AFRICAN DEVELOPMENT BANK

URGENT WATER SUPPLY AND SANITATION REHABILITATION PROJECT

COUNTRY: ZIMBABWE

SUPPLEMENTARY GRANT

OWAS DEPARTMENT

June 2013

Appraisal Team

Regional Director E. Faal, SARC

Sector Director S. B. Jallow, OWAS/FAE

Division Manager O. Chanda, OWAS.2

Officer-In-Charge D. Kitabire, ZWFO

Team Leader: E. A. Demissie, OWAS.2/ZWFO

Table of contents

EXECUTIVE SUMMARY ......................................................................................................................... iv

I. INTRODUCTION ................................................................................................................................ 1

II. ORIGINAL PROJECT ......................................................................................................................... 1

2.1 Project Background and Origin......................................................................................................... 1

2.2 Project Objective ......................................................................................................................... 2

2.3 Project Components ..................................................................................................................... 2

2.4 Project Costs and Financing Arrangements ................................................................................. 2

2.5 Project Implementation Status ..................................................................................................... 3

III. REVISED PROJECT FINANCING ..................................................................................................... 6

3.1 Objectives and Description .......................................................................................................... 6

3.2 Revised Project Cost estimates .................................................................................................... 6

3.3 Revised Implementation Schedule .............................................................................................. 7

3.4 Project Implementation................................................................................................................ 8

IV. JUSTIFICATION FOR SUPPLEMENTARY FINANCING ............................................................... 8

V. LEGAL INSTRUMENTS AND AUTHORITY ................................................................................. 10

5.1 Legal Instrument ......................................................................................................................... 10

5.2 Conditions Associated with Bank’s Interventions ....................................................................... 10

5.3 Compliance with Bank Policies ................................................................................................... 10

VI. CONCLUSION AND RECOMMENDATION .................................................................................. 10

6.1 Conclusion ................................................................................................................................. 10

6.2 Recommendation ....................................................................................................................... 10

Annex I: Project Cost Estimates- Budget, Engineer Estimate and Actual Bids

Annex II : Project Implementation Schedule

i

Grant Information

Client’s information

BORROWER: Government of the Republic of Zimbabwe

Financing Plan

ADB’s key financing information

Supplementary Grant

US$ 13.956 million

Interest type* N/A

Interest rate spread* N/A

Commitment fee* N/A

Other fees* N/A

Tenor N/A

Grace period N/A

EIRR (base case) 14.17%

Timeframe - Main Milestones (expected)

Approval of Supplementary Financing by Zim-Fund POC 05/04/2013

Approval of Supplementary Financing by AfDB Board 10/07/2013

Effectiveness 10/07/2013

Last Disbursement 31/12/2014

Source Amount (US$)

million

Instrument

Zim-Fund 13.956 Grant

TOTAL COST 13.956 Grant

ii

Currency Equivalents

March 2013

1UA = US Dollar (USD) 1.51483

FISCAL YEAR

1 January – 31 December

Acronyms and Abbreviations

AfDB African Development Bank

ADF African Development Fund

AWF African Water Facility

EIRR Economic Internal Rate of Return

GoZ Government of Zimbabwe

M&E Monitoring and Evaluation

MDTF Multi Donor Trust Fund

MMU Multi Donor Trust Fund Management Unit

NRW Non Revenue Water

NGO Non-Governmental Organization

NPV Net Present Value

PA Procurement Agency

IE Implementation Entity

POC Programme Oversight Committee

UWSSRP Urgent Water Supply and Sanitation Rehabilitation Project

VFM Value for Money

WASH Water and Sanitation and Hygiene

S&H Sanitation and Hygiene

WSS Water Supply and Sanitation

Zim-Fund Zimbabwe Multi-Donor Trust Fund

iii

RESULT MATRIX

Indicator Baseline Target

Cholera fatality rate 4.1% (2011) <1% (2020)

Diarrhea morbidity in children under 5 7.2/1000(2010) <5 (2020)

40% San. (2010)

90% by 2020, 100% by

2030

80% Water (2010)

90% by 2020, 100% by

2030

reliable and stable water produced 746,000m3 (2010) 820,000m3 (2014)

Quality of water - % of samples meeting standards 70% (2010) 90% (2014)

waste water treated

76,325m3/d

(2010) 298,000m3/d (2014)

no. of people to benefit from improved service N/A 2.4 million (52% women)

Reduction in NRW 55% (2011) 52% (2015)

Revenue collection Efficiency 40% (2010) 60% (2014)

Component 1: Water Supply and Sanitation Infrastructure

No. of water treatment works N/A 6 (2014)

clean water pump units replaced (to distribution

system) N/A 13 (2014)

raw water puming units replaced N/A 6 (2014)

No. of reservoirs built N/A 1 (2014)

National statistics, DHS

(Demographic and Health

Surveys)

access to clean water and sanitation in Zimbabwe

Rehabilitation of water supply

infrastructure

OU

TP

UT utility reports, progress

reports, works

commission reports

improved service delivery

utility reports, progress

reports, works

commission reports

IMP

AC

T

Poor sector financing is a risk overlong term but the

improved political and regulatory environment and

increased government focus and continued

development partners support will mitigate this risk.

stabilised and restored water

and sanitation services

OU

TC

OM

E

Country and Project name: Zimbabwe – Urgent Water Supply and Sanitation Rehabilitation Project

The purpose of the Project is to contribute to improved health and social wellbeing of the population through improved provision of water and sanitation servic

RESULTS CHAIN

PERFORMANCE INDICATORSMEANS OF

VERIFICATIONRISKS/MITIGATION MEASURES

Increased access to improved

water supply and sanitation

services resulting in improved

public health

The risk of failure to operate and maintaine

rehabilitated facilities will be mitigated through the

capacity building and training of staff and provision

of essential O&M supplies

iv

Indicator Baseline Target

No. of waste water treatment works N/A 9 (2014)

No. waste water effluent Pumping units 0 functioning 9 (2014)

No. of raw sewage pumping units 0 functioning 19 (2014)

km of rehabilitated sewer line N/A 13km (2014)

sewer cleaning capacity sewer cleaning equipment no capacity 6 (2013)

Component 2 Sanitation and Hygiene PromotionS&H needs assessment and baseline report gender

responsive N/A yes by 2013

S&H education program developed N/A yes by 2013community groups and school WASH groups trained

(60% women) N/A 120

No. School WASH groups trained (60% girls) 60

No. of people trained N/A

6000 (60% trainees

women)

No. of people reached through the program N/A 2.4 million (52% women)

Component 3: Institutional capacity building

Qualitative rapid assessment of past trainings N/A yes by 2013

training package/module prepared N/A yes by 2013

O&M staff trained N/A

120 (20% women) by

2014

capacity building goods supplied N/A yes by 2013

Revenue and Cost Recovery Revenue and cost recovery strategy N/A 6 by 2014

Medium and long term investment plans prepared Investment plans N/A 6 by 2014

Component 4: Engineering Services and Project Management

Independent Procurement agent engaged N/A yes by Nov 2011

Implementing Entity engaged N/A yes by Nov 2011

Project Steering Committee established N/A yes by Apr 2012

project audited N/A yes 2013, 2014

Original Revised at Implementation

Component 1: 24.86 38.71

Component 2: 0.30 0.39

Component 3: 1.56 2.14

Component 4: 2.93 2.37 Total: 29.65 43.61

RISKS/MITIGATION MEASURES

INPUTS Million USD

rehabilitation of sanitation infrastructures

Risk of power insecurity: this will be mitigated

through the ongoing EPIRP and next phase project

which will improve reliabiity at the facitlities

Effective project management system established

Capacity building for operation maintenanceRisk of implementation delays. To be mitigated

through close follow-up and monitoring of progress

by the Bank through the MMU and closer

collaboration with GoZ institutions and

Municipalities, adn the project steering committee;

RESULTS CHAINPERFORMANCE INDICATORS

Component 2: Hygiene Promotion

Component 3: Institutional capacity building

MEANS OF

VERIFICATIO

Component 4: Engineering Services and Project Management

S&H needs assessment and program development

(gender sensitive)

Taining and promotion activities

OU

TP

UT

KE

Y A

CT

IVIT

IES COMPONENTS

Component 1 : Rehabilitation of water supply and sanitation infrastructure

v

EXECUTIVE SUMMARY

A grant amounting to USD 29.651 million from the resources of the Zimbabwe Multi-Donor

Trust Fund to finance the Urgent Water Supply and Sanitation Rehabilitation Project (UWSSRP)

targeting six municipalities (Harare, Chitungwiza, Chegutu, Masvingo, Kwekwe, and Mutare)

was approved in April 2011 with the Protocol of Agreement being signed in June 2011. The

envisaged outcomes of the intervention include: increased reliability, quality and availability of

water supply in the Project areas; restored wastewater treatment capacity; and reduced incidence

of cholera and other water related diseases.

The Project was launched in December 2011 following the recruitment of the Implementing

Entity and Procurement Agent in November 2011. Since then, significant progress has been

achieved. The technical assessments, definition of scope of works and services and preparation

of procurement documents were completed followed by launch of procurement process. The

tenders evaluation for all major packages have almost been completed. The rehabilitation works

and the sewer cleaning equipment contracts for Mutare have been awarded while those for

Harare, Chitungwiza, Chegutu, Kwekwe and Masvingo are being finalised. The audit services,

investment plan, and hygiene and sanitation services contracts are in the final stages of

conclusion. The physical works commenced in March 2013 with the handing over of the Mutare

site to the contractor who has started mobilizing its key staff to site.

Despite the good progress made in the procurement process, the high bid prices obtained for the

tenders pose challenges for the implementation of the Project. Priced bids received were

significantly higher than the budgeted figures estimated in the Project Appraisal Report and the

Engineer’s recent estimate. The reasons for the high bid prices were (i) the complexity of the

rehabilitation works and associated risks; (ii) the gap of information in terms of manuals,

procedures, and as built drawings for existing systems (iii) lack of recent, similar projects with a

similar scale in Zimbabwe to use as references; and (iv) perceived risks by the market in relation

to the unusual complex implementation arrangement. Considering the concluded tenders and

making estimates on further requirements during implementation, the expected total value of the

Project is now estimated at US$ 43.607 million in order to execute the project as originally

envisaged. The additional resources required are therefore US$ 13.956 million.

It is highly recommended that if the Project goals and objectives are to be met, the Project must

be completed as per the original plan. Reducing the scope of works will result in the Project

failing to achieve its objectives. The supplementary resources being requested will make it

possible for the Project to be completed as planned. Taking this into account, the Program

Oversight Committee (POC) of the Zim-Fund approved the supplementary Grant on 5 April

2013.

1

REPORT AND RECOMMENDATION OF MANAGEMENT FOR A PROPOSED

SUPPLEMENTARY GRANT TO ZIMBWBWE FOR THE URGENT WATER SUPPLY

AND SANITATION REHABILITATION PROJECT (UWSSRP)

Management hereby submits this report and recommendations concerning a proposal to grant a

US$ 13.956 million supplementary grant to the Republic of Zimbabwe from the resources of the

Zimbabwe Multi-Donor Trust Fund (Zim-Fund) to finance the shortfall in financing for the full

implementation of the UWSSRP.

I. INTRODUCTION

1.1 It is to be recalled that on 7 April 2011, the Board approved, on a lapse-of-time basis,

financing of the UWSSRP targeting six municipalities (Harare, Chitungwiza, Chegutu,

Masvingo, Kwekwe, and Mutare) for the stabilisation and improvement of water and sanitation

services. The envisaged outcomes of the intervention include: increased reliability, quality and

availability of water supply in the Project areas; restored wastewater treatment capacity; and

reduced incidence of cholera and other water related diseases.

1.2 The original estimated cost of the Project was US$ 29.561 million. The Project Protocol

of Agreement is dated 10 June 2011, and the Project was launched on 15 December 2011 after

the recruitment of the Implementing Entity and Procurement Agent was finalized in November

2011, followed by technical assessments, preparation of tender documents, and commencement

of the tendering process. By 31 December 2012, the tendering of the major components of the

Project had been completed. The tendering resulted in high bid prices beyond the budgetary

provisions of the Project. Due to the importance of implementing the full scope of the Project for

achieving the Project objectives, this report is requesting supplementary financing in the amount

of US$ 13.956 million to enable the full implementation of the Project as originally envisaged.

II. ORIGINAL PROJECT

2.1 Project Background and Origin

2.1.1 The political and economic situation in Zimbabwe for the last decade has severely

affected all sectors of the economy including infrastructure. With limited resources for

maintenance, most of the infrastructure including water supply and sanitation infrastructure has

fallen into disrepair with inevitable deterioration that seriously compromising service delivery.

The dilapidated state of the infrastructure was a major contributing factor to the severe cholera

outbreak during 2008/09 rainy season. Until the delivery of water supply and sanitation services

is improved, the threat of outbreaks of water-related diseases, including cholera, will remain. A

rapid assessment to establish the status of the main water supply and sewerage infrastructure in

most of the bigger towns throughout the country was carried out in 2009 and 2010 with support

2

from development partners, identifying emergency, short-term and medium term rehabilitation

works.

2.1.2 As a result, the six urban areas of Harare, Chitungwiza, Mutare, Masvingo, Kwekwe and

Chegutu were chosen for this Project. The Project is part of the ongoing efforts to improve the

Water Supply and Sanitation infrastructure. The Project entails urgent repairs and rehabilitation

of critical installations including pumping stations, electro-mechanical works, and water

treatment plants. For sanitation, the urgent repairs include critical trunk and outfall sewers,

booster pump stations and treatment works, as well as treated effluent disposal facilities. The

Project will also support community sensitization and promotion of improved sanitation and

hygiene. In addition, the Project will provide capacity building support to the municipalities and

assistance in developing medium- and long-term development plans for water and sanitation

services.

2.2 Project Objective

2.2.1 The main Project objective has not changed and is to provide urgent support for

restoration and stabilization of water supply and sanitation services in the municipalities of

Harare, Chitungwiza, Mutare, Chegutu, Masvingo and Kwekwe, and to improve their

sustainability.

2.3 Project Components

2.3.1 As appraised in 2010/11, the UWSSRP was the first intervention proposed for financing

under the Zim-Fund. The Project was prepared through wide consultations with donors in

Zimbabwe and various arms of the national government and local authorities. The Project

components have not changed and are as follows:

A. Rehabilitation of Water Supply and Sewerage Infrastructure

B. Promotion of Improved Sanitation and Hygiene Education

C. Institutional Support

D. Project Management and Engineering Services.

2.4 Project Costs and Financing Arrangements

The total Project estimated budget at appraisal was US$ 29.651 million (approximately

UA 19.053 million). The tables below provide details on the original amounts allocated by

component and category of expenditure.

3

Table 1: Project Cost Estimates by Component

Components US$ (million)

A Rehabilitation of Water Supply and Sewerage

Systems in the Six Urban Areas

24.857

B Promotion of Improved Sanitation and Hygiene

Education

0.300

C Institutional Support 1.561

D Project Management and Eng. Services 2.933

Total 29.651

Table 2: Project Cost by Category of Expenditure

2.5 Project Implementation Status

2.5.1 The Project became effective for disbursement only in May 2012 due to the time taken

for the Government of Zimbabwe (GoZ) to fulfill the conditions precedent to first disbursement.

This delay slowed down the initial technical assessment phase for the preparation of detailed

scope, specification and design of Project interventions. The overall slippage from the

implementation schedule set out in the Appraisal Report is currently estimated at 12 months.

Despite the delays, the Project has made steady progress and achieved the following milestones:

Completion of the technical assessments and definition of scope of works and services

for all six municipalities;

Preparation of procurement documents;

Launch of procurement process including prequalification process;

Completion of tenders evaluation for all major packages;

Negotiation with recommended bidders either completed or near completion;

Award of Contracts (supply of sewer cleaning equipment-UWSSRP/009 and works

contract for Mutare – UWSSRP/004); and

Commencement of physical works for the Mutare package.

2.5.2 The detailed status of implementation of the Project by component is as follows:

2.6 Rehabilitation of Water Supply and Sewerage Systems Infrastructure

2.6.1 The tendering process for all works packages have reached advanced stages. The Mutare

works package (UWSSRP/004) was awarded in February 2013. The Contractor, Technofab-

Category of Expenditure USD (million)

A Works 24.857

B Services 3.994

C Miscellaneous 0.800

TOTAL PROJECT COSTS 29.651

4

Gammon Joint Venture, has mobilised and physical works commenced shortly thereafter in

March 2013. These works are scheduled for completion by the year-end 2013. The contract for

the supply of sewer cleaning equipment (UWSSRP/009) was also awarded in February 2013, and

delivery of all equipment will be completed within six months from the date of the confirmed

order, which is expected to be 30th October 2013.

2.6.2 The other bids received for the remaining two works packages (1) Harare and

Chitungwiza, and (2) Chegutu, Kwekwe and Masvingo were judged to be high compared to the

engineer’s estimates and budget. Following a request from the Zim-Fund contributing donors, a

value for money (VFM) analysis was conducted. The assessment concluded that there was no

VFM for the two works packages due to some items being priced higher than market value.

Following the VFM outcome discussions, the POC authorised the MMU to proceed to negotiate

with the recommended bidder with a view to remove the high priced pond desludging activities

from the scope and retender those activities following revision of specification and requirements.

The preparation of the bidding documents was completed and tendering is in progress. The two

main works packages, as re-scoped to remove the pond desludging activities, have been

successfully negotiated for revised scope in line with the Bank’s Rules and Procedures for

Procurement of Goods and Works.

2.7 Promotion of Improved Sanitation and Hygiene Education

The terms of reference for this component were prepared based on the recently prepared

Urban Hygiene and Sanitation Promotion Guidelines and other guidelines for participatory

health and hygiene education and consultation with the participating municipalities. The

activities under this component include comprehensive review of similar activities carried out in

the recent past in urban areas, and conducting pilot baseline survey to establish the demographic

and social economic situation of communities in typical high density areas. On the basis of the

findings of the baseline study, the appropriate promotion and education program will be designed

and implemented. The recruitment of a suitable NGO to carry out this assignment was concluded

in April 2013 with activities commencing on 20th

May 2013.

2.8 Institutional Support

2.8.1 Following an initial scoping assessment of each municipality, a capacity building

program was designed. The institutional capacity building will include training module

development and training in water and waste water treatment process, operation and maintenance

of sewer cleaning, occupational health and safety procedures, and water quality monitoring. This

component will also engage each municipality to develop cost recovery strategy with improving

service levels to residents. The recruitment process of a suitable service provider is in progress

with the contract anticipated to be finalized in June 2013.

5

2.8.2 This component also envisages providing planning support for each municipality in

medium (2020) and long-term (2030) water and sanitation investment plan preparation. The

outcome of the exercise will enable the municipalities to prepare bankable investment plans on

the basis of their priorities and in view of their medium and long-term requirements. The contract

for the service provider was concluded in April 2013 with activities commencing on 20th

May

2013.

2.8.3 The provision of capacity building goods/equipment will be synchronized with the work

of the institutional development consultancy and investment plan preparation services.

2.9 Project Management and Engineering Services

2.9.1 The GoZ procured the services of Lahmeyer GKW Consult GmbH (formerly Poyry

Environment GmbH) as an Implementing Entity (IE) for the Project with assistance by the MMU

through advanced contracting procedures with the procurement process commencing prior to the

approval of the Project by the Board of the AfDB. In line with the Zim-Fund Operations Manual,

the IE provides project management, coordination, technical assessment, preparation of technical

documents for tenders and supervision services. The IE and GoZ entered into the Implementing

Entity Agreement in November 2011, with the IE mobilization commencing in December 2011.

2.9.2 In accordance with the the Zim-Fund Operations Manual, the GoZ similarly recruited

Crown Agents (UK) as a Procurement Agent (PA) for projects financed under the Zim-Fund,

initially with resources from the Fragile State Facility. The PA is responsible for providing

procurement services and is acting as the procuring and contracting entity on behalf of GoZ. The

GoZ and the PA concluded the Procurement Agent Agreement in November 2011, again using

advanced contracting with the assistance of the MMU, and the PA commenced its services in

December 2011.

2.9.3 Following the recruitment of the PA and IE, the Project was officially launched in

December 2011. Both the PA and the IE have performed well to date and shown an admirable

willingness to ensure achievement of the Project objectives under difficult circumstances.

2.9.4 To date, the IE has been active in conducting technical assessments, providing technical

inputs for tender document preparation process, prequalification, tendering process, evaluation

process, and contract award negotiations. With the technical input from the IE, the PA is

effectively leading and administering the procurement process. The procurement process for

most of the packages is near completion and the next phase of the PA role will focus on

administering the contracts on behalf of GoZ. The IE will have the role of engineer to supervise

the works and services to be provided.

2.9.5 The Project audit for the year ending 2011 was postponed as justified by the absence of

any financial transaction and low level of activities during that year and the project’s first audit is

due by the end of June 2013 and will be cover all project activities up to December 2012. The

6

recruitment of the Project auditor was concluded in May 2013 and the auditor commenced its

service as of 29 May 2013. The auditor services will include both the Zim-Fund [Phase 1] water

and power projects.

2.9.6 Despite the good progress made in the procurement process under each of the above

components, the high bid prices obtained for the tenders pose challenges for the implementation

of the Project. Priced bids received have been significantly higher than the budgeted figures set

out in the Project Appraisal Report, as well as the engineers’ estimate at bidding stage. Further

details on the bid amounts and additional resources requirement is covered in section 3 of this

report.

III. REVISED PROJECT FINANCING

3.1 Objectives and Description

The Project objectives have not changed and remain as described in section 2.2 above.

However the total population estimated at appraisal in the Project beneficiary municipalities has

changed from 4.15 million to 2.4 million following the national population census conducted in

August 2012. This has been reflected in the revised Project Log frame.

3.2 Revised Project Cost estimates

3.2.1 The bidding process for most of the Project packages has been completed and the current

status of the budget in relation to the received bid prices is provided in Annex I. The received bid

prices exceeded the budget by a margin ranging from 25 % to 108 %. The principal reasons for

the high tender price outcomes were due to (i) The complexity of the rehabilitation works and

associated risks with shorter duration for execution in operational plants; (ii) the gap of

information in terms of manuals, procedures, and as built drawings for existing systems (iii)

Lack of recent, similar projects with a similar scale in Zimbabwe to use as references; and (iv)

Complexity of implementation arrangement and perceived risks.

3.2.2 Considering the concluded tenders and making estimates for outstanding contracts and

requirements during works execution phase, that include the new packages dealing with the pond

desludging activities, that was removed from the scope of works for the two remaining

rehabilitation packages, the extra management and engineering services, and the contingency, the

expected total value of the Project is estimated at the revised total amount of US$ 43.607 million

as shown in Table 3.1 and 3.2 below. Additional resources amounting to US$ 13.956 is therefore

required for the Project to achieve its original objective.

7

Table 3.1: Revised Project Cost Estimates by Component

Components

At

Appraisal

US$

(million)

Revised at

Implementation

US$ (millions)

A Rehabilitation of Water Supply and Sewerage

Systems in the Six Urban Areas

24.857

36.867

B Promotion of Improved Sanitation and

Hygiene Education

0.3

0.375

C Institutional Support

1.561

2.035

D Project Management and Eng. Services

2.933

2.253

Total

29.651

41.531

Contingency at 5%

2.076

Total

29.651

43.607

Additional Resource Required

13.956

Table 3.2: Supplementary Financing Categories of Expenditure

Categories of Expenditure Amount in US$

Works 11.805

Services -

Miscellaneous 0.075

Goods -

Contingency 2.076

Total 13.956

3.2.3 Further details on costing contract–by-contract is provided in Annex I.

3.3 Revised Implementation Schedule

The revised implementation schedule is being determined based on the anticipated

commencement of the Harare and Chitungwiza (UWSSRP/002) and Chegutu, Kwekwe and

Masvingo (UWSSRP 003) rehabilitation works contracts. The proposed new works packages for

the pond desludging activities for UWSSRP/002 and 003 will be scheduled to run parallel with

the main works contracts. There have been several delays in the Project since its beginning due

to delay in recruitment of the IE and PA, delay in project effectiveness, late advance payments to

8

the IE and PA, late completion of the technical assessment, longer period taken for the

procurement process, and delayed conclusion of the works and services packages. It is now

envisaged that the Project components will be completed by end-March 2014. In this regard, the

deadline for last disbursement was extended from 31 December 2013 to 31st December 2014,

which will apply equally to the supplementary financing. A revised project implementation

schedule is at Annex II.

3.4 Project Implementation

3.4.1 Implementation Arrangement: The original institutional and implementation

arrangements of the Project will continue. The POC provides an overall strategic and policy

oversight for the Zim-Fund. The MMU under the Bank’s oversight provides portfolio

management support. The Implementing Entity and Procurement Agent procured through the

program provide project management and procurement services respectively on behalf of the

Government of Zimbabwe. The Project receives guidance from a Project Steering Committee

comprising beneficiary municipalities and key Ministries.

3.4.2 Monitoring and Evaluation: Zim-Fund has recruited a consultant to develop the M&E

framework for the Project, and the M&E framework will be rolled out from June 2013. The

Project result matrix has been updated on the basis of the technical assessment and recent data

available. It was also prepared in line with the new template approved by the Bank.

3.4.3 Social and Environmental Management Plan: An Environmental and Social

Management Plan specific to each municipality was developed for implementation and

monitoring. The Plan has been systematically included in the works packages for implementation

by the contractors and its implementation will be monitored and supervised by the supervising

engineer.

IV. JUSTIFICATION FOR SUPPLEMENTARY FINANCING

4.1 The supplementary financing proposal was approved by the Program Oversight

Committee of the Zim-Fund, which is composed of the Zim-Fund donors and GoZ

representatives, on 5 April 2013, after consideration of the importance of achieving the original

objective of the Project. The Project is in alignment with the Bank Group Country Program Brief

and the Bank’s Strategy for 2013-2022. The inadequate provision or lack of clean water supply

and sanitation services has affected the vulnerable and poorer segment of the residents of the

beneficiary municipalities the most. It therefore significantly responds to the inclusive agenda

and should be supported for the achievement of the full Project objective.

4.2 This supplementary financing proposal meets the applicable general conditions and

specific conditions for supplementary financing set out in the Bank Group Policy and Procedures

for Supplementary Financing (ADB/BD/WP/97/83). The execution of the Project has

9

commenced and is progressing satisfactorily from the technical perspective but will require

additional resources to achieve its objectives and the GoZ is not in a position to provide

additional financing. In this regard, the Zim-Fund POC took into account the factors enumerated

below in approving the supplementary financing:

a) There is need to build upon the recent water supply and sanitation interventions so as to

improve the deteriorated water supply and sanitation infrastructure in the beneficiary

municipalities. A delay in improvement of water and sanitation services has high tangible

and nontangible economic and social costs.

b) The Project Appraisal cost estimates were derived from the emergency works in 2009

and prices then-prevailing in the country. The estimates were not based on a detailed

feasibility study but were prepared rather as an urgent response with technical assessment

and project execution combined. Notwithstanding the IE’s scoping which took into

account the available budget, the bid prices were surprisingly high for certain value

works and goods items. Although re-scoping is possible to match the available budgets,

this would result in the original objectives of the Project not being met.

c) The various elements of the works identified for rehabilitation are interdependent and the

intended objective cannot be achieved if some of the elements are removed. In particular,

two of the principal outcomes of the current intervention would be at risk, namely: (i)

stabilization of bulk of water supply in several of the project municipalities; and (ii)

reduction of pollution of water sources with untreated sewage discharges in several of the

project municipalities.

d) An alternative of reducing the scope to match the available budget would be the removal

of one or more of the beneficiary municipalities from the Project. This would however

result in a significant proportion of the originally identified target communities being

excluded with a corresponding reduction in the overall impact of the Project. The

removal of any municipality is also sensitive and would risk damaging the reputation of

the Zim-Fund in the eyes of the local governments and the population.

e) The project is technically and economically viable even with the revised cost. The

economic cost benefit analysis of the revised project has been carried out by comparing

the “with” and “without” project scenarios. The revised EIRR for the project is 14.2%

and NPV (at 10%) is US$ 15.6 million, which is lower than the estimate at appraisal,

EIRR 22% and NPV US$ 37.2 million. However, the value is higher than the opportunity

cost of capital for similar projects estimated as 12%. As such, the project is considered

economically viable.

10

V. LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal Instrument

The legal instrument to finance the supplementary grant will be a Protocol of Agreement

between the Republic of Zimbabwe and the Bank, in its capacity as the administrator of the

Zimbabwe Multi-Donor Trust Fund (Zim-Fund), for a grant from the resources of the Zim-Fund.

5.2 Conditions Associated with Bank’s Interventions

5.2.1 Conditions Precedent to Entry into Force of the Grant

The Protocol of Agreement will enter into force on its date of signature by the Recipient and the

Bank.

5.2.2 Conditions Precedent to First Disbursement of the Grant

The conditions precedent to first disbursement of the initial grant, which will be extended to the

supplementary grant, have been fulfilled. As such, disbursements may be made from the

supplementary grant upon entry into force of the Protocol of Agreement.

5.3 Compliance with Bank Policies

The proposed supplementary grant complies with all applicable Bank policies, including

the Bank Group Policy and Procedures for Supplementary Financing.

VI. CONCLUSION AND RECOMMENDATION

6.1 Conclusion

Priced bids received have been significantly higher than the budgeted figures from the

estimates arrived at during the Project Appraisal stage and by the Engineer’s estimate.

Considering the concluded tenders and estimates on the outstanding packages and the

requirements during execution, the expected total value of the works is estimated at US$ 43.607

million, thus a requirement of additional resources of US$ 13.956 million is needed in order to

achieve the objectives of UWSSRP.

6.2 Recommendation

Considering the many socio-economic and environmental benefits of this Project, it is

recommended that the Bank approves this supplementary grant, from the resources of the Zim-

Fund, for the amount of US$ 13.956 million for the UWSSRP.

- 1 -

Annex I: Project Cost Estimates- Budget, Engineer Estimate and Actual Bids

ZIMFUND UWSSRP: PROJECT COMPONENTS FINACIAL STATUS

6-Jun-13

Component Project No. DescriptionBudget as

appraisedCost Estimate by IE

Contract

Value /

Lowest

Compliant

Bid Price /

Revised

Estimate

Actual Contract

or revised

estimate

Additional

Resource

Required

Comment

[USD] [USD] [USD] [USD] [USD]

Rehabilitation of Water Supply and

Sewerage SystemsUWSSRP/002

Rehabilitation of Water Supply and Sewerage

Systems in Harare and Chitungwiza10955000

10402511.86

16073315 11345690 390690

Contracts have been negotiated in line with

recommendations from the VFM assessment and pond

desludging items were removed from the scope resulting in

revised contract amount

UWSSRP/003Rehabilitation of Water Supply and Sewerage

Systems in Chegutu, Kwekwe and Masvingo8342000

7392528.25

11789394.5 9231294.5 889294.5

Contracts have been negotiated in line with

recommendations from the VFM assessment and pond

desludging items were removed from the scope resulting in

revised contract amount

UWSSRP/004Rehabilitation of Water Supply and Sewerage

Systems in Mutare5560000 7919360.78 9717543 9080343.05 3520343.05

Letter of award issued on 30.01.2013. Contract price

reduction was due to removal of bill item for access road.

The item removed will be executed through provision sum

included in the contract

UWSSRP/009Supply and delivery of sewer cleaning ,

related equipment and associated services

Included in 002,

003 and 0043300000 4117369.4 4117369.4 4117369.4 contract negotiated and awarded

UWSSRP/012 Harare and Chitunwiza Pond desludging included in 002 included in 003 2337938 2337938these works are the reduced scope from UWSSRP/002 and

have been advertised in May 2013

UWSSRP/013 Chegutu Pond desludging included in 003 included in 004 754233 754233these works are the reduced scope from UWSSRP/003 and

have been advertised in May 2013

Sanitation and Hygiene Education PrograrmUWSSRP/005 Sanitation and Hygiene Education Programme 300000 300000 387,873 387,874 87873 contract negotiated and awarded

- 2 -

Component Project No. DescriptionBudget as

appraisedCost Estimate by IE

Contract

Value /

Lowest

Compliant

Bid Price /

Revised

Estimate

Actual Contract

or revised

estimate

Additional

Resource

Required

Comment

[USD] [USD] [USD] [USD] [USD]

Institutional SupportUWSSRP/006

Institutional Development Consultancy

Services538280 590400 590400 590400 52120 Prices not yet available.

UWSSRP/007 Investment Plan Consultancy Services 522480 1047600 945075 945075 422595 contract negotiated and awarded

UWSSRP/010Specialist Software and related computer

Equipment included in 011 included in 011 Prices not yet available.

UWSSRP/011 Capacity Building Goods 500000 500000 500000 500000 0 Prices not yet available.

Project Management and Eng. ServicesUWSSRP/001 Implementing Entity Services 2872820 2211066 2211066 -661754 Actual contract, signed November 2011

UWSSRP/008 Project Auditing Services 60000 60000 42379.03 42379.03 -17620.97 contract negotiated and awarded

Total 29,650,580 31,512,401 41,530,873 11,880,293

Contingency at 5% 2,076,544 2,076,543.6

Total Additional Funding 43,607,417 13,956,837

Notes: 1. The phsical contingency assumed at 5% overall will cover additional payments for the IE services due to project delay, project audit requirement beyond the current requirement due to increased

project duration, and any additional requirement beyond the current contract amounts and due to unavoidable circustances.

2. In the Cost Estimates the estimated cost for UWSSRP/009 separated from UWSSRP/002, 003 and 004

3. The cost estimate for UWSSRP/004 originally considered the re-use of pipe materials on site for which the contract estimate was at US$4.686 million. However, EU rules regarding the use of

Asbestos meant that this was not permitted, with considerable increased cost. The revised engineer estimate stands at US$7.919 million

Annex II : Project Implementation Schedule

Annex 3 : Map of the Country and Location of the Project Areas