facility administration manual administration manual purpose and process 1. the facility...

Project Number: 45389 MFF Number: 0071 Loan Numbers: 2921, 3144 February 2018

Republic of Azerbaijan: Second Road Network Development Investment Program

Facility Administration Manual

CONTENTS

ABBREVIATIONS iii

I. PROGRAM/PROJECT DESCRIPTION 1

A. Rationale 1 B. Impact and Outcome 3

II. IMPLEMENTATION PLANS 4

A. Project Readiness Activities for Tranche 2 4 B. Overall Program/Project Implementation Plan 4

III. PROGRAM/PROJECT MANAGEMENT ARRANGEMENTS 7

A. Project Implementation Organizations – Roles and Responsibilities 7 B. Key Persons Involved in Implementation 10 C. Project Organization Structure 11

IV. COSTS AND FINANCING 13

A. Detailed Cost Estimates by Expenditure Category 15 B. Allocation and Withdrawal of Loan Proceeds 17 C. Detailed Cost Estimates by Financier 18 D. Detailed Cost Estimates by Components 19 E. Detailed Cost Estimates by Year 21 F. Contract and Disbursement S-curve 21 G. Fund Flow Diagram 24

V. FINANCIAL MANAGEMENT 25

A. Updated Financial Management Assessment 25 B. Disbursement 27 C. Accounting 28 D. Auditing and Public Disclosure 28

VI. PROCUREMENT AND CONSULTING SERVICES 30

A. Advance Contracting 30 B. Procurement of Goods, Works, and Consulting Services 30 C. Procurement Plan 31 D. Consultant's Terms of Reference 31 E. Review of Contract Modifications 32

VII. SAFEGUARDS 33

A. Environment 33 B. Land Acquisition and Resettlement 35 C. Indigenous Peoples 36

VIII. GENDER AND SOCIAL DIMENSIONS 38

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 39

A. Project Design and Monitoring Framework for the Investment Program 39 B. Design and Monitoring Framework for Tranche 1 42 C. Design and Monitoring Framework for Tranche 2 44 D. Monitoring 47 E. Evaluation 47

F. Reporting 48 G. Stakeholder Communication Strategy 48

X. ANTICORRUPTION POLICY 49

XI. ACCOUNTABILITY MECHANISM 50

XII. RECORD OF FAM CHANGES 51

APPENDIXES 1 Procurement Plans 2 Terms of Reference for Construction Supervision of the Masalli-Jalilabad Road

Project (Tranche 1) 3 Terms of Reference for Program Management Consultant 4 Terms of Reference for Construction Supervision of the Jalilabad-Shorsulu Road

Project (Tranche 2) 5 Compliance with FFA and Loan Covenants

Facility Administration Manual Purpose and Process

1. The facility administration manual (FAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The FAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the FAM.

2. The State Agency of Azerbaijan Automobile Roads (AAY) is wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB’s policies and procedures. ADB staff is responsible to support implementation including compliance by AAY of their obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures.

3. At Loan Negotiations the borrower and ADB shall agree to the FAM and ensure consistency with the Framework Financing Agreement (FFA). Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the FAM and the FFA, the provisions of the FFA shall prevail.

4. After ADB Board approval of the facility and Management approval of project's periodic financing request

(PFR) reports, changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the FAM.

ABBREVIATIONS

AAY = State Agency of Azerbaijan Automobile Roads ADB = Asian Development Bank ADF = Asian Development Fund AFS = audited financial statements CQS = consultant qualification selection DMF = design and monitoring framework EARF = environmental assessment and review framework EIA = environmental impact assessment EMP = environmental management plan ESMS = environmental and social management system GACAP = governance and anticorruption action plan GDP = gross domestic product ICB = international competitive bidding IEE = initial environmental examination IPP = indigenous people plan IPPF = indigenous people planning framework LAR = land acquisition and resettlement LIBOR = London interbank offered rate MFF = multitranche financing facility MOT = Ministry of Transport NCB = national competitive bidding NGOs = nongovernment organizations PAI = project administration instructions PAM = project administration manual PIU = project implementation unit QBS = quality based selection QCBS = quality- and cost based selection RRP = report and recommendation of the President to the Board SBD = standard bidding documents SGIA = second generation imprest accounts SOE = statement of expenditure SPS = Safeguard Policy Statement SPRSS = summary poverty reduction and social strategy TOR = terms of reference

I. PROGRAM/PROJECT DESCRIPTION

A. Rationale

1. The transport sector in Azerbaijan, of which roads comprise the dominant mode of freight and passenger transport, plays an important role in the economy, accounting for around 6% of the gross domestic product (GDP). The country occupies an important geographical position in terms of transit routes, with roads and railway lines connecting the areas of the Black Sea and the Caspian Sea. Thus, the transport sector contributes to regional cooperation by facilitating the development of international trade. This sector is also crucial to the domestic economy since it links the rural population to urban and international markets.

2. In the past, Azerbaijan’s economy has been mainly dependent on oil sector revenues. With the oil boom expected to last for a finite period, the Government has put emphasis on the development of non-oil sector infrastructure to sustain economic growth. Accordingly, over the past few years, Azerbaijan has been rehabilitating and developing the non-oil sector infrastructure needed to sustain rapid growth, benefiting from increasing oil and gas revenues, and also putting in place a credible framework to effectively manage the increase in resource flows. The development of transport infrastructure is one of the key tasks of the Government to sustain GDP growth and promote trade with neighbouring countries. The poor condition of the national road network poses a challenge. Approximately 56% of the main road network is in a poor state and needs urgent repair, and the majority of lower category roads are in an extremely poor condition. Among other road sections, the East–West road corridor (Baku–Ganja–Gazakh–Georgian border through Alyat and a more direct route through Shamakhi, and the North–South road corridor (Russian border–Baku–Alyat–Astara–Iranian border), as well as feeder roads connecting rural areas with the main corridors, are considered to be key to addressing the transport bottleneck to nationwide development and poverty alleviation.

3. Strategic context and roadmap. The State Program on Poverty Reduction and Economic Development (SPPRED) 2008–20151 and the State Program on Socioeconomic Development of Regions (SPSDR) (2009–2014)2 represents the Government’s overall strategic framework for development. The infrastructure pillar of the SPPRED contemplates, among other things, the reconstruction of a significant portion of the country’s roads in accordance with international standards. To realize the strategic goal for road reconstruction, the Government prepared a Road Network Development Program (RNDP)3 for 2006–2015, which was subsequently extended to cover the period of 2006–2022. Under the RNDP, the reconstruction and rehabilitation of about 9,500 km of roads is contemplated during the period of 2006–2022 at an estimated total cost of $8.46 billion (in 2012 prices). Through both physical and nonphysical interventions, the RNDP establishes a roadmap for the development of an efficient, safe, sustainable, and internationally and domestically integrated transport network in support of the country’s economic and social development. Supporting new priority projects of the Government necessitates a new multitranche financing facility (MFF). The strategy and roadmap of first MFF,

1 Republic of Azerbaijan. 2008. State Program on Poverty Reduction and Economic Development, 2008–2015. Baku. 2 Republic of Azerbaijan. 2009. State Program on Socioeconomic Development of Regions, 2009–2014. Baku. 3 The Ministry of Transport prepared a Road Network Development Program for 2006–2015 in July 2006 at an

estimated cost of $5.3 billion (in 2006 prices) covering about 9,500 km of roads. While the Government undertook implementation of the road projects along the lines presented in the RNDP, there were delays in implementation of RNDP mainly due to delays in land acquisition and resettlement, project readiness, delays in procurement of works and consulting services, and lack of institutional capabilities.

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which have been updated, remain valid for this new MFF. The proposed investment program fits well with the overall transport sector development strategy4 of the Government.

4. MFF. The Alyat–Masalli road, which is a priority project under the Government’s RNDP, was originally planned for implementation under the World Bank financed Highway II Project. The World Bank dropped about 63 km road section (Masalli to Shorsulu) from their investment program, due to the reasons: (i) experienced cost overruns and low disbursement rates from their ongoing projects, (ii) even additional financing was not enough to finance up to this section, (iii) World Bank policy restrict additional investments, when the disbursements level from ongoing projects are below the minimum. However, the preparatory works such as detailed designs, cost estimates and safeguard documents, etc., have been prepared by the World Bank. Land acquisition and resettlement (LAR) activities have been substantially completed as per the World Bank’s LAR. Thus, considering the level of project readiness, the Government has requested ADB to provide a new MFF (for the Second Road Network Development Investment Program) to finance the construction between Masalli and Shorsulu. ADB has carried out due diligence of the above preparatory documents to confirm to ADB’s policies and requirements.

5. The proposed investments, physical and nonphysical in nature, will add to those already being supported by ADB and other development partners. Built on the results of the ongoing first Road Network Development Program (footnote 9) and through a holistic road subsector based approach involving physical investment and capacity development, Azerbaijan’s road network will become more effective and efficient. The investment program will include capacity development component for (A) strengthening the capacity of executing agency (EA) and implementing agency (IA) through special training and on job-training in strategic planning, project preparation and implementation; (B) assisting EA/IA in (i) mainstreaming road safety audits during design, construction and implementation phases of the road network and prescribing road safety improvements, (ii) development of road standards and specifications including for pavement layers under different climatic and site conditions and (iii) prioritizing road sections for long term performance based maintenance contracts.

6. Compared to stand alone loan, the MFF is the suitable funding modality given its flexibility, ability to sequence investments considering the full readiness of the program. Additionally, the `country allocation’ limitation doesn’t allow stand-alone loan to the extent required to finance the 63 km of highway section. All the preconditions for the MFF are in place, including the existence of a coherent strategy, sector roadmap, investment and financing plans, and policy framework. Preparatory works for the sections of the road under 2 tranches have been completed and tranches are ready in all respects for implementation. Considering the experiences from the first MFF and to ensure continuity, the government selects MFF modality to finance this motorway section. Based on the near-term investment requirements of the Government, the new MFF, amounting to $500 million has been planned at 80% of the estimated cost of the proposed investment program. This will consolidate the partnership started under the existing MFF. The lessons learnt from the implementation of the first Road Network Development Program and from World Bank projects—such as cost overruns, slow implementation, and low disbursement rates have been incorporated in designing the new MFF.

4 In support of implementing SPPRED (2008–2015) and other programs of the Government, the Ministry of Transport

prepared a transport policy paper, followed by a transport sector development strategy developed with ADB assistance [ADB. 2006. Republic of Azerbaijan: Transport Sector Development Strategy. Baku. (Technical Assistance Consultant Report)].

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B. Impact and Outcome

7. The impact of the investment program will be greater economic growth in Azerbaijan and expanded trade with neighbouring countries. The outcome of the investment program will be an efficient, adequate, safe, and sustainable road corridors in Azerbaijan.

8. Outputs of the Investment Plan. The outputs will be:

(i) A new motorway between Masalli and Shorsulu constructed, and key sections of R32 and M5/R57 rehabilitated;

(ii) Program management and implementation capacities of State Agency of Azerbaijan Automobile Roads (AAY) improved; and

(iii) Transport sector governance improved.

9. Outputs of Tranche 1 (Loan 2921). The outputs will be:

(i) Around 30 km section of the new motorway between Masalli and Jalilabad of the Masalli–Shorsulu road constructed;

(ii) Project implementation support to AAY for construction supervision and program management;

(iii) Due diligence requirements completed for new road sections R32 and M5/R57; and

(iv) R32 (Ujar–Sardab–Agjabedi) road rehabilitated.

10. Outputs of Tranche 2 (Loan 3144). The outputs will be:

(i) Around 30 km of the new motorway between Jalilabad and Shorsulu constructed; (ii) Project management and implementation capacity of AAY improved; (iii) Transport sector governance improved; and (iv) M5 (Yevlakh–Zagatala–Georgian border) and R57 road sections rehabilitated.

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II. IMPLEMENTATION PLANS

A. Project Readiness Activities for Tranche 2

11. Detailed design, cost estimates and safeguard documents, etc., prepared by the World Bank have been considered for Tranches 1 and 2 under the investment program after necessary due diligence to confirm to ADB’s policies and requirements. The project implementation unit (PIU) in AAY will manage implementation of the investment program, together with the World Bank-assisted highway II project. The overall readiness activities for Tranche 2 are in Table 2.1

Table 2.1: Project Readiness Activities for Tranche 2

Indicative Activities

2014 2015

Who responsible Q1 Q2 Q3 Q4 Q1 Q2

Advance contracting actions EAa and ADB

Establish project implementation arrangements

EAa and ADB

ADB Management approval ADB

Loan signing ADB and Government

Issuance of legal opinion Government

Loan effectiveness ADB and Government

ADB = Asian Development Bank, EA = executing agency. a The Ministry of Transport (MOT) was the executing agency and Azeravtoyol OJSC (AAY) under MOT was the

implementing agency. In accordance with the Order No. 826 of the President of Azerbaijan dated 9 March 20l6, ARS has been renamed as the Azeravtoyol Open Joint-Stock Company (AAY) which now reports directly to the Cabinet of Ministers of Azerbaijan Republic. Recently, AAY was converted to the State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 19 December 2017.

12. For Tranche 2, the AAY has provided: (i) a project appraisal report, including technical, economic, financial, environmental, and social assessments; and (ii) a PFR. The project report is prepared in accordance with the criteria and procedures stated in Schedule 4 of the FFA and other related requirements of the Government and ADB. B. Overall Program/Project Implementation Plan

13. The investment program will be implemented over a period of seven years and will be completed by 31 December 2020. Tranche 1 completion date was extended from 31 January 2018 to 31 December 2020. The updated implementation plan for Tranche 1 is shown in Figure 2.1. The implementation plans shall be updated annually by AAY/PIU together with ADB. 14. Tranche 2 will be implemented over five years and completed by 30 June 2020. The loan closing date will be 31 December 2020. The implementation plan for Tranche 2 is shown in Figure 2.2. The implementation plans shall be updated annually by AAY/PIU together with ADB.

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Figure 2.1: Implementation Plan for Tranche 1

Activity 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Civil works

Procurement of civil works

Implementation of civil works

Construction Supervision

Selection of consultants

Construction supervision

Program Management


Program management

Completed activities for original program scope

Planned activities for new road section

6 Figure 2.2: Implementation Plan for Tranche 2

Activity 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Civil works

Procurement of civil works

Implementation of civil works



Construction supervision

Road Safety Audit

Standards Pavement Design

Feasibility Study on Tolling

Land Acquisition


Ongoing activities for original program scope

Planned activities for new road section and tolling system

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III. PROGRAM/PROJECT MANAGEMENT ARRANGEMENTS

A. Project Implementation Organizations – Roles and Responsibilities

15. The Ministry of Transport (MOT) was the EA and AAY under MOT was the implementing agency. In accordance with the Order No. 826 of the President of Azerbaijan dated 9 March 2016, AAY now reports directly to the Cabinet of Ministers of Azerbaijan Republic and is subsequently renamed as Azeravtoyol OJSC. Recently, AAY was converted to the State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 19 December 2017. In order to administer the program/project effectively, the existing Steering Committee is comprised of representatives from the Cabinet of Ministers’ Office, Ministry of Economic Development, Ministry of Finance, AAY, and the PIU director among others. Its primary task is to oversee the implementation of the first Road Network Development Program will continue to provide overall guidance for the implementation of the second investment program as Program Steering Committee (PSC). PSC will meet quarterly to monitor and ensure taking appropriate measures for timely implementation of the projects. PSC will ensure interagency coordination to facilitate timely approvals from various agencies and provide overall guidance for implementation of the investment program.

16. AAY/PIU will be responsible for day to day implementation activities. AAY/PIU will expand the existing project implementation unit (PIU) to implement the investment program. Given the limited technical staff in PIU, a program management consultant (PMC) was engaged under Tranche 1. Based on such PMC’s performance under Tranche 1, the scope of its contract may be extended to cover various studies for transport sector governance under Tranche 2 and to assist AAY/PIU in implementation of both Projects 1 and 2 covering the entire investment program. PMC will also build AAY’s capacity through on the job training and other specialized trainings for PIU staff, including the capacity to integrate climate proofing measures in the road design, procurement, construction monitoring and maintenance, environmental and social safeguards, financial management, contract and project management so that the PIU staff can independently handle program management in future. PMC shall help AAY/PIU in submitting project/program management reports to ADB. Thus, PMC role is to build the capacity and not to substitute the capacity. The implementation plan for PMC is shown in Figure 3.2.

17. The PIU and PMC jointly will oversee all activities under the investment program, including project preparation and implementation, procurement of works and selection of consultants, disbursements and financial management, compliance with safeguard requirements and reporting to AAY and ADB. PMC will introduce a suitable management information system in the PIU and train them for efficient and effective management of the investment program. The PMC will assist AAY/PIU in preparing and submitting flash reports and photographs concerning implementation progress of each tranche. It will also submit other required performance and monitoring reports consistent with existing project implementation requirements and compliance with covenants. The implementation progress reports will include evaluation of issues/problems and recommendations for remedial actions.

Table 3.1: Project Implementation Organizations – Roles and Responsibilities

Project Implementation Organizations Management Roles and Responsibilities

Program Steering Committee (PSC)

• Monitor and take appropriate measures for timely implementation of the investment program;

• Interagency coordination to facilitate timely approvals from various agencies;

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Project Implementation Organizations Management Roles and Responsibilities • Provide overall guidance for implementation of the investment

program;

• Review implementation progress and resolve issues;

• Comprised of representatives from Cabinet of Ministers’ Office, Ministry of Economic Development, Ministry of Finance, Ministry of Transport, AAY, and the PIU director among others; and

• To meet periodically.

State Agency of Azerbaijan Automobile Roads (AAY)

• Overall responsibility in coordinating program, tranches and projects;

• Ensure timely provision of agreed counterpart funds and approval for project activities;

• Ensure successful implementation of all components of each tranche under the investment program;

• Ensure timely engagement of the contractors and consultants;

• Provide overall project management; finalizing surveys, design, bidding documents, and contract awards;

• Monitor and evaluate project activities and outputs, including periodic review, preparation of review and progress reports reflecting issues and time-bound actions taken (or to be taken), and their timely submission to ADB;

• Prepare regular periodic progress reports, monitoring and evaluation reports, and project completion report and their timely submission to MOF and ADB;

• Establish strong financial management system and submit timely withdrawal applications to ADB, conducting timely financial audits as per agreed timeframe, submitting audited project account reports, and taking recommended actions;

• Process and submit to ADB any request, when required, for reallocating the loan proceeds;

• Submit subsequent PFRs for subsequent tranches and projects under the investment program;

• Involve beneficiaries and civil society representatives in all stages of project design and implementation;

• Public disclosure of project outputs and procurement results;

• Quality assurance of works, and services of consultants and counterpart staff;

• Ensure compliance with all loan covenants and reporting to ADB on compliance with covenants;

• Prepare, implement, and monitor safeguards in accordance with the LARF and EARF, ADB’s SPS (2009), Loan Agreement and the Financing Agreement;

• Establish a grievance redress mechanism with a dedicated grievance staff to address all subproject-related grievance;

• Ensure projects' sustainability during post implementation stage and reporting to ADB on the assessed development impacts.

Program Management Consultants

• Overall program management of the investment program;

• Jointly with PIU to oversee all activities under the investment program, including project preparation and implementation, procurement of works and selection of consultants, disbursements and financial management, contract administration, compliance with safeguard requirements (including monitoring and reporting of

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activities for livelihood restoration of DPs) and reporting to ADB and AAY;

• Assist PIU to ensure reduced time for procurement and contracting of works, goods, and services; on-time and within budget completion of works; and timely payment to contractors and consultants;

• Assist PIU in engaging contractors and consultants and in contract administration;

• Provide capacity building support for AAY/PIU through on-the-job and specialized training in integrating climate proofing measures in the road design, procurement, construction monitoring and maintenance, environmental and social safeguards, financial management, contract and project management

• Assist PIU to ensure compliance with loan covenants by the borrower/executing agency;

• Assist PIU in grievance redress management and reporting

• Assist PIU to submit snapshot of progress with special emphasis on the major problems in implementation of the projects and the steps that are required to be taken by the Employer / Consultants to overcome such problems.

Construction Supervision Consultants

• Assist the AAY/PIU in overall program management of the investment program;

• Jointly with PIU, oversee all activities under the investment program, including project preparation and implementation, procurement of works and selection of consultants, disbursements and financial management, contract administration, compliance with safeguard requirements (including monitoring and reporting of activities for livelihood restoration of DPs) and reporting to ADB and AAY;

• Function as the “Engineer” in administering the civil works contract (the Contract) in accordance with FIDIC;

• Assist PIU in engaging contractors and consultants and in contract administration;

• Provide capacity building support for AAY/PIU through on-the-job and specialized training on road design, procurement, construction monitoring and maintenance, environmental and social safeguards, financial management, contract and project management;

• Assist PIU to ensure compliance with loan covenants by the borrower/executing agency;

• Monitor land acquisition and resettlement activities undertaken by PIU and provide the required support;

• Assist PIU in grievance redress management and reporting;

• Review and comment on the monthly progress reports submitted by the contractor;

• Assist in establishing a system for project performance monitoring in accordance with the project framework; and

• Assist PIU to submit snapshot of progress with special emphasis on the major problems in implementation of the projects and the steps that are required to be taken by the Employer / Consultants to overcome such problems.

Asian Development Bank (ADB)

• Assist AAY/PIU to ensure reduced time for procurement and contracting of works, goods, and services; on-time and within budget

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completion of works; and timely payment to contractors and consultants;

• Review all the documents that require ADB approval;

• Conduct regular loan review missions, a mid-term review, and project/program completion mission;

• Timely processing of withdrawal applications and release eligible funds;

• Update regularly the project performance review reports with the assistance of MOF and AAY; and

• Update and post on ADB website the project information for public disclosure, and the safeguards documents in accordance with the ADB SPS (2009).

Ministry of Finance (MOF) • Signing the FFA and the Loan Agreement for each Project;

• Monitoring of the investment program implementation and providing respective coordination and facilitation;

• Budgeting, allocating and releasing counterpart funds;

• Endorsing to ADB the authorized staff with approved signatures for WAs processing; and

• Processing and submitting to ADB any request, when required, for reallocating the loan proceeds.

B. Key Persons Involved in Implementation

1. Executing Agency

Name Position Contact Number

Saleh Mammadov Chairman Tel.: +994 12 406 96 77 State Agency of Azerbaijan Automobile

Roads Fax: +994 12 406 97 02 [email protected]

Jamil Rustamkhanli Deputy Chairman Tel.: +994 12 406 96 77 State Agency of Azerbaijan Automobile


Jeyhun Yusifov Director, Project Implementation Unit Tel.: +994 12 406 96 77 State Agency of Azerbaijan Automobile


2. Asian Development Bank

Name Position Contact Number

Dong-Soo Pyo

Director

Tel.: +63 2 632 6765

Transport and Communications Division, CWRD

Fax: +63 2 636 2428 [email protected]

Jurgen Sluijter Senior Transport Specialist Tel.: +63 2 632 6413 Transport and Communications Division,

CWRD Fax: +63 2 636 2428 [email protected]

mailto:[email protected]




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C. Project Organization Structure

Figure 3.1: Project Organization Structure

Ministry of Finance

AAY [Executing Agency]

Project Steering Committee (PSC)

[Representatives from Ministry of Finance, Ministry of Economic

Development, Cabinet Minister’s Office and AAY]

PIU4 of AAY [Implementing Agency]

Ministry of Economic

Development

Asian Development

Bank

Civil Works Contractors

Construction Supervision Consultants

Consultants for Capacity

Development Studies for Road Network

Management: 1. Road Safety Program; 2. Road and Pavement

Design Standards and Specifications

3. Feasibility study for tolling facilities along M3 Highway

• Engineering, Quality Control;

• Procurement;

• Contract Administration;

• Financial and MIS;

• Compliance with safeguard and other ADB requirements

• Reporting

Program Management Consultant (PMC)

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Figure 3.2: Implementation Plan for Program Management Consultant

Activity 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Program Management for both Tranches

Tranche 1

Review various studies and prepare initial LARP compliance report

Finalize TORs for Standards and Pavement Design Study

Finalize TORs for Road Safety Study

Tranche 2

Procurement of works and consultants


Facilitate and monitor conduct of studies

Prepare DMF monitoring reports

Identify other studies as needed


Ongoing and planned activities for revised program scope

Planned activities for new road sections and tolling system

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IV. COSTS AND FINANCING

18. The total cost of the investment program is estimated at $644 million equivalent. The total cost of Tranche 1 amounts to $312 million and Tranche 2 amounts to $332 million equivalent. Table 4.1 summarizes the costs estimates and demonstrates how the proposed second investment program contributes significantly in accomplishment of Azerbaijan’s overall road network development plan.

Table 4.1: Investment Program ($ million)

Beforea Afterb

Item MFF T1 T2 MFF T1 T2

A. Base Costc 1. Civil works 360.0 180.0 180.0 380.0 180.0 200.0

2. Equipment 0.0 0.0 0.0 30.0 0.0 30.0 3. Consultancy services 30.0 10.0 20.0 29.0 10.0 19.0 4. Project management 0.0 0.0 0.0 1.0 0.0 1.0 5. Land acquisition and resettlement 10.0 5.0 5.0 11.0 5.0 6.0 6. Taxes and duties 90.0 45.0 45.0 85.0 45.0 40.0 Subtotal (A) 490.0 240.0 250.0 536.0 240.0 296.0 B. Contingenciesd 110.0 60.0 50.0 80.0 60.0 20.0 C. Financing Charges During

Implementation 25.0 12.0 13.0 28.0 12.0 16.0

Total (A+B+C) 625.0 312.0 313.0 644.0 312.0 332.0 MFF = multitranche finance facility, T1 = Tranche 1 (Loan 2921), T2 = Tranche 2 (Loan 3144). a Refers to the original amount approved for T1 on 25 October 2012 and T2 on 29 July 2014. b Refers to the investment program after the proposed change in scope.

c In mid-2017 prices for the major change in scope portion. Taxes and duties are financed from government resources. d The aggregate incremental cost of the additional change in scope is estimated at $179.6 million (see para. 21) while

there is currently $238 million in savings under the MFF (para. 16). Upon completing the procurement for the activities covered under the change in scope, the Asian Development Bank will discuss with the government the cancellation of funds in excess of what is required under the MFF. Commitment charges will continue to apply to the unutilized amount until such time as any excess funds have been cancelled.

Source: ADB estimates.

19. The financing plan for Tranche 1 and 2 is summarized in Table 4.2 and 4.3. The Government contribution will be used to meet land acquisition costs, taxes, duties and interest and other charges during construction.

Table 4.2: Financing Plan

($ million) Beforea Afterb

Item

MFF T1 T2 Share of

Total (%) MFF T1 T2 Share of

Total (%)

Asian Development Bank Ordinary capital resources (loan) 500.0 250.0 250.0 80.0 500.0 250.0 250.0 78.0

Government 125.0 62.0 63.0 20.0 144.0 62.0 82.0 22.0

Total 625.0 312.0 313.0 100.0 644.0 312.0 332.0 100.0

MFF = multitranche finance facility, T1 = Tranche 1 (Loan 2921), T2 = Tranche 2 (Loan 3144). a Refers to the original amount approved for T1 on 25 October 2012 and T2 on 29 July 2014. b Refers to the investment program after the proposed change in scope. Source: ADB estimates.

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Table 4.3: ADB Financing by Expenditure Category for Tranche 1 and 2 ($ million)

Item T1 T2 Total Cost

A. Base Costa 1. Civil Works 187.0 186.0 373.0 2. Equipment 0.0 25.0 25.0 3. Consultancy Servicesb 10.0 10.0 20.0

Subtotal (A) 197.0 221.0 418.0 B. Contingenciesc 53.0 29.0 82.0 C. Interest and Other Charges 0.0 0.0 0.0

Total 250.0 250.0 500.0 a In mid-2017 prices for the major change in scope portion. b Construction supervision, program management and various other studies. c Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price

contingencies were estimated using the Asian Development Bank cost escalation factors; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.


20. With the revised scope, Tranche 1 and 2 will cost the same. Table 4.4.a and 4.4.b present the revised based cost breakdown.

Table 4.4.a: Tranche 1 Investment Plan ($ million)

Item Amounta

A. Base Costb 1. Motorway construction 157.00 2. R32 rehabilitation 73.00 3. Project implementation support 12.00 4. Land acquisition 5.00 Subtotal (A) 247.00 B. Contingenciesc 53.00 C. Financing Charges During Implementationd 12.00 Total (A+B+C) 312.00

Table 4.4.b: Tranche 2 Investment Plan ($ million)

Item Amounta

A. Base Costb 1. Motorway construction 177.00 2. M5/R57 rehabilitation 68.00 3. Installation of tolling facilities and structures 30.00 4. Project implementation support and capacity development 12.00 Subtotal (A) 287.00 B. Contingenciesc 29.00 C. Financing Charges During Implementation 16.00 Total (A+B+C) 332.00 a Includes taxes and duties of $111 million as cash contribution to be financed from government resources. b In mid-2017 prices for the major change in scope portion. c Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price



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21. The government has requested a loan of $250 million from ADB’s ordinary capital resources to help finance each individual tracnhes under MFF. The loan will have a 21-year term, including a grace period of 4 years, straight-line repayment method, an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year, and such other terms and conditions set forth in the draft loan agreement. Based on this, the average loan maturity is 12.75 years and there is no maturity premium payable to ADB.

A. Detailed Cost Estimates by Expenditure Category

Table 4.5: Updated Detailed Cost Estimates by Expenditure Category for the Investment Program

($ million) a

Item Foreign

Exchange Local

Currency Total Cost

% of Total Base Cost

A. Base Costs 1. Civil Works 373.00 0.00 373.00 70.00 2. Equipment 25.00 0.00 25.00 5.00 3. Consultants a. Construction Supervision 12.00 0.00 12.00 2.00 b. Program Management and studies 8.00 0.00 8.00 1.00

4 Land Acquisition 0.00 5.00 5.00 1.00 Subtotal (A) 418.00 5.00 423.00 79.00

B. Taxes and Duties 0.00 111.00 111.00 21.00 Total Base Cost 418.00 116.00 534.00 100.00

C. Contingenciesb 82.00 0.00 82.00 15.00

Subtotal (C) 82.00 0.00 82.00 15.00 D. Financing Charges During Implementation Subtotal (D) 0.00 28.00 28.00 5.00 Total Project Cost (A+B+C+D) 500.00 144.00 644.00 120.00 a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price



16

Table 4.6: Detailed Cost Estimates by Expenditure Category for Tranche 1

($ million) a

Item Foreign

Exchange Local

Currency Total Cost


A. Base Costs

1. Civil Works 187.00 0.00 187.00 75.00 2. Consultants a. Construction Supervision 6.00 0.00 6.00 2.00

b. Program Management and studies 4.00 0.00 4.00 1.60 3. Land Acquisition 0.00 5.00 5.00 2.00 Subtotal (A) 197.00 5.00 202.00 80.60

B. Taxes and Duties 0.00 45.00 45.00 19.40 Total Base Cost 197.00 50.00 247.00 100.00 C. Contingencies b

Subtotal (C) 53.00 0.00 53.00 21.00 D. Financing Charges During Implementation Subtotal (D) 0.00 12.00 12.00 5.00 Total Project Cost (A+B+C+D) 250.00 62.00 312.00 136.00

a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price



Table 4.7: Detailed Cost Estimates by Expenditure Category for Tranche 2

($ million)a

Item Foreign

Exchange Local

Currency Total Cost


A. Base Costs

1. Civil Works 186.00 0.00 186.00 65.00

2. Equipment 25.00 0.00 25.00 8.00 3. Consultants a. Construction Supervision 6.00 0.00 6.00 2.00

b. Program Management 3.00 0.00 3.00 1.00

c. Capacity development and studies 1.00 0.00 1.00 0.30 Subtotal (A) 221.00 0.00 221.00 76.30

B. Taxes and Duties 0.00 66.00 66.00 23.70 Total Base Cost 221.00 66.00 287.00 100.00 C. Contingencies b 29.00

Subtotal (C) 29.00 0.00 29.00 10.00 D. Financing Charges During Implementation c Subtotal (D) 0.00 16.00 16.00 5.00 Total Project Cost (A+B+C+D) 250.00 82.00 332.00 115.00




17

B. Allocation and Withdrawal of Loan Proceeds

Table 4.8: Allocation and Withdrawal of Loan Proceeds (Second Road Network Development Investment Program – Tranche 1)

CATEGORY ADB FINANCING

Number Item Total Amount Allocated

for ADB Financing Basis for Withdrawal from the Loan

Account ($)

1 Works 180,000,000 100% of total expenditure claimed*

2 Consulting Services 10,000,000 100% of total expenditure claimed*

3 Unallocated 0

TOTAL 250,000,000

* Exclusive of taxes and duties imposed within the territory of the Borrower.

Table 4.9: Allocation and Withdrawal of Loan Proceeds (Second Road Network Development Investment Program – Tranche 2)

CATEGORY ADB FINANCING

Number Item Total Amount Allocated for

ADB Financing ($)

Basis for Withdrawal from the Loan Account

Category Subcategory

1 Works 200,000,000 100% of total expenditure claimed*

2 Consulting Services 20,000,000

2A Construction Supervision 7,000,000 100% of total expenditure claimed*

2B Program and Project Management Support

5,500,000 100% of total expenditure claimed*

2C Studies for Transport Sector Governance


2D Sector Capacity Development


2E Project External Audits 300,000 100% of total expenditure claimed*

3 Unallocated 30,000,000

TOTAL 250,000,000

* Exclusive of taxes and duties imposed within the territory of the Borrower.

18

C. Detailed Cost Estimates by Financier

Table 4.10: Detailed Cost Estimates by Financier for the Investment Program ($ million) a

ADB Azerbaijan

Item Amount % of Cost Category Amount

% of Cost Category

Total Cost

A. Investment Costs 1 Civil Works 360.00 100.00 0.00 0.00 360.00 2 Consultants a. Construction Supervision 12.00 100.00 0.00 0.00 12.00

b. Program Management and Other Studies 18.00 100.00 0.00 0.00 18.00 3 Land Acquisition 0.00 0.00 5.00 100.00 5.00

Subtotal (A) 390.00 98.00 5.00 2.00 395.00 B. Taxes and Duties 0.00 0.00 114.00 100.00 114.00

Total Base Cost 390.00 77.00 119.00 23.00 509.00

C. Contingencies b 110.00 100.00 0.00 0.00 100.00 D. Financing Charges During Implementation 0.00 0.00 25.00 100.00 25.00

Total Project Cost (A+B+C+D) 500.00 78.00 144.00 22.00 644.00 % Total Project Cost 78.00 22.00 100.00

a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price contingencies

were estimated using the Asian Development Bank cost escalation factors; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.


Table 4.11: Detailed Cost Estimates by Financier for Tranche 1 ($ million) a




ADB Azerbaijan


% of Cost Category

Total Cost

A. Investment Costs 1 Civil Works 187.00 100.00 0.00 0.00 187.00 2 Consultants

a. Construction Supervision 6.00 100.00 0.00 0.00 6.00 b. Program Management 4.00 100.00 0.00 0.00 4.00

3 Land Acquisition 0.00 0.00 5.00 100.00 5.00 Subtotal (A) 197.00 97.00 5.00 3.00 202.00

B. Taxes and Duties 0.00 0.00 45.00 100.00 45.00

Total Base Cost 197.00 97.00 50.00 3.00 247.00 C. Contingencies b 53.00 100.00 0.00 0.00 53.00

D. Financing Charges During Implementation 0.00 0.00 12.00 100.0 12.00 Total Project Cost (A+B+C+D) 250.00 80.00 62.00 20.00 312.00 % Total Project Cost 80.00 20.00 100.00

19

Table 4.12: Detailed Cost Estimates by Financier for Tranche 2 ($ million) a

a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price contingencies


c Includes interest and commitment charges. Interest during construction has been computed at the 5-year forward London interbank offered rate. The commitment charges are 0.15% per year to be charged on the undisbursed loan amount.


D. Detailed Cost Estimates by Components

Table 4.13: Detailed Cost Estimates by Component – Tranche 1 ($ million) a

Item Total Cost

Component 1: Infrastructure Development

Amount % of Cost Category

A. Investment Costs 1. Civil Works 187.00 187.00 100.00 2. Consultants a. Construction Supervision 6.00 6.00 100.00 b. Program Management 4.00 4.00 100.00 3. Land Acquisition 5.00 5.00 100.00 Subtotal (A) 202.00 202.00 100.00 B. Taxes and Duties 45.00 45.00 100.00 Total Base Cost 247.00 247.00 100.00 C. Contingencies b Subtotal (C) 53.00 53.00 100.00 D. Financing Charges During Implementation Subtotal (D) 12.00 12.00 100.00 Total Project Cost (A+B+C+D) 312.00 312.00 100.00

a In mid-2017 prices for the major change in scope portion.

b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price contingencies were estimated using the Asian Development Bank cost escalation factors; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.


ADB Azerbaijan


% of Cost Category

Total Cost

A. Investment Costs 1. Civil Works 186.00 100.00 0.00 0.00 186.00 2. Equipment 25.00 100.00 0.00 0.00 25.00 3. Consultants a. Construction Supervision 6.00 100.00 0.00 0.00 6.00 b. Program Management 3.00 100.00 0.00 0.00 3.00 e. Capacity development and studies 1.00 100.00 0.00 0.00 1.00 Subtotal (A) 221.00 100.00 0.00 0.00 221.00 B. Taxes and Duties 0.00 0.00 66.00 100.00 66.00 Total Base Cost 221.00 77.00 66.00 23.00 287.00 C. Contingencies b 29.00 100.00 0.00 0.00 29.00 D. Financing Charges During Implementation c 0.00 0.00 16.00 100.0 16.00 Total Project Cost (A+B+C+D) 250.00 75.00 82.00 25.00 332.00 % Total Project Cost 75.00 25.00 100.00

20

Table 4.14: Detailed Cost Estimates by Components – Tranche 2

($ million) a

Item Total Cost

Component 1: Infrastructure Development

Component 2: Capacity Development

and Studies

Amount % of Cost Category Amount

% of Cost Category

A. Investment Costs 1 Civil Works 186.00 186.00 100.00 0.00 0.00 2 Equipment 25.00 25.00 100.00 0.00 0.00 3 Consultants a. Construction Supervision 6.00 6.00 100.00 0.00 0.00 b. Program Management 3.00 2.00 67.00 1.00 33.00

c. Capacity development

and studies 1.00 0.00 0.00 1.00 100.00

Subtotal (A) 221.00 220.00 99.00 2.00 1.00

B. Taxes and Duties 66.00 66.00 100.00 0.00 0.00 Total Base Cost 287.00 286.00 99.00 2.00 1.00

C. Contingencies b

Subtotal (C) 29.00 29.00 100.00 0.00 0.00 D. Financing Charges During

Implementation c

Subtotal (D) 16.00 16.00 0.00 0.00 0.00 Total Project Cost (A+B+C+D) 332.00 330.00 99.00 2.00 1.00



c Includes interest and commitment charges. Interest during construction has been computed at the 5-year forward London interbank offered rate. The commitment charges are 0.15% per year to be charged on the undisbursed loan amount.


21

E. Detailed Cost Estimates by Year

Table 4.15: Detailed Cost Estimates by Year – Tranche 1 ($ million) a

Item Total Cost 2012 2013 2014 2015 2016 2017 2018 2019 2020

A. Investment Costs 1. Civil Works 187.00 0.00 0.00 29.00 55.00 32.00 32.00 10.00 15.00 14.00 2. Consultants

a. Construction Supervision 6.00 0.00 1.00 1.90 1.50 0.60

0.60

0.12

0.12

0.16

b. Program Management and studies 4.00 0.00 1.30 1.00 1.00 0.40 0.10 0.10 0.10 0.00

3. Land Acquisition 5.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Subtotal (A) 202.00 5.00 2.30 31.90 57.50 33.00 32.70 10.22 15.22 14.16 B. Taxes and Duties 45.00 0.00 0.50 7.38 13.31 7.59 7.50 2.48 2.48 3.76 Total Base Cost 247.00 5.00 2.80 39.28 70.81 40.59 40.20 12.70 17.70 17.92 C. Contingencies b 53.00 0.00 0.70 9.87 18.11 8.14 9.00 1.12 3.12 2.94

D. Financing Charges During Implementation 12.00 0.00 1.50 1.50 1.50 1.50

1.50

1.50

1.50

1.50

Total Project Cost (A+B+C+D) 312.00 5.00 5.00 50.65 90.42 50.23

50.70

15.32

22.32

22.36 a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price



Table 4.16: Detailed Cost Estimates by Year – Tranche 2 ($ million) a

Item Total Cost 2014 2015 2016 2017 2018 2019 2020

A. Investment Costs

1. Civil Works 186.00 0.00 20.00 20.00 28.00 30.00 50.00 38.00 2. Equipment 25.00 0.00 0.00 0.00 0.00 0.50 15.00 9.50 3. Consultants a. Construction Supervision 6.00 0.00 0.00 0.70 1.00 1.60 1.70 1.00 b. Program Management 3.00 0.00 0.00 0.00 1.00 0.50 1.00 0.50

c. Capacity development and

studies 1.00 0.00 0.00 0.05 0.30 0.50 0.05 0.10 Subtotal (A) 221.00 0.00 20.00 20.75 30.30 33.10 67.75 49.10

B. Taxes and Duties 66.00 0.00 5.00 10.00 12.00 9.00 15.00 15.00 Total Base Cost 287.00 0.00 25.00 30.75 42.30 42.1 82.75 64.10

C. Contingencies b 29.00 0.00 5.50 8.00 4.50 5.00 2.00 4.00

D. Financing Charges During Implementation c 16.00 0.00 2.66 2.66 2.66 2.66 2.66 2.70

Total Project Cost (A+B+C+D) 332.00 0.00 33.16 41.41 49.46 49.76 87.41 70.80 a In mid-2017 prices for the major change in scope portion. b Physical contingencies computed at 10% for goods and civil works, and 5% for consulting services. Price contingencies



22

F. Contract and Disbursement S-curve

Loan 2921-AZE (Tranche 1)

Contract Awards Disbursements

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2013 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2014 128.024 3.126 0.000 0.000 131.150 18.237 0.623 3.712 8.542 31.114

2015 0.000 0.000 0.000 0.000 0.000 3.850 17.154 13.344 22.313 56.661

2016 0.000 0.000 0.000 0.000 0.000 0.000 4.773 14.835 13.906 33.514

2017 2.551 0.000 0.000 0.000 2.551 0.000 0.000 3.484 7.649 11.133

2018 0.000 0.000 76.000 0.000 76.000 0.000 0.000 0.000 10.950 10.950

2019 0.000 10.000 0.000 0.000 10.000 18.250 18.250 5.950 5.000 47.450

2020 0.000 0.000 0.000 30.299 30.299 7.300 12.000 10.000 3.000 32.300

2021 0.000 0.000 0.000 0.000 0.000 5.000 12.000 5.000 4.878 26.878 a Includes unallocated amount of $60.0 million. b Contract award and disbursements up to Q4 2017 are actual figures.

S-curve for Tranche 1

0

50

100

150

200

250

2013 2014 2015 2016 2017 2018 2019 2020 2021


23

Loan 3144-AZE (Tranche 2)


Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2015 0.000 0.000 94.952 5.692 100.644 0.000 0.000 0.000 21.460 21.460

2016 0.000 0.000 0.000 0.023 0.023 3.029 8.704 13.523 8.754 34.010

2017 4.492 0.000 0.000 0.000 4.492 0.000 0.000 0.000 4.987 4.987

2018 0.000 0.000 77.023 4.000 81.023 0.000 4.000 12.702 12.851 29.553

2019 0.000 30.000 0.090 0.034 30.124 21.000 40.000 26.000 23.000 110.000

2020 0.000 0.000 0.000 0.000 0.000 6.000 15.000 9.000 9.200 39.200

2021 0.000 33.694 0.000 0.000 33.694 5.000 5.790 0.000 0.000 10.790 a Includes unallocated amount of $30.0 million. b Contract award and disbursements up to Q4 2017 are actual figures.

S-curve for Tranche 2

0

50

100

150

200

250

2015 2016 2017 2018 2019 2020 2021


24

G. Fund Flow Diagram

Ministry of Finance (Recipient)

Asian Development Bank

AAY (Executing Agency)

PIU4 of AAY (Implementing Agency)

• Contractors

• Consultants W

ithdra

wal A

pplic

atio

n

Direct Payment

Claims

Withdrawal Application

25

V. FINANCIAL MANAGEMENT

A. Updated Financial Management Assessment

22. A financial management assessment (FMA) and a risk assessment of country level systems were conducted by ADB with focus on program management, financial accounting, auditing, procurement, and corruption mitigation measures. The FMA concludes that the Project Implementation Unit (PIU) in State Agency of Azerbaijan Automobile Roads (AAY) has satisfactory financial management capability to record financial transactions and balances, provide regular and reliable financial statements and monitoring reports, and safeguard the financial assets. These risks and mitigation measures have been assessed and included in the risk assessment and management plan. Activities under the transport network management capacity development component will seek to further minimize and mitigate these risks through training, restructuring, and institutional strengthening. 23. The key FMA findings and lessons learnt from the ongoing MFF are follows:

Table 5.1: Summary of the Financial Management Assessment

Subject Conclusion

Implementing Agencya

The Ministry of Transport will be the Executing Agency and AAY, under the Ministry of Transport, will be the Implementing Agency. Responsibility rests with the chairman of AAY but day-to-day activities will be carried out by the PIU in AAY that manages projects supported by ADB, World Bank and European Bank for Reconstruction and Development. The PIU will also undertake such functions as (i) preparing periodic financing requests, (ii) engaging and supervising consultants and contractors, (iii) preparing reports, and (iv) obtaining approvals from ADB and the Government.

Funds Flow Arrangements

Funds flow arrangements are reliable, predictable and secure. AAY has experience of implementing donor financed projects to work under funds flow arrangements acceptable to ADB. The same funds flow arrangements as for the first Multitranche Financing Facility (MFF) are expected to be used for the second MFF.

Staffing AAY is adequately staffed with qualified and experienced financial specialists. As for the first MFF, AAY will implement the second MFF. The PIU is headed by its Director, who reports to the chairman of AAY. The PIU comprises AAY staff who will be supported by a program management consultant for project implementation and monitoring. PIU is also supported by two program management consultants on intermittent bases.

Accounting Policies and Procedures

AAY’s accounting policy is based on the Azerbaijan National Accounting Standards and Financial Reporting Regulations for State Budget Finance Organizations. Azerbaijan National Accounting Standards are progressively being modernized in accordance with international accounting standards

Internal Audit An audit division in AAY carries out internal audit. Investment projects are in the audit plan

External Audit Government investment funded project is audited by the Chamber of Accounts, Ministry of Finance and Ministry of Taxes. AAY’s financial statement is audited by independent external auditor. PIU project financial statement is audited by independent external auditor.

Reporting and Monitoring

AAY and PIU reports comply with reporting requirements of Ministry of Finance, Ministry of Economic Development and Ministry of Taxes. Past PIU reports (Quarterly Progress Reports) to ADB have been submitted in a timely manner and in accordance with ADB requirements

26

Subject Conclusion

Information Systems AAY has moved from 1C accounting system to Sun system in December 2016 across its 117 offices. PIU will implement 1C accounting system. Reports are generated from the accounting system. PIU uses a simple computer program for accounting. Reports are prepared with help of this program supplemented by spreadsheets as necessary. This suits project requirements, although some reports cannot be automatically generated. Many ADB-financed projects in other countries use this program.

a The Ministry of Transport (MOT) was the executing agency and Azeravtoyol OJSC (AAY) under MOT was the implementing agency. In accordance with the Order No. 826 of the President of Azerbaijan dated 9 March 20l6, ARS has been renamed as the Azeravtoyol Open Joint-Stock Company (AAY) which now reports directly to the Cabinet of Ministers of Azerbaijan Republic. Recently, AAY was converted to the State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 19 December 2017.

24. During the implementation phase, AAY and PIU may face inherent risks arising at the (i) country level and (ii) organization/project level. Examples of country-specific risks are delays in disbursement of counterpart funds, delays due to public procurement rules and slow Customs clearance of imported construction equipment. FMA risks shall need to be considered and updated throughout the life of the investment program. Risk mitigation measures shall also be updated accordingly.

Table 5.2: Risk Assessment and Mitigation Measures

Risk Risk

Assessment Risk Mitigation Measures

Inherent Risk

Country-specific Risks M Obtain AAY’s annual audited financial statement. Obtain from MOF and AAY written guarantees of timely disbursement of counterpart funds. Include institutional and procurement arrangements in the Loan Agreement.

Entity-specific Risks N Continue to have regular training on ADB procedures.

Project-specific Risks N For Financial Management, conduct training annually on ADB procedures even though the implementing PIU is experienced in ADB rules and procedures. Insist on land acquisition and resettlement being complete before the contract starts. Be vigilant for project obstacles that could delay progress and add to costs.

Overall Inherent Risk M

Control Risk

Implementing Entity N Organizational capacity of PIU is assessed to be competent to support implementation.

Fund Flow N Ensure timely availability of counterpart funds by following the existing funds flow arrangements that have worked satisfactorily in the past.

Staffing M Recruited two program management consultants are required trainings to familiarize ADB’s procedures and requirements. The PIU has two financial management specialists with a minimum of a bachelor degree in commerce and accounting and three years’ work experience. Each is assigned for certain projects. ADB should insist the staff qualification should be maintained and should continue its support with briefing and training on ADB financial reporting requirements and professional accounting matters.

27

Risk Risk

Assessment Risk Mitigation Measures

Accounting Policies and Procedures

M PIU will develop project specific accounting manual based on national accounting standards and the requirements of ADB.

Internal Audit M AAY’s internal audit unit conducts internal audits of PIU. Ensure that this unit exercises internal audit of PIU for this MFF by agreement between ADB and AAY.

External Audit M This MFF, PIU’s project financial statement will be audited by Grant Thornton.a Continue this practice by requiring external audit of accounts in accordance with International Accounting Standards by an international auditor acceptable to ADB.

Reporting and Monitoring M Require the PIU to report in accordance with ADB requirements with inherent adequate control mechanisms.

Information Systems M PIU continues to use 1C accounting computer program for project needs. When AAY move to Sun system (planned by end of 2016), regular reconciliation between 1C and Sun System will be taken by PIU and Finance department of AAY. If Sun system is suitable for PMU, AAY will consider migrating the project data from 1C to Sun system.

Overall Control Risk M H = High, S = Substantial, M = Moderate, N = Negligible or Low. a Grant Thornton audited the project accounts for all projects under MFF1 and MFF2 for FY2011-2014. AAY recruited

a new audit firm to conduct the audit of project accounts for FY2015-FY2017. Source: Asian Development Bank staff and project preparatory technical assistance - FMA Tranche 1.

B. Disbursement

25. The Loan proceeds under the investment program will be disbursed in accordance with ADB‘s Loan Disbursement Handbook (2015, as amended from time to time),5 and detailed arrangements agreed upon between the Government and ADB. All the payments will be made in accordance with the ADB‘s direct payment procedures. 26. To facilitate project implementation through timely release of Tranche 2 loan proceeds, AAY will establish an imprest account promptly after loan effectiveness at a commercial bank acceptable to ADB.6 The maximum ceiling of the imprest account will not exceed 10% of the loan amount. The imprest account is to be used exclusively for the ADB’s share of eligible expenditures for Tranche 2. The currency of the respective imprest account will be the USD. AAY, who established the imprest account in its name is accountable and responsible for proper use of advances to the imprest account. The initial and additional advances to the imprest account may be requested based on 6 months estimated expenditures to be financed through the imprest account. The imprest account will be established, managed, and liquidated in accordance with ADB’s Loan Disbursement Handbook (2015, as amended from time to time) and detailed arrangements agreed by the Government and ADB. ADB’s Loan Disbursement Handbook describes which supporting documents should be submitted to ADB and which should be retained by the government for liquidation and replenishment of an imprest account. 27. The SOE procedure may be used for reimbursement of eligible expenditures or liquidation of advances to the imprest account. The ceiling of the SOE procedure is the equivalent of $100,000 per individual payment. Supporting documents and records for the expenditures

5 Available at: http://www.adb.org/Documents/Handbooks/Loan_Disbursement/loan-disbursement-final.pdf. 6 The bank charges incurred in the operation of the imprest account may be financed from the loan proceeds.

28

claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. Reimbursement and liquidation of individual payments in excess of the SOE ceiling should be supported by full documentation when submitting the withdrawal application to ADB. 28. AAY will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications to ADB. Before the submission of the first withdrawal application, the government shall submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000 equivalent, under reimbursement and imprest fund procedures, unless otherwise approved by ADB. Individual payments below this amount should generally be paid from the imprest account, or by the EA and subsequently claimed to ADB through reimbursement. ADB reserves the right not to accept withdrawal applications below the minimum amount. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. C. Accounting

29. AAY will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the project. AAY will prepare consolidated project financial statements in accordance with the government's accounting laws and regulations which are consistent with international accounting principles and practices. D. Auditing and Public Disclosure

30. AAY will cause the detailed project financial statements to be audited in accordance with International Standards on Auditing and with the Government's audit regulations, by an independent auditor acceptable to ADB. The audited project financial statements will be submitted in the English language to ADB within six months of the end of the fiscal year by AAY. 31. AAY will also cause the entity-level financial statements to be audited in accordance with International Standards on Auditing and with the Government's audit regulations, by an independent auditor acceptable to ADB. The audited entity-level financial statements, together with the auditors’ report and management letter, will be submitted in the English language to ADB within one month after their approval by the competent authority. 32. The annual audit report for the project accounts will include an audit management letter and audit opinions which cover (i) whether the project financial statements present a true and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting framework; (ii) whether loan and grant proceeds were used only for the purposes of the project or not; (iii) the level of compliance for each financial covenant contained in the legal agreements for the project; (iv) use of the imprest fund procedure; and (v) the use of the statement of expenditure procedure certifying to the eligibility of those expenditures claimed under SOE procedures, and proper use of the SOE and imprest procedures in accordance with ADB’s Loan Disbursement Handbook and the project documents.

29

33. Compliance with financial reporting and auditing requirements will be monitored by review missions and during normal program supervision, and followed up regularly with all concerned, including the external auditor. 34. The Government and AAY have been made aware of ADB’s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements.7 ADB reserves the right to require a change in the auditor (in a manner consistent with the constitution of the borrower), or for additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures. 35. Public disclosure of the project financial statements, including the audit report on the project financial statements, will be guided by ADB’s Public Communications Policy (2011).8 After review, ADB will disclose the project financial statements for the project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting them on ADB’s website. The Audit Management Letter will not be disclosed.

7 ADB Policy on delayed submission of audited project financial statements:

• When audited project financial statements are not received by the due date, ADB will write to the executing agency advising that (i) the audit documents are overdue; and (ii) if they are not received within the next six months, requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters will not be processed.

• When audited project financial statements have not been received within 6 months after the due date, ADB will withhold processing of requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters. ADB will (i) inform the executing agency of ADB’s actions; and (ii) advise that the loan may be suspended if the audit documents are not received within the next six months.

• When audited project financial statements have not been received within 12 months after the due date, ADB may suspend the loan.

8 Available from http://www.adb.org/documents/pcp-2011?ref=site/disclosure/publications

http://www.adb.org/documents/pcp-2011?ref=site/disclosure/publications

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VI. PROCUREMENT AND CONSULTING SERVICES

A. Advance Contracting

36. Under each tranche, ADB may, subject to its policies and procedures, allow on request advance contracting. The Government acknowledges that any approval of advance contracting will not constitute a commitment by ADB to finance the related project.

37. All advance contracting will be undertaken in conformity with ADB’s Procurement Guidelines (2017). The issuance of invitations to bid under advance contracting will be subject to ADB approval. The borrower and the executing agency have been advised that approval of advance contracting does not commit ADB to finance the Project.

38. The government approved advance contracting of civil works and consultancy services under Tranche 1. ADB-financed goods and services will be procured according to ADB’s Procurement Guidelines (2017). International competitive bidding procedure to be followed for contracts with an amount above $10 million for civil works. The upper limit for a civil works contract to be procured through national competitive bidding procedures will be set at below $10 million.

39. The government approved advance contracting of civil works and consulting firm under Tranche 2. Advance procurement of civil works and recruitment of consulting firm will keep the momentum for bidding and consultant selection activities. AAY has the capacity to handle the advance actions as it has gained required experience under ongoing ADB-financed projects. The government and the executing agency were advised (i) that ADB approval of advance contracting does not commit ADB to subsequently approve the project or finance procurement costs, and (ii) that ADB will not finance expenditures paid by the borrower prior to loan effectiveness, as no retroactive financing has been requested.

B. Procurement of Goods, Works, and Consulting Services

40. Procurement of goods and works and consultant recruitment financed under the investment program will follow ADB's Procurement Guidelines (2017).

41. Before the start of any procurement ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB’s Procurement Guidelines (2017).

42. The details of the works and consultancy services envisaged under the investment program are as under:

Table 6.1: Details of Procurement of Works and Consultancy Services

Item

Procurement/ Recruitment

Method Tranche 1

(Loan 2921) Tranche 2

(Loan 3144)

Works

Civil works contract

ICB $180 million, excluding taxes

$200 million, excluding taxes

Consulting Services

Construction supervision consultant QCBS $6 million $6 million Program management consultant QCBS $4 million $4 million Transport sector governance study (three contracts) QCBS $6 million Sector capacity development QCBS $1.2 million

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Project financial auditing (up to five contracts) LCS $300,000 Monitoring, auditing, sector assessment, and safeguards compliance (up to five contracts)

ICS $500,000

43. The procurement plans for Projects 1 and 2 indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C. The procurement plan will be updated on a regular basis and approval of ADB shall be sought on each updated procurement plan. 44. All consultants will be recruited according to ADB’s Procurement Guidelines (2017).9 The terms of reference for all consulting services (firm) are detailed in Section D. 45. Tranche 1 required a total of 429 person-months (241 international and 188 national) of services from consulting firms for the original project scope. This comprises (i) 307 person-months (158 international and 149 national) for construction supervision; and (ii) 122 person-months (83 international and 39 national) for program management. AAY selected and engaged the consultants in accordance with ADB’s Procurement Guidelines (2017) using the quality- and cost-based selection method. Additional consulting services will be procured for the expanded scope, details of which will be confirmed once the updated procurement plan is finalized. The consulting services will be financed from ADB loan. 46. Tranche 2 required a total of 683 person-months (418 international and 265 national) of services from consulting firms and individual experts for the original project scope. Consultants were recruited and engaged in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). This comprises (i) 299 person-months (159 international and 140 national) for construction supervision; (ii) 124 person-months (84 international and 40 national) for program management; (iii) 195 person-months (120 international and 75 national) for various studies for transport sector governance; (iv) 40 person-months international for sector capacity development; (v) 10 person-months (estimated) for project financial auditing; and (vi) 15 person-months international individual consultants for monitoring, audit, and safeguards improvement. Additional consulting services will be procured for the expanded scope, details of which will be confirmed once the updated procurement plan is finalized. 47. With the inclusion of two new road sections and the installation of the tolling system along M3 motorway, new works and consultancy packages are being prepared. C. Procurement Plan

48. The procurement plans are in Appendix 1.

D. Consultant's Terms of Reference

49. The terms of reference (TOR) for consultancy services for (i) construction supervision, and (ii) program management are in Appendix 2, 3, and 4, respectively. The following provides the actual of the TORs for the consulting services as per signed contract.

50. Consulting Services for Construction Supervision. Consultant will be engaged for each tranche of the investment program to perform as the Engineer of the Project. The consultant will administer the construction contracts and ensure that the contractual clauses

9 Checklists for actions required to contract consultants by method available in e-Handbook on Project Implementation

at: http://www.adb.org/documents/handbooks/project-implementation/.

http://www.adb.org/documents/handbooks/project-implementation/

32

for both quality and specifications of work are complied with, and the works are constructed in accordance with the provisions of the construction contracts. The consultant’s representative will be a full-time in the project area in accordance with the provisions of the construction contracts.

51. Consulting Services for Program Management. Consultant will be engaged under Tranche 1 for overall program management. The services of the consultants will be extended under Tranche 2 of the investment program. The consultant will implement the investment program in coordination with AAY and building AAY’s capacity, including the capacity to integrate climate proofing measures in the road design, procurement, construction and maintenance and financial management. The consultant shall be responsible for overall program management and shall submit program/project management reports to AAY and ADB.

E. Review of Contract Modifications

52. ADB will review contract modifications in accordance with the procedures set forth in the loan agreement between the government of Azerbaijan and ADB.

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VII. SAFEGUARDS

53. The Government will ensure that all the requirements prescribed in Schedule 5 of the FFA, and the following frameworks that have been prepared with respect to the Facility are complied with during the processing and implementation of the investment program:

(i) environmental assessment and review framework (“EARF”); and (ii) land acquisition and resettlement framework (“LARF”)

54. The safeguard frameworks cover the Facility specific information and requirements in accordance with ADB’s Safeguard Policy Statement (2009) (SPS): (i) the general anticipated impacts of the projects likely to be financed under the Facility on the environment, and involuntary resettlement; (ii) the safeguard criteria that are to be used in selecting projects; (iii) the requirements and procedure that will be followed for screening and categorization, impact assessments, development of management plans, public consultation and information disclosure (including the 120-day disclosure rule, if required), and monitoring and reporting; (iv) the institutional arrangements (including budget and capacity requirements) and Government’s and ADB’s responsibilities and authorities for the preparation, review and clearance of safeguard documents. The Government will also ensure that the Land Acquisition and Resettlement Plan prepared for Tranche 1 which covers the remaining LAR-related activities (including livelihood restoration activities during project implementation) will be implemented, monitored and reported to ADB.

55. For subsequent tranches, at the preparation of each PFR, the applicability and relevance of each safeguard framework for the frameworks above will be reviewed and updated to ensure relevance and consistency with all applicable laws and regulations in Azerbaijan and ADB’s SPS (2009), as amended from time to time. In the event that there is a discrepancy between the laws and regulations of Azerbaijan and ADB safeguard policies, the ADB safeguard policies will prevail. In addition, the Government will carry out due diligence works on ongoing projects to assess the status of compliance with the safeguards-related plans and frameworks.

56. For each tranche, the Government will submit safeguard monitoring reports semi-annually covering all the aspects and issues from perspectives of environment, and land acquisition and resettlement.

57. AAY will ensure that the Investment Program is implemented with active participation of all national stakeholders, using participatory practices, and consultation will continue throughout implementation of the Investment Program. Disclosure of relevant information to these stakeholders will continue throughout implementation of the Investment Program.

A. Environment

58. The Government will ensure that the design, construction, and operation and maintenance of the facilities under investment program are carried out in accordance with ADB’s SPS (2009), applicable laws and regulations in Azerbaijan, the EARF, and respective EIA. AAY will ensure that potential adverse environmental impacts arising from the investment program are minimized by implementing all mitigation and monitoring measures as presented in the environment management plan (EMP) included in the EIA. Specially, the Government through AAY will ensure that:

(i) Site specific EMP (SSEMP) are prepared for the section of road based on the EMP provided in the EIA;

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(ii) AAY has sufficient resources to implement and record the implementation of the EMPs prepared for the investment program;

(iii) Starting from project commencement, AAY will submit semi-annual environmental reports to ADB, within three months of the close of each half of the calendar year during implementation of each individual project under the investment program. The report will include, among other things, a review of progress made on environmental measures detailed in the EIA and EMP, and monitoring thereof; and problems encountered and remedial measures taken;

(iv) Detailed engineering designs, civil works and other contracts for the investment program facilities incorporate applicable environmental measures identified in the EIA and EMP;

(v) Civil works contractors are supervised to ensure compliance with the requirements of the EIA and EMP;

(vi) EIA is disclosed to the public 120 days before the approval of the associated tranche by ADB Management;

(vii) EIA and EMP are prepared for subsequent tranches according to the procedures and guidelines set forth in the EARF, ADB’s SPS (2009), and Azerbaijan’s laws and regulations.

59. In areas of wetlands, the following measures will be complied with:

(i) No waste storage areas will be kept within the wetland areas; (ii) Storage of oils and chemicals will be prohibited in the wetland areas and if

unavoidable they will be held within specifically constructed bunded areas; (iii) Hydrology/hydraulic experts within the construction supervision team will review

the detailed designs to ensure that standard design features adapted to local conditions are included for the interception, containment and treatment of potential spills of oil and hazardous materials from the road;

(iv) DSC will review the detailed design and ensure relevant provisions are included in the construction drawings with regards to the design of culverts and inclusion of ledges above normal water level for mammals;

(v) Placement of petrol stations within or adjacent to the wetlands will be prohibited; (vi) No construction will be carried out in the wetlands during the breeding season of

the birds; (vii) Haul roads will not be located in the wetlands, and if unavoidable, these will be

decommissioned and re-vegetated after the construction; (viii) Emergency response plan will be put in place for clean-up of potential spills of

hazardous chemicals in the wetlands which will be detailed in the SSEMP; (ix) Only locally native species will be planted in or adjacent to the wetland areas for

landscaping purposes; (x) The implementing agency will recruit additional specialized expertise to

undertake the specific studies needed to develop the culvert design and location, drainage and storm water structures, design and location of wildlife and grazing animal underpasses, and design of ecological monitoring programs;

(xi) The implementing agency will recruit additional specialized expertise to pilot and implement the turtle action plan (biodiversity expert with specialization in turtles);

(xii) A comprehensive monitoring program designed as part of the SSEMP will be implemented to ensure the effectiveness of the various mitigation measures and for the long-term monitoring of the ecology and hydrology associated with the wetlands, the environment specialist of the project management consultants (PMC) will conduct this monitoring of the implementation of the SSEMP;

35

(xiii) ADB will review and approve the site-specific environmental management plans.

60. An environmental assessment and review framework10 was prepared for the entire MFF as required by ADB’s Safeguard Policy Statement (2009). According to the MFF, each tranche is to be assessed and categorized separately. The proposed motorway is a new alignment, Tranche 1 passes through settled areas, while the proposed Tranche 2 section passes through wetlands which are considered important bird area. Tranche 2, as Tranche 1, is also classified as environment Category A. An environmental impact assessment (EIA) report was prepared for the entire alignment covering both tranche 1 and 2 sections. The EIA was approved by ADB and disclosed on the ADB website in 2012. The EIA recommends specific mitigation measures with regard to motorway design and construction and a robust long-term monitoring program. The contracts for the supervision consultant, program management consultant, and civil works will include stringent provisions for compliance with environmental safeguards. An ecological expert and environmental specialist will be engaged to ensure implementation of the environmental management plan. Assurances to mitigate potential harm to the wetlands are also included in the framework financing agreement and loan agreements.

B. Land Acquisition and Resettlement

61. The Government will ensure that each tranche financed under the Facility are developed, implemented and maintained in accordance with all applicable laws and regulations of Azerbaijan, ADB’s Safeguard Policy Statement (2009) and the LARF.

62. The Government will cause AAY to ensure that:

(i) for projects with involuntary resettlement, a land acquisition and resettlement plan (LARP) acceptable to ADB is prepared for each tranche in accordance with all applicable laws and regulations of Azerbaijan, ADB’s Safeguard Policy Statement (2009) and the LARF, as a submission with the PFR;

(ii) all land and rights-of-way required by the projects are made available free and clear from any and all rights and claims of third parties and any other encumbrances in a timely manner, subject to compliance with all applicable laws and regulation of Azerbaijan, ADB’s Safeguard Policy Statement (2009), the LARF and the LARPs;

(iii) no civil works contract for any project involving resettlement will be awarded until the full compensation has been paid and the entire land has been acquired in accordance with the LARP approved by ADB;

(v) no physical or economic displacement takes place in connection with the projects until compensation and other entitlements have been provided to displaced people; and a comprehensive income and livelihood restoration program, including job placement for severely affected and vulnerable households, has been established in accordance with the LARF and LARP;

(vi) compensation payments to municipalities are completed without further delay; (vii) contractors comply with the measures and requirements relevant to the contractor

set forth in the EIA, the EMP, and the LARP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report;

10 Environmental Assessment and Review Framework (accessible from the list of linked documents in Appendix 2 of

RRP approved in 2012).

36

(viii) contractors provide AAY with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the EIA, the EMP, or the LARP;

(ix) contractors adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and,

(x) contractors fully reinstate pathways, other local infrastructure, and temporarily used land to at least their pre-project condition upon the completion of construction; and

(xi) all required safeguards monitoring reports are submitted to ADB on time.

63. Tranche 1 is Categorized ‘A’ for resettlement. The land acquisition and resettlement has been implemented and the recommendations from the public consultations were included in the design and construction. An independent monitor verified and confirmed that compensation payments had been provided according to the LARP provisions and that there were no complaints. Employment opportunities for local skilled people through the civil works contract are being assessed. AAY will provide a list to the contractor of displaced persons including vulnerable households for providing employment and confirm details with names in monitoring reports.

64. Tranche 2 is Categorized ’B’ for resettlement. A LARF for the program was prepared and approved in July 2012. The Land Acquisition and Resettlement Plan (LARP), was prepared for the project and land acquisition is complete. A due diligence report was prepared in July 2013, and the LARP was reviewed and updated in March 2014. Except for 6 vulnerable households who lose more than 10% of their land and will be provided employment when construction commences all compensation payments have been made and no outstanding issues are identified to date. The construction of the project requires the acquisition of approximately 172.5 ha in 3 villages within the districts of Neftchala, Bilasuvar and Jalilabad - including 55.22 ha of private land, 21.99 ha of municipality-owned land, and 95.29 ha of State reserve land. AAY There is no impact to structures and trees. In total, 86 households will be affected. AAY will submit internal monitoring reports once the construction works commence. Grievance will be monitored through the supervision consultant. AAY will provide a list of the 6 severely affected households to be employed by the contractor. Employment should be provided prior to possessing their lands. Information including, the names of the household members employed included in the monitoring reports.

65. In the revised scope, the two new road sections are classified B for environment as the potential environmental impacts are largely related to the construction stage and are temporary and site specific. Both project roads are classified B for involuntary resettlement, as with limited road widening activities, only a few business and agricultural plots located along the project roads are affected and the impacts will not be significant. Both project roads are classified category C for indigenous peoples as the proposed roads do not have any known social or cultural groups classified as indigenous peoples under ADB’s Safeguard Policy Statement (2009).

C. Indigenous Peoples

66. Azerbaijan shall ensure that projects financed under the Facility do not have any indigenous people’s impacts within the meaning of the Safeguard Policy Statement. In the event that project(s) do have any such impacts, Azerbaijan shall take all steps required to ensure that the Project complies with the applicable laws and regulations of Azerbaijan and the Safeguard Policy Statement.

37

67. Tranche 2 has no adverse impact on indigenous peoples. Ethnic Azeri accounts for most of the population in the project area; few other nationalities include Talysh, who are not negatively affected by the Project. Project is thus classified as Category ‘C’ for indigenous peoples as defined under ADB’s SPS (2009).

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VIII. GENDER AND SOCIAL DIMENSIONS

68. AAY will incorporate provisions in civil work contracts that contractors shall (i) comply with Azerbaijan’s applicable labour laws and related international treaty obligations and not employ child labour, (ii) provide safe work conditions and separate sanitation facilities for male and female workers, (iii) provide equal wage to male and female workers for work of equal value, (iv) provide employment opportunities for women, including skilled labour (v) carry out programs of preventing HIV/AIDS, illicit drugs and human trafficking at workers’ campsites. AAY, with assistance from the PMC, will coordinate with the rayon executive powers and other relevant agencies in facilitating the development of small business opportunities along the motorway. Related to this, AAY will coordinate with SIDUS in the implementation of a pilot project financed under RETA 7563 which aims to deliver training to women entrepreneurs along the road to scale up their businesses.

69. At the project implementation, consultations with the participants above will continue in order to disclose the project’s progress. Prior to the commencement of civil works, AAY will conduct consultation meetings with the support of the construction supervision consultants and contractors.

70. The Investment Program has some gender elements in terms of improving women's access to markets and services, opportunities to skilled women and women's participation in monitoring the project's impact. The Program is linked to a pilot project,11 which aims to train women entrepreneurs to scale up their businesses. This will enable them to fully benefit from improved access to markets. Increased access to social services, economic opportunity, and consumer choice is expected to significantly increase the welfare of women, household incomes, achievement of the Millennium Development Goals, and overall poverty reduction.

71. All projects financed under the MFF will include appropriate measures to raise public awareness on the potential risk of HIV/AIDS and other sexually transmitted infections, as well as drug and human trafficking and require contractors to take measures to protect construction workers from the risks of HIV/AIDS and other sexually transmitted infections, and giving construction workers time to be tested or receive treatment. The supervision consultant and PMC will coordinate with the contractors and monitor the implementation. 72. Tranche 2 will have a positive impact on women. The civil works contractors are encouraged to employ women during construction although experience shows this is not likely to result in female employment due to restrictive cultural norms in areas outside the capital, Baku. Direct employment for women from project activities is therefore limited, but women are expected to benefit from improved access to social services and markets in the project area. Civil works bidding documents and contracts will include provisions requiring contractors to take measures to protect construction workers and nearby communities from potential health risks such as HIV/AIDS12 and other sexually transmitted infections.

11 ADB. 2010. Technical Assistance for Promoting Gender-Inclusive Growth in Central and West Asia Developing

Member Countries. Manila. 12 HIV/AIDS refers to human immunodeficiency virus/acquired immunodeficiency syndrome.

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IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION

73. AAY will undertake periodic project performance review under each individual project and for the Investment Program, in accordance with the PPMS to evaluate the scope, implementation arrangements, progress and achievements of objectives of the related project and overall Investment Program. AAY will prepare and submit to ADB quarterly progress reports for the individual projects. The reports will include a description of physical progress, problems, and difficulties encountered and a summary of financial accounts that will consist of grant or loan expenditures during the period, year to date, and total to date, and include a report on progress of the implementation of mitigation measures as specified in the contracts and environmental management plan. A project completion report will be submitted within three months following completion of each project. A facility completion report will be submitted within six months after completion of the Investment Program.

A. Revised Design and Monitoring Framework for the Investment Program13

13 The Ministry of Transport (MOT) was the executing agency and Azeravtoyol OJSC (AAY) under MOT was the

implementing agency. In accordance with the Order No. 826 of the President of Azerbaijan dated 9 March 20l6, ARS has been renamed as the Azeravtoyol Open Joint-Stock Company (AAY) which now reports directly to the Cabinet of Ministers of Azerbaijan Republic. Recently, AAY was converted to the State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 19 December 2017.

Impact the Program is Aligned with: Trade with neighboring countries expanded and economic growth of Azerbaijan improved. (Program-defined)

Results Chain Performance Indicators with Targets and Baseline

Data Sources and Reporting Mechanisms

Risks

Outcome An Efficient, adequate, safe, and sustainable southern motorway corridor from Baku road corridors in Azerbaijan achieved.

By 2020 2021

a. Freight traffic increased by 30% 35% along the project roads (2010 baseline: 11,325 million ton-km)

b. Passenger traffic

increased by 20% 25% along the project roads (2010 baseline: 16,633 million passenger-km)

c. Funding for road

maintenance increased to at least $350 million (2011 baseline: $200 million)

d. Road traffic accidents

reduced by 10% along the project roads (2011 baseline: 2,890 number of accidents)

e. About 4 2.8 million beneficiaries served by along the project roads

a-e. MFF and project progress and completion reports of AAY a,b,d, e. AAY annual surveys, Statistical Yearbook of Azerbaijan c. Road subsector budget and expenditure records

Rapid deterioration of the road network caused by weak axle-load controls, weather and climatic conditions

40

Outputs 1. A new About 63 km of newly constructed motorway between Masalli and Shorsulu constructed, and key sections of R32 and M5/R57 rehabilitated

By 2018 2020 1.a. 63 km of the new motorway Masalli-Shorsolu constructed with international roughness index less than 5 meters per km (2010 baseline: zero) 1.b. 70 km of R32 and 55 km of M5/R57 rehabilitated with international roughness index less than 5 meters per km (2017 baseline: IRI = >5)

1a-b. MFF and project progress, completion reports of AAY and AAY annual surveys

Cost overruns result in less work accomplished than designed Delays caused by erratic weather, site condition in the project sites

2. Improved Program management and implementation capacities of AAY improved

2.a. All civil works contracts awarded and contractors mobilized as planned (2010 baseline: not applicable)

2a. AAY annual surveys, AAY project progress reports

3. Improved Transport sector governance improved

By 2020 3.a. Road safety audits conducted and improvement designs ready for at least 50% of ADB-financed roads (2010 baseline: None) 3.b. Road standards and specifications, including pavement layer design standards and specifications finalized (2010 baseline: None) 3.c. By 2020, performance-based maintenance contracts for at least 100 km awarded

3c. Feasibility study on installing a tolling system along M3 motorway submitted for government’s approval (2017 baseline: None) 3d. Tolling facilities and structures along M3 motorway operational (2017 baseline: None)

3a-c. AAY annual surveys, AAY project progress reports

MOT AAY delays required changes in business practices for sustainable transportation

41

AAY = State Agency of Azerbaijan Automobile Roads, IRI = international roughness index, km = kilometer, MFF = multitranche financing facility, OCR = ordinary capital resources.

Key Activities with Milestones

Tranche 1: 1.1 Procurement of civil works and consulting services commenced in September 2012. 1.2 Civil works and supervision consultant contracts awarded in December 2013 and completed in August 2017. 1.3 Program management consultants recruited in December 2013. 1.4 Award contract for civil works and supervision consultant for R32 by Q3 2018. 1.5 Complete R32 contracts by Q3 2020. Tranche 2: 2.1 Civil works contracts awarded in August 2015. 2.2 Complete civil works by January 2019. 2.3 Recruit consultants for transport sector governance and deliver agreed outputs from 2018-2020. 2.4 Award contract for civil works and supervision consultant for M5/R57 by Q3 2018. 2.5 Complete M5/R57 contracts by Q4 2020. 2.6 Complete the feasibility study on tolling system by Q4 2018. 2.7 Complete the installation of tolling facilities and structures by Q3 2020.

Inputs ADB: $500 million (OCR) Government: $125 million Total: $625 million

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B. Revised Design and Monitoring Framework for Tranche 1

Results Chain Performance Targets and Indicators


Risks

Outcome An Efficient, adequate, safe, and sustainable road network corridors in Azerbaijan achieved. connecting the country domestically and internationally

By 2020 2021 a. Freight traffic increased by

10% 12% (2010 baseline: 11,325 million ton-km)

b. Passenger traffic increased

by 5% 7% (2010 baseline: 16,633 million passenger-km)

c. Funding for road


d. Number of road traffic

accidents reduced by 5% (2011 baseline: 2,890 number of accidents)

e. About 2 1.2 million people

beneficiaries along the project roads

a,b,d. MFF and project progress and completion reports of AAY a,b,d,e. Statistical Yearbook of Azerbaijan, AAY annual surveys c. Road subsector budget and expenditure records

Rapid deterioration of the road network caused by weak axle-load controls, erratic weather and climatic conditions

Outputs 1. Construction of an

approximately 30 km section of the A new motorway between Masalli and Jalilabad constructed of the Masalli–Shorsulu road, and key sections of R32 rehabilitated

By 2020 1a. About 30 km of the new motorway Masalli-Jalilabad constructed of new four lane motorways constructed on time and within budget and meeting technical specifications with international roughness index of less than 5 meters per km (2010 baseline: zero) 1b. 70 km of R32 rehabilitated with international roughness index less than 5 meters per km (2017 baseline: IRI = >5)

1a-b. AAY annual surveys, Project Progress and Completion Reports of AAY

Cost overruns resulting in increase in construction costs Delays caused by erratic weather condition in the project sites

2. Project implementation Support to AAY on project management, supervision and implementation provided for construction supervision and program management

2a. All contracts awarded and mobilized as planned before 2015 (2011 baseline: not applicable) 2.b Terms of reference (TOR) and request for proposal (RFP) for engagement of consultants for road safety audits and for development of road standards and specifications, including for pavement layer standards and

2a-b. AAY annual surveys, Project Progress and Completion Reports of AAY



43



Risks

specifications are finalized and RFPs are issued by 2015 2.b. Report deliverables (monthly progress, safeguards, audit reports) timely completed and submitted as planned (2011 baseline: None)

3. Due diligence

requirements for new road sections R32 and M5/R57 completed

3a. All needed due diligence documents approved by AAY by Dec 2017

3a. AAY project progress reports

Activities with Milestones Output 1 1.1 Procurement and recruitment started in Jul 2012 and completed in Dec 2013. 1.2 Civil works and supervision consulting contracts awarded in Dec 2013, new civil works for R32 awarded in Q3 2018, and all works completed by Q4 2020. Output 2 2.1 Program management consultants recruited in Dec 2013. 2.2. Complete PMC services by 31 December 2020. Output 3 3.1 Short-term consultants to undertake preparatory works for R32 and M5/R57 recruited in Aug 2017 3.2 Due diligence documents for R32 and M5/R57 completed in Dec 2017. 3.3 Bid documents tendered in Dec 2017 and Feb 2018.

Inputs ADB: $250 million (OCR Loans) Government: $62 million

AAY = State Agency of Azerbaijan Automobile Roads, ADB = Asian Development Bank, km = kilometer, MFF = multitranche financing facility, OCR = Ordinary Capital Resources.

44

C. Revised Design and Monitoring Framework for Tranche 2



Risks

Outcome An Efficient, adequate, efficient, safe, and sustainable motorway road corridors between Shorsulu and Jalilabad in Azerbaijan achieved.

By 2020 2021 a. Freight traffic

increased by 20% 22% (2010 baseline: 11,325 million ton-km)

b. Passenger traffic

increased by 15% 17% (2010 baseline: 16,633 million passenger-km)

c. Funding for road


d. Number of road traffic

deaths per 100,000 population reduced by 5% 7% (2010 baseline: 10.2%)

e. Number of road traffic

crashes reduced by 5% 7% (2011 baseline: 2,890 number of crashes)

f. About 2 1.6 million

people beneficiaries along the project roads

g. 217,500 218,000 average daily vehicle-kilometers achieved in the first full year of operation (2011 baseline: None as it is a new motorway; 2017 baseline for M5/R57: 4,565 annual average daily traffic)

MFF and project progress and completion reports, Statistical Yearbook of Azerbaijan, AAY annual surveys, Road subsector budget and expenditure records from AAY a-g. MFF and project progress and completion reports of AAY, Statistical Yearbook of Azerbaijan, AAY annual surveys c. Road subsector budget and expenditure records

Deterioration of the road network caused by weak axle-load controls

Outputs Current Project 1. About 30 km of a

newly constructed A new motorway between Jalilabad and Shorsulu and open to traffic M5/R57 road sections rehabilitated

By 2019 2020 30 km of the new motorway Jalilabad-Shorsolu constructed of a new four lane motorway constructed on time and within budget and meeting technical specifications with international roughness index of less than 5 meters

1a-b. Project progress and completion reports of AAY

Cost overruns resulting in increases in construction costs Delays caused by erratic weather condition in the project sites


45



Risks

2. Improved Program

management and implementation capacities of AAY improved

3. Improved Transport

sector governance improved

per km (2010 baseline: zero) 1b. 55 km of M5/R57 rehabilitated with international roughness index less than 5 meters per km (2017 baseline: IRI = >5) 2a. Works and services contracts awarded timely, and the contractor and consultants mobilized as planned (2011 baseline: Not applicable) 2b. Report deliverables (monthly progress, safeguards, audit reports) timely completed and submitted as planned (2011 baseline: None) 3a. Road safety audits conducted and improvement designs ready for 50% of ADB financed roads (2010 baseline: None) 3b. Road standards and specifications, including pavement layer design standards and specifications finalized (2010 baseline: None) 3c. Performance-based maintenance contracts developed for at least 100 km of roads on the network under the responsibility of AAY 3c. Feasibility study on installing a tolling system along M3 motorway submitted for government’s approval (2017 baseline: None) 3d. Tolling facilities and structures along M3 motorway operational (2017 baseline: None)

2a-b. Project progress and completion reports of AAY 3a-c. Project progress and completion reports of AAY


Activities with Key Milestones Output 1 1.1 Civil works contracts awarded in Aug 2015.

Inputs ADB OCR: $250 million

46



Risks

1.2 Complete construction of the motorway section by 31 Mar 2019. 1.3 Award civil works contract for M5/R57 by Q3 2018. 1.4 Complete the rehabilitation works for M5/R57 by Q3 2020. Output 2 2.1 Recruit and mobilize DSC completed in Aug 2015. 2.2 Complete DSC services by 31 December 2020. 2.3 Complete PMC services by 31 December 2020. Output 3 3.1 Mainstream road safety audits and complete improvement designs by

31 December 2018. 3.2 Draft road standards, specifications, and pavement design specifications by 31

December 2019. 3.3 Complete the feasibility study on tolling system by Q4 2018. 3.4 Complete the installation of tolling facilities and structures by Q3 2020.

Government: $82 million

AAY = State Agency of Azerbaijan Automobile Roads, ADB = Asian Development Bank, DSC = design review and construction supervision consultant, km = kilometer, m = meter, MFF = multitranche financing facility, OCR = ordinary capital resources, PMC = program management consultant.

47

D. Monitoring

74. Project performance monitoring system. AAY/PIU will establish a project performance monitoring system (PPMS)14 for the Facility within six months of the Effective Date and collect baseline data for performance monitoring. The key indicators and assumptions outlined at the impact and outcome levels in the project design and monitoring framework will be the primary data required for analysis. AAY/PIU is responsible for daily monitoring, reporting, and evaluating the progress for implementing the project, and maybe tasked to develop the PPMS.

75. AAY/PIU, with the assistance of the consultants supervising the works in each tranche will collect baseline data and other information during implementation. Thereafter, it will analyze data once every 12 months, and include the results of the analyses and corrective measures (if any) taken to reverse negative trends and impacts in AAY’s quarterly report to ADB. ADB review missions will discuss these reports and actions taken by AAY/PIU to ensure that all the targets and milestones are met.

76. Compliance monitoring. The loan covenants on policy, legal, financial, economic, environmental, social, labor standards and others will be monitored regularly through various reports (monthly progress reports, quarterly progress reports, and annual reports), and discussion during review missions.

77. Safeguards monitoring. The monitoring and reporting of the activities identified in the environment and resettlement action plans is discussed in Section VII.

78. Gender and social dimensions monitoring. The anticipated impacts of the investment program on people’s livelihoods around the construction sites are estimated as not serious. However, AAY will be responsible for monitoring closely the contractors’ compliance with terms to be on the civil works contract of conducting education activities for preventing HIV/AIDS, human traffic and illicit drugs and of creating gender-mainstreamed employment environments at the construction sites. Such activities will be reported by AAY to ADB in regular progress reports.15

E. Evaluation

79. ADB will field at least two review missions annually to discuss implementation progress and assess the project implementation, including procurement, civil works, financing status, and environmental and social safeguards based on quarterly progress reports.

80. A mid-term review mission will be carried out two years after each loan becomes effective. The mid-term review will focus on: (i) implementation progress of civil works and consulting services; (ii) performance of consultants and contractors; (iv) status of compliance with the understandings in the framework financing agreement (FFA) and the covenants in the loan agreement; and (v) the need for any midcourse changes in the scope or schedule of the tranche projects to ensure full achievement of its impact.

14 ADB's project performance reporting system is available at:

http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool. 15 ADB's Handbook on Social Analysis: A Working Document, is available at:

http://www.adb.org/Documents/Handbooks/social-analysis/default.asp, Staff Guide to Consultation and Participation: http://www.adb.org/participation/toolkit-staff-guide.asp, and, CSO Sourcebook: A Staff Guide to Cooperation with Civil Society Organizations: http://www.adb.org/Documents/Books/CSO-Staff-Guide/default.asp

http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

http://www.adb.org/Documents/Handbooks/social-analysis/default.asp

http://www.adb.org/participation/toolkit-staff-guide.asp

http://www.adb.org/Documents/Books/CSO-Staff-Guide/default.asp

48

81. Within 6 months of physical completion of each project, AAY will submit a project completion report to ADB. 16

F. Reporting

82. AAY/PIU will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions; (c) updated procurement plan and (d) updated implementation plan for next 12 months; and (iii) a project completion report within 6 months of physical completion of the Project. To ensure projects continue to be both viable and sustainable, AAY’s project accounts and annual financial statements, together with the associated auditor's report, should be adequately reviewed.

83. AAY/PIU will maintain separate project records and accounts adequate to identify the (i) goods and services financed from the loan proceeds, (ii) financing resources received, (iii) expenses incurred on the components of each project, and (iv) use of counterpart funds. Project accounts will follow international accounting principles and practices. AAY/PIU will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 6 months of the end of the fiscal year. The annual audit report will include a separate audit opinion on the use of the imprest accounts and the SOE procedure, if applicable.

G. Stakeholder Communication Strategy

84. AAY and ADB will ensure that the Investment Program is implemented with active participation of all national stakeholders, using participatory practices, and consultation will continue throughout implementation of the Investment Program. Disclosure of relevant information to these stakeholders will continue throughout implementation of the Investment Program.

Project Documents Means of

Communication Responsible

Party Frequency Audience(s)

Project Information Document (PID)

ADB’s website ADB Quarterly updating General Public

Framework Financing Agreement (FFA)

ADB’s website ADB Always available online General Public

Loan Agreement ADB’s website ADB Always available online General Public

Report and Recommendations of the President (RRP)

ADB’s website ADB Posted within 2 weeks of loan approval; Always available online

General Public

Facility Administration Memorandum (FAM)

ADB’s website ADB After loan negotiation, to be updated

General Public

Environmental Impact Review Framework (EIRF), Environmental Impact Assessments (EIAs) and

ADB’s website AAY and ADB

EARF, EIA and EMP posted on the website before appraisal; EMP to be updated regularly; All documents always

General Public; project-affected persons

16 Project completion report format is available at: http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-

Sector-Landscape.rar

http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-Sector-Landscape.rar

http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-Sector-Landscape.rar

49

Project Documents Means of

Communication Responsible

Party Frequency Audience(s)

Environmental Management Plan (EMP)

available online

Land Acquisition and Resettlement Framework (LARF), Land Acquisition and Resettlement Plans (LARPs)

ADB’s website AAY and ADB

LARF and LARP posted on the website before appraisal; All documents always available online


Safeguard Monitoring Reports

ADB’s website ADB Routinely disclosed, no specific requirement


Procurement requirements

ADB website for procurement notices; invitation for bids (IFB), local newspaper advertisement

AAY and ADB

Available online (current and archive)

General Public; potential civil works contracting firms

Consulting services requirements

ADB’s website for recruitment notice (CSRN) for expression of interest

AAY When required General Public; consulting firms

ADB website for list of short-listed firms

ADB To be posted after short-listing; always available

General Public; consulting firms

Request for proposal, public opening

AAY When required General Public; consulting firms

Annual Audited Project Accounts and Auditor Opinion

ADB Website ADB, AAY Within 30 days of date of receipt by ADB from AAY

General Public

X. ANTICORRUPTION POLICY

85. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the Project.17 All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all Project contractors, suppliers, consultants and other service providers. Individuals/entities on ADB’s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contracts under the investment program.18

86. To support these efforts, relevant provisions are included in the framework financing agreement, loan agreement and the bidding documents for the investment program.

87. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government. Consistent with its commitment to good governance, accountability, and

17 Available at: http://www.adb.org/Documents/Policies/Anticorruption-Integrity/Policies-Strategies.pdf. 18 ADB's Integrity Office web site is available at: http://www.adb.org/integrity/unit.asp.

http://www.adb.org/Documents/Policies/Anticorruption-Integrity/Policies-Strategies.pdf

http://www.adb.org/integrity/unit.asp

50

transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the project(s) under the Program. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the loan regulations and bidding documents for the Program. In particular, all contracts financed by ADB in connection with the Program shall include provisions specifying the right of ADB to audit and examine the records and accounts of AAY/PIU and all contractors, suppliers, consultants, and other service providers as they relate to the Program. 88. The Government and AAY agreed to take additional measures to improve governance, accountability, and transparency under the MFF. These measures include (i) independent external auditing of contracts, project accounts, and financial statements; (ii) decisions of all procurement-related matters by the Tendering Committee, which comprises representatives of the Ministry of Economic Development, Ministry of Finance, Ministry of Transport, and the State Procurement Agency (as observer) in accordance with ADB’s Guidelines on Procurement (2017); (iii) verification of contractors’ payment claims by the supervision consultant in accordance with contract specifications; and (iv) timely disclosure of information on selection of consultants and contractors through local newspapers.

XI. ACCOUNTABILITY MECHANISM

89. People who are, or may in the future be, adversely affected by the project may submit complaints to ADB’s Accountability Mechanism. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted projects can voice, and seek a resolution of their problems, as well as report alleged violations of ADB’s operational policies and procedures. Before submitting a complaint to the Accountability Mechanism, affected people should make a good faith effort to solve their problems by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, should they approach the Accountability Mechanism.19

19 For further information see: http://www.adb.org/Accountability-Mechanism/default.asp.

http://www.adb.org/Accountability-Mechanism/default.asp

51

XII. RECORD OF FAM CHANGES

FAM Version Date of Revision Reasons for Change Main Contents of Change

V1 Date created: September 2012

V2 22 July 2014 Tranche 2 Processing (Negotiated Version)

All sections of the FAM, in particular, cost estimates, CAD projections, project implementation schedule, safeguards, DMF and procurement plan for Tranche 2

V3 17 October 2014 Update Procurement Plans and CAD projections

• Replaced procurement plans for Projects 1 and 2 with the approved PRS-generated version.

• Revised CAD projections

V4 24 January 2015 Review Mission • Revised contract awards projections for 2015 and 2020

• Include compliance with FFA and loan covenants as appendix

V5 14 October 2015 Review Mission • Update key persons involved in implementation (ARS)

• Revised contract awards projections for 2015 and 2020.

• Update procurement plans

• Construction supervision consultant’s TORs updated (per signed contract)

• Update compliance with FFA and loan covenants as appendix

V6 6 November 2015 Update Procurement Plan • Update procurement plan of L3144-AZE

V7 21 October 2016 Midterm Review • Update project roles and responsibilities, key persons involved, and renaming of AzerRoadService OJSC (ARS) to Azeravtoyol OJSC (AAY)

• Revise CAD projections


• Update compliance with FFA and loan covenants.

V8 September 2017 Preparation for processing major chance in scope of MFF

• All relevant sections to reflect inclusion of 2 new road sections and feasibility study on tolling system to be financed from loan savings

V9 December 2017 – January 2018

Preparation for processing major chance in scope of MFF

• Renaming of Azeravtoyol OJSC (AAY) to State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 19 December 2017.


• Update compliance with FFA and loan covenants.

52 Appendix 1

PROCUREMENT PLAN

Basic Data

Project Name: Second Road Network Development Investment Program - Tranche 1 Project Number: 45389-002 Approval Number: 2921 Country: Azerbaijan Executing Agency: State Agency of Azerbaijan

Automobile Roads

Project Procurement Classification: Implementing Agency: PIU 4 of "Azeravtoyol" Open Joint-Stock Company

Project Procurement Risk: Project Financing Amount: US$ 312,000,000 ADB Financing: US$ 250,000,000 Cofinancing (ADB Administered): Non-ADB Financing: US$ 62,000,000

Project Closing Date: 31 December 2020

Date of First Procurement Plan: 25 October 2012 Date of this Procurement Plan: 31 January 2018

A. Methods, Thresholds, Review and 18-Month Procurement Plan

1. Procurement and Consulting Methods and Thresholds

Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold Comments

International Competitive Bidding for Works

US$ 10,000,000 and Above

National Competitive Bidding for Works

Between US$ 100,000 and US$ 9,999,999

The first NCB is subject to prior review of bidding document of first procurement, thereafter post review.

Consulting Services Method Comments

Quality- and Cost-Based Selection for Consulting Firm

Single Source Selection for Consulting Firm Individual Consultants Selection for Individual Consultant

Individual consultants may be selected on an ad-hoc basis to provide intermittent and independent service on the projects.

2. Goods and Works Contracts Estimated to Cost $1 Million or More

The following table lists goods and works contracts for which the procurement activity is either ongoing or expected to commence within the next 18 months.

Package Number General Description Estimated

Value Procurement

Method Review (Prior/ Post)

Bidding Procedure

Advertisement Date

(quarter/year) Comments

CW/AZE-2921/R32

Upgrading of R32 Ujar-Zarbad-Agjabedi Road

72,686,163.53

ICB Prior 1S2E Q1 / 2018 Prequalification of Bidders: N Domestic Preference Applicable: N Bidding

Appendix 1 53

Document: Large Works Comments: Inclusive of 18% VAT $11,087,719.41

Lot 1: Lot1: km0+000 to km37+000

35,825,742.94

Lot 2: Lot2: km37+000 to km70+500

36,860,420.59

3. Consulting Services Contracts Estimated to Cost $100,000 or More

The following table lists consulting services contracts for which the recruitment activity is either ongoing or expected to commence within the next 18 months.

Package Number

General Description

Estimated Value

Recruitment Method

Review (Prior/ Post)

Advertisement Date

(quarter/year) Type of

Proposal Comments

None

4. Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100,000 (Smaller Value Contracts)

The following table lists smaller-value goods, works and consulting services contracts for which the activity is either ongoing or expected to commence within the next 18 months.

Goods and Works

Package Number

General Description

Estimated Value

Number of Contracts

Procurement

Method


Bidding Procedure

Advertisement Date


None

Consulting Services

Package Number

General Description

Estimated Value

Number of Contracts

Recruitment Method


Advertisement Date


Proposal Comments

None

B. Indicative List of Packages Required Under the Project

The following table provides an indicative list of goods, works and consulting services contracts over the life of the project, other than those mentioned in previous sections (i.e., those expected beyond the current period).

Goods and Works Package Number

General Description

Estimated Value

(cumulative)

Estimated Number of Contracts

Procurement Method

Review (Prior/Post)

Bidding Procedure

Comments

None

Consulting Services Package General Estimated Number of Recruitment Review Type of Comments

54 Appendix 1

Number Description Value Contracts Method (Prior/ Post)

Proposal

TBD Preparation of FS for tolling system along M3 motorway

$3,000,000.00 1 QCBS Prior FTP

C. List of Awarded and On-going, and Completed Contracts

The following tables list the awarded and on-going contracts, and completed contracts.

1. Awarded and Ongoing Contracts

Goods and Works

Package Number

General Description

Estimated Value

Awarded Contract

Value Procurement

Method

Advertisement Date

(quarter/year)

Date of ADB Approval of

Contract Award

Comments

02/2013/ICB/CW/AZE/Alat-Astara

Construction of the Masalli-Jalilabad section (about 30 km) of Alyat-Masalli Motorway

180,000,000.00 182,215,109.08 ICB Q1 / 2012 28-NOV-13 Contract signed on 11 Dec 2013. Accepted Contract Amount: AZN 142,820,202.50 (excluding VAT)

Consulting Services

Package Number

General Description

Estimated Value

Awarded Contract

Value Recruitment

Method

Advertisement Date

(quarter/year)


Contract Award

Comments

CS-02 M5/R57 road section

459,000.00 356,000.00 SSS Q3 / 2017 21-AUG-17 Contract signed on 22 Aug 2017

CS-01 R32 road section

428,000.00 302,775.00 SSS Q3 / 2017 10-AUG-17 Contract signed on 11 Aug 2017

Construction Supervision of Civil Works

Construction supervision of Civil works contract

6,000,000.00 5,595,120.00 QCBS Q3 / 2012 02-DEC-13 Contract signed on 28 Dec 2013. Accepted Contract Amount: $5,595,120. (excluding VAT)

Program Management Consultant

Program management consultant

4,000,000.00 4,031,641.71 QCBS Q4 / 2012 02-DEC-13 Contract signed on 28 Dec 2013. Accepted Contract Amount: $3,465,400. and AZN 444,160. (excluding VAT)

Appendix 1 55

PROCUREMENT PLAN

Basic Data Project Name: Second Road Network Development Investment Program - Tranche 2 Project Number: 45389-004 Approval Number: 3144 Country: Azerbaijan Executing Agency: State Agency of Azerbaijan

Automobile Roads

Project Procurement Classification: Implementing Agency: PIU 4 of "Azeravtoyol" Open Joint-Stock Company

Project Procurement Risk: Project Financing Amount: US$ 332,000,000 ADB Financing: US$ 250,000,000 Cofinancing (ADB Administered): Non-ADB Financing: US$ 82,000,000

Project Closing Date: 31 December 2020

Date of First Procurement Plan: 29 July 2014 Date of this Procurement Plan: 31 January 2018

A. Methods, Thresholds, Review and 18-Month Procurement Plan

1. Procurement and Consulting Methods and Thresholds

Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold Comments

International Competitive Bidding for Goods


Shopping for Goods Up to US$ 100,000 International Competitive Bidding for Works


Consulting Services Method Comments

Least-Cost Selection for Consulting Firm Quality- and Cost-Based Selection for Consulting Firm Individual Consultants Selection for Individual Consultant

2. Goods and Works Contracts Estimated to Cost $1 Million or More

The following table lists goods and works contracts for which the procurement activity is either ongoing or expected to commence within the next 18 months.


Value Procurement


Bidding Procedure

Advertisement Date


ICB/02/3144AZE

Upgrading of Yevlakh-Zagatala-Georgian Border Road (M5) and Rehabilitation of R57 Road

68,462,100.42

ICB Prior 1S2E Q4 / 2017 Prequalification of Bidders: N Domestic Preference Applicable: N Bidding Document: Large Works

56 Appendix 1

Comments: Inclusive of 18% VAT $10,443,371.25

Lot 1: Lot1: Section Xaldan-Suchma (km 0+300 - 33+100)

31,169,136.94

Lot 2: Lot2: Section Suchma-Shaki Roundabout (km 33+100 - 46+120) and Rehabilitation of R57 Road

37,292,963.48

ICB/02/3144AZE

Installation of Tolling Facilities

30,000,000.00 TBD

3. Consulting Services Contracts Estimated to Cost $100,000 or More

The following table lists consulting services contracts for which the recruitment activity is either ongoing or expected to commence within the next 18 months.


Value Recruitment


Advertisement Date


Proposal Comments

CSC-03/3144AZE

Construction supervision consultant for M5/R57 and R32 roads

8,561,608.00 QCBS Prior Q1 / 2018 FTP

Assignment: International Quality-Cost Ratio: 90:10 Comments: Inclusive of 18% VAT $1,306,008; EA note: 90:10 ratio to improve consultant quality

PMC-02/3144AZE

Program Management Consultant

4,000,000.00 QCBS Prior Q1 / 2018 FTP

Assignment: International Quality-Cost Ratio: 90:10 Comments: Pursuant to para 21 of the RRP for MFF2, the program management consultant engaged under Tranche 1 may be extended to assist AAY with implementation of the entire investment program depending on its performance under Tranche 1.

Appendix 1 57

4. Goods and Works Contracts Estimated to Cost Less than $1 Million and

Consulting Services Contracts Less than $100,000 (Smaller Value Contracts)

The following table lists smaller-value goods, works and consulting services contracts for which the activity is either ongoing or expected to commence within the next 18 months.

Goods and Works

Package Number

General Description

Estimated Value

Number of Contracts

Procurement

Method


Bidding Procedure

Advertisement Date


Goods-1/3144-AZE

Purchase of office equipment

90,000.00 1 SHOPPING

Post Q2 / 2018 Comments: As submitted in EA's updated procurement plan.

Consulting Services

Package Number

General Description

Estimated Value

Number of

Contracts Recruitment


Advertisement Date


Proposal Comments

CS02/ADB/3144-AZE

External Audit of Project Accounts for FY 2015, 2016, and 2017

34,000.00 1 LCS Prior Q1 / 2018 BTP

Assignment: International Comments: Audit of project accounts for all loans under MFF0071-AZE

B. Indicative List of Packages Required Under the Project

The following table provides an indicative list of goods, works and consulting services contracts over the life of the project, other than those mentioned in previous sections (i.e., those expected beyond the current period).

Goods and Works Package Number

General Description

Estimated Value (cumulative)

Estimated Number of Contracts

Procurement Method

Review (Prior/Post)

Bidding Procedure

Comments

TBD Installation of tolling system, facilities and structures along M3 motorway

$30,000,000.00 1 ICB Prior 1S2E Details depend on result of FS

Consulting Services

Package Number

General Description

Estimated Value

Number of Contracts

Recruitment Method


Type of Proposal Comments

None

C. List of Awarded and On-going, and Completed Contracts

The following tables list the awarded and on-going contracts, and completed contracts.

1. Awarded and Ongoing Contracts

58 Appendix 1

Goods and Works

Package Number

General Description

Estimated Value

Awarded Contract

Value Procurement

Method Advertisement

Date (quarter/year)


Contract Award

Comments

ICB/01/3144AZE

Construction of the Jalilabad-Shorsulu (About 30km) of Masalli-Shorsulu motorway

200,000,000.00 143,022,499.65 ICB Q2 / 2014 09-JUL-15 Contract was signed on 20 August 2015. Accepted Contract Amount: AZN176,553,434.90. (inclusive of provisional sum and 18% VAT).

Consulting Services

Package Number

General Description

Estimated Value

Awarded Contract

Value Recruitment

Method Advertisement

Date (quarter/year)


Contract Award

Comments

CS02/ADB/3144

External Audit of Project Accounts for FY 2015, 2016 and 2017

34,000.00 23,970.00 LCS Q1 / 2016 14-OCT-16 Contract was signed on 25 October 2016.

02/QCBS/3144AZE

Construction Supervision consultant for CW

6,000,000.00 5,692,317.00 QCBS Q1 / 2014 11-SEP-15 Contract was signed on 29 October 2015.

Appendix 2 59

TERMS OF REFERENCE FOR CONSTRUCTION SUPERVISION OF THE MASALLI–JALILABAD ROAD PROJECT (TRANCHE 1)1

I. INTRODUCTION

1. The Government of the Republic of Azerbaijan (the Government) has requested the Asian Development Bank (ADB) to provide financial assistance for the Second Road Network Development Investment Program (the Program) under the proposed Multi-tranche Financing Facility (MFF). Part of the funding under the MFF will be used for construction of sections of a new 4-lane motorway/expressway along the southern road corridor between Masalli and Jalilabad. The civil works will involve construction of bituminous road, bridges, flyovers, major interchanges, agricultural culverts and underpasses and structures. Sections of the route pass through wetland areas.

2. The Ministry of Transport will be the executing agency. The Azeryolservis ASC, under the Ministry of Transport, shall be the Implementing Agency (IA) for this project.

3. The IA now wishes to engage a firm of consultants for construction supervision. The consulting services will involve, but not be limited to, review of detailed design and approval of good for construction drawings, certification of all the works under the civil works contract for quality and quantity, civil works contract administration, and benefit monitoring and evaluation.

II. OBJECTIVES

4. The primary objectives of the consulting services are:

a. Function as the ‘Engineer’ in administering the civil works contract (the Contract) in accordance with the International Federation of Consulting Engineers (FIDIC) Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer Multilateral Development Bank Harmonised Edition.

b. Review of detailed design and approve drawings for construction of the road by the civil works contractor (the Contractor);

c. Ensure that the permanent and temporary works have been designed and are constructed in accordance with the technical specifications and standards forming part of the civil works contract with the Contractor;

d. Advise IA on all matters concerning implementation of the civil works contract including quality control, progress of work, arbitration or litigation, certification for payments;

e. Ensure compliance with safeguards, including the management of environmental mitigation plans;

f. Provide the staff of the IA with on-site training in contract administration and other procedures relevant to site supervision and contract administration.

III. DETAILED SCOPE OF WORK

5. The IA intends to award a civil works contract for the construction of the road between Masalli to Jalilabad Crossing; Section (km 142+890 to km 110+300). The consultant shall administer and supervise the civil works contract. In doing so, care shall be taken to minimize climatic impacts and to implement green-house gas reduction measures.

1 The updated TOR is included in the consultant’s contract.

60 Appendix 2

6. Design Review and Approval: During the initial period, the consultant shall carry out a review of the detailed design made available by the IA. Prior to the start of construction, the consultant shall also review and approve construction drawings prepared by the Contractor. The scope of work shall include, but not be limited to, the following:

a. Establish the schedule, methods, and procedures for reviewing the detailed design made available by the IA and of construction drawings prepared by the Contractor.

b. Review the detailed design and construction drawings in accordance with the design standards/technical specifications and the actual site requirements. The review of the detailed design shall be completed within 45 days of the commencement of services. Review of construction drawings will be completed no later than seven days from the date of submission to facilitate the commencement of works;

c. Ensuring that the technical specifications have been duly accounted for in the detailed engineering design and construction drawings; and

d. Provide periodic status reports to the IA and ADB on the design review, identify any problems and difficulties encountered and the proposed solutions.

7. Contract Administration and Construction Supervision:

General a. The civil works will be executed under the (FIDIC) Conditions of Contract.

Accordingly, Azeryolservis will be the “Employer” and the consultant will function as the “Engineer” subject to certain requirements for the Engineer to seek the approval of the Employer prior to taking action under specified clauses of the Contract.

b. The consultant will administer the civil works contract and supervise the day-to-day civil works on site following construction supervision procedures based on sound international practices to: (i) ensure that the Project is constructed in accordance with the provision of the civil works contract; (ii) monitor the completion of the Project within the agreed programme and budget and to the quality standards and safeguard provisions stipulated in the Contract; (iii) monitor compliance with the safeguard requirements and ensure that adequate mitigation measures have been taken during the implementation of the Project; (iv) maintain communication with local communities and help identify and resolve emerging issues and complaints; and (v) advise the IA on matters concerning implementation of the Project.

c. The consultant will report to the IA and ADB on matters concerning implementation of the project. The consultant shall also participate in ADB’s review Missions at site and with the IA and take necessary steps to resolve any issues arising.

d. The consultant will be required to nominate an Engineer’s Representative who will be full-time resident in the project area.

e. The consultant shall operate a quality system that governs their own activities. The Quality Plan shall comply with the latest practices published by the International Standards Organisation (ISO). Within one month of the commencement of the services, the Consultant shall submit a draft Quality Plan covering their various duties to be undertaken during the design review and the supervision of the civil works contract. The consultant shall amend the draft Quality Plan to such extent

Appendix 2 61

as is mutually agreed with the IA. The consultant shall work throughout the duration of the commission to the procedures and requirements of the Quality Plan.

Construction Supervision f. The consultant, as the Engineer, shall be responsible to carry out all the tasks as

defined in the FIDIC Conditions of Contract. The responsibilities of the Engineer shall include, but not be limited to, the following tasks:

i. Ensure that the Notice to Commence is issued to the Contractor clearly stipulating the start date of the Project;

ii. Monitor land acquisition and resettlement activities undertaken by the Employer and provide the required support, as and when required;

iii. Liaise with the appropriate authorities to ensure that all the affected utility services are promptly relocated to avoid any disruption to the works;

iv. Ensure that the project site/right of way, free from all encumbrances, is handed over to the Contractor in accordance with the agreed schedule or otherwise advise the Contractor of possible delays in handing over of the project site;

v. Ensure that the Contractor has submitted all the required bank guarantees (performance securities, advance payment guarantee and guarantee for release of retention money, if any) and insurance policies required in accordance with the Contract;

vi. Examine the Contractor’s work programme (or the revised work programme) and accord the approval to the Contractor to carry out the works. Wherever required, facilitate the reaching of agreement between the Employer and the Contractor regarding the work programme and ensure that the construction works are carried out in accordance with the agreed work programme. The Engineer will keep the Employer informed of any delay or potential delays in the work schedule of the Contract, and will take all necessary actions to prevent potential delays;

vii. Ensure all construction equipment ismobilized by the Contractor in accordance with the work programme/Contract and inspect the Contractor’s equipment;

viii. Approve and/or issue working drawings/good for construction drawings and issue instructions to the Contractor as required in accordance with the Contract specification and the Contractor's quality management plan;

ix. Issue clarifications and supplementary drawings to the Contractor and/or approve alternate drawings, provide the Contractor with all necessary surveys and reference data to facilitate the work and to avoid any potential delays in implementation of the works;

x. Inspect and approve all material sources identified by the Contractor;

xi. Inspect the results of material and soil tests to ensure compliance with specifications and issue immediate notice to the Contractor in the event that such materials and works fail to comply with the specifications;

xii. Maintain records of all testing work, including cross-referencing of items of work to which each test refers and location from which any samples were obtained for testing;

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xiii. Supervise the Contractor in all matters concerning safety of workers and the public, and the care of civil works including provision of necessary personal protective equipment, lights, guardrails, fencing and security. The consultant shall establish written procedures for monitoring and reporting on safety;

xiv. Regularly monitor and inspect the Contractor’s quality control and assurance programme to ensure that quality of the finished works meet the Contract standards and specifications. This includes regular checking of the materials testing programme;

xv. Carry out regular audits of the Contractor’s and subcontractors’ quality systems to ascertain that the requirements of the systems and the IA’s quality objectives are being met. The quality audits shall be done at least once every six months. The consultant shall report all non-conformities to the IA after each audit and explain what actions shall be taken by the contractor to rectify each non-conformity.

xvi. Assess and check the laboratory and field tests carried out by the contractor, and carry out independent tests;

xvii. Prepare the non-conformity reports and propose rectification work or solution;

xviii. Monitor progress of the construction works through computer-aided project management techniques;

xix. Convene regular site meetings with the Contractor to discuss issues and problems affecting the progress, and brief the Employer;

xx. Coordinate with the relevant local government authorities/agencies so as to minimize disruption to the works programme;

xxi. Review and comment on the monthly progress reports submitted by the Contractor detailing the work undertaken during the previous month, the progress of the work against the approved schedule, the problems and difficulties encountered by the Contractor and other issues requested by the Employer;

xxii. Assist the IA in processing the Contractor’s application for subcontracting parts of the works, and removing ambiguities and the contract documents, if any.

xxiii. Measure the completed works and keep detailed records, including measurement books;

xxiv. Maintain permanent record which shall include, but not be limited to, site correspondences, survey data, work programme, material testing results, quality acceptance data, daily site diaries, records of plant, labour and materials used, measurement and certification, minutes of meetings, and records of all the data/reports/certificates/statements, etc., under the Contract.

xxv. This permanent record shall be handed over to the IA after the expiry of the consultancy contract;

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xxvi. Prepare quarterly cashflow projections for the Employer in an acceptable format, in which cashflow should identify budget estimates for all outstanding works;

xxvii. Measure the work and certify the interim and final payment certificates for submission to the Employer;

xxviii. Assess and make necessary recommendations to the IA on the Contractor’s applications for extension of time for completion, claims for additional payment, contract variations, changes in scope of work, any disputes, etc.;

xxix. Review all claims submitted by the Contractor and provide advice to the Employer of the validity of the claim, the effect of such claim on the construction schedule and the cost of the project;

xxx. Advise and assist the Employer with respect to arbitration or litigation relating to the works, whenever required;

xxxi. Issue taking over certificates in respect of satisfactory completion of the works in accordance with the contract provisions;

xxxii. At the completion of the works, verify the Contractor’s “as-built drawings” as a true record of the works as constructed and ensure that the works have been executed in accordance with all the provisions contained in the Contract including those relating to the standards of workmanship, safety requirements, and compliance with safeguard requirements;

xxxiii. Undertake environmental monitoring to ensure that the construction methods proposed by the Contractor for carrying out the works are satisfactory, with particular references to the technical requirements of sound environmental standards on the basis of the ADB’s Safeguard Policy Statement (SPS) 2009;

xxxiv. Ensure that the construction works are undertaken based on the environmental management plans to mitigate the environmental issues as detailed in the Environmental Impact Assessment (EIA) and the Initial Environmental Examination (IEE). The Ecologist in the construction Supervision team will prepare the specific protocols of the turtle management plan (provided in the EIA and EMP) and will oversee implementation of the plan during the culvert construction stage. The status of the implementation of environmental management plans and the environmental monitoring reports shall be covered in the reports submitted by the Engineer to the IA and ADB;

xxxv. The construction of the road passes through wetland areas. The consultants should possess environmental management expertise to effectively supervise the road construction in wetland areas and ensure that the mitigation measures as per the EMP are implemented;

xxxvi. Carry out environmental management seminars for the Contractor and IA’s staff;

xxxvii. Prepare internal monitoring reports on the land acquisition and resettlement activities (including the livelihood restoration activities through job placement of members of severely affected and vulnerable households) in accordance with the Land Acquisition and Resettlement Plan (LARP)

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prepared by the IA in line with the ADB’s Safeguards Policy Statement 2009;

xxxviii. Ensure minimum disruption to the local settlements while approving Contractor’s work programme, including monitoring of the impacts of construction work on local settlements, and by reporting impact monitoring to the Employer;

xxxix. Ensure that no child labour is used for the construction works or any other activities associated with the project;

xl. Ensure opportunities for skilled female labour are facilitated and made available;

xli. Monitor the implementation of the health and safety programme at camp site including the information and education campaign on sexually-transmitted diseases and HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome) shall be dealt in a gender-sensitive manner as required under the civil works contract;

xlii. Provide on-the-job training for the IA’s staff at site on construction supervision, contract administration, quality control and assurance, safeguards, PPMS and monitoring and evaluation and other activities.

Project Performance Monitoring/Benefit Monitoring and Evaluation g. The consultant shall establish a system for project performance monitoring in

accordance with the project framework. In doing so, the consultant will:

i. Identify, on the basis of the project, performance indicators and the targets to be monitored during the implementation of the project and shall establish systems for collecting data and statistics for such monitoring;

ii. Carry out a baseline survey on performance indicators and establish a set of baseline data based on which the project impacts will be reassessed;

iii. Collect required data and undertake other relevant surveys before start of construction, after the 1st and 2nd year from the commencement date, and immediately after completion of the Project;

iv. Assess the socioeconomic impacts and environmental sustainability of the Project;

v. Incorporate findings and supporting data in the project completion report; and

vi. Conduct training in operational social research methods and build the capacity of the IA.

8. Actions Requiring Specific Approval of the Employer:

a. The consultant will be required to obtain prior approval of the Employer in the following matters:

i. Approving subletting of any part of the works;

ii. Certifying additional cost;

iii. Determining an extension of time;

iv. Issuing a variation having any financial implications in any manner; and

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v. Fixing rates or prices for any item.

IV. DURATION OF SERVICES

9. The consultancy services are required for 36 calendar months for construction supervision and the defects notification period of civil works contract.

V. TEAM COMPOSITION

10. It is estimated that about 158 person-months of international consultants’ services and about 149 person months of national consultants’ services would be required by the IA to accomplish the tasks. The requirement of various key experts and the duration of their engagement are indicated below. However, the consultants should propose additional non-key experts within the budget that may be required to accomplish the tasks.

Expertise Input (months)

A. International Key Experts

1 Team Leader/Sr. Highway Engineer 35

2 Resident Engineer/Highway Engineer 33

3 Bridge Specialist/Structural Engineer 27

4 Materials Engineer 27

5 Contract Specialist 12

6 Environmental Monitoring Specialist 2

7 Social Sector/Resettlement/Benefit Monitoring Specialist 3

8 Ecologist (Turtle Expert) 1

9 Quality Assurance Engineer 12

10 Geotechnical Engineer 6

Subtotal (A) 158

B. National Key Experts

11 Deputy Resident Engineer/Highway Engineer 36





16 Quantity Surveyor 36

Subtotal (B) 149

TOTAL (A+B) 292

11. The personnel specified above shall be supplemented by the consultant with an appropriate number of surveyors, junior engineers, inspectors, translators and support staff as necessary to properly perform the services. These non-key experts and support personnel shall not be separately reimbursed by the IA nor subject to approval.

VI. QUALIFICATION REQUIREMENTS

12. The minimum qualification requirements for all the key positions are indicated below.

13. International Key Experts:

a. Team Leader/Sr. Highway Engineer: Preferably with a Degree in civil engineering and post graduate qualification in highway engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 15 years similar experience in design and construction supervision of highway projects with flexible pavements, including 8 years’ international experience. Tasks and responsibilities include performing the duties of the

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Engineer according to the conditions of the works contract, leading and managing the supervision team, certifying payments, and acting as the primary liaison to the Client.

b. Resident Engineer/Highway Engineer: Preferably with a Degree in civil engineering and post graduate qualification in highway or bridge engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 15 years’ similar experience in design and construction supervision of highway projects with flexible pavements, including 6 years’ international experience. Tasks and responsibilities include the day to day management of the supervision team, monitoring and reporting on the progress of the works, addressing technical and quality issues as they arise and ensuring the works are carried out in accordance with the Specifications.

c. Bridge Specialist/Structural Engineer: Preferably with a Degree in civil or structural engineering and post graduate qualification in structural engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 12years’ similar experience in design and construction of interchanges, flyovers, bridges, culverts, causeways, and other structures, including 5 years’ international experience. This expert is responsible for all technical aspects concerning bridges, culverts and highway structures.

d. Material Engineer: Preferably with a Degree in civil engineering and post graduate qualification in geotechnical or material engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 12years’ similar experience of establishing and managing quality assurance for the supervision of construction works, laboratory and field testing for flexible pavement materials as per ASTM, AASHTO and BS standards including 5 years’ international experience. Tasks and responsibilities include approving all materials and method statements in accordance with the Specifications and the quality assurance scheme, and verifying the accuracy of all tests.

e. Contract Specialist: Preferably with a Degree in civil engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 12years’ similar experience in the implementation of highway projects using FIDIC conditions of contract involving contract management including change in scope of work, variations under the contract, settlement of claims and disputes, etc., including 5 years’ international experience. This expert is responsible for managing all contractual risks, claims, disputes and variations and advising the client on such matters.

f. Environmental Monitoring Specialist: Preferably with a Degree or post graduate degree in environmental sciences or equivalent. At least 10 years’ experience in conducting environmental impact assessments and implementation of environment mitigation plans and/or monitoring implementation of environmental mitigation measures and health and safety plans during implementation of projects including highway projects funded by developing partners, including 5 years’ international experience. This expert is responsible for ensuring the full implementation of environmental mitigation measures and health and safety plans.

g. Social Sector/Resettlement/Benefit Monitoring Specialist: Preferably with a Degree or post graduate degree in sociology or social sciences or equivalent. At least 10 years’ experience in development and/or implementation of resettlement plans, conducting socio-economic surveys and benefit monitoring involved in

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implementation of projects including highway projects funded by developing partners, including 5 years’ international experience. This expert is responsible for land and resettlement issues, managing concerns of impacted persons and the welfare of staff working on the project.

h. Turtle Expert/Ecologist: Preferably with a Post graduate degree in biological sciences or equivalent. At least 10 years’ experience in the protection and conservation of fresh water sensitive species, including 5 years specific experience in fresh water/pond water turtle conservation. Tasks and responsibilities include ensuring the implementation of plans to protect turtles and other wild life impacted by the project.

i. Quality Assurance Engineer: Preferably with a Degree in civil engineering and relevant professional qualification in the management of the ISO 9000 family of standards. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 12 years’ similar experience in all phases of quality assurance process, supervision of construction works. This expert is responsible for ensuring that a comprehensive quality system is establish and implemented coving all aspects of the Contractor’s and the Consultant’s activities.

j. Geotechnical Engineer: Preferably with a Degree in civil engineering and post graduate degree in geotechnical engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. At least 12 years’ similar experience in geotechnical investigations and the design of highway embankments and highway structures, including 6 years’ international experience. This expert is responsible for all geotechnical matters including checking the designed solutions are appropriate for the ground conditions encountered on site.

14. National Key Experts:

a. Deputy Resident Engineer/Highway Engineer: Preferably with a Degree in civil engineering and at least 10 years’ similar experience in design and construction supervision of highway projects.

b. Bridge Specialist/Structural Engineer: Preferably with a Degree in civil engineering and at least 10 years’ similar experience in design and construction of interchanges, flyovers, bridges, culverts, causeways, and other structures.

c. Material Engineer: Preferably with a Degree in civil engineering and at least 5 years’ similar experience in supervision of construction works, and laboratory and field testing for flexible pavement materials as per ASTM, AASHTO and BS standards as part of a quality assurance process;

d. Environment Monitoring Specialist: Preferably with a Degree in environmental sciences or equivalent and at least 5 years’ experience in conducting environmental impact assessments and implementation of environment mitigation plans and/or monitoring implementation of environmental mitigation measures during implementation of projects including highway projects funded by developing partners.

e. Social Sector/Resettlement/Benefit Monitoring Specialist: Preferably with a Degree in sociology or social sciences or equivalent and at least 5 years’ experience in development and/or implementation of resettlement plans, conducting socio-economic surveys and benefit monitoring involved in

68 Appendix 2

implementation of projects including highway projects funded by developing partners.

f. Quantity Surveyor: Preferably with a Degree in civil engineering and at least 5 years’ experience as a quantity surveyor in construction of highway projects executed under FIDIC conditions of contract.

All national key experts are responsible for ensuring works are completed in accordance with the contract, effective communication between national and international staff, and supporting their corresponding International Expert in his or her duties.

VII. REPORTING REQUIREMENTS

15. The consultant shall provide the Azeryolservis with reports in three hard copies in both English and Azeri. The consultant shall provide the ADB with reports in two hard copies in English. All documents shall also be provided in electronic formats agreed with the Azeryolservis. As a minimum this will require one electronic copy in an appropriate editable format and a second copy in Portable Document Format (PDF).

16. All correspondence to Azeryolservis shall be in both English and Azeri languages.

17. The consultant will prepare and submit the following reports:

a. An inception report to be submitted within 1 month of commencement of services. The inception report shall including the performance indicators to be monitored during and at the end of the project, and the draft Quality Plan.

b. Report on the data-collection system and the baseline survey for the Project Performance Monitoring/Benefit Monitoring and Evaluation, to be submitted within 3 months of commencement of services;

c. A weekly one-page report on the progress of works and any issues that require immediate attention of the IA;

d. Monthly reports, to be submitted within 7 days of the end of each month, to include progress monitoring, quality assurance/quality control, schedules of contract payments and variation orders, graphical representations of progress against programme based on the approved contract schedules, charts of physical progress on major items, status of any delays, contractual claims, relevant photographs, details of all financial projections and details of impediments to the works and proposals for overcoming them;

e. Annual appraisal reports covering all aspects such as progress monitoring, quality assurance/quality control, status of any delays, contractual claims, and details of all financial projections, to be submitted within 14 days of the end of each year;

f. Draft project completion report, in ADB’s format, to be submitted to IA for completion and onwards transmission to the ADB, within 3 months of completion of the civil works.

VIII. IMPLEMENTATION ARRANGEMENTS AND COUNTERPART SUPPORT

18. The Project Implementation Unit (PIU) within the Azeryolservis will serve as the liaison between Azeryolservis, consultants and contractors, and shall be responsible for the overall project management.

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19. Services, facilities and property to be made available to the Consultant by the Client, through the provision under the civil works contract, will include:

a. Site Offices, including buildings, maintenance and insurance, utilities, furniture and air-conditioning, computers, printers, scanners and photocopies;

b. Vehicles, including site vehicles appropriate to the number of supervision staff, maintenance, taxes and insurance;

c. Equipment including survey and inspection equipment;

d. Accommodation local to the Site appropriate to the number of supervision staff including maintenance, insurance and utilities;

e. Support staff comprising chainmen for surveying work and laboratory assistants.

f. Laboratory facilities and equipment.

20. No other facilities, equipment, logistical support, or other things will be provided during the services. The consultant shall therefore be responsible for all costs associated with:

a. Office stationary and consumables, including printing consumables;

b. Telephone, fax and internet hardware, installation and usage costs;

c. Fuel for Vehicles;

d. Personal Safety Equipment;

e. Codes and Standards;

f. Any accommodation away from the Site locality;

g. Support Staff including drivers and cleaners; and

h. Any other costs necessary for the performance of the Service.

21. Professional and support counterpart personnel to be assigned by the Client to the Consultant’s team: None.

22. Client will provide the following inputs, project data and reports to facilitate preparation of the Proposals: Not Applicable.

70 Appendix 3

TERMS OF REFERENCE FOR PROGRAM MANAGEMENT CONSULTANT1

I. INTRODUCTION

1. The Government of the Republic of Azerbaijan (the Government) has requested the Asian Development Bank (ADB) to provide financial assistance for the Second Road Network Development Investment Program (the investment program) under the proposed Multi-tranche Financing Facility (MFF). The Ministry of Transport (MOT) will be the executing agency (EA) and Azeryolservis ASC will be the implementing agency (IA). Under the investment program, it has been proposed to engage a program management consultant (PMC) to assist in the management of the program. The PMC will also build the Azeryolservis’s capacity through on the job training and other specialized trainings for Azeryolservis’s Project Implementation Units (PIUs), including the capacity to integrate climate proofing measures in the road design, procurement, construction monitoring and maintenance, environmental and social safeguards, financial management, contract and project management so that the PIU staff can independently handle program management in the future. The PMC shall help Azeryolservis in submitting project and program management reports to MOT and ADB. Thus, the PMC role is to build the capacity and not to substitute the capacity. The PMC shall be responsible for assisting Azeryolservis in overall program management and shall submit reports to Azeryolservis, MOT, Program Steering Committee (PSC) and the ADB on all matters concerning program implementation.

2. The PMC will introduce a suitable management information system and train the PIU in the efficient and effective management of the investment program. The PMC will assist Azeryolservis in preparing and submitting flash reports and photographs concerning implementation progress of each tranche. It will also submit other required performance and monitoring reports consistent with existing project implementation requirements and compliance with covenants to EA and ADB. The implementation progress reports will include evaluation of issues/problems and recommendations for remedial actions.

II. OBJECTIVES

3. Azeryolservis is soliciting proposals from national and international firms of consultants with experience and knowledge to improve the efficacy of program management and help its management and staff to increase oversight of ADB financed projects (and, as and when required, other projects implemented by Azeryolservis), make timely and optimum decisions, and enhance their project management skills. The objective is to ensure effective project delivery, contract compliance, effective planning, and timely procurement by maintaining transparency at each stage, compliance with safeguard requirements and quality assurance. It is assumed that the PMC’s actions and advise will lead to: reduced time for procurement and contracting of works, goods, and services (from the time of approval by ADB and other stakeholders to the time of mobilization); on-time and within budget completion of works; timely payment to contractors and consultants; a higher level of staff skills; and help promote trust, teamwork, and customer-orientation at Azeryolservis.

III. DETAILED SCOPE OF WORK

4. The PMC shall be responsible for assisting Azeryolservis in overall program management in coordination with Ministry of Transport, Ministry of Finance (MoF) of the Republic of Azerbaijan, supervision consultants and other consultants, ADB, other financing institutions and line ministries. PMC shall provide, through regular site visits and reviews of reports, the services broadly described below:


Appendix 3 71

Program Management

a. Recommend to Azeryolservis, actions needed to resolve critical issues related projects, including, but not limited to: (i) change and variation orders, extensions of time, changes in cost estimates and financing plans, recruitment and/or replacement of personnel, etc.; (ii) procurement of works, goods, and services; (iii) compliance with ADB safeguard requirements; (iv) maintenance of project accounts and facilitation of external financial audits; (v) procurement and construction delays and cost/price variations; and (vi) overall performance of the service providers and contractors;

b. Prepare schedules of key activities related to procurement, contracting, and project implementation for each component under each tranche of the investment program to be used as a base schedule. Monitor the actual implementation of the plan and assist Azeryolservis in taking corrective measures as and when required. Also assist Azeryolservis in ensuring that all the components under the Projects are implemented and provide assistance in resolving issues impeding the progress of all the components;

c. Assist Azeryolservis in preparing periodic financing requests (PFR) for the subsequent tranches/new projects to be financed out of MFF. The activities will include but not limited to: coordination with design consultants; carry out technical reviews of the feasibility studies and detailed designs and facilitating Azeryolservis’s approval to design, technical standards, bills of quantities and cost estimates; finalization of Initial Environment Examination (IEE)/Environmental Impact Assessment (EIA) and Land Acquisition and Resettlement Plan (LARP), preparation of external resettlement monitoring reports as per ADB’s requirements; finalization of economic analysis as per the requirements of ADB; preparation of PFR and PFR Report; coordinate with ADB for approval of draft PFR and assist Azeryolservis in negotiation, as and when required;

d. Assist Azeryolservis in preparing and/or updating the procurement plans and in timely procurement of works and consultancy services. The activities will include but not limited to: preparation of bid documents/Request for Proposal (RFP), terms of reference, carrying out technical and financial evaluation, contract negotiations, obtaining all the approvals from ADB and award of contracts, etc.;

e. Assist Azeryolservis in establishing a formal procedure for monitoring, reviewing, and reporting by the supervising consultants on respective projects with performance targets and a schedule for achieving the targets;

f. Introduce a streamlined management information system (MIS) using latest information technology to provide Azeryolservis and ADB a snapshot of progress (including progress photographs) at any given time (e.g., in the form of information uploaded to a particular website for easy access by all the stakeholders), including summaries of progress reports submitted by the consultants with special emphasis on the major problems in implementation of the projects and the steps that are required to be taken by the Employer / Consultants to overcome such problems;

g. Assist Azeryolservis in performing routine reviews of ADB financed projects to ensure that roads are designed and constructed strictly in accordance with the provisions of the contracts, technical specifications; ADB specified social and environmental safeguards, loan covenants, international best practices, and national laws and regulations;

72 Appendix 3

h. Assist Azeryolservis to ensure compliance with safeguard requirements – ensure that (i) the entire resettlement activities are carried out in accordance with the ADB’s requirements (including implementation of livelihood restoration activities through prioritization in employment for members of severely affected and vulnerable households), (ii) environment management plans are being implemented during the project implementation effectively and (iii) all requirements in the EIAs and EMPs are addressed in the bid documents and monitored. All loan agreement covenants relating to critical wildlife in the project area are appropriately addressed. All critical wildlife related mitigation measures and plans should be effectively coordinated and implemented as required. Assistance should also be provided to Azeryolservis in establishing and managing an effective grievance redress system and timely reporting to ADB and Azeryolservis of emerging issues and complaints related to projects under the MFF;

i. Assist Azeryolservis in preparing yearly contracts’ award and disbursements targets, review actual performance on a monthly basis, identify reasons for shortfall and follow up with the borrower and the executing agency in a timely manner to take appropriate measures;

j. Assist Azeryolservis in ensuring compliance with the loan covenants by the borrower/executing agency and ensuring that all the stipulated contract conditions, more specifically ADB’s social and environmental safeguard aspects, have been complied with by the contractors and consultants in implementation of projects;

k. Assist Azeryolservis in carrying out assessment to ensure compliance with ADB’s Safeguard Policy Statement (SPS) 2009, resettlement and environment frameworks and EIAs and LARPs during the implementation of the investment program. Specifically, the consultants shall carry out post project monitoring of the wildlife once after one year and another after 5 years of the completion of each tranche;

l. Planned projects will pass through wetland areas. The consultants shall provide environmental management expertise to effectively supervise the road construction in wetland areas and ensure that the mitigation measures as per the EMP are implemented in coordination with the supervision consultants;

m. Report on the assessment of DMF performance targets/indicators for each tranche of the investment program;

n. On an ongoing basis, perform a Business Process Review of the adequacy, and effectiveness of the existing accounting, record keeping, and financial reporting environment and the corresponding systems, procedures and internal control environment in Azeryolservis and recommend for required improvements;

o. Oversee the contractor and supervision consultant activities and ensure that they are implementing and monitoring gender designs (such as comfort rooms, bus-stops, access facilities), providing opportunities for skilled female labour, and dealing with HIV matters in a gender-sensitive manner;

p. Perform a review of the internal and external audits currently being undertaken and through a dialogue with internal and external auditors identify and proceed to bridge any gaps in the scope, approach and methodology adopted by internal and external auditors;

q. Provide on-the-job training and other specialized trainings to Azeryolservis staff, and PIU staff in particular, on all aspects of project management (including integration of

Appendix 3 73

climate proofing measures in the road design, procurement, construction monitoring and maintenance, environmental and social safeguards, financial management, and contract management) to ensure that the staff are confident and fully trained to carry on the required tasks independently at the end of this consultancy;

r. Coordinate and harmonize services, such as the preparation of procurement plans, the management information system and preparation of documents with Azeryolservis’s investment programmes financed by institutions other than the ADB.

s. Assist the Azeryolservis in applying the project management tools and procedures described above to other sections of the Azeryolservis, including PIUs managing projects financed by institutions other than the ADB.

Road Sector Studies

t. Carry out a comprehensive assessment of various studies on road sector being conducted by the consultants engaged by development partners;

u. Based on the assessment, assist Azeryolservis in preparing terms of reference and RFP for engagement of consultants to carry out the following tasks:

i. Mainstreaming the road safety audits in the road network development; and network management. This will include road safety audit during design, construction and operation of various roads, including the secondary and local roads and in implementation of road safety measures;

ii. Development of independent set of road standards, a design manual and specifications for Azerbaijan, including the specifications for pavement layers design for different terrains (local site conditions) and climatic conditions. The consultants shall take into account the progress made so far under one of the capacity building initiatives and will develop and finalize the standards and specifications with additional studies and data to be collected.

v. PMC will assist in selection of the consultants for each of the above studies which will include, but not limited to, preparation of terms of reference and RFP documents, carrying out technical and financial evaluation, contract negotiations, obtaining all the approvals from ADB and award of contracts, etc.;

w. Post award of contract for the above studies, PMC will monitor the services performed by the consultants, review the reports submitted and assist Azeryolservis in finalizing these outputs of the consultants for implementation.

Management of Road Network

x. The PMC will assist Azeryolservis in selection of consultants which shall include, but not limited to, preparation of terms of reference and RFP documents, carrying out technical and financial evaluation, contract negotiations, obtaining all the approvals from ADB and award of contracts, etc. The consultants to be engaged by Azeryolservis shall be required to carry out the following tasks:

i. Assist in collection of data about road conditions and update the road database (road asset management system) on a periodical basis;

ii. On the basis of the updated information available in the road asset management system, prioritize various roads sections requiring routine and periodical maintenance;

74 Appendix 3

iii. Prepare bid documents, along with the performance parameters, for engagement of private sector contractors under long term performance based contracts for the prioritized sections of the roads;

iv. Assist Azeryolservis in procurement activities and in award of performance based maintenance contracts and other contracts;

v. Any other related tasks.

y. Post award of contract for the above study, PMC will monitor the services performed by the consultants, review the reports submitted and assist Azeryolservis in finalizing the outputs of the consultants for implementation.

IV. EXPECTED OUTCOME

5. The PMC shall support Azeryolservis in the management of ADB financed, and other related, projects. With the support of the PMC, it will be expected that:

a. All the key activities in the pre-construction stage of projects such as feasibility study and/or detailed designs, procurement of goods, works, and services for the approved projects, and award of contracts are in accordance with ADB policies, procedures, and schedules agreed between the Government and ADB; and are completed without delay;

b. All the key activities in the construction stage of projects such as commencement of works, contractor’s mobilization, timely implementation of the projects, issuance of change orders, extensions of time, levy of liquidated damages, etc., and all technical/financial formalities are performed in accordance with ADB policies and procedure, and schedules agreed between the Government and ADB;

c. Periodic financing requests and related documents for future projects are submitted to ADB as agreed between the Government and ADB;

d. All bidding documents/RFPs, evaluation reports and other reports are prepared in a timely manner;

e. All the loan covenants are met by the Borrower. This shall be ensured in a phased manner in respect of all ongoing projects as also for the future projects. Reports regarding this shall be submitted to ADB on a periodical basis;

f. All the components under each Project are completed on time and within budget, including engagement of consultants for various studies and award of performance based maintenance contracts;

g. All staff of the Azeryolservis’s PIUs and management are well versed in procurement, contracting, contract administration, financial management, social and environmental management, and art of communication with stakeholders to allow them to independently carryout project management duties;

h. All the documents relating to the project (like bids, contracts, approval letters, all project documents, correspondences with contracts/consultants/ADB/MoF/MOT/ Azeryolservis, financial records, consultants’ reports, feasibility studies, detailed design reports, etc.,) are maintained effectively and efficiently within the PIU/Azeryolservis. PMC will also ensure that all important documents are digitized and maintained in a secured manner by Azeryolservis;

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i. Road and bridge design manuals and specifications tailored for Azerbaijan are prepared and their use implemented. Where current standards are no longer appropriate or represent best practice, the standards and norms shall be updated.

j. A project performance monitoring/benefit monitoring and evaluation system is introduced for all the tranches of the investment programs and the DMF performance targets/indicators are assessed on a periodically.

V. REPORTING REQUIREMENTS

6. The consultant shall provide the Azeryolservis with reports in three hard copies in both English and Azeri. The consultant shall provide the ADB with reports in two hard copies in English ADB (one each to ADB headquarters and Resident Mission in Baku). All documents shall also be provided in electronic formats agreed with the Azeryolservis. As a minimum this will require one electronic copy in an appropriate editable format and a second copy in Portable Document Format (PDF).

7. All correspondence to Azeryolservis shall be in both English and Azeri languages.

8. The consultant will prepare and submit the following reports:

a. Inception report to be submitted within 1 month of mobilization;

b. Monthly reports, to be submitted within 7 days of the end of each month, to include the details of the activities performed, the status of all components under each Project, graphical presentations of progress against planned program, details of impediments to the works and the steps for overcoming them;

c. Submit periodical flash reports giving a snapshot of progress, including progress photographs (e.g., in the form of information uploaded to a particular website for easy access by all the stakeholders) with special emphasis on the major problems in implementation of the projects and the steps that are required to be taken by the Employer/Consultants to overcome such problems;

d. Draft road standards, road and bridge design manuals and specifications within 9 months of commencement of the services. Final documents one month after receiving all stakeholder’s comments;

e. Draft final report 2 months before the completion of the services, which shall be modified taking into account the comments of ADB and the Government.

f. Final report at completion of the services.

VI. DURATION AND TEAM COMPOSITION

9. The services will be required over a period of 36 calendar months. The team should collectively have experience in program management of transport sector projects, civil engineering aspects of roads (geometric design, pavement design, materials, geotechnical, hydraulics, structures, construction, road safety and maintenance), financial management (budgeting, accounting and disbursements), training and mentoring, social and environmental management, and team leadership.

10. The timing of inputs will be agreed with the Azeryolservis before each staff member is mobilized. Inputs will not necessarily be continuous, and the consulting services shall be

76 Appendix 3

structured to most efficiently address the needs and priorities of the Azeryolservis and ADB. The consulting services will require the following input:

Proposed Staffing

Position No. Person-Months Position No.

Person-Months

International Key Experts National Key Experts

Program Management Specialist/ Team Leader

1 30 Highway Engineer 1 12

Procurement Specialist/Deputy TL 1 15 Financial Management Specialist 1 3 Social Sector and Resettlement Specialist

1 6 Social Sector and Resettlement Officer

1 12

Environmental Specialist 1 4 Environmental Officer 1 9 Road Safety Specialist 1 5 Pavement Design Specialist 1 6 Pavement Engineer 1 6 Highway Specialist 1 5 Bridge Specialist 1 4 Road Network Management Specialist

1 6

Total (International Key Experts) 10 84 Total (National Key Experts) 4 39

Total (International and National Key Experts) 123 person-months

11. The personnel specified above shall be supplemented by the consultant with an appropriate number of translators, technical and administrative support staff as necessary to properly perform the services. These non-key experts and support personnel shall not be separately reimbursed by the IA nor subject to approval.

VII. COUNTERPART SERVICES AND FACILITIES

12. Client’s Input and Counterpart Personnel.

a. No services, facilities or property will be made available to the Consultant by the Client.

b. No professional and support counterpart personnel will be assigned by the Client to the Consultant’s team.

13. The Client will provide all available inputs, project data, reports and other material necessary for implementation of the assignment.

14. The Client will provide the following inputs, project data and reports to facilitate preparation of the Proposals: None.

15. The Consultant will arrange their own facilities to properly perform the services, including furnished office accommodation, transport, laptops/computers, printers, photocopying machines, internet, consumables, stationery, etc. Office accommodation may become available within Azeryolservis offices following a move to new premises expected during 2014, but this cannot be guaranteed.

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VIII. ELIGIBILITY AND QUALIFICATION REQUIREMENTS

16. The consulting firm or its team members should not have been engaged by Azeryolservis or a donor agency as a supervision and/or design consultant or an advisor on any project or been part of the contractors’ or the supervising consultants’ teams in on-going projects funded or administered by ADB.

17. The PMC should have provided services of similar scope, scale, duration, and nature in the last ten years, and have a successful track record of meeting the goals and objectives of the assignment in a timely and efficient manner. This should be demonstrated through a list of projects and references (names and contact information of clients during the past ten years) that can verify the effectiveness and efficiency of the firm’s services.

18. The qualifications requirements for the key-personnel are as under:

International Key Experts:

a. Program Management Specialist/Team Leader: Preferably having a Post Graduate Degree in Highway Engineering or related field with overall 20 years’ experience and 15 years’ experience in similar position and in similar assignment involving project/contract administration involving planning, project implementation, reporting, etc. from Employers’ point of view and capacity building of clients’ staff. He/she should have a thorough understanding of technical aspects of road design and construction as well as a broad understanding of economic, financial, social, environmental and social aspects of road projects. He/she should also have experience in managing multi-disciplinary and multi-national teams, and have a proven track record of successfully completing similar assignments. He/she should have 10 years of international experience on similar projects with administration of FIDIC.

Tasks and responsibilities include leading and managing the PMC team, acting as the primary liaison with the Client, ensuring the work is completed and the objectives and outcomes of these Services are fulfilled. The expert will be directly responsible for the successful implementation of program management systems and procedures within Azeryolservis.

b. Procurement Specialist/Deputy Team Leader: Preferably having a Degree in engineering, business administration, or related field and 20 years’ experience in profession, with about 15 years’ experience in similar positions and in similar assignments involving procurement planning, procurement, contract administration, project implementation and capacity building of client’s staff, etc. Minimum 8 years of international experience on similar projects and experience in procurement planning and procurement of externally assisted projects (ADB, World Bank, etc.).

In addition to supporting the Team Leader, the expert’s tasks and responsibilities include monitoring and overseeing the procurement process all stages in accordance with procurement plans and Bank guidelines, and assisting Azeryolservis with the preparation of feasibility studies, bidding documents, and evaluation reports.

c. Financial Management Specialist: Preferably having a Degree in finance, economics or business administration, preferably Certified Accountant or MBA, and 15 years’ experience in profession, with about 10 years’ experience in handling financial management of large infrastructure projects funded by

78 Appendix 3

developing partners (like ADB, World Bank, USAID, etc.) including capacity building of clients’ staff. Minimum 5 years of international experience handling projects financed by international agencies. Tasks and responsibilities include ensuring robust financial systems are in place, assisting Azeryolservis in the preparation of periodic financing requests and the preparation of economic analysis of schemes.

d. Social Sector and Resettlement Specialist: Preferably having 10 years’ experience in resettlement programs in the developing countries with post graduate degree in Sociology or equivalent in similar projects funded by Asian Development Bank/World Bank, including capacity building of clients’ staff. 5 years of International experience as in similar projects. Tasks and responsibilities include ensuring projects fully comply with ADB safeguard requirements, finalizing Land Acquisition and Resettlement Plans and the preparation of external resettlement monitoring reports.

e. Environmental Specialist: Qualified Environmental Specialist preferably having 15 years’ relevant experience with specialization in establishing procedure for Environment Management system in similar projects funded by Asian Development Bank/World Bank, including capacity building of clients’ staff. 5 years of International experience as Environmental specialist in similar projects, specific experience of having worked in areas where sensitive biodiversity is present. Tasks and responsibilities include ensuring projects fully comply with ADB safeguard requirements and finalizing Initial Environmental Examinations and Environmental Impact Assessments.

f. Road Safety Specialist: Preferably having Degree in Transportation Engineering or related field with overall a 15 years’ experience and 10 years’ experience in similar position and in similar assignment involving road safety audit, implementation of road safety measures, etc., and have a proven track record of successfully completing similar assignments. He/she should have 5 years of international experience on similar projects. Tasks and responsibilities cover all technical aspects of the Services relating to road safety, including undertaking road safety audits thereby ensuring compliance with international best practice and current Azeryolservis procedures.

g. Pavement Design Specialist: Preferably having a Degree in civil engineering and post graduate degree with specialization in pavements engineering with 15 years’ experience in design of pavement layers for different terrains (local site conditions) and climatic conditions. Should have experience in developing pavement design standards and specifications for any country. He/she should have including 6 years international experience. Tasks and responsibilities cover all technical aspects of the Services relating to road pavements and specifically the preparation of a design manual and specifications.

h. Highway Specialist: Preferably having a Post Graduate Degree in Highway Engineering or related field with overall 15 years’ experience and 10 years’ experience in similar position and in similar assignment and should have a thorough understanding of technical aspects of road design and construction. He should have a thorough understanding of the road standards and specifications adopted by developed and developing countries and countries with similar geographical and climatic conditions. Should have experience in developing road/highway standards and specifications for any country. He/she should have 6

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years of international experience on similar assignments. Tasks and responsibilities cover all technical aspects of the Services relating to road design, including the preparation of a design manual and specifications, and advising Azeryolservis on project specific problems as they arise.

i. Bridge Specialist: Preferably having a Post Graduate Degree in Structural Engineering or related field with overall 15 years’ experience and 10 years’ experience in similar position and in similar assignment and should have a thorough understanding of technical aspects of design and construction of bridges, structures, flyovers, interchanges, etc. He should have a thorough understanding of the standards and specifications for bridges and other structures adopted by developed and developing countries and countries with similar geographical and climatic conditions. Should have experience in developing standards and specifications for bridges/flyovers/structures, etc., in foreign country. He/she should have 5 years of international experience on similar assignments. Tasks and responsibilities cover all technical aspects of the Services relating to bridges and highway structures, including the preparation of a design manual and specifications, and advising Azeryolservis on project specific problems as they arise.

j. Road Network Management Specialist: Preferably having a Degree in Civil Engineering; preferably at post graduate level and 15 years’ experience in profession, with about 10 years’ experience in management of road network involving collection of data about road conditions, maintenance of road database (road asset management system), project planning, development of performance parameters/specifications for maintenance, procurement, project implementation, etc., including capacity building of clients’ staff. Should have experience in designing, developing and awarding performance based maintenance contracts. Minimum 6 years of international experience handling projects financed by international agencies. Tasks and responsibilities cover all aspects of the Services relating to the Management of the Road Network as defined in the Detailed Scope of Works of these Terms of Reference.

National Key Experts:

k. Highway Engineer: Preferably having a Degree in Civil Engineering or in Highway Engineering or related field with overall 10 years’ experience in similar position and in similar assignment involving project/contract administration from Employers’ point of view and capacity building of clients’ staff. He/she should have a thorough understanding of technical aspects of road design and construction and have a proven track record of successfully completing similar assignments. Should have experience in handling projects funded by international agencies and with administration of FIDIC.

l. Social Sector and Resettlement Officer: Preferably having a minimum of 6 years’ experience in resettlement programs in the developing countries with degree in Sociology or equivalent in similar projects funded by Asian Development Bank/World Bank, including capacity building of clients’ staff.

m. Environmental Officer: Qualified Environmental Specialist preferably with 6 years’ relevant experience with specialization in establishing procedure for Environment Management system in similar projects funded by Asian Development Bank/World Bank, including capacity building of clients’ staff.

80 Appendix 3

n. Pavement Engineer: Degree in civil engineering preferably with 6 years’ experience in design of pavement layers. He/she should have country specific knowledge of design pavement requirements for different site conditions and climatic conditions.

All national key experts are responsible for supporting their corresponding International Key Expert in his or her duties, advising on local standards, practices and regulations, and ensuring effective communication between national and international staff

Appendix 4 81

TERMS OF REFERENCE FOR CONSTRUCTION SUPERVISION OF THE JALILABAD-SHORSULU ROAD PROJECT (TRANCHE 2)1

I. BACKGROUND

1. The Government of the Republic of Azerbaijan (the Government) has requested the Asian Development Bank (ADB) to provide financial assistance for the Second Road Network Development Investment Program (the Program) under the proposed Multi-tranche Financing Facility (MFF). Part of the funding under the MFF will be used for construction of the Alat - Astara Highway, from Jalilabad Intersection to Shorsulu Intersection (km 110+700 to km 80+600). 2. The Ministry of Transport will be the executing agency. The Azeryolservis ASC, under the Ministry of Transport, shall be the Implementing Agency (IA) for this project. 3. The IA now wishes to engage a firm of consultants for construction supervision. The consulting services will involve, but not be limited to, review of detailed design and approval of good for construction drawings, certification of all the works under the civil works contract for quality and quantity, civil works contract administration, and benefit monitoring and evaluation.

II. OBJECTIVES OF THE ASSIGNMENT

4. The primary objectives of the consulting services are:

(i) Function as the ‘Engineer’ in administering the civil works contract (the Contract) in accordance with the International Federation of Consulting Engineers (FIDIC) Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer Multilateral Development Bank Harmonized Edition.

(ii) Review of detailed design and approve drawings for construction of the road by the civil works contractor (the Contractor);

(iii) Ensure that the permanent and temporary works have been designed and are constructed in accordance with the technical specifications and standards forming part of the civil works contract with the Contractor;

(iv) Advise IA on all matters concerning implementation of the civil works contract including quality control, progress of work, arbitration or litigation, certification for payments;

(v) Ensure compliance with safeguards, including the management of environmental mitigation plans;

(vi) Provide the staff of the IA with on-site training in contract administration and other procedures relevant to site supervision and contract administration.

III. SCOPE OF SERVICES, TASKS (COMPONENTS) AND EXPECTED DELIVERABLES

5. The IA intends to award a civil works contract for the construction of Alat - Astara Highway, from Jalilabad Intersection to Shorsulu Intersection (km 110+700 to km 80+600). 6. The consultant shall administer and supervise the civil works contract. In doing so, care should be taken to minimize climatic impacts and to implement green-house gas reduction measures.


82 Appendix 4

7. The consultant will have all functions and responsibilities vested on the “Engineer” in the FIDIC conditions of contract. 8. Design review and approval. During the initial period, the consultant shall carry out a review of the detailed design made available by the IA. Prior to the start of construction, the consultant shall also review and approve construction drawings prepared by the Contractor. The scope of work shall include, but not be limited to, the following:

(i) Establish the schedule, methods, and procedures for reviewing the detailed design made available by the IA and of construction drawings prepared by the Contractor.

(ii) Review the detailed design and construction drawings in accordance with the design standards/technical specifications and the actual site requirements. The review of the detailed design shall be completed within 45 days of the commencement of services. Review of construction drawings will be completed no later than seven days from the date of submission to facilitate the commencement of works;

(iii) Ensuring that the technical specifications have been duly accounted for in the detailed engineering design and construction drawings; and

(iv) Provide periodic status reports to the IA and ADB on the design review, identify any problems and difficulties encountered and the proposed solutions.

1. Contract Administration and Construction Supervision

General

(i) The civil works will be executed under the (FIDIC) Conditions of Contract. Accordingly, Azeryolservis will be the “Employer” and the consultant will function as the “Engineer” subject to certain requirements for the Engineer to seek the approval of the Employer prior to taking action under specified clauses of the Contract.

(ii) The consultant will administer the civil works contract and supervise the day-to-day civil works on site following construction supervision procedures based on sound international practices to: (i) ensure that the Project is constructed in accordance with the provision of the civil works contract; (ii) monitor the completion of the Project within the agreed programme and budget and to the quality standards and safeguard provisions stipulated in the Contract; (iii) monitor compliance with the safeguard requirements and ensure that adequate mitigation measures have been taken during the implementation of the Project; (iv) maintain communication with local communities and help identify and resolve emerging issues and complaints; and (v) advise the IA on matters concerning implementation of the Project.

(iii) The consultant will report to the IA and ADB on matters concerning implementation of the project. The consultant shall also participate in ADB’s review Missions at site and with the IA and take necessary steps to resolve any issues arising.

(iv) The consultant will be required to nominate an Engineer’s Representative who will be full-time resident in the project area.

(v) The consultant shall operate a quality system that governs their own activities. The Quality Plan shall comply with the latest practices published by the International Standards Organisation (ISO). Within one month of the commencement of the services, the Consultant shall submit a draft Quality Plan covering their various duties to be undertaken during the design review and the supervision of the civil

Appendix 4 83

works contract. The consultant shall amend the draft Quality Plan to such extent as is mutually agreed with the IA. The consultant shall work throughout the duration of the commission to the procedures and requirements of the Quality Plan.


9. The consultant, as the Engineer, shall be responsible to carry out all the tasks as defined in the FIDIC Conditions of Contract. The responsibilities of the Engineer shall include, but not be limited to, the following tasks:

(i) Ensure that the Notice to Commence is issued to the Contractor clearly stipulating the start date of the Project;

(ii) Monitor land acquisition and resettlement activities undertaken by the Employer and provide the required support, as and when required;

(iii) Liaise with the appropriate authorities to ensure that all the affected utility services are promptly relocated to avoid any disruption to the works;

(iv) Ensure that the project site/right of way, free from all encumbrances, is handed over to the Contractor in accordance with the agreed schedule or otherwise advise the Contractor of possible delays in handing over of the project site;

(v) Ensure that the Contractor has submitted all the required bank guarantees (performance securities, advance payment guarantee and guarantee for release of retention money, if any) and insurance policies required in accordance with the Contract;

(vi) Examine the Contractor’s work program (or the revised work program) and accord the approval to the Contractor to carry out the works. Wherever required, facilitate the reaching of agreement between the Employer and the Contractor regarding the work program and ensure that the construction works are carried out in accordance with the agreed work program. The Engineer will keep the Employer informed of any delay or potential delays in the work schedule of the Contract, and will take all necessary actions to prevent potential delays;

(vii) Ensure all construction equipment is mobilized by the Contractor in accordance with the work program/Contract and inspect the Contractor’s equipment;

(viii) Approve and/or issue working drawings/good for construction drawings and issue instructions to the Contractor as required in accordance with the Contract specification and the Contractor's quality management plan;

(ix) Issue clarifications and supplementary drawings to the Contractor and/or approve alternate drawings, provide the Contractor with all necessary surveys and reference data to facilitate the work and to avoid any potential delays in implementation of the works;

(x) Inspect and approve all material sources identified by the Contractor; (xi) Inspect the results of material and soil tests to ensure compliance with

specifications and issue immediate notice to the Contractor in the event that such materials and works fail to comply with the specifications;

(xii) Maintain records of all testing work, including cross-referencing of items of work to which each test refers and location from which any samples were obtained for testing;

(xiii) Supervise the Contractor in all matters concerning safety of workers and the public, and the care of civil works including provision of necessary personal protective equipment, lights, guardrails, fencing and security. The consultant shall establish written procedures for monitoring and reporting on safety;

84 Appendix 4

(xiv) Regularly monitor and inspect the Contractor’s quality control and assurance program to ensure that quality of the finished works meet the Contract standards and specifications. This includes regular checking of the materials testing program;

(xv) Carry out regular audits of the Contractor’s and subcontractors’ quality systems to ascertain that the requirements of the systems and the IA’s quality objectives are being met. The quality audits shall be done at least once every six months. The consultant shall report all non-conformities to the IA after each audit and explain what actions shall be taken by the contractor to rectify each non-conformity;

(xvi) Assess and check the laboratory and field tests carried out by the contractor, and carry out independent tests;

(xvii) Prepare the non-conformity reports and propose rectification work or solution; (xviii) Monitor progress of the construction works through computer-aided project

management techniques; (xix) Convene regular site meetings with the Contractor to discuss issues and problems

affecting the progress, and brief the Employer; (xx) Coordinate with the relevant local government authorities/agencies so as to

minimize disruption to the works program; (xxi) Review and comment on the monthly progress reports submitted by the Contractor

detailing the work undertaken during the previous month, the progress of the work against the approved schedule, the problems and difficulties encountered by the Contractor and other issues requested by the Employer;

(xxii) Assist the IA in processing the Contractor’s application for subcontracting parts of the works, and removing ambiguities and the contract documents, if any.

(xxiii) Measure the completed works and keep detailed records, including measurement books;

(xxiv) Maintain permanent record which shall include, but not be limited to, site correspondences, survey data, work program, material testing results, quality acceptance data, daily site diaries, records of plant, labor and materials used, measurement and certification, minutes of meetings, and records of all the data/reports/certificates/statements, etc., under the Contract.

(xxv) This permanent record shall be handed over to the IA after the expiry of the consultancy contract;

(xxvi) Prepare quarterly cashflow projections for the Employer in an acceptable format, in which cashflow should identify budget estimates for all outstanding works;

(xxvii) Measure the work and certify the interim and final payment certificates for submission to the Employer;

(xxviii) Assess and make necessary recommendations to the IA on the Contractor’s applications for extension of time for completion, claims for additional payment, contract variations, changes in scope of work, any disputes, etc.;

(xxix) Review all claims submitted by the Contractor and provide advice to the Employer of the validity of the claim, the effect of such claim on the construction schedule and the cost of the project;

(xxx) Advise and assist the Employer with respect to arbitration or litigation relating to the works, whenever required;

(xxxi) Issue taking over certificates in respect of satisfactory completion of the works in accordance with the contract provisions;

(xxxii) At the completion of the works, verify the Contractor’s “as-built drawings” as a true record of the works as constructed and ensure that the works have been executed in accordance with all the provisions contained in the Contract including those relating to the standards of workmanship, safety requirements, and compliance with safeguard requirements;

Appendix 4 85

(xxxiii) Undertake environmental monitoring to ensure that the construction methods proposed by the Contractor for carrying out the works are satisfactory, with particular references to the technical requirements of sound environmental standards on the basis of the ADB’s Safeguard Policy Statement (SPS) 2009;

(xxxiv) Ensure that the construction works are undertaken based on the environmental management plans to mitigate the environmental issues as detailed in the Environmental Impact Assessment (EIA) and the Initial Environmental Examination (IEE). The Ecologist in the construction Supervision team will prepare the specific protocols of the turtle management plan (provided in the EIA and EMP) and will oversee implementation of the plan during the culvert construction stage. The status of the implementation of environmental management plans and the environmental monitoring reports shall be covered in the reports submitted by the Engineer to the IA and ADB;

(xxxv) The construction of the road passes through wetland areas. The consultants should possess environmental management expertise to effectively supervise the road construction in wetland areas and ensure that the mitigation measures as per the EMP are implemented;

(xxxvi) Prepare internal monitoring reports on the land acquisition and resettlement activities (including the livelihood restoration activities and monitor job placement of members of severely affected and vulnerable households) in accordance with the Land Acquisition and Resettlement Plan (LARP) prepared by the IA in line with the ADB’s Safeguards Policy Statement 2009;

(xxxvii) Ensure minimum disruption to the local settlements while approving Contractor’s work program, including monitoring of the impacts of construction work on local settlements, and by reporting impact monitoring to the Employer;

(xxxviii)Ensure that no child labor is used for the construction works or any other activities associated with the project;

(xxxix) Ensure opportunities for skilled female labor are facilitated and made available; (xl) Monitor the implementation of the health and safety program at camp site including

the information and education campaign on sexually-transmitted diseases and HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome) shall be dealt in a gender-sensitive manner as required under the civil works contract; and

(xli) Provide on-the-job training for the IA’s staff at site on construction supervision, contract administration, quality control and assurance, safeguards, PPMS and monitoring and evaluation and other activities.

Project Performance Monitoring/Benefit Monitoring and Evaluation

10. The consultant shall establish a system for project performance monitoring in accordance with the project framework. In doing so, the consultant will:

(i) Identify, on the basis of the project, performance indicators and the targets to be monitored during the implementation of the project and shall establish systems for collecting data and statistics for such monitoring;

(ii) Carry out a baseline survey on performance indicators and establish a set of baseline data based on which the project impacts will be reassessed;

(iii) Collect required data and undertake other relevant surveys before start of construction, after the 1st and 2nd year from the commencement date, and immediately after completion of the Project;

(iv) Assess the socioeconomic impacts and environmental sustainability of the Project;

86 Appendix 4

(v) Incorporate findings and supporting data in the project completion report; and (vi) Conduct training in operational social research methods and build the capacity of

the IA.

2. Actions Requiring Specific Approval of the Employer

11. The consultant will be required to obtain prior approval of the Employer in the following matters:

(i) Approving subletting of any part of the works; (ii) Certifying additional cost; (iii) Determining an extension of time; (iv) Issuing a variation having any financial implications in any manner; and (v) Fixing rates or prices for any item.

IV. DURATION OF THE ASSIGNMENT

12. The consultancy services are required for 36 calendar months for construction supervision and 24 calendar months during the defects notification period of civil works contract. The consultancy services contract is expected to commence in October 2014. V. TEAM COMPOSITION AND QUALIFICATION REQUIREMENTS FOR KEY EXPERTS

13. It is estimated that about 186 person-months of international consultants’ services and about 125 person months of national consultants’ services would be required by the IA to accomplish the tasks. The requirement of various experts and the duration of their engagement are indicated below. However, the consultants may propose additional staff, within the budget, that may be required to accomplish the tasks.

Expertise Input (months)

A. International Consultants

1 Team Leader/Sr. Highway Engineer 39

2 Resident Engineer/Highway Engineer 36


4 Pavement cum Materials Engineer 24

5 Contract cum Quantity Specialist 24



8 Ecologist 1

9 Quality Assurance Engineer 24

10 Geotechnical Engineer 12

11 Road Safety Auditor 2

Subtotal (A) 186

B. National Consultants

12 Deputy Resident Engineer/Highway Engineer 40





17 Quantity Surveyor 35

Subtotal (B) 125

TOTAL (A+B) 311

Appendix 4 87

14. The personnel specified above shall be supplemented by the consultant with an appropriate number of land surveyors, junior engineers, inspectors, translators and support staff as necessary to properly perform the services. These personnel shall not be separately reimbursed by the IA nor subject to approval.

VI. TASKS AND QUALIFICATION REQUIREMENTS

1. International Consultants

(i) Team Leader/Sr. Highway Engineer: The Team Leader/ Sr. Highway Engineer will be responsible for overall project management in performing scope of work indicated in the Terms of Reference for the Consulting Services, namely for the overall successful completion of the design review and supervision tasks. The Team Leader/ Sr. Highway Engineer shall act on behalf of the FIDIC Engineer. (FIDIC conditions of Contract, MDB Harmonized Edition). The specific focus of the Team Leader/ Sr. Highway Engineer will be early the identification of issues and proposing mitigation or preventive measures in all aspects of the scope of work. The Team Leader/ Sr. Highway Engineer shall be responsible for giving solutions to the technical issues during the design review stage, as well as addressing issues potentially leading to claims and increase of costs in the civil works contract in the supervision stage, by means of proper management of the both design review and construction supervision components. Special attention will be given to claim/ dispute resolution activities as well as prevention of delays during the construction supervision stage. The Team Leader/ Sr. Highway Engineer will be responsible for preparation of variation orders and their submission for the approval to PIU and ADB. The Team Leader/ Sr. Highway Engineer will also have advisory role on potentially expected or actual claims. The Team Leader/ Sr. Highway Engineer shall prepare Monthly, and all required reports and all type of documents indicate in the Terms of Reference for the Consulting Services. During the construction supervision stage the Team Leader/ Sr. Highway Engineer will lead official meetings with the Contractor, such as monthly meeting with the Contractor, as well as shall be present during the official tests, such as the concrete paving official tests and other. Qualification: Degree in civil engineering preferably with post graduate qualification in highway engineering. Professional licensing (charted/certified) and the right to practice the profession. Preferably fifteen (15) years similar experience in design and construction supervision of highway projects with flexible pavements, with FIDIC General Conditions of Contract, including 8 years’ international experience.

(ii) Resident Engineer/Highway Engineer: The Resident Engineer/Highway Engineer will be responsible for overall project management in all technical aspects by performing scope of work indicated in the Terms of Reference for the Consulting Services. The Resident Engineer/ Highway Engineer will be responsible for the completion of tasks in design review stage as well as supervision stage in the framework of the FIDIC Conditions of Contract on behalf of the Engineer. In the supervision stage the Resident Engineer/ Highway Engineer shall supervise all the construction activities, be aware of daily progress of the construction as well as existing issues and suggest immediate solutions in consultation with the Team Leader. The specific focus of the Resident Engineer/

88 Appendix 4

Highway Engineer will be early identification of technical issues and proposing mitigation or preventive measures in all technical aspects of the scope of work related to various project activities. The Resident Engineer/ Highway Engineer will be responsible for early identification of technical issues potentially leading to claims and increase of costs (especially in civil works contracts) by means of proper management of the construction supervision component and personal review of contracts’ progress. Special attention will be given to claim/ dispute resolution activities related to price escalation, as well as prevention of delays, possibly caused by right of way issues (if any), deficiencies in designs (if any), construction specifications and others. The Resident Engineer/ Highway Engineer will be responsible for preparation of variation orders and their submission for the approval to PIU. The Resident Engineer/ Highway Engineer will also have advisory role on potentially expected or actual claims. The Resident Engineer/ Highway Engineer will assist the Team Leader to prepare Monthly, and all required reports and all type of documents indicate in the Terms of Reference for the Consulting Services. During the construction supervision stage the Resident Engineer shall be present and assist the Team Leader in leading official meetings, such as monthly meetings with the Contractor, concrete paver official tests and other. The Resident Engineer/ Highway Engineer shall be responsible for the all technical issues of whole scope indicated in this Terms of Reference for the Consulting Services. Qualification: Degree in civil engineering and preferably with post graduate qualification in highway or bridge engineering. Should possess professional licensing (chartered/certified) and the right to practice the profession. Preferably fifteen (15) years’ similar experience in design and construction supervision of highway projects with flexible pavements, with FIDIC General Conditions of Contract, including 6 years’ international experience.

(iii) Bridge Specialist/Structural Engineer: During the design review the specialist will be responsible for the review of design of the bridges and structures. During the construction supervision the specialist shall monitor the Contractors’ bridge construction, rehabilitation and repair works to assess and determine the need for adjustment of the works and, as required, provide working drawings, specification details and instructions to the Contractor for any bridge within the construction site for works which are found during the construction period to require rehabilitation but are not already specifically scheduled for rehabilitation under the contract. Qualification: Degree in civil or structural engineering preferably with post graduate qualification in structural engineering or relevant discipline. Should possess professional licensing (charted/certified) and the right to practice the profession. Preferably twelve (12) years’ similar experience in design and construction of interchanges, flyovers, bridges, culverts, causeways, and other structures, including 5 years’ international experience.

(iv) Pavement cum Materials Engineer: Materials Engineer will be responsible for performing scope of work indicated in the Terms of Reference for the Consulting Services. In the construction supervision stage the specialist will be responsible for supervising the setting up, organization and layout of the Contractors’ field laboratories; monitoring the mobilization of the testing equipment to ensure that the laboratories are adequately equipped and capable of performing all the

Appendix 4 89

specified testing requirements of the Contract; and supervising the setting-up of the Contractor’s rock crushers and concrete and cement mixing plants to ensure that the specified requirements for such equipment are fully met. The specialist shall review, cement and concrete plant construction and operation. The specialist shall prepare the Quality Assurance plan and participate in preparation of the supervision manual. During the supervision stage the specialist shall supervise the testing and evaluation of highway construction materials used in modern highway construction techniques. Review of the mix designs for the concrete pavement submitted by the Contractor. Qualification: Degree in civil engineering preferably with post graduate qualification in geotechnical or material engineering. Should possess professional licensing (charted/certified) and the right to practice the profession. Preferable twelve (12) years’ similar experience of establishing and managing quality assurance for the supervision of construction works, laboratory and field testing for flexible pavement materials as per ASTM, AASHTO standards including 5 years’ international experience.

(v) Contract cum Quantity Specialist: (i) evaluate and settle variations and standard format of claims and (ii) assess contract amendments and updated particular conditions of contract. Qualification: Degree in civil engineering, law or relevant discipline with 12 years’ similar experience in the implementation of highway projects using FIDIC conditions of contract involving contract management including change in scope of work, variations under the contract, settlement of claims and disputes, etc., including 5 years’ international experience.

(vi) Environmental Monitoring Specialist: During the supervision stage the Specialist will prepare a detailed action plan to ensure that the Environmental Management System is established, implemented, maintained and will monitor its performance. He/she will also take care of all environmental issues during bridge construction works. He/she will also conduct environmental training and briefings to provide environmental awareness on ADB and the government environmental safeguards policies, requirements and standard operating procedures in conformity with the government’s regulations and international practice for project and PIU staff; ensure baseline monitoring and reporting of Contractor’s compliance with contractual environmental mitigation measures during the supervision stage. Qualification: Degree or diploma in environmental sciences or equivalent. Preferably ten (10) years’ experience in conducting environmental impact assessments and implementation of environment mitigation plans and/or monitoring implementation of environmental mitigation measures and health and safety plans during implementation of projects including highway projects funded by developing partners, including 5 years’ international experience.

(vii) Social Sector/Resettlement/Benefit Monitoring Specialist: Conduct selective household surveys and participatory research to monitor socioeconomic impacts on beneficiaries during the construction supervision. Ensure implementation of gender provisions as outlined in section IIIB of the SPRSS. Campaign HIV and human trafficking awareness. Implementation of resettlement plans, conducting

90 Appendix 4

socio-economic surveys and benefit monitoring involved in implementation of the project. Qualification: Degree or diploma in sociology or social sciences or equivalent. Preferably ten (10) years’ experience in development and/or implementation of resettlement plans, conducting socio-economic surveys and benefit monitoring involved in implementation of projects including highway projects funded by developing partners, including 5 years’ international experience.

(viii) Ecologist: The Ecologist will prepare the specific protocols of the turtle management plan (provided in the EIA and EMP) and will oversee implementation of the plan during the construction stage. Qualification: Degree in biological sciences or equivalent. Experience in the protection and conservation of fresh water sensitive species, including specific experience in fresh water/pond water turtle conservation.

(ix) Quality Assurance Engineer: Monitor and inspect the Contractor’s quality control and assurance program to ensure that quality of the finished works meet the Contract standards and specifications. This includes regular checking of the materials testing program; Carry out regular audits of the Contractor’s and subcontractors’ quality systems to ascertain that the requirements of the systems and the IA’s quality objectives are being met. Assess and check the laboratory and field tests carried out by the contractor, and carry out independent tests. Qualification: Degree in civil engineering and experience in QA/QC functions in road construction. Should possess professional licensing (charted/certified) and the right to practice the profession. Preferably twelve (12) years’ similar experience in all phases of quality assurance process and supervision of construction works.

(x) Geotechnical Engineer: Study any proposed technical options for improving sections of the road, including consideration of geometric alignment, embankment and pavement strengthening, and rehabilitation. Qualification: Degree in civil engineering or geotechnical engineering. Should possess professional licensing (chartered/certified) and the right to practice the profession. Preferably twelve (12) years’ similar experience in geotechnical investigations and the design of highway embankments and highway structures, including 6 years’ international experience.

(xi) Road Safety Auditor: The Road Safety Specialist will review designs, specifications, construction method, etc. from road safety perspective. Review traffic control plans prepared by the Contractor during construction· Verify design of temporary diversions and traffic management arrangements. Regularly inspect road safety audit work zones under traffic. Conduct a post-construction road safety audit, identify road safety issues and provide recommendations to address them. Raise the PIU's capacity and awareness of the international standards of road safety.

Qualification: Degree in civil engineering or transport highway engineering, and preferably post graduate specialization in road safety. Should possess

Appendix 4 91

professional licensing or certificate as a road safety auditor. Preferably fifteen (15) years’ experience in road and highways and 8 years’ relevant experience in road safety audits completing all road audits for at least 2 road projects.

2. National Consultants

(i) Deputy Resident Engineer/Highway Engineer: He/she will assist Team Leader on coordination and supervision the road construction works in the field including coordination and liaison with Employer and will assist the Team Leader in day-to-day construction supervision, monitoring schedule, preparing monthly certificates, reviewing and approving shop drawings and as-built-drawings. Qualification: Degree in civil engineering. Preferably ten (10) years’ similar experience in design and construction supervision of highway projects.

(ii) Bridge Specialist/Structural Engineer: Under the guidance of international bridge specialist, will review the bridge design submitted by the contractor. He will undertake day to day site inspection of bridge and other structural works during construction. Qualification: Degree in civil engineering. Preferably ten (10) years’ similar experience in design and construction of interchanges, flyovers, bridges, culverts, causeways, and other structures.

(iii) Materials Engineer: Under the guidance of the international material engineer, he/she will undertake day-to-day supervision of compliance to material specifications and testing, supervise the contractors work, and certify the construction in accordance with contract conditions including acceptance standards of materials, approval of source supply, and material testing methods. Qualification: Degree in civil engineering. Preferably five (5) years’ similar experience in supervision of construction works, and laboratory and field testing for flexible pavement materials as per ASTM, AASHTO and BS standards as part of a quality assurance process.

(iv) Environment Monitoring Specialist: He/she will (i) review all documents and reports regarding the integration of environmental including contractor’s environmental action plan, (ii) supervise the contractors' compliance to EMP, and (iii) prepare compliance reports. Qualification: Degree in environmental sciences or equivalent. Preferably five (5) years’ experience in conducting environmental impact assessments and implementation of environment mitigation plans and/or monitoring implementation of environmental mitigation measures during implementation of projects including highway projects funded by developing partners.

(v) Social Sector/Resettlement/Benefit Monitoring Specialist: Provide all the professional and logistic support to the team leader/and the international social development, resettlement and benefit monitoring specialist. Conduct regular visits to project sites. Prepare reports to the international social development, resettlement and benefit monitoring specialist.

92 Appendix 4

Qualification: Degree in sociology or social sciences or equivalent. Preferably five (5) years’ experience in development and/or implementation of resettlement plans, conducting socio-economic surveys and benefit monitoring involved in implementation of projects including highway projects funded by developing partners.

(vi) Quantity Surveyor: He will assist Highway Engineer in daily supervision, check the quantity, variations, justification and verify the monthly certificates. Qualification: Degree in civil engineering. Preferably five (5) years’ experience as a quantity surveyor in construction of highway projects executed under FIDIC conditions of contract.

VII. REPORTING REQUIREMENTS AND TIME SCHEDULE FOR DELIVERABLES

15. The consultant shall provide the Azeryolservis with reports in three hard copies in both English and Azeri. The consultant shall provide the ADB with reports in two hard copies in English. All documents shall also be provided in electronic formats agreed with the Azeryolservis. As a minimum this will require one electronic copy in an appropriate editable format and a second copy in Portable Document Format (PDF). 16. All correspondence to Azeryolservis shall be in both English and Azeri languages. 17. The consultant will prepare and submit the following reports:

(i) An inception report to be submitted within 1 month of commencement of services. The inception report shall include the performance indicators to be monitored during and at the end of the project, and the draft Quality Plan.

(ii) Report on the data-collection system and the baseline survey for the Project Performance Monitoring/Benefit Monitoring and Evaluation, to be submitted within 3 months of commencement of services;

(iii) A weekly one-page report on the progress of works and any issues that require immediate attention of the IA;

(iv) Monthly reports, to be submitted within 7 days of the end of each month, to include progress monitoring, quality assurance/quality control, schedules of contract payments and variation orders, graphical representations of progress against program based on the approved contract schedules, charts of physical progress on major items, status of any delays, contractual claims, relevant photographs, details of all financial projections and details of impediments to the works and proposals for overcoming them;

(v) Annual appraisal reports covering all aspects such as progress monitoring, quality assurance/quality control, status of any delays, contractual claims, and details of all financial projections, to be submitted within 14 days of the end of each year;

(vi) Draft project completion report, in ADB’s format, to be submitted to IA for completion and onwards transmission to the ADB, within 3 months of completion of the civil works.

Appendix 4 93

VIII. CLIENT’S INPUT AND COUNTERPART PERSONNEL

18. The Project Implementation Unit (PIU) within the Azeryolservis will serve as the liaison between Azeryolservis, consultants and contractors, and shall be responsible for the overall project management. 19. The IA will provide, through the provision under the civil works contract, fully furnished site offices and accommodation for the staff of the consultant, equipment including laboratory equipment, and vehicles etc. The IA shall also provide all relevant project reports, documents, etc. relating to the project and qualified counterpart personnel to work in close coordination with the consultant. 20. Equipment, Facilities and other things for the consultant. The consultant will be provided with logistical support consisting of equipment, vehicles and office accommodation to be procured as part of the Works contracts. The support will include:

(i) Site Offices, including buildings, maintenance and insurance, utilities, furniture and air-conditioning, computers, printers, scanners and photocopies;

(ii) Vehicles, including site vehicles appropriate to the number of supervision staff, maintenance, taxes and insurance;

(iii) Equipment including survey and inspection equipment; (iv) Accommodation local to the Site appropriate to the number of supervision staff

including maintenance, insurance and utilities; (v) Support staff comprising chainmen for surveying work and laboratory assistants.

21. No other facilities, equipment, logistical support, or other things will be provided during the services. The consultant shall therefore be responsible for all costs associated with:

(i) Office stationary and consumables, including printing consumables; (ii) Telephone, fax and internet hardware, installation and usage costs; (iii) Fuel for Vehicles; (iv) Personal Safety Equipment; (v) Codes and Standards; (vi) Any accommodation away from the Site locality; (vii) Support Staff including drivers and cleaners; and (viii) Any other costs necessary for the performance of the Service.

94 Appendix 5

COMPLIANCE WITH FRAMEWORK FINANCING AGREEMENT AND LOAN COVENANTS MFF 0071: SECOND ROAD NETWORK DEVELOPMENT INVESTMENT PROGRAM23

A. Compliance with Framework Financing Agreement

Covenants Status of Compliance

Investment Program

Azerbaijan will, and will cause MOT and ARS to: (i) ensure timely implementation of the Investment Program, including executing the implementation arrangements set out in Schedule 3 to this FFA and monitoring and evaluating implementation based on the Design and Monitoring Framework set out in Schedule 2 to this FFA; (ii) ensure that all projects financed under the Facility are selected and approved in accordance with the criteria and procedure set out in Schedule 4 to this FFA; and (iii) ensure that all projects financed under the Facility are developed, implemented and maintained in accordance with the safeguard requirements set out in Schedule 5 to this FFA.

(FFA Schedule 6, Para. 1)

Being complied with.

AAY and PIU are implementing the Investment Program based on the Design and Monitoring Framework. Projects are selected in accordance with the FFA including meeting the safeguard requirements.

Change in Ownership and Operation

In the event that (i) any change in ownership of any project facility financed under the Facility, (ii) any sale, transfer, or assignment of interest of any project facility financed under the Facility, or (iii) any lease or other contract or other modification of MOT’s or ARS’s functions and authority over operation and maintenance of any project facility financed under the Facility, is anticipated, Azerbaijan will, and will cause MOT and ARS, to ensure that ADB’s consent is obtained at least six months prior to the implementation of such a plan. Azerbaijan will, and will cause MOT and ARS to, ensure that any such changes shall be carried out in a legal and transparent manner.



No change of ownership or operation has occurred or is anticipated.

Road Maintenance

Azerbaijan will cause MOT, through ARS, to develop, in consultation with ADB, and approve a road maintenance plan for the fiscal years 2015–2022 by 31 December 2014, which will (i) establish a system for efficient planning and prioritization of road maintenance works, (ii) provide funding modalities to finance the maintenance of relevant roads acceptable to ADB, (iii) develop or adopt

Partially complied with and ongoing.

• An "Azerbaijan Road Sector Master Plan" was prepared by consulting firm "Finnroad" in 2012 and covered both investment and maintenance activities in the road sector till 2024. In earlier 2016, the plan was updated under an EBRD led project (by Louis Berger) with the final report submitted to “Azeravtoyol” OJSC (AAY) in August 2016.

23 The Ministry of Transport (MOT) was the executing agency and Azeravtoyol OJSC (AAY) under MOT was the

implementing agency. In accordance with the Order No. 826 of the President of Azerbaijan dated 9 March 20l6, ARS has been renamed as the Azeravtoyol Open Joint-Stock Company (AAY) which now reports directly to the Cabinet of Ministers of Azerbaijan Republic. Recently, AAY was converted to the State Agency of Azerbaijan Automobile Roads following the Decree of the President of Azerbaijan dated 18 October 2017.

Appendix 5 95


adequate road maintenance standards and prepare relevant road maintenance planning and operational manuals, and (iv) provide training to strengthen the capacity of local maintenance units. Azerbaijan will cause MOT to ensure that a road maintenance program covering the country’s entire road network is implemented.


According to AAY, an EBRD supported consultancy prepared a study on performance based maintenance contracts and standard contract documents, and designed a pilot project. The consultants recommended the area-wide performance based maintenance contracts covering all classifications of roads. The implementation of a pilot project is under discussion and expected to start in the Ganja-Gazakh area in December 2018.

Azerbaijan will cause MOT, in consultation with ADB, (i) to undertake a study to develop an independent set of road standards and specifications for pavement layers design for all motorway roads to be financed under (a) the Facility and (b) the Multitranche Financing Facility for the Road Network Development Program approved by ADB’s Board in September 2007 (the “Previous Facility”) (the Facility and the Previous Facility hereinafter being referred to collectively as the “Facilities”) and (ii) to use such study as the basis for preparing and entering into performance-based maintenance contracts covering all such motorway roads, each such contract to be entered into prior to the opening of the relevant motorway road based on bidding documents and a framework approved by ADB.



• In support of the move towards performance based maintenance, AAY is updating its road database – an important tool necessary for establishing and monitoring service levels. This activity is included in the World Bank supported Third Highway Project and expected finalized in December 2017.

• On 11 May 2016 the Cabinet of Ministers approved the new organizational structure of the road maintenance administration. The road maintenance administration consists of 83 separate limited liability companies (LLC), all of them reporting to AAY, including 7 LLCs in charge of all major highways; 10 LLCs for the greater Baku area covering 12 administrative districts within Baku, another 10 special purpose maintenance LLCs; 55 LLCs for all roads outside Baku except major highways; and one LLCs in charge of road bridges throughout the country.

Road Safety

Azerbaijan will cause MOT to undertake, in consultation with ADB, a road safety audit for each motorway road to be financed under the Facilities and shall ensure that the recommendations included in such audit, as approved by ADB, are incorporated into the design, operation and maintenance of such motorway roads.



• AAY now routinely includes formal road safety audits at both the design and the pre-opening stages of major highway projects and provides resources for it to be done by specialists. The project for the construction of the Alat - Astara Highway, Jalilabad Intersection to Shorsulu Intersection (km 110+700 to km 80+600) involves a road safety specialist with tasks including reviewing temporary traffic plans and conducting a pre-opening road safety audit. AAY is reviewing the older contracts for other sections of the Project Road to ensure pre-opening road safety audits are undertaken.

• TOR for the Road Safety study has been prepared by the Program Management Consultant (L2921) in early 2015, but not approved by AAY since AAY’s Charter has no clearly defined reference to road safety.

96 Appendix 5


TOR has to be revised by AAY, in consultation with concerned government agencies, and incorporate the road safety responsibilities by different government agencies and resubmitted before granting approval. The study should be agreed with all concerned agencies to institute relevant traffic monitoring and appropriate safety enforcement measures. The Cabinet of Ministers’ support is needed to address this issue. Road safety audit will be done for all roads under MFF1 and MFF2 prior opening for traffic.

Azerbaijan, acting through the relevant government authorities, will ensure that each motorway road to be financed under the Facilities is at all times patrolled by traffic police who will enforce national laws and regulations on such motorway road. Azerbaijan will cause ARS to ensure monitoring of the accident rate and traffic volume for each motorway road financed under the Facilities and will institute appropriate safety enforcement measures.



Planning for the continuous patrolling of the Project Road falls with the State Road Police (DYP). The collection of data on accidents and traffic volumes will be undertaken Upon completion for the Project Road. DYP made significant progress in road safety monitoring on major roads throughout the country: vehicle speed radars and surveillance cameras have been installed on all main highways, and all city roads through the country. Regular patrolling by modern road police cars (BMW brand) equipped with radars and cameras has been introduced on all major highways.

Azerbaijan, acting through the relevant government agencies, will ensure strict border control to prevent trafficking of humans, wildlife, endangered species, and illegal substances on each motorway road financed under the Facilities.



Border controls are maintained by the State Migration Service and the State Customs Committee of the Republic of Azerbaijan in accordance with National legislation.

Axle Loads

Azerbaijan will cause ARS to establish vehicle weighing stations within each motorway road financed under the Facilities to control axle overloading and will institute appropriate procedures and regulations to enforce the axle load control in respect of each such motorway road.



Four (4) weighbridge stations have been installed (under L2354) and calibrated and are under defects notification period until 1 December 2016. AAY has to submit for ADB review a complete set of legal documentation for the enforcement of the axle load control on the Project Road by December 2016, including the following regulatory acts:

o The decree of the Cabinet of Ministers of Azerbaijan Republic No. 214s dated 16 June 2015 (issued for the enforcement of Section 1 of the Decree of Azerbaijan Republic President No 1114 dated 18 March 2015 on protection of the public roads) stipulates phased installation of technical equipment (electronic scales and micro-chips) measuring weight and mass

Appendix 5 97


parameters of full-size and heavy vehicles travelling on the roads of national significance.

o According to this decree Phase I (2015-2016) stipulates the construction of 16 electronic scales. With this regard the relevant project survey works have been performed and statements prepared. Phase II (2017-2018) considers the construction of another 16 electronic scales.

o Pursuant to the Law on modifications to the Azerbaijan Republic Code of Administrative Violations No 303 - VQD dated 24 June 2016 and the Decree of the President of Azerbaijan Republic dated 20 July 2016 on the implementation of the said Law, the responsibility for this activity was transferred from the Ministry of Internal Affairs to AAY. AAY by its Order No 55 dated 29 June 2016, appointed responsible officials.

o Based on the above framework, the axle load control has to be enforced on the Project Road once the roads are opened for traffic.

Tolling

At least six months prior to the opening for operation of the motorway road financed under Tranche 1 of the Previous Facility, Azerbaijan will cause ARS to have provided ADB with MOT-endorsed framework and definitive action plan for establishing tolling roads along all motorway roads to be financed under the Facilities. By 31 December 2015, ARS shall review and inform ADB of any significant difficulties in establishing rolls on expressway roads under Azerbaijan’s laws and regulations.



• EA has completed the toll road study and has legal and regulatory framework, (as described in detail in the toll road study final report) that can be used to have maintenance concessions. The study identified the Project Road (M3 corridor) as suitable for tolling with relatively few major regulatory or practical obstacles. The consultants considered that tolling this corridor could raise sufficient revenue to cover operational and maintenance costs.

• Application of pilot tolling is taking longer than expected due to delays in the road construction. Recently, the Government of Azerbaijan requested Azeravtoyol to develop operational procedures for tolling the Project Road. To this end, Azeravtoyol is currently tasking an international consulting firm with developing specific tolling plans for the M3 corridor.

• The GoA considers Alat-Astara highway as the only realistic road for introducing the tolling once it gets completed. The Cabinet of Ministers requested ADB to use loan savings for the detailed design and

98 Appendix 5


installation of the tolling infrastructure. AAY will engage the consultant by 15 March 2018.

Vehicle Emissions

At least six months prior to the opening for operation of the motorway road financed under Tranche 1 of the Previous Facility, Azerbaijan will cause ARS, jointly with the concerned government agencies, to provide to ADB Azerbaijan’s emission standards and the penalties for infringement of such standards. Azerbaijan will ensure that, through the relevant agencies, such vehicle emission standards are enforced.



The GoA introduced Euro-3/4 fuel emission standard from January 2013/2014, and is planning to adopt Euro-5 standard from 2018. The department of Ecology police is authorized agency to monitor vehicle emissions. The Cabinet of Ministers support is needed to initiate discussions as the subject of interagency coordination, including Road Policy Department and State Committee for Standardization, Metrology and Patent.

Policy Dialogue

Azerbaijan will, and will cause MOT and ARS to, ensure that ADB is kept informed about Azerbaijan’s policies and program related to the road sector that may materially affect the financial viability of any project or subproject under the Facilities.



Communications on policies and programs has to be improved. For example, AAY should provide detailed information on its organizational status changes with clear explanation of the rationale for such changes.

Good Governance and Anticorruption

Azerbaijan will, and will cause MOT and ARS to, (i) comply with ADB’s Anticorruption Policy (1998, as amended to date) and acknowledges that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices related to the Investment Program and (ii) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigations.



There have been no allegations or investigations into corrupt, fraudulent, collusive or coercive practice relating to the Project.

Azerbaijan will, and will cause MOT and ARS to, ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Investment Program.



Anticorruption provisions are being included in all bidding document and contracts.

Safeguards

Azerbaijan will, and will cause MOT and ARS to, ensure that each project financed under the Facility is prepared, designed, constructed, implemented,


Each project is designed and constructed in accordance with the laws and regulation of the Republic of Azerbaijan and the ADB’s

Appendix 5 99


operated and decommissioned in accordance with the following:

(i) all applicable laws and regulations of Azerbaijan;

(ii) ADB’s Safeguard Policy Statement (2009) (“SPS”);

(iii) the EARF;

(iv) the environmental impact assessment or initial environmental examination for such project, which will have been prepared in accordance with all applicable laws and regulations of Azerbaijan, the SPS and the EARF;

(v) the environmental management plan for such project;

(vi) the LARF; and

(vii) the land acquisition and resettlement plan for such project, which shall have been prepared in accordance with all applicable laws and regulations of Azerbaijan, the SPS and the LARF.


Safeguards Policy. EIAs, EMPS and LARF are prepared and implemented for each project.

Without limiting the generality of the foregoing, Azerbaijan will, and will cause MOT and ARS to, comply with certain additional covenants in respect of the protection of wetlands which, where applicable, will be incorporated in the legal agreement for the particular project financed under the Facility.


Complied with.

B. Compliance with Covenants: Loan 2921-AZE: Second Road Network Development Investment Program (Tranche 1)


Financials

Counterpart Support

The Borrower shall, and shall cause the Project Executing Agency and ARS to, make available on a timely basis all necessary financial, technical and human resources necessary for implementation of the Project, including the LARP and EMP.

(Loan 2921, Schedule 5, Para. 3)


Such resources include a dedicated Project Implementation Unit, within AAY, with responsibility for the Project. The PIU is staffed with a multidisciplinary team including procurement specialist engineers and safeguard experts.

Human and Financial Resources to Implement Safeguards Requirements The Borrower shall, and shall cause the Project Executing Agency and ARS to, make available


100 Appendix 5


necessary budgetary and human resources to fully implement the EMP and the LARP.


Prohibited List of Investments The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that no proceeds of the Loan are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of the SPS.



Others

Implementation Arrangements The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that the Project is implemented in accordance with the detailed arrangements set forth in the FAM. Any subsequent change to the FAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the FAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.


Being complied with. Extension of the contract with PMC consultant is being finalized.

Construction Quality The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that: (a) the Project facilities comply with the technical specifications of the design; and (b) construction, supervision, quality control and project management are performed according to internationally accepted standards and practices.


Being complied with and ongoing.

An international firm of consulting engineers has been appointed to supervise the civil works which are ongoing.

AAY has introduced new quality control procedures and these are being applied to this project.

Change in Ownership and Operation In the event the Borrower, the Project Executing Agency or ARS proposes (a) any change in ownership of the Project Road or Project facilities, (b) any sale, transfer, or assignment of interest or control in the Project Road or Project facilities, or (c) a lease or other contract or other modification of the Project Executing Agency or ARS’s functions or authority over implementation and operation of the Project Road or Project facilities, the Borrower shall, and shall cause the Project Executing Agency and ARS to, at least 6 months prior to the implementation of such proposal, consult with ADB and obtain its consent. The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that any such proposal is carried out in a legal and transparent manner.


No change of ownership or operation has occurred or is anticipated

Appendix 5 101



Governance and Anticorruption The Borrower shall, and shall cause the Project Executing Agency and ARS to, (a) comply with ADB’s Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.




Governance and Anticorruption The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project.


Complied with.

Anticorruption provisions are included in all bidding document and contracts.

Safeguards

Environment The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that the preparation, design, construction, implementation, operation and decommissioning of the Project and all Project facilities comply with (a) all applicable laws and regulations of the Borrower relating to environment, health, and safety; (b) the Environmental Safeguards; (c) the EARF; and (d) all measures and requirements set forth in the respective EIA and EMP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.



EMP has been prepared in accordance with the EIA and regular monitoring has been established. These requirements have been included in the works and supervision contracts.

Land Acquisition and Involuntary Resettlement The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that all land and all rights-of-way required for the Project and all Project facilities are made available to the Works contractor in accordance with the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement; (b) the Involuntary Resettlement Safeguards; (c) the


Civil works are ongoing. Land acquisition and resettlement tasks have been carried out according to the compensation eligibility and entitlement provisions developed in line with the Azeri laws and the ADB SPS (2009).

AAY has overall responsibility for the Project, including the preparation, implementation, and financing of all LAR tasks and for interagency coordination. AAY exercises its functions through the Project Implementation Unit (PIU),

102 Appendix 5


LARF; and (d) all measures and requirements set forth in the respective LARP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.


which is responsible for general project execution, and tasked with day-to-day project activities at rayon/subproject levels.

Land Acquisition and Involuntary Resettlement Without limiting the application of the Involuntary Resettlement Safeguards, the LARF or the LARP, the Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that no physical or economic displacement takes place in connection with the Project until:

(a) compensation and other entitlements have been provided to affected people in accordance with the LARP;

(b) a comprehensive income and livelihood restoration program has been established in accordance with the LARP; and

(c) a due diligence report prepared by an external expert in accordance with the LARP has been cleared by ADB.



Safeguards – Related Provisions in Bidding Documents and Works Contract The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that all bidding documents and contracts for Works contain provisions that require contractors to:

(a) comply with the measures and requirements relevant to the contractor set forth in the EIA, the EMP and the LARP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report;

(b) make available a budget for all such environmental and social measures;

(c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the EIA, the EMP or the LARP;

(d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and

(e) fully reinstate pathways, other local infrastructure, and agricultural land to at


Civil works are ongoing and monitoring continues by the supervising consultant and PIU. The noise and vibration studies for the new 2 roads are ongoing.

Appendix 5 103


least their pre-project condition upon the completion of construction.


Safeguards Monitoring and Reporting The Borrower shall, and shall cause the Project Executing Agency and ARS to, do the following:

(a) submit semi-annual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission;

(b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the EIA, the EMP or the LARP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan;

(c) prior to the award of the Works contract, engage qualified and experienced external expert or qualified NGO under a selection process and terms of reference acceptable to ADB, to verify information produced through the Project monitoring process, and facilitate the carrying out of any verification activities by such external experts; and

(d) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the LARP promptly after becoming aware of the breach.



Sector

Road Maintenance The Borrower shall, and shall cause the Project Executing Agency and ARS to, develop, in consultation with ADB, and approve a road maintenance plan for the fiscal years 2015-2022 by 31 December 2014, which such plan shall (a) establish a system for efficient planning and prioritization of road maintenance works, (b) provide funding modalities to finance the maintenance of relevant roads acceptable to ADB, (c) develop or adopt adequate road maintenance standards and prepare relevant road maintenance planning and operational manuals, and (d) provide training to strengthen the capacity of local maintenance units. The Borrower shall, and shall


An "Azerbaijan Road Sector Master Plan" was prepared by consulting firm "Finnroad" in 2012 and covered both investment and maintenance activities in the road sector till 2024. In earlier 2016, the plan was updated under an EBRD led project (by Louis Berger) with the final report submitted to “Azeravtoyol” OJSC (AAY) in August 2016. According to AAY, an EBRD supported consultancy prepared a study on performance based maintenance contracts and standard contract documents, and designed a pilot project. The consultants recommended the area-wide performance based maintenance contracts covering all classifications of roads.

104 Appendix 5


cause the Project Executing Agency and ARS to, ensure that a road maintenance program covering the country’s entire road network is implemented.


The implementation of a pilot project is under discussion and expected to start in the Ganja-Gazakh area by December 2018.

Road Maintenance This paragraph 5 shall amend and restate in its entirety paragraph 8 of Schedule 5 to the Loan Agreement for Loan No. 2354-AZE dated 15 January 2008 (“Loan 2354-AZE Loan Agreement”) between the Borrower and ADB: The Borrower shall, and shall cause the Project Executing Agency and ARS to, in consultation with ADB, (a) undertake a study to develop an independent set of road standards and specifications for pavement layers design for all motorway roads to be financed under the Road MFFs and (b) use such study as the basis for preparing and entering into performance-based maintenance contracts covering all such motorway roads, each such contract to be entered into prior to the opening of the relevant motorway road based on bidding documents and a framework approved by ADB.



• In support of the move towards performance based maintenance, AAY is updating its road database – an important tool necessary for establishing and monitoring service levels. This activity is included in the World Bank supported Third Highway Project and expected to be finalized by mid-2018.

• On 11 May 2016 the Cabinet of Ministers approved the new organizational structure of the road maintenance administration. The road maintenance administration consists of 83 separate limited liability companies (LLC), all of them reporting to AAY, including 7 LLCs in charge of all major highways; 10 LLCs for the greater Baku area covering 12 administrative districts within Baku, another 10 special purpose maintenance LLCs; 55 LLCs for all roads outside Baku except major highways; and one LLCs in charge of road bridges throughout the country. This remains unchanged under the new structure of AAY.

Road Safety The Borrower shall, and shall cause the Project Executing Agency and ARS to, undertake, in consultation with ADB, a road safety audit for each motorway road to be financed under the Road MFFs and shall ensure that the recommendations included in such audit, as approved by ADB, are incorporated into the design, operation and maintenance of such motorway roads.



• AAY now routinely includes formal road safety audits at both the design and the pre-opening stages of major highway projects and provides resources for it to be done by specialists. The project for the construction of the Alat - Astara Highway, Jalilabad Intersection to Shorsulu Intersection (km 110+700 to km 80+600) involves a road safety specialist with tasks including reviewing temporary traffic plans and conducting a pre-opening road safety audit. AAY is reviewing the older contracts for other sections of the Project Road to ensure pre-opening road safety audits are undertaken.

• TOR for the Road Safety study has been prepared by the Program Management Consultant (L2921) in early 2015, but not approved by AAY since AAY’s Charter has no clearly defined reference to road safety. Road safety audit will be done for all roads under MFF1 and MFF2 prior opening for traffic.

Appendix 5 105


Road Safety The Borrower, acting through the relevant government authorities, shall ensure that the Project Road is at all times patrolled by traffic police who will enforce national laws and regulations on the Project Road. The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure monitoring of the accident rate and traffic volume on the Project Road and shall institute appropriate safety enforcement measures.



Planning for the continuous patrolling of the Project Road falls with the State Road Police (DYP). The collection of data on accidents and traffic volumes will be undertaken Upon completion for the Project Road. DYP made significant progress in road safety monitoring on major roads throughout the country: vehicle speed radars and surveillance cameras have been installed on all main highways, and all city roads through the country. Regular patrolling by modern road police cars (BMW brand) equipped with radars and cameras has been introduced on all major highways.

Axle Loads The Borrower shall, and shall cause the Project Executing Agency and ARS to, establish vehicle weighing stations within the Project Road to control axle overloading and shall institute appropriate procedures and regulations to enforce the axle load control on the Project Road.



Four (4) weighbridge stations have been installed (under L2354) and calibrated and are under defects notification period until 1 December 2016. AAY has to submit for ADB review a complete set of legal documentation for the enforcement of the axle load control on the Project Road by December 2016, including the following regulatory acts:

o The decree of the Cabinet of Ministers of Azerbaijan Republic No. 214s dated 16 June 2015 (issued for the enforcement of Section 1 of the Decree of Azerbaijan Republic President No 1114 dated 18 March 2015 on protection of the public roads) stipulates phased installation of technical equipment (electronic scales and micro-chips) measuring weight and mass parameters of full-size and heavy vehicles travelling on the roads of national significance.

o According to this decree Phase I (2015-2016) stipulates the construction of 16 electronic scales. With this regard the relevant project survey works have been performed and statements prepared. Phase II (2017-2018) considers the construction of another 16 electronic scales.

o Pursuant to the Law on modifications to the Azerbaijan Republic Code of Administrative Violations No 303 - VQD dated 24 June 2016 and the Decree of the President of Azerbaijan Republic dated 20 July 2016 on the implementation of the said Law, the

106 Appendix 5


responsibility for this activity was transferred from the Ministry of Internal Affairs to AAY. AAY by its Order No 55 dated 29 June 2016, appointed responsible officials.

o Based on the above framework, the axle load control has to be enforced on the Project Road immediately once the road is opened for traffic.

Tolling This paragraph 9 shall amend and restate in its entirety paragraph 12 of Schedule 5 to the Loan 2354-AZE Loan Agreement: At least six months prior to the opening for operation of the first completed motorway road financed under the Road MFFs, the Borrower shall cause ARS to have provided ADB with an Project Executing Agency-endorsed framework and definitive action plan for establishing tolling roads along all motorway roads to be financed under the Road MFFs. By 31 December 2015, the Borrower shall have caused ARS to review and inform ADB of any significant difficulties in establishing tolls on expressway roads under the Borrower’s laws and regulations.



• EA has completed the toll road study and has legal and regulatory framework, (as described in detail in the toll road study final report) that can be used to have maintenance concessions. The study identified the Project Road (M3 corridor) as suitable for tolling with relatively few major regulatory or practical obstacles. The consultants considered that tolling this corridor could raise sufficient revenue to cover operational and maintenance costs.

• Application of pilot tolling is taking longer than expected due to delays in the road construction. Recently, the Government of Azerbaijan requested Azeravtoyol to develop operational procedures for tolling the Project Road. To this end, Azeravtoyol is currently tasking an international consulting firm with developing specific tolling plans for the M3 corridor.

• The GoA considers Alat-Astara highway as the only realistic road for introducing the tolling once it gets completed. The Cabinet of Ministers requested ADB to use loan savings for the detailed design and installation of the tolling infrastructure. AAY will engage the consultant by 15 March 2018.

Vehicle Emissions This paragraph 10 shall amend and restate in its entirety paragraph 13 of Schedule 5 to the Loan 2354-AZE Loan Agreement: At least six months prior to the opening of the first completed motorway road financed under the Road MFFs, the Borrower shall cause ARS, jointly with the concerned government agencies, to provide to ADB the Borrower’s emission standards and the penalties for infringement of such standards. The Borrower shall ensure, through the relevant agencies, that such vehicle emission standards are enforced.


Being complied.

The GoA introduced Euro-3/4 fuel emission standard from January 2013/2014, and is planning to adopt Euro-5 standard from mid-2018. The department of Ecology police is authorized agency to monitor vehicle emissions. The Cabinet of Ministers support is needed to initiate discussions as the subject of interagency coordination, including Road Policy Department and State Committee for Standardization, Metrology and Patent.

Appendix 5 107


Policy Dialogue The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that: (a) ADB is kept informed of the policies and programs of the Borrower for the road sector, including those under discussion with other multilateral and bilateral agencies and those that may materially affect the economic viability of any motorway road financed under the Road MFFs; and (b) ADB is given an opportunity to comment on any proposed new transport sector policies or programs.




Social

Indigenous Peoples The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that the Project does not cause any impact on indigenous people within the meaning of the SPS. In the event that the Project does have any such impact, the Borrower shall, and shall cause the Project Executing Agency and ARS to, take all steps required to ensure that the Project complies with the applicable laws and regulations of the Borrower and the Safeguard Policy Statement.


Complied with.

The project does not have impact on indigenous people.

Health and Labor Standards The Borrower shall, and shall cause the Project Executing Agency and ARS to, ensure that all contractors: (a) comply with all laws and mandated provisions on labor, health, safety, sanitation and working conditions; (b) use their best efforts to employ women and local people negatively affected by, or living in the vicinity of, the Project; (c) disseminate information at worksites and campsites on the risks of sexually transmitted diseases and HIV/AIDS for those employed during construction; (d) are required not to differentiate between men and women’s wages or benefits for work of equal value; (e) provide accommodation to construction workers at campsites during the constructions period and ensure that all work sites and campsites are safe for all employees, service providers, the public and road users; (f) eliminate all forms of forced or compulsory labor; (g) allow freedom of association and right of assembly; and (h) abstain from engaging persons below the legally employable age in Azerbaijan.



Provision is made in the civil works contract for Masalli Jalilabad and in Azeri law. Compliance is monitored by the supervising engineer and statutory authorities.

108 Appendix 5


Health and Labor Standards The Borrower shall, and shall cause the Project Executing Agency and ARS to, undertake concrete measures including border controls and road patrols to prevent trafficking of humans, wildlife, endangered species and illegal substances on the Project facilities.



Border controls are maintained by the State Migration Service and the State Customs Committee

C. Compliance with Covenants: Loan 3144-AZE: Second Road Network Development

Investment Program (Tranche 2)


Financials

Financial Management

The Borrower shall cause ARS to ensure that ARS’s internal audit unit conducts internal audits of the PIU.



Internal audits are being undertaken by AAY on a semi-annual basis.

Financial Management

The Borrower shall cause ARS to ensure that (a) the PIU is adequate staffed with personnel qualified and experienced in project management and accounting and (b) the PIU staff are trained in ADB procedures and financial reporting requirements.



Others

Implementation Arrangements The Borrower shall, and shall cause MOT and ARS to ensure that the Project is implemented in accordance with the detailed arrangements set forth in the FAM. Any subsequent change to the FAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the FAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.



Implementation Arrangements The Borrower shall ensure, and cause MOT and ARS to ensure, that the financial management capacity of ARS is strengthened, and its accounting systems are improved by undertaking


Appendix 5 109


the measures and carrying out the activities set out in the FAM.


Counterpart Support

The Borrower shall, and shall cause MOT and ARS to, make available, promptly as and when needed, the funds, facilities, services, land, and other resources as shall be necessary or required, in addition to the proceeds of the Loan, for the carrying out of the Project, including the LARP and EMP, and for the operation and maintenance of the Project facilities. The Borrower shall furnish to ADB, promptly at its request, evidence satisfactory to ADB that such funds, facilities, services, land, and other resources are available for purposes related to the Project.



Change in Ownership and Operation In the event that the Borrower, MOT or ARS proposes (a) any change in ownership of the Project Road or Project facilities, (b) any sale, transfer, or assignment of interest or control in the Project Road or Project facilities, or (c) a lease or other contract or other modification of MOT or ARS’s functions or authority over implementation and operation of the Project Road or Project facilities, the Borrower shall, and shall cause MOT and ARS to, at least 6 months prior to the implementation of such proposal, consult with ADB and obtain its consent. The Borrower shall, and shall cause MOT and ARS to, ensure that any such proposal is carried out in a legal and transparent manner.



No change of ownership or operation has occurred or is anticipated

Governance and Anticorruption The Borrower shall, and shall cause MOT and ARS to, (a) comply with ADB’s Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.




Governance and Anticorruption The Borrower shall, and shall cause MOT and ARS to, ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions

Complied with.

Anticorruption provisions are included in all bidding document and contracts.

110 Appendix 5


specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project.


Governance and Anticorruption The Borrower shall ensure and cause MOT and ARS to ensure that (a) all contracts are audited by an independent external auditor; (b) decisions of all procurement related matters are taken by a tendering committee composed of representatives of MEI, MOF, MOT and the State Procurement Agency as observer in accordance with the Procurement Guidelines; (c) the payment claims of all contractors are verified by the Project management consultant in accordance with contract specifications; and (d) information on the selection of consultants and contractors is disclosed through local newspapers in a timely manner.


Being complied with

Governance and Anticorruption The Borrower shall provide and cause MOT and ARS to provide updated information on the Project on the websites of MOT and ARS website, including information on the performance of the Project, environmental monitoring, business opportunities, bidding process and guidelines, outcome of biddings and summary progress reports.


Being complied with

Safeguards

Environment The Borrower shall, and shall cause MOT and ARS to, ensure that the preparation, design, construction, implementation, operation and decommissioning of the Project and all Project facilities comply with (a) all applicable laws and regulations of the Borrower relating to environment, health, and safety; (b) the Environmental Safeguards; (c) the EARF; and (d) all measures and requirements set forth in the respective EIA and EMP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.



EMP has been prepared in accordance with the EIA and regular monitoring has been established. These requirements have been included in the works and supervision contracts.

Environment The Borrower shall, and shall cause MOT and ARS to, (a) ensure that in areas of the wetlands,


Appendix 5 111


construction will not be undertaken during the breeding season for birds, and additional specialized expertise will be engaged to review the design and location of culverts and wildlife and grazing animal underpasses; and (b) pilot and implement the turtle action plan outlined in the EIA and EMP.


Land Acquisition and Involuntary Resettlement The Borrower shall, and shall cause MOT and ARS to, ensure that all land and all rights-of-way required for the Project and all Project facilities are made available to the Works contractor in accordance with the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement specifically including the Loans on the Purchase of Land for Public Needs dated 20 April 2010, No. 987-111Q; (b) the Involuntary Resettlement Safeguards; (c) the LARF; and (d) all measures and requirements set forth in the respective LARP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.



Civil works are ongoing. Land acquisition and resettlement tasks have been carried out according to the compensation eligibility and entitlement provisions developed in line with the Azeri laws and the ADB SPS (2009).

AAY has overall responsibility for the Project, including the preparation, implementation, and financing of all LAR tasks and for interagency coordination. AAY exercises its functions through the Project Implementation Unit (PIU), which is responsible for general project execution, and tasked with day-to-day project activities at rayon/subproject levels. The LARP for the new R32 road has been approved by ADB and is being implemented.

Land Acquisition and Involuntary Resettlement Without limiting the application of the Involuntary Resettlement Safeguards, the LARF or the LARP, the Borrower shall, and shall cause MOT and ARS to, ensure that no physical or economic displacement takes place in connection with the Project until: (a) compensation and other entitlements have been provided to affected people in accordance with the LARP; (b) a comprehensive income and livelihood restoration program has been established in accordance with the LARP; and (c) a due diligence report prepared by an external expert in accordance with the LARP has been cleared by ADB.



Indigenous Peoples

The Borrower shall, and shall cause MOT and ARS to, ensure that the Project does not cause any impact on indigenous people within the

Complied with.

The project does not have impact on indigenous people.

112 Appendix 5


meaning of the SPS. In the event that the Project does have any such impact, the Borrower shall, and shall cause MOT and ARS to, take all steps required to ensure that the Project complies with the applicable laws and any other applicable regulations of the Borrower and the SPS.


Human and Financial Resources to Implement Safeguards Requirements The Borrower shall, and shall cause MOT and ARS to, make available necessary budgetary and human resources to fully implement the EMP and the LARP.



Safeguards – Related Provisions in Bidding Documents and Works Contract The Borrower shall, and shall cause MOT and ARS to, ensure that all bidding documents and contracts for Works contain provisions that require contractors to: (a) comply with the measures and requirements relevant to the contractor set forth in the EIA, the EMP (including preparation of site specific environmental management plans for review and approval by PIU and ADB prior to commencement of construction) and the LARP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report; (b) make available a budget for all such environmental and social measures; (c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the EIA, the EMP or the LARP; (d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and (e) fully reinstate pathways, other local infrastructure, and agricultural land to at least their pre-project condition upon the completion of construction.



Civil works are ongoing and monitoring continues by the supervising consultant and PIU.

Appendix 5 113


Safeguards Monitoring and Reporting The Borrower shall, and shall cause MOT and ARS to, do the following: (a) submit semi-annual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission; (b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the EIA, the EMP or the LARP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; (c) prior to the award of the Works contract, engage qualified and experienced external expert or qualified non-governmental organizations under a selection process and terms of reference acceptable to ADB, to verify information produced through the Project monitoring process, and facilitate the carrying out of any verification activities by such external experts; and (d) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the LARP promptly after becoming aware of the breach.



Safeguards monitoring reports are regularly disclosed.

Prohibited List of Investments The Borrower shall, and shall cause MOT and ARS to, ensure that no proceeds of the Loan are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of the SPS.


Being complied with

Sector

Construction Quality The Borrower shall, and shall cause MOT and ARS to, ensure that: (a) the Project facilities comply with the technical specifications of the design; and (b) construction, supervision, quality control and project management are performed according to internationally accepted standards and practices.


Being complied with and ongoing.

An international firm of consulting engineers has been appointed to supervise the civil works which are ongoing.

AAY has introduced new quality control procedures and these are being applied to this project.

Road Maintenance The Borrower shall and shall cause MOT and ARS to continue to implement the road maintenance


• An "Azerbaijan Road Sector Master Plan" was prepared by consulting firm "Finnroad"

114 Appendix 5


plan for 2008 to 2015 developed under the loan agreements for Tranche 1 under the Facility (Loan No. 2354-AZE) (Loan No. 2355-AZE(SF)). The Borrower shall and shall cause MOT and ARS to implement the road maintenance plan for 2015 to 2022 to be developed under the loan agreement for Tranche 1 under the Second Facility (Loan No. 2921-AZE). The Borrower shall ensure and cause MOT and ARS to ensure that the Project Road and Project facilities are maintained according to the standards adopted under the road maintenance plans and, to this end, that adequate data on the condition and use of the Project facilities and the Project Road are collected and managed; that inspections of the Project Road and Project facilities are regularly carried out; and that preventive maintenance and repair of the Project Road and the Project facilities are undertaken as required. The Borrower shall ensure and cause MOT and ARS to ensure that sufficient funding and resources are made available for the maintenance of the Project Road and the Project facilities.


in 2012 and covered both investment and maintenance activities in the road sector till 2024. In earlier 2016, the plan was updated under an EBRD led project (by Louis Berger) with the final report submitted to “Azeravtoyol” OJSC (AAY) in August 2016. According to AAY, an EBRD supported consultancy prepared a study on performance based maintenance contracts and standard contract documents, and designed a pilot project. The consultants recommended the area-wide performance based maintenance contracts covering all classifications of roads. The implementation of a pilot project is under discussion and expected to start in the Ganja-Gazakh area in December 2016.

• In support of the move towards performance based maintenance, AAY is updating its road database – an important tool necessary for establishing and monitoring service levels. This activity is included in the World Bank supported Third Highway Project and expected finalized in December 2017.

• On 11 May 2016 the Cabinet of Ministers approved the new organizational structure of the road maintenance administration. The road maintenance administration consists of 83 separate limited liability companies (LLC), all of them reporting to AAY, including 7 LLCs in charge of all major highways; 10 LLCs for the greater Baku area covering 12 administrative districts within Baku, another 10 special purpose maintenance LLCs; 55 LLCs for all roads outside Baku except major highways; and one LLCs in charge of road bridges throughout the country. AYY is to provide ADB with the annual road maintenance funding for the entire network by 31 March 2018.

Road Safety The Borrower shall, and shall cause MOT and ARS to, develop an implementation plan for road safety strategy and mainstreaming of road safety audit and improvements on a national basis satisfactory to ADB by 31 December 2017.


Road safety plan completed and will be submitted to ADB by mid-March 2018.

Road Safety The Borrower, acting through the relevant government authorities, shall ensure that the Project Road is at all times patrolled and the applicable laws and regulations on road safety are enforced in relation to the Project Road. The


Planning for the continuous patrolling of the Project Road falls with the State Road Police (DYP). The collection of data on accidents and traffic volumes will be undertaken Upon completion for the Project Road. DYP made

Appendix 5 115


Borrower shall, and shall cause MOT and ARS to, ensure monitoring of the accident rate and traffic volume on road infrastructure facilities, including the Project Road and implement appropriate safety enforcement measures.


significant progress in road safety monitoring on major roads throughout the country: vehicle speed radars and surveillance cameras have been installed on all main highways, and all city roads through the country. Regular patrolling by modern road police cars (BMW brand) equipped with radars and cameras has been introduced on all major highways.

Vehicle Emissions The Borrower shall ensure, through the relevant agencies, enforce the vehicle emission standards applicable in the territory of the Borrower.



The GoA introduced Euro-3/4 fuel emission standard from January 2013/2014, and is planning to adopt Euro-5 standard from 2018. The department of Ecology police is authorized agency to monitor vehicle emissions. The Cabinet of Ministers support is needed to initiate discussions as the subject of interagency coordination, including Road Policy Department and State Committee for Standardization, Metrology and Patent.

Policy Dialogue The Borrower shall, and shall cause MOT and ARS to, ensure that: (a) ADB is kept informed of the policies and programs of the Borrower for the road sector, including those under discussion with other multilateral and bilateral agencies and those that may materially affect the economic viability of any motorway road financed under the Road MFFs; and (b) ADB is given an opportunity to comment on any proposed new transport sector policies or programs.



Social

Health and Labor Standards The Borrower shall, and shall cause MOT and ARS to, ensure that all contractors: (a) comply with all laws and mandated provisions on labor, health, safety, sanitation and working conditions; (b) use their best efforts to employ women and local people negatively affected by, or living in the vicinity of, the Project; (c) disseminate information at worksites and campsites on the risks of sexually transmitted diseases and HIV/AIDS for those employed during construction; (d) are required not to differentiate between men and women’s wages or benefits for work of equal value; (e) provide accommodation to construction workers at campsites during the constructions period and ensure that all work sites and campsites are safe for all employees, service providers, the public and road users; (f) eliminate all forms of forced or compulsory labor; (g) allow freedom of association


Provision is made in the civil works contract for Jalilabad-Shorsulu and in Azeri law. Compliance is monitored the by the supervising engineer and statutory authorities.

116 Appendix 5


and right of assembly; and (h) abstain from engaging persons below the legally employable age in Azerbaijan.


Health and Labor Standards The Borrower shall, and shall cause MOT and ARS to, undertake concrete measures including border controls and road patrols to prevent trafficking of humans, wildlife, endangered species and illegal substances on the Project facilities.



Gender and Development The Borrower shall ensure that the principles of gender equity aimed at increasing Project benefits and impacts on women in the Project area consistent with ADB’s Policy on Gender and Development (1998) are followed during implementation of the Project, including (a) equal pay to men and women for work of equal value; (b) enabling working conditions for women workers; and (c) taking necessary actions to encourage women living in the Project area to participate in the design and implementation of the Project activities.

