - EstatesUnit of Measure: NumberIndicator Type: Custom


Value 0.00 1635.00 29100.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People provided with access to Improved Sanitation - Estates FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 788.00 14600.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People trained to improve hygiene behavior/sanitation practices under the projUnit of Measure: NumberIndicator Type: Custom


Value 0.00 6000.00 128900.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People trained to improve hygiene behavior/sanitation practices - femaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 3000.00 64400.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

People trained in improved hygiene behavior or sanitation practices (Estates)Unit of Measure: NumberIndicator Type: Custom



Value 0.00 5200.00 31600.00 No Change

Date 24-Jun-2015 17-Nov-2017 30-Jun-2020

People in Estates trained in improved hygiene behavior - FemaleUnit of Measure: NumberIndicator Type: Custom Breakdown


Value 0.00 2600.00 16000.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Households gaining access to safe disposal of fecal sludge in urban areasUnit of Measure: NumberIndicator Type: Custom


Value 0.00 0.00 29400.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Number of CBOs visited and evaluated by DNCWSUnit of Measure: NumberIndicator Type: Custom


Value 0.00 450.00 1000.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Number of other water service providers that the project is supportingUnit of Measure: NumberIndicator Type: Custom



Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

DNCWS organizational structure designed and approved by MinistryUnit of Measure: NumberIndicator Type: Custom




Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Comprehensive sector program prepared and approved by MinistryUnit of Measure: NumberIndicator Type: Custom



Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

WSS CKD Mitigation program prepared and approved by MinistryUnit of Measure: NumberIndicator Type: Custom



Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

Proportion of grievances registered related to project delivery that have been redressedUnit of Measure: PercentageIndicator Type: Custom


Value 0.00 100.00 95.00 No Change

Date 24-Jun-2015 17-Nov-2017 31-Dec-2020

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